Key Legal Aspects of the Sales Process Mark Bisset, Partner, Clyde - - PDF document

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3rd & 4th July | Wotton House

Key Legal Aspects of the Sales Process

Mark Bisset, Partner, Clyde & Co, London David M. Hernandez, Shareholder, Vedder Price, Washington DC

3rd & 4th July | Wotton House

Overview

• Essential elements of the LOI
• Long form versus short form
• Negotiating the deposit and escrow
• The aircraft sale and purchase agreement
• Getting deals to completion

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Essential Elements of the LOI

• Purpose? To establishes the initial deal terms
• Parties (Back-to-back transaction?)
• Price
• Deposit
• Pre-Buy Inspection & Delivery Condition
• Expenses
• Warranties
• Tax
• Jurisdiction

3rd & 4th July | Wotton House

Long form versus short form LOI

• Depends on the aircraft
• Level of details varies significantly
• Relevant to aircraft costs
• Escrow agent procedures
• Delivery condition
• Delivery process
• Inspection scope
• Long form LOI could be used a sale/purchase agreement
• Level of detail consistent with parties’ wishes
• Subject to contract

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Negotiating the deposit and escrow

• Primary concern is risk, and how adequately mitigate risks
• How motivated or desperate are the parties?
• What is appropriated deposit for the aircraft and risk?
• Refundable or Non-refundable?
• Liquidated Damages or Penalty?
• What is escrow and should you use it?
• Which jurisdiction?
• The Escrow Agreement, intended purpose vs. reality

3rd & 4th July | Wotton House

Aircraft Sale and Purchase Agreement

• Agreement to sell relevant to aircraft and market
• Avoid broker’s offer to use prior agreement
• Template is LOI, but “Subject to Contact”
• Comprehensive
• Timing
• Deposit refundability
• Spare parts and equipment included
• Delivery condition and delivery process
• Maintenance condition, MSP/ADs/SBs, pending maintenance
• Representation and warranties
• Risk mitigation/damage prior to closing

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Aircraft Sale and Purchase Agreement (Cont.)

• Technical acceptance
• Financing and other contingencies
• Export control considerations, who is the buyer, end user
• Default and remedies
• Termination rights, excusable delays
• Indemnification and insurance
• Delivery & post-closing obligations
• Broker commissions
• Governing law and venue

3rd & 4th July | Wotton House

Getting deals to completion

• Discrepancy or damage risk on delivery flight, payment of costs
• Is the aircraft in the delivery condition
• All buyer and seller conditions to closing completed
• Who is in charge of the pre-closing process
• Verify everything, look at actual documents
• Warranty or MSP transfers
• Preposition closing documents, government approvals
• Funds management
• Insurance
• Closing checklist

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Getting deals to completion (cont.)

• Completion Documents
• Bill of Sale
• Acceptance Certificate/Delivery Receipt
• Mortgage/Lien Release
• Title Documents/Limited Liability Company Statement for US SPEs
• VAT Documents
• Aviation Authority
• Certificate of Registration
• C of A/Export C of A
• Mortgage & Lien Releases
• De-registration Certificate

3rd & 4th July | Wotton House

Questions & contact information

David M. Hernandez Shareholder | Vedder Price P.C. D +1 202 312 3340 M +1 202 403 1678 dhernandez@vedderprice.com Vedder Price P.C. 1401 I Street NW, Suite 1100 Washington, D.C. 20005 www.vedderprice.com Mark Bisset Partner | Clyde & Co LLP D +44 20 7876 4854 M +44 7810 557 841 Mark.Bisset@clydeco.com Clyde & Co LLP The St Botolph Building 138 Houndsditch London EC3A 7AR | UK www.clydeco.com