EFTA01070351.pdf

INDEX LOAN AND AIRCRAFT SECURITY AGREEMENT (SIN 681) THIS LOAN AND AIRCRAFT SECURITY AGREEMENT (SIN 681) (together with all Addenda, Riders and Annexes hereto, this 'Agreement') is dated as of August 31, 2011 (the "Closing Date"), by and among RANCE ACQUISITIONS, LLC, acting as an exchange accommodation titleholder (hereinafter referred to as the 'EAT"), WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee ("Owner Trustee"), AVIONETA HOLDINGS LLC, a Delaware limited liability company ('Avioneta", and together with EAT and Owner Trustee, the "Customers" and each individually, a 'Customer) and BANC OF AMERICA LEASING & CAPITAL, LLC ("Lender). In consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: RECITALS A. Capitalized and certain other terms used but not otherwise defined in this Agreement shall have the meanings ascribed to them in Annex A attached hereto and made a part hereof B. Avioneta is a party to an Aircraft Purchase and Sale Agreement dated August 4, 2011 (the "Purchase Agreement"), with ITT Corporation ("Seller') with respect to the Aircraft. Pursuant to an Assignment of Aircraft Purchase and Sale Agreement dated as of August 31, 2011, between Avioneta and EAT, Avioneta has assigned its rights and obligations under the Purchase Agreement to EAT, and EAT will be acquiring the Aircraft, as an "exchange accommodation titleholder" as defined by the regulations and revenue procedures promulgated under Section 1031 of the Internal Revenue Code of 1986, as amended, in order to effect a like-kind exchange within the meaning of said Section 1031 (the "Like-Kind Exchange"). C. Avioneta and Owner Trustee have entered into a Trust Agreement, pursuant to which Avioneta created a trust in order for the Owner Trustee to, on and after the Exchange Completion Date, hold, protect and conserve the Aircraft or the membership interests in the EAT until such time as Avioneta directs the Owner Trustee to distribute the Aircraft in accordance with its written instructions (but subject in all respects to the provisions of this Agreement and the other Loan Documents), and Owner Trustee has accepted the trust as therein provided. D. At the request of Avioneta and Guarantor, Lender is entering into this Agreement with Customers to finance the purchase by EAT of the Aircraft in order to facilitate the Like-Kind Exchange and to finance certain refurbishments and upgrades to the Aircraft. Contemporaneously herewith, Owner Trustee is leasing the Aircraft from EAT pursuant to the Aircraft Lease. E. Avioneta is the trustor of Appollo 2003.1 Trust, the sole member of Avioneta LLC (the 'Existing Owner) which is the owner of a 1998 Gulfstream IV aircraft bearing FM Registration Mark N12NZ and manufacturer's serial number 1376 (the "Existing Aircraft"). To complete the Like-Kind Exchange, Avioneta intends to instruct Existing Owner to enter into a contract to sell the Existing Aircraft and assign its rights thereunder to a qualified intermediary (as defined in Treasury Regulation 31.1031(k)-1(g)(4))to effect the sale thereof on or before the Exchange Completion Date. F. Immediately after such sale of the Existing Aircraft, to complete the Like-Kind Exchange, the EAT will transfer title to the Aircraft (or the membership interests in the EAT) through Time Value Property Exchange, Inc., the qualified intermediary, to Owner Trustee. G. Whether or not the Like-Kind Exchange is completed on or before the Exchange Completion Date, no later than the Exchange Completion Date, EAT will convey to Owner Trustee, and Owner Trustee will acquire, good and marketable title to either the membership interests in the EAT or the Aircraft and to any and all other Collateral in which EAT has any rights, title or interests, subject to no Liens, except the security interest and other Liens created hereby in favor of Lender. NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: \33037610 9 EFTA01070351  (LOAN AGREEMENT (SIN 681)) SECTION 1. TERMS OF LOAN. 1.1 Loan and Use of Proceeds. Subject to the terms and conditions of this Agreement. Lender agrees to make a loan to the Customers in the principal amount set forth in Annex B attached hereto and made a part hereof (the 'Loan"). Customers shall use the proceeds of the Loan to finance or refinance the costs of the acquisition of the Aircraft. 1.2 Repayment and Prepayment. The Customers' obligations to repay the Loan shall be evidenced by one or more Promissory Notes dated on and/or after the Closing Date, payable by the Customers to the order of Lender in the original principal amount of the Loan (as amended, modified, restated, extended and renewed from time to time, the 'Note"). The Loan shall bear interest and be repaid by the Customers at the times and in the manner set forth in the Note. The Loan may be prepaid only in the manner and subject to terms and conditions set forth in the Note and, if applicable, Section 4.7 hereof or the Conversion Rider. SECTION 2. CONDITIONS OF BORROWING. Lenders obligation to make the Loan shall be both subject to and conditioned upon the satisfaction of all of the conditions precedent specified in the Closing Terms Addendum attached to and made a part of this Agreement. SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter into this Agreement and to make the Loan herein provided for, the Customers and (in the instances indicated) each Customer represents, warrants and covenants to Lender that: (a) (i) each Customer (A) is duly qualified to do business in each jurisdiction in which the conduct of its business or the ownership or operation of its assets requires such qualification, including the jurisdiction of the Primary Hangar Location; (B) has the necessary authority and power to own and operate the Aircraft and its other assets and to transact the business in which it is engaged; (C) is a `citizen of the United States' within the meaning of the Transportation Code; and (D) has the form of business organization set forth in Annex B hereto and is and will remain duly organized, validly existing and in good standing under the laws of the state of its organization set forth in Annex B hereto, its federal tax identification number is as set forth in Annex B hereto, and its state-issued organizational identification number (if any), chief executive office and principal place of business address are all as set forth on Annex B hereto; and (ii) its name as shown in the preamble of this Agreement is its exact legal name as shown on its charter, by-laws, articles of organization or operating agreement, as applicable. each as amended as of the Closing Date; (b) (i) each Customers execution and delivery of, and performance of its obligations under and with respect to, each of the Loan Documents (including its borrowing the amounts constituting the Loan, granting the Lenders Lien against the Aircraft and other Collateral and participating in the other transactions contemplated herein and therein), (A) have been duly authorized by all necessary action on the part of such Customer consistent with its form of organization, (B) do not contravene or constitute a default under any Applicable Law, any of such Customers Organizational Documents, or any agreement, indenture, or other instrument to which such Customer is a party or by which it may be bound, (C) do not require the approval of or notice to (1) any Governmental Authority, except for the filings and registrations specified in the Closing Terms Addendum, all of which shall have been duly effected prior to or concurrently with Lender making the Loan, or (2) any other party (including any trustees or holders of indebtedness), and (D) will not result in the creation or imposition of any Lien on any of the assets of such Customer (including, in the case of Owner Trustee, the Trust Estate) other than the Lenders Lien created hereby and by the other Loan Documents with respect to the Collateral; (ii) each of the Transaction Documents referenced in the Closing Terms Addendum has been duly executed and delivered by an authorized representative of each of the Transaction Parties, and constitutes the legal, valid and binding obligation of each of the other Transaction Parties thereto, enforceable against each of them in accordance with the respective terms of such Transaction Documents (including, without limitation, the grant of the Lenders Lien); and (iii) without limiting the foregoing, upon Lender's advancing the Loan on the Closing Date, (A) the Customers will have satisfied or complied with all conditions precedent and requirements as set forth in the Loan Documents required to have been satisfied or complied with concurrently with or prior to such advance and (B) no Default or Event of Default shall be then existing; (c) in the case of each Customer, there are no proceedings pending or, so far as the officers, managers, or members of each Customer know, threatened against or affecting such Customer or any of its property before any Governmental Authority that could impair the EAT's, until any transfer of the Aircraft to 2 \33037610 9 EFTA01070352  (LOAN AGREEMENT (SIN OM Owner Trustee (the "EAT Aircraft Transfer), and thereafter, Owner Trustee's title to the Aircraft or any of the other Collateral, or that, if decided adversely, could materially affect the financial condition or operations of such Customer or its ability to perform its obligations under any of the Loan Documents; (d) (i) Avioneta is the sole Trustor under the Trust Agreement (ii) prior to any EAT Aircraft Transfer, EAT has, and shall continue to have, good and marketable title to the Collateral, free and clear of Liens, except Permitted Liens (iii) after any EAT Aircraft Transfer, Owner Trustee will have good and marketable title to the Collateral, free and clear of Liens, except Permitted Liens; (iv) the Lender's Lien in the Airframe, the Engines and the other Collateral is and shall remain validly created and perfected, and has and shall continue to have first priority over any other Liens pursuant to all Applicable Laws; and (v) all filings, recordings, registrations or other actions necessary or desirable in order to vest such title in the EAT or Owner Trustee, as applicable, and establish, perfect and give first priority to Lender's Lien and other rights and interests in, against or with respect to the Collateral, have been duly effected, and all Impositions in connection therewith have been duly paid; (e) without limiting any of the other representations and warranties in this Agreement, for the purposes of the Cape Town Convention and any other Applicable Law, (i) upon the conclusion of the sale of the Aircraft to EAT (and no later than the Exchange Completion Date, the EAT Aircraft Transfer or 100% of the membership interests in the EAT to Owner Trustee), and EAT's and Owner Trustee's, as applicable, grants and assignments, and (if constituting a lease) any Permitted Third Party Agreement, contemplated in the Loan Documents or other Transaction Documents, the EAT or Owner Trustee, as applicable, and (if a lessee) any Interested Third Party shall be situated in, and the Customers will cause the Aircraft to be duly registered in, the United States of America (which is a contracting state), (ii) with respect to any of the Transaction Documents relating to the Airframe or any Engine, each of the respective parties thereto has power to dispose of the Airframe and Engines, as contemplated therein by way of the relevant Transaction Document, and (iii) the Purchase Documents qualify as a 'contract of sale'. and (if constituting a lease) any Permitted Third Party Agreement and the Loan Documents are effective to constitute international interests in the Airframe and Engines and security assignments of the related associated rights and transfer of the related international interests, as contemplated therein, and each such Registerable Interest will be effective against third parties upon registration at the International Registry, without any further filings or registrations (except as contemplated in the Loan Documents); (i) all financial statements of Avioneta, if any, copies of which have been heretofore delivered to Lender, are complete and correct, have been prepared in accordance with GAAP and present fairly the financial position of Avioneta as at the date thereof and the results of its operations for the period ended on said date and there has been no material adverse change in the financial condition, business or operations of Avioneta since the date thereof; and (ii) each Customer has filed all federal, state and local income tax returns that are required to be filed and has paid all taxes as shown on said returns and all assessments received by it to the extent that such taxes and assessments have become due, and such Customer does not have any knowledge of any actual or proposed deficiency or additional assessment in connection therewith; and (9) (i) The Aircraft (A) has been delivered to EAT, is in EAT's possession and is, as of the Closing Date, unconditionally, irrevocably and fully accepted by EAT, (B) has been inspected by the Customers to their complete satisfaction and, without limiting the foregoing, (1) has been found to be in good working order, repair and condition and fully equipped to operate for its intended purpose, and (2) is in conforrnity with the requirements of the Purchase Agreement and the Applicable Standards, (C) is currently certified under existing FAA rules and regulations and any other Applicable Laws and is airworthy in all respects, and (D) is and will remain primarily hangared at the Primary Hangar Location; (ii) without limiting the foregoing, (A) solely as between Lender and the Customers (and without prejudicing the Customers' rights against Seller or any other third party, which rights are not being disclaimed hereby), no Customer has any pending claims and has no knowledge of any facts upon which a future claim may be based, against any prior owner, the Seller, manufacturer or supplier of the Aircraft or any of the other Collateral, for breach of warranty or otherwise, and (B) all of the information contained in Annex C, including the registration number of the Aircraft, and the serial numbers, manufacturer and model numbers of the Airframe, Engines, and APU, are true and accurate in all respects and (iii) on and after the Exchange Completion Date, Owner Trustee will either own good and marketable title to the Collateral free and clear of Liens except Permitted Liens or will own good and marketable title to 100% of the membership interests of EAT. 3 133037610 9 EFTA01070353  (LOAN AGREEMENT (SIN 681)) SECTION 4. COVENANTS. The Customers covenant and agree that from and after the Closing Date and so long as any of the Obligations are outstanding. 4.1 Notices; Financial Information: and Further Assurances. The Customers and (in the instances indicated) each Customer will, at its sole expense: (a) promptly give written notice to Lender of (i) the occurrence of any Default or Event of Default; (ii) the occurrence of any Event of Loss or event of which any Customer may be aware that could become an Event of Loss; (iii) the commencement or threat of any material litigation or proceedings affecting any Customer or any material litigation or proceedings affecting the Aircraft or any of the other Collateral, or the ability of any Customer to comply with its obligations under the Loan Documents; and (iv) any dispute between any Customer or any Interested Third Party and any Governmental Authority or other party that involves the Aircraft or any of the other Collateral or that might materially interfere with the normal business operations of any Customer; (b) cause Guarantor to comply with the financial reporting requirements set forth in the Guaranty and promptly furnish to Lender any such financial and other information regarding the Customer or Guarantor or any of its affiliates as Lender may from time to time reasonably request; and (c) promptly execute and deliver to Lender such further instruments, UCC and FAA filings (including an IDERA) and other documents, make, cause to be made and/or consent to all registrations (including any discharges and subordinations, or as to the prospective or actual sale of, and any international interest in, the Engines) with the International Registry, and take such further action, as Lender may from time to time reasonably request in order to further carry out the intent and purpose of the Loan Documents and to establish, protect and enforce the rights, interests and remedies and Liens (including the first priority thereof) created, or intended to be created, in favor of Lender thereby. 4.2 General Obligations. (a) each Customer agrees that it shall (i) duly observe and conform to all requirements of Applicable Law relating to the conduct of its business and/or the Aircraft. (ii) remain a "citizen of the United States* within the meaning of the Transportation Code, (iii) obtain and keep in full force and effect (A) all rights, franchises, licenses and permits that are necessary to the proper conduct of its business, and (B) all approvals by any Governmental Authority required with respect to the performance of its obligations under the Loan Documents and the operation of the Aircraft and its business, (iv) cause the Aircraft to remain primarily hangared at the Primary Hangar Location, and duly registered in EAT's name until EAT conveys title to the Aircraft to Owner Trustee and at all times thereafter in Owner Trustees name under the Transportation Code (including, by making all necessary reports, re-registering its ownership of the Aircraft, and taking all other actions required by Applicable Law), and (v) pay and perform all of its obligations and liabilities when due. (b) each Customer agrees that (i) it shall not change its presently existing legal name or its form or state of organization on or after the date of this Agreement, without Lender's prior written consent, (ii) if its presently existing state organizational identification number changes, or if such Customer currently has no such state organizational number but is subsequently issued such a number, on or at any time after the date of this Agreement, such Customer shall immediately notify Lender thereof, and (iii) it shall not change the presently existing mailing, chief executive office and/or principal place of business address on or after the date of this Agreement without giving Lender thirty (30) days' prior written notice of the same. (c) EAT and Owner Trustee shall not amend, amend and restate, supplement or otherwise modify the EAT Note without the prior written consent of Lender. 4.3 Taxes. (a) Customers will file with all appropriate taxing authorities all Federal, state and local income tax returns that are required to be filed and all registrations, declarations, returns and other documentation with respect to any personal property taxes (or any other taxes in the nature of or imposed in lieu of property taxes) due or to become due with respect to the Aircraft or any of the other Collateral. (b) Customers will (i) pay on or before the date when due all taxes as shown on said returns and all taxes assessed, billed or otherwise payable with respect to the Aircraft or the other Collateral directly to the appropriate taxing authorities; and (ii) pay when due all license and/or registration or filing fees, assessments, governmental charges and sales, use, property, excise, privilege, value added and other taxes (including any related interest or penalties) or other charges or fees now or hereafter imposed by any governmental body or agency upon Customers or the Aircraft or any of the other Collateral, with respect to the landing, airport use, manufacturing, ordering, shipment, purchase, ownership, delivery, installation, leasing, chartering, operation, 4 \33037610 9 EFTA01070354  (LOAN AGREEMENT (SIN possession, use or disposition of the Aircraft or any of the other Collateral, or any interest therein (the items referred to in (i) and (ii) above being referred to herein collectively, as "Impositions'), except, in the case of clause (b) above, to the extent such Impositions are being contested in good faith with due diligence by appropriate proceedings and the payment of which the applicable Customer has established adequate reserves in accordance with GAAP and the payment of which is made when required. 4.4 No Disposition of Collateral or Liens: Title and Security Interest. (a) Except as otherwise permitted herein, the Customers shall not sell (other than the EAT Aircraft Transfer on the Exchange Completion Date), assign, enter into any Third Party Agreement, convey, mortgage, exchange or otherwise transfer or relinquish possession of (including by any seizure or other taking by any foreign or domestic governmental authority) or dispose of the Airframe or Engines, any Part, any related associated rights, international interests or prospective international interests, any proceeds or any of the other Collateral, or attempt or offer to do, or suffer or permit any of the foregoing. The Customers shall be permitted, however, to deliver possession of the Airframe, the Engines, or any APU or Part to another Person for testing, service, repair, maintenance, overhaul, alteration or modification, and to enter into Permitted Third Party Agreements, in each case, if and to the extent consistent with the provisions of the Loan Documents. Customers will warrant and defend (i) the good and marketable title of EAT to the Airframe, the Engines and the other Collateral until the EAT Aircraft Transfer and at all times thereafter the good and marketable title of Owner Trustee to the Airframe, the Engines and the other Collateral and (ii) the validity, perfection and first priority of Lender's Lien in the Collateral, against all other Liens, claims and demands whatsoever, except Permitted Liens; and without limiting the foregoing, Customers will not (i) create, assume or suffer to exist any Liens on or with respect to the Airframe, the Engines, or any of the other Collateral, or any Customer's interest therein (other than Permitted Liens); and (ii) promptly take such action as directed by Lender to duly discharge any such unpermitted liens. (b) So long as no Default or Event of Default is then existing, the Customers may enter into and remain a party to Third Party Agreements, in each such case, subject to the satisfaction of, and compliance by such Customer and each Interested Third Party with, all of the following throughout the term of such arrangement: (i) Each such Interested Third Party shall (A) be and remain solvent, and (unless an individual) organized under the laws of a state within the United States: and (B) if engaged by any Customer as a manager and/or charter operator, while so engaged, (1) have a recognized favorable reputation as a manager and/or charter operator, as the case may be, of aircraft similar to the Aircraft, (2) be providing management and/or charter operation services for other aircraft owners similar to the services contemplated therein, and (3) if and at all times while conducting any charter operations (x) have and maintain a valid Part 135 Certificate evidencing its authority to conduct such operations, (y) list the Aircraft on its operations specifications, and (z) comply with all Applicable Standards pertaining to such charter operations. (ii) Any operation of the Aircraft pursuant to any such Third Party Agreement shall be limited to (A) if by Customers, any time sharing agreements (as defined in Section 91.501(c)(1)) complying with Part 91 of the FARs and all other Applicable Standards, (B) if by a charter operator, pursuant to and in full compliance with the requirements of Part 135 of the FARs and all other Applicable Standards, or (C) if such Third Party Agreement is a "dry lease" by a Customer, as lessor, to an Affiliate or other Interested Third Party permitted pursuant hereto, as lessee, operation by such lessee complying with (1) Part 91 and any other applicable provision of the FARs, and all other Applicable Standards, and (2) the provisions hereof and of the other Loan Documents pertinent to the operation of the Aircraft (whether by any Customer or any permitted Interested Third Party). (iii) The related Third Party Agreement shall (A) be and remain, subject and subordinate to Lenders Lien in and with respect to the Collateral, and Lenders rights and remedies under the Loan Documents (and such subordination shall be expressly acknowledged therein), (B) not convey any Lien on, or other property interest in or against the Airframe, the Engines or any of the other Collateral, except for a Permitted Lien (but, without giving effect to clause (a) of the definition of such term). (C) not permit any further disposition of or unpermitted Lien against the Aircraft or any of the other Collateral by any of the Interested Parties thereto or any other Person, or any change in registration or unpermitted change in hangaring of the Aircraft, (D) not contain provisions that are inconsistent with the provisions of any of the Loan Documents or cause such Customer to breach any of its representations, warranties or agreements under any of the Loan Documents, (E) be in conformity with all requirements of the FARs and other Applicable Laws, and (F) otherwise conform to any Operating Consent required by Lender with respect thereto. (iv) (A) Customers shall have specified such Third Party Agreement on Annex B if existing on the Closing Date, or if not then existing shall give Lender at least thirty (30) Business Days' prior written notice of its intention to enter into a Third Party Agreement with respect to which applicable Customer, shall be 5 \339376I0 9 EFTA01070355  (LOAN AGREEMENT (SIN 681)) relinquishing possession or control of the Airframe or Engines; and (B) no later than the effective date thereof Customers shall comply with, and at all times thereafter remain in compliance with, any related requirements by Lender, including (1) entering into, and causing any related Interested Third Parties to enter into, an Operating Consent, (2) causing Lender to be covered by the Required Coverages (which, for the purposes hereof, may include insurance coverages obtained and maintained by an Interested Third Party, conforming to the insurance requirements herein and in any of the other Loan Documents), and (3) entering into or delivering, or causing to be entered into and delivered, all such other documents, filings and assurances, making or causing to be made such filings and registrations, and taking or causing to be taken all such other actions, in each case as may be required by Lender and (4) paying or reimbursing Lender for any related costs or expenses. (v) Lender shall have the right, but not the obligation, to (A) require reasonable evidence that any Interested Third Party satisfies the requirements provided herein, and (B) review any such Third Party Agreement, as from time to time supplemented and amended, to determine its conformity with the provisions hereof, but without assuming any responsibility with respect thereto. (vi) None of the Customers shall make, nor permit to be made, any filing or registration with respect to any Permitted Third Party Agreement, unless so directed by Lender pursuant to Section 5.2 or otherwise. (c) With respect to any Third Party Agreements complying with all of the provisions of Section 4.4(b) (each a *Permitted Third Party Agreement"), although certain of the duties and obligations of Customers under the Loan Documents may be performed by one or more of the Interested Third Parties, (i) no such Permitted Third Party Agreement shall reduce any of the Customers' obligations, or Lender rights, under any of the Loan Documents, (ii) all of the Customers' obligations under the Loan Documents shall be and remain primary and continue in full force and effect as the obligations of a principal and not of a guarantor or surety, and (iii) Lender is not waiving the right to require full and timely performance of any such obligations in strict accordance with the provisions hereof and of the other Loan Documents. By way of clarification and not limitation, with respect to any provisions of this Agreement or any of the other Loan Documents requiring any Customer to take or refrain from taking an action relating to the Aircraft or any of the other Collateral, such provision may also be read to mean that the Customers shall cause the same to be done in accordance therewith, if at that time the Aircraft or such other Collateral is in the possession or control of an Interested Third Party pursuant to a Permitted Third Party Agreement. 4.5 Use of Aircraft: Maintenance; Modifications: Security. (a) Customers will operate the Aircraft in compliance with Part 91 and any other applicable provision of the FARs, and all other Applicable Standards. Unless otherwise expressly permitted hereunder (or under a Permitted Third Party Agreement), (i) Customers shall not operate or permit the Aircraft to be operated for air taxi operations or otherwise under Part 135 of the FARs; and (ii) Customers shall at all times have, and maintain, "operational control* of the Aircraft (as such term is then interpreted by the FAA or such other applicable Governmental Authority), and no other Person shall operate the Aircraft. The Aircraft at all times will be operated by duly qualified pilots having satisfied all requirements established and specified by the FAA, the TSA, any other applicable Governmental Authority and the Required Coverages. (b) Customers may fly the Aircraft temporarily to any country in the world, provided that the Aircraft (i) shall at all times be based and predominantly used, operated and located in the continental United States; and (ii) shall not be flown, operated, used or located in, to or over any such country or area (temporarily or otherwise) (A) that is excluded from the Required Coverages (or specifically not covered by such insurance), (B) with which the United States does not maintain favorable diplomatic relations, (C) in any area of recognized or threatened hostilities, (D) to the extent that payment of any claim under the Required Coverages directly or indirectly arising or resulting from or connected with any such flight, operation, use or location would be prohibited under any trade or other economic sanction or embargo by the United States of America, or (E) in violation of any of the Loan Documents or any Applicable Standards. Customers shall adopt, implement and comply with all security measures required by any Applicable Law, or by any Required Coverages, or that are necessary or appropriate for the proper protection of the Aircraft (whether on the ground or in flight) against theft, vandalism, hijacking, destruction, bombing, terrorism or similar acts. (c) Customers agree that, with respect to the Airframe, the Engines, each APU and each Part, Customers will at their own expense, (i) maintain, inspect, service, repair, overhaul and test the same in accordance with Applicable Standards; (ii) make any alterations or modifications that may at any time be required to comply with Applicable Standards, and to cause the Aircraft to remain airworthy; (iii) furnish all 6 133037610.9 EFTA01070356  (LOAN AGREEMENT (SIN 681)) required parts, replacements, mechanisms, devices and servicing so that the condition and operating efficiency thereof will at all times be no less than its condition and operating efficiency as and when delivered to EAT, ordinary wear and tear from proper use alone excepted; (iv) promptly replace all Parts (A) which become worn out, lost, stolen, taken, destroyed, damaged beyond repair or permanently rendered or declared unfit for use for any reason whatsoever, or (B) if not previously replaced pursuant to clause (A), as and when required by any Applicable Standards, including any applicable life limits; and (v) maintain (in English) all Records in accordance with Applicable Standards. All maintenance procedures shall be performed by properly trained, licensed, and certified maintenance sources and personnel utilizing replacement parts approved by the FAA and the manufacturer of (as applicable) the Airframe, the Engines, or any APU or Part. Without limiting the foregoing, Customers shall comply with all mandatory service bulletins and airworthiness directives by causing compliance to such bulletins and/or directives to be completed through corrective modification in lieu of operating manual restrictions. (d) Customers will not make or authorize any improvement, change, addition or alteration to the Aircraft that will impair the originally intended function or use of the Aircraft, diminish the value of the Aircraft as it existed immediately prior thereto, or violate any Applicable Standard. All repairs, parts, replacements, mechanisms and devices added by the Customers or on its behalf shall immediately, without further act, become part of the Aircraft and subject to the Lender's Lien granted under this Agreement. For the avoidance of doubt, all repairs, parts, replacements, mechanisms and devices removed from the Aircraft and replaced pursuant to Sections 4.5(c) or (d) shall, once replaced, immediately, without further act, be released from the Lender's Lien granted under this Agreement. 4.6 Insurance. (a) Customers agree to maintain at all times, at its sole cost and expense, with insurers of recognized reputation and responsibility satisfactory to Lender (but in no event having an A.M. Best or comparable agency rating of less than 'A-"): (i) (A) comprehensive aircraft liability insurance against bodily injury or property damage claims including, without limitation, contractual liability, premises liability, death and property damage liability, public and passenger legal liability coverage, and sudden accident pollution coverage, in an amount not less than $200,000,000.00 for 20 or more seats, or if the Aircraft will be chartered, or $100,000,000.00 for 10 or more seats, or $50,000,000.00 for fewer than 10 seats for each single occurrence, and (B) personal injury liability in an amount not less than $25.000,000.00; but, in no event shall the amounts of coverage required by sub-clauses (A) and (B) be less than the coverage amounts as may then be required by Applicable Law; (ii) 'all-risk" ground, taxiing, and flight hull insurance on an agreed-value basis, covering the Aircraft, provided that such insurance shall at all times be in an amount not less than the greater of (1) the full replacement value of the Aircraft (as determined by Lender), or (2) the unpaid principal amount of the Note (each such amount re-determined as of each anniversary of the date hereof for the next succeeding year throughout the term of this Agreement); and (iii) war risk and allied perils (including confiscation, appropriation, expropriation, terrorism and hijacking insurance) in the amounts required in paragraphs (i) and (ii), as applicable. (b) Any policies of insurance carried in accordance with this Section 4.6 and any policies taken out in substitution or replacement of any such policies shall (i) be endorsed to name Lender as an additional insured as its interests may appear (but without responsibility for premiums), (ii) provide, with respect to insurance carried in accordance with Section 4.6(a)(ii) or (a)(iii) above, that any amount payable thereunder shall be paid directly to Lender as sole loss payee and not to Lender and any Customer or the Customers jointly, (iii) provide for thirty (30) days' (seven (7) days' in the case of war, hijacking and allied perils) prior written notice by such insurer of cancellation, material change, or non-renewal, (iv) include a severability of interest clause providing that such policy shall operate in the same manner as if there were a separate policy covering each insured. (v) waive any right of set-off against Lender, and any rights of subrogation against Lender, (vi) provide that in respect of the interests of Lender in such policies, that the insurance shall not be invalidated by any action or inaction of any Customer or any other Person operating or in possession of the Aircraft, regardless of any breach or violation of any warranties, declarations or conditions contained in such policies by or binding upon any Customer or any other Person operating or in possession of the Aircraft, and (vii) be 7 \330376109 EFTA01070357  (LOAN AGREEMENT (SR 68.1)) primary, not subject to any co-insurance clause and shall be without right of contribution from any other insurance. (c) Customers shall not self-insure (by deductible, premium adjustment, or risk retention arrangement of any kind) with respect to any of the risks required to be insured pursuant to this Section 4.6. Customers agree that they shall obtain and maintain such other insurance coverages, or cause adjustments to be made to the scope, amount or other aspects of the existing insurance coverages, promptly upon Lender's request, as and when Lender deems such additional insurance coverages or modifications to be appropriate in light of any changes in Applicable Law, prudent industry practices, the insurance market, the Customers' anticipated use of the Aircraft or other pertinent circumstances. All of the coverages required herein shall be in full force and effect worldwide throughout any geographical areas to, in or over which the Aircraft is operated. All insurance proceeds payable under the requisite policies shall be payable in U.S. Dollars. (d) At least ten (10) days prior to the policy expiration date for any insurance coverage required by this Section 4.6, the Customers shall furnish to Lender evidence (having the form and substance consistent with Section 1(f) of the Closing Terms Addendum) of the renewal or replacement of such coverage, complying with the terms hereof, for a twelve (12) month or greater period commencing from and after such expiration date. 4.7 Event of Loss: Loaner Ermines. (a) Upon the occurrence of any Event of Loss with respect to the Aircraft and/or the Airframe, the Customers shall notify Lender of any such Event of Loss within five (5) days of the date thereof. The Customers shall pay the then Outstanding Balance promptly upon its receipt of insurance proceeds relating to such Event of Loss, but in no event later than thirty (30) days after the occurrence of such Event of Loss (irrespective as to whether any or all of such proceeds have been received). Upon Lender's receipt in good and indefeasible funds of all of the amounts required to be paid pursuant to the preceding sentence (whether by applying Customer Parties' payment of such amounts, or any such insurance proceeds, or both) the Aircraft shall be released from the Lenders Lien, and Lender shall remit to the Avioneta any such insurance proceeds so received by Lender, to the extent then remaining. (b) Upon an Event of Loss with respect to an Engine or any APU (as applicable, a "Lost Rem") under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, the Customers shall, within thirty (30) days after the occurrence of such Event of Loss, replace such Lost Item, with a Permitted Replacement; provided that so long as Customers have promptly commenced and are in good faith searching for a Permitted Replacement such thirty (30) day period shall be extended as reasonably required, but in no event more than sixty (60) additional days. Any engine or auxiliary power unit constituting a "Permitted Replacement for a Lost Item shall (i) be of the same make and model number as the Lost Item, (ii) be free and clear of all Liens and (iii) have a value, utility and useful life at least equal to, and be in as good an operating condition as, the Lost Item, assuming such Lost Item was in the condition and repair required by the terms hereof immediately prior to the occurrence of such Event of Loss. The Customers, at their own cost and expense, shall (i) furnish Lender with such documents to evidence such conveyance, (ii) cause the Permitted Replacement to be subject to the Lender's Lien under this Agreement, and (iii) take such other actions as may be required by Lender to cause the Lender's Lien therein to be validly created, perfected and have first priority, including as evidenced on the FM Registry, the International Registry, and any other recording office. Each such Permitted Replacement shall, after such conveyance, be deemed an "Engine' or "APU" (as defined herein), as applicable, and shall be deemed part of the same Aircraft as was the Lost Item replaced thereby. (c) In the event an Engine is damaged and is being repaired, or is being inspected or overhauled, the Customers, at their option, may temporarily substitute another engine during the period of such repair or overhaul, so long as such engine is of the same make and model as the Engine being repaired or overhauled, is free and clear of any Lien that might impair Lenders rights or interests in the Airframe and is maintained in accordance herewith (any such substitute engine being hereinafter referred to as a "Loaner Engine"). The Customers shall (i) cause such Loaner Engine to be installed and removed, as applicable, by a maintenance facility certified by the FM and manufacturer with respect to the Aircraft, and (ii) cause the repaired or overhauled original Engine to be reinstalled on the Airframe promptly upon completion of the repair or overhaul, but in no event later than the earlier of ninety (90) days after removal or the occurrence of an Event of Default. The Lender hereby agrees for the benefit of each owner, lessor or secured party of any Loaner 8 t33037610.9 EFTA01070358  (LOAN AGREEMENT (S/N 681)) Engine that Lender will not acquire or claim as against such owner, lessor or secured party, any right, title or interest in any Loan Engine as a result of such Loaner Engine being installed on the Airframe. (d) So long as no Default has occurred and is continuing, and no Event of Default or Event of Loss with respect to the Aircraft has occurred, any loss or damage proceeds of the Required Coverages received by Lender shall be released by Lender to the Customers to reimburse Customers for paying the costs actually incurred with respect to repairs made to the Aircraft so as to restore it to the condition required by this Agreement, or for the purchase of a Permitted Replacement pursuant to Section 4.7(b), or shall be disbursed by Lender as otherwise required by this Agreement. 4.8 Aircraft Registration. On or before the Closing Date, and at all times thereafter, so long as any of the Obligations are outstanding, the Customers shall remain solely responsible pursuant to the applicable provisions of this Agreement to cause (i) the Aircraft to be effectively and otherwise validly registered in EAT's, until the EAT Aircraft Transfer, and thereafter Owner Trustees, name on the Registry, and (ii) the U.S. registration number then currently assigned to the Aircraft to remain authorized for use by EAT, until the EAT Aircraft Transfer, and thereafter by Owner Trustee, on the Aircraft, in each case, accordance with the Registration Requirements; and without limiting the foregoing, or any other provision of this Agreement, the Customers shall: (a) cause the Registration Certificate to be maintained within the Aircraft and cause the U.S. registration number then currently assigned to the Aircraft to remain authorized for use by the EAT, until the EAT Aircraft Transfer, and thereafter for use by Owner Trustee, on the Aircraft; including by (A) notifying Lender immediately of any event or circumstance with respect to which the Registration Requirements require further action by the Customers, the Registry or any other Governmental Authority or other Person, (B) immediately upon receipt, placing the original, replacement or renewal Registration Certificate on the Aircraft prior to the expiration or other invalidation of any previously issued Registration Certificate (whether the certificate or any other document constituting the Registration Certificate as defined herein) under the Registration Requirements, and (C) complying with any and all of the other Registration Requirements relating to such Registration Certificate, and to the Registration Certificate replaced thereby (including any of the same relating to the destruction or return thereof, as the case may be); and (b) upon the occurrence, and at all times thereafter, of any Defective Registration (and without waiving the Customers' responsibility to avoid such circumstance), or if the operation of the Aircraft is no longer authorized by the Registration Requirements, the Customers shall (A) neither operate nor permit or suffer the operation of the Aircraft without a currently effective and otherwise valid Registration Certificate (and shall cause the pilots to be made aware of the Defective Registration), and otherwise comply with the FARs and other Applicable Laws relating to such Defective Registration, (B) ground and store the Aircraft in a manner reasonably acceptable to Lender, and (C) inform the insurer or insurers thereof, and obtain and maintain adjustments to the insurance coverages required pursuant Section 4.6 of this Agreement which may be necessary or desirable to Lender so as to reflect any changes in the insurable risks relating to any Defective Registration. 4.9 Like-Kind Exchange. Whether or not the Like-Kind Exchange is completed on or before the Exchange Completion Date, on the first to occur of the EAT Aircraft Transfer, the sale or other transfer of 100% of the membership interest of the EAT or the Exchange Completion Date, the following, as applicable, shall occur: (a) If an EAT Aircraft Transfer has occurred, then contemporaneously therewith: (i) EAT shall deliver a FAA Bill of Sale (AC Form 8050-2), the FAA Entry Point Filing Form (AC Form 8050-135), if appropriate, with respect to the sale of the Aircraft and a warranty bill of sale to Owner Trustee, pursuant to which EAT shall convey to Owner Trustee, and Owner Trustee will acquire, good and marketable title to the Aircraft and to any and all other Collateral in which EAT has any rights, title or interests (or in the case of a sale or transfer of ownership of the