observe any of its agreements, covenants or obligations arising under this" agreement, such failure shall "constitute an 'Event of Default'" under the Reimbursement Agreement. Id. § 7.1(b)(i).
Pursuant to the Note Purchase Agreement, "ACMT agreed to pay Euralair $ 10 million for the Notes, and Euralair agreed to repay that amount by May 31, 1997." Def. Mem. at 13 (citing Cplt. Ex. A, P 1.1; Cplt. Ex. B, P 1); Pl. Reply Mem. at 2. One of the events constituting an "Event of Default" under the Note Purchase Agreement is that the "Noteholder shall have received written notice from [GE] that an Event of Default has occurred and is continuing under the Reimbursement Agreement." Cplt. Ex. A, § 9.1(f).
Under the Guaranty Agreement, GE guaranteed Euralair's obligation to pay the principal and post-maturity interest on the Notes, plus certain taxes. Cplt. Ex. C, §§ 1, 2(a); Pl. Mem. at 4. The Guaranty Agreement also provides that GE may fulfill its obligations as guarantor by purchasing the Notes from ACMT upon an Event of Default under the Note Purchase Agreement: "upon the occurrence and during the continuance of any Event of Default [under the Note Purchase Agreement], [GE] shall have the right, but shall not be obligated to: (ii) purchase the then outstanding principal amount of the Guaranteed Notes from the Noteholder . . . ." Cplt. Ex. C, § 3(b)(ii).
Finally, the Reimbursement Agreement provides that "in the event that [GE] makes any payment under the Guaranty Agreement in respect of principal of the notes, [Euralair] shall, immediately upon demand by [GE], reimburse [GE] for such payment, together with interest thereon . . . ." Cplt. Ex. D, § 2.1.
D. Events after 1992
According to GE, the following events occurred after GE and Euralair entered into the above-described financing agreements. In its 3(g) Statement, Euralair purports to deny these allegations by GE. However, Euralair does not really dispute that the events occurred. Rather, Euralair either disagrees with the relevance of the events or seeks to explain why the events were justified or do not constitute an act of default. Accordingly, I will first describe the events as related (and evidenced) by GE, and will then address whether the actions constitute an act of default.
Euralair did not order a spare GE engine, either before or since April 30, 1995. Pl. 3(g) P 15. By letter dated August 21, 1995, GE issued a Prepayment Instruction to Euralair, pursuant to § 6.2 of the Reimbursement Agreement. Id. P 16. This letter informed Euralair that "unless Euralair agreed to a restructuring of the financing arrangement, Euralair was required to prepay the entire outstanding principal of the Notes by" September 8, 1995. Id. ; see also Cplt. Ex. F. Euralair did not follow the Prepayment Instruction or otherwise agree to a restructuring. Pl. 3(g) P 17. Believing that Events of Default had occurred under both the Reimbursement Agreement and the Note Purchase Agreement, GE provided written notice to this effect to ACMT on January 29, 1996. GE sent a copy of this notice to Euralair. Pl. 3(g) P 21; Cplt. Ex. G.
According to GE, this written notice to ACMT triggered "both automatic acceleration of the Notes under the Note Purchase Agreement and GE's obligations under the Guaranty Agreement to pay the outstanding principal of the Notes or to purchase the Notes from ACMT." Pl. 3(g) P 22 (citing Cplt. Ex. A §§ 9.1(f), 9.2(a); Cplt. Ex. B at 2; Cplt. Ex. C §§ 2(a), 3(b)). GE purchased the Notes from ACMT on January 29, 1996. Pl. 3(g) P 23; Cplt. Ex. H. GE then demanded, by letter dated January 30, 1996, that Euralair "immediately reimburse GE for the principal amount of the Notes and interest accrued thereon as well as for all costs, fees, liabilities, losses and expenses incurred by GE in connection with Euralair's defaults." Pl. 3(g) P 25; Cplt. Ex. I. Euralair admits that it did not comply with GE's payment demands. Def. 3(g) P 26; Pl. 3(g) P 26.
GE now seeks repayment of the $ 10 million advance, plus interest (at the rates specified in the financing agreements), expenses and attorneys' fees. In its counterclaim, Euralair seeks dismissal of the complaint and judgment in the amount of $ 20 million plus interest, costs and disbursements.
Euralair presents three arguments against granting summary judgment in favor of GE.
A. Euralair is Not in Default
First, Euralair argues that it is not in default of the Note Purchase Agreement or the Reimbursement Agreement. Euralair admits that it did not order a spare GE engine by April 30, 1995. Answer PP 17-18. GE alleges that this failure to order is an Event of Prepayment under the Reimbursement Agreement, and Euralair acknowledges that the Reimbursement Agreement "specifies certain circumstances under which GE may instruct Euralair to prepay the Notes." Def. Mem. at 14 (citing Cplt. Ex. D, P 6). However, Euralair contends that the failure to order a spare engine by that date is not an Event of Prepayment.
Euralair points to the purchase agreement between Boeing and Euralair, which provided that the two Boeing 777 airplanes would be delivered to Euralair in April and May, 1997. See Cutner Aff., Ex. 1 § 2.1. Next, Euralair points to Letter Agreement No. 2 between GE and Euralair, which states that "Euralair agrees to place a firm and unconditional purchase order with GE, at least twenty-four (24) months prior to delivery of the first of the above two (2) 777-B aircraft, for a minimum quantity of one (1) spare new GE90-B4 Engine in support of such two aircraft . . . ." Cutner Aff., Ex. 3; Second Marcu Aff., Ex. 2 (emphasis added). Finally, Euralair states that it could not proceed with the spare engine order because its contract with the "large French government-owned commercial airline" was not renewed in April 1995. Def. Mem. at 14. Consequently, Boeing agreed to delay until October and November 1998 the delivery of the two airplanes Euralair had agreed to buy. Cutner Aff., Exs. 11, 21.
Euralair argues that the provision of Letter Agreement No. 2 requiring it to order a spare engine at least 24 months before delivery of the first Boeing airplane signifies that the order deadline was floating. Under this theory, when the expected delivery date of the airplanes was moved back, Euralair's deadline for ordering a spare GE engine moved back as well. See Def. 3(g) P 15; Def. Mem. at 14-15. GE replies that Euralair's theory overlooks certain portions of Letter Agreement No. 2. The letter agreement states that the "terms of advancement of the US $ 10,000,000" introductory allowance "are outlined in Attachment A to this Letter Agreement No. 2." Second Marcu Aff., Ex. 2 at 2. Attachment A states, in part, that:
GE intends to provide the funds for any advance of the Introductory Allowance by unconditionally guaranteeing, to financial institutions selected by GE, the principal and accrued interest of notes issued by Euralair in accordance with the terms of this agreement. GE's obligation to furnish its guarantee is conditioned upon the preparation, negotiation, execution and delivery of definitive documentation pertaining thereto containing such provisions as GE and its legal counsel deem appropriate in their sole discretion.
Second Marcu Aff., Ex. 2, Attachment A at 1. According to GE, this reference to "definitive documentation" contemplates the financing agreements entered into six days later, including the Reimbursement Agreement, under which Euralair was required "to place a firm and unconditional order with [GE] not later than April 30, 1995 for one new GE90-B4 spare aircraft engine . . ." Pl. Reply Mem. at 7; Cplt. Ex. D. § 6.1(b).
Euralair's argument suggests that the Court must determine whether the two agreements are in conflict. "Generally, the rule is that separate contracts relating to the same subject matter and executed simultaneously by the same parties may be construed as one agreement." Williams v. Mobil Oil Corp., 83 A.D.2d 434, 439, 445 N.Y.S.2d 172 (2d Dep't 1981) (citing Rudman v. Cowles Communications, Inc., 30 N.Y.2d 1, 13, 330 N.Y.S.2d 33, 280 N.E.2d 867 (1972)). Therefore, I shall construe Letter Agreement No. 2 and the Reimbursement Agreement as one agreement. According to other general rules of contract construction, the preferred "interpretation of an instrument . . . avoids inconsistencies and gives meaning to all of its terms." Bed ' N' Bath of Spring Valley, Inc. v. Spring Valley Partnership, 185 A.D.2d 584, 587, 586 N.Y.S.2d 416 (3d Dep't 1992); see also Rentways, Inc. v. O'Neill Milk & Cream Co., 308 N.Y. 342, 347, 126 N.E.2d 271 (1955) ("'that interpretation is favored which will make every part of a contract effective'") (citing Fleischman v. Furgueson, 223 N.Y. 235, 239, 119 N.E. 400 (1918)). "Where there is an apparent repugnancy between two clauses of a contract, the court has the duty to reconcile them, if possible." People v. Stokes, 165 Misc. 2d 934, 937, 630 N.Y.S.2d 634 (Sup. Ct. Monroe Co. 1995) (citing Hudson-Port Ewen Assoc., L.P. v. Chien Kuo, 165 A.D.2d 301, 303-304, 566 N.Y.S.2d 774 (3d Dep't), aff'd, 78 N.Y.2d 944, 573 N.Y.S.2d 637, 578 N.E.2d 435 (1991)). Further, "where there are general and specific provision relating to the same matter, the special provisions control, even if there is an inconsistency." 165 Misc. 2d at 938 (citing Lewiston-Porter Central School District v. Sobol, 154 A.D.2d 777, 779, 546 N.Y.S.2d 227 (3d Dep't 1989), appeal dismissed, 75 N.Y.2d 978, 556 N.Y.S.2d 530, 555 N.E.2d 927 (1990)). According to these principles, the contract in the instant case must be interpreted in favor of the specific provision (that the order deadline was April 30, 1995) rather than the more general provision (that the order deadline was 24 months before delivery of the first Boeing plane).
In sum, the financing agreements provide that, unless Euralair placed a firm order for a spare GE engine by April 30, 1995, GE could issue a Prepayment Instruction to Euralair, instructing Euralair to repay the $ 10 million advance from GE. The term in Letter Agreement No. 2 requiring an order 24 months prior to delivery does not negate the more specific term in the Reimbursement Agreement. Euralair admittedly failed to order the spare engine by the April 30, 1995 deadline. Euralair does not contend that any modification was made to the Reimbursement Agreement, which was executed six days after Letter Agreement No. 2. Therefore, as alleged by GE, Euralair was in default of the Reimbursement Agreement as of September 8, 1995, when the deadline for complying with GE's August 21, 1995 Prepayment Instruction passed. See Pl. 3(g) PP 17-20; Cplt. Ex. D, § 7.1(b)(i). Further, Euralair was in default of the Note Purchase Agreement as of January 29, 1996, when GE provided written notice to ACMT that an Event of Default had occurred and was continuing under the Reimbursement Agreement. See Pl. 3(g) PP 21-22; Cplt. Ex. A, § 9.1(f). Euralair has failed to raise a genuine issue of material fact as to whether it defaulted on these Agreements.
B. Euralair's Assignment of Boeing Contract to GE Replaced Euralair's Obligation to Repay the Advance
Euralair's next argument focuses on GE's acquisition of a security interest in Euralair's contract with Boeing for the two 777 jet airplanes. Euralair suggests that this assignment took the place of any obligation by Euralair to reimburse GE for the Introductory Allowance. That is, Euralair would not have to reimburse the money paid by GE to Euralair, "because in taking the place of Euralair, GE would be handsomely compensated by Boeing." Def. Mem. at 10. "If Euralair . . . failed to order the GE engine 90-B4, GE would assume the responsibilities of Euralair and take over the contract with Boeing. . . . GE would receive early delivery of the two 777 aircraft." Id.
Euralair essentially argues that the "alternative rights GE has under a Security Agreement between the parties somehow deprived GE of its primary rights under the Reimbursement and Note Purchase Agreements." Pl. Reply Mem. at 3. However, an examination of the Security Agreement reveals otherwise. As stated earlier, through the Security Agreement, GE accepted as collateral a security interest in Euralair's contract with Boeing. The agreement was negotiated on Euralair's behalf by United States and French counsel (see Marcu Aff., Ex. 1), and Euralair does not allege that either counsel was incompetent. Section 5.5 of the Security Agreement, entitled "Remedies Cumulative," states that
Each and every right, power and remedy hereby specifically given to [GE] shall be in addition to every other right, power and remedy specifically given under this Security Agreement or under the other Financing Documents . . . and each and every right . . . may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by [GE].
The term "Financing Documents" includes the Reimbursement Agreement, the Notes, the Note Purchase Agreement, the Guaranty Agreement, and the Security Agreement. See Cplt. Ex. D, § 1. Thus by the terms of the Security Agreement, the fact that the Security Agreement granted GE a certain remedy did not preclude GE from exercising remedies granted under the Reimbursement and Note Purchase Agreements.
In support of its argument, Euralair cites a note from GE to Euralair dated September 17, 1992. In this note, John Berten (the General Manager of GE's International Sales Department) wrote:
I AM PLEASED TO REPORT THAT OUR LEGAL AND FINANCIAL CONSULTANTS HAVE FINISHED THEIR REVIEW OF THE POSSIBLE IMPACT OF COMPLETING THE ARRANGEMENTS OF OUR GENERAL TERMS AGREEMENT. WITH THIS REVIEW NOW AVAILABLE, WE HAVE MET WITH OUR SENIOR MANAGEMENT, AND HAVE SECURED THEIR AGREEMENT TO PROCEED WITH THE NECESSARY PAPERWORK TO COMPLETE OUR NEGOTIATIONS.