Exhibit 10.12
MORTGAGE AND SECURITY AGREEMENT
Dated as of November 20, 2002
made by
AMERICAN TRANS AIR, INC.
in favor of
CITIBANK, N.A.,
as the Collateral Agent
TABLE OF CONTENTS
Page
RECITALS......................................................................1
GRANTING CLAUSE...............................................................1
HABENDUM CLAUSE...............................................................4
ARTICLE 1 DEFINITIONS........................................................6
Section 1.01 Definitions....................................................6
ARTICLE 2 COVENANTS OF THE COMPANY..........................................14
Section 2.01 Aircraft Registration, Maintenance and Operation; Possession
and Permitted Leases; Insignia................................14
(a) (i) Registration and Maintenance.............................14
(ii) Operation of Aircraft and Spare Engines.................15
(iii) Reregistration.........................................16
(b) Possession and Permitted Leases...............................18
(c) Insignia......................................................22
(d) Substitution of Engines/Propellers............................22
(e) Additional Aircraft-related Collateral........................22
Section 2.02 Replacement and Pooling of Parts; Alterations, Modifications
and Additions.................................................23
(a) Replacement of Parts..........................................23
(b) Pooling of Parts..............................................23
(c) Alterations, Modifications and Additions......................23
(d) Certain Matters Regarding Passenger Convenience Equipment.....24
Section 2.03 Pledged Spare Parts Use, Possession and Designated Locations..25
Section 2.04 Insurance.....................................................26
(a) Public Liability and Property Damage Insurance................26
(b) Insurance Against Loss or Damage to an Aircraft, a Spare Engine,
etc..........................................................27
(c) War-Risk, Hijacking and Related Perils Insurance..............28
(d) Reports, Certificates, etc....................................28
(e) Self-Insurance................................................29
(f) Additional Insurance by the Company...........................29
(g) Indemnification by Government in Lieu of Insurance............29
(h) Terms of Insurance Policies...................................30
(i) Application of Payments During Existence of a Specified Default
or an Event of Default........................................31
Section 2.05 Inspection....................................................31
Section 2.06 UCC Collateral................................................31
Section 2.07 Liens.........................................................33
Section 2.08 Performance...................................................33
Section 2.09 Further Assurances............................................33
ARTICLE 3 EVENT OF LOSS.....................................................33
Section 3.01 (a) Event of Loss with Respect to an Aircraft..................33
(b) Event of Loss with Respect to an Engine, a Propeller or
Spare Engine................................................36
(c) Event of Loss with Respect to Pledged Spare Parts...........38
(d) Application of Payments from Governmental Authorities for
Requisition of Title, etc...................................38
(e) Requisition for Use of an Aircraft by the United States
Government or Government of Registry of an Aircraft.........39
(f) Requisition for Use of an Engine, a Propeller or Spare Engine
by the United States Government or the Government of Registry
of an Aircraft.............................................39
(g) Application of Payments During Existence of Specified Defaults
and Events of Default......................................39
(h) Treatment of Insurance Proceeds in Accordance with Loan
Agreement..................................................40
ARTICLE 4 REMEDIES..........................................................40
Section 4.01 Remedies Available to Collateral Agent........................40
Section 4.02 Expenses......................................................43
Section 4.03 Waiver of Claims..............................................43
Section 4.04 Discontinuance of Proceedings.................................44
ARTICLE 5 TERMINATION OF SECURITY AGREEMENT.................................44
Section 5.01 Termination of Security Agreement.............................44
ARTICLE 6 MISCELLANEOUS.....................................................45
Section 6.01 Notices.......................................................45
Section 6.02 GOVERNING LAW.................................................45
Section 6.03 Execution in Counterparts.....................................46
Section 6.04 Amendments....................................................46
Section 6.05 Documentation.................................................46
Section 6.06 Cash Collateral...............................................46
EXHIBITS
Exhibit A1 Form of Mortgage and Security Agreement Supplement (Aircraft)
Exhibit A2 Form of Mortgage and Security Agreement Supplement (Engine/Propeller)
Exhibit A3 Form of Mortgage and Security Agreement Supplement
(Pledged Spare Parts)
Exhibit B Schedule of Aircraft
Exhibit C Schedule of Spare Engines
Exhibit D Summary Description of Pledged Spare Parts
Exhibit E Designated Locations
Exhibit F Schedule of Countries Authorized for Domicile of Permitted Lessee
Exhibit G Schedule of Countries Authorized for Aircraft Registration
MORTGAGE AND SECURITY AGREEMENT
This MORTGAGE AND SECURITY AGREEMENT (as amended, modified, restated or
otherwise supplemented from time to time in accordance with the terms hereof,
this "Security Agreement") dated as of November 20, 2002 is made by AMERICAN
TRANS AIR, INC., an Indiana corporation (the "Company") in favor of CITIBANK,
N.A., a national banking association organized and existing under the laws of
the United States of America, acting solely in its capacity as Collateral Agent
for the Board, the Lenders and the Participants (as such terms are defined in
the Loan Agreement (as defined below)) and as directed by the Board and the
Lenders (the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, all capitalized terms used and not otherwise defined herein shall
have the respective meanings set forth or referred to in Article 1 hereof;
WHEREAS, the Company is an air carrier certificated under Sections 41102
and 44705 of Title 49 of the United States Code and holds air carrier operating
certificates;
WHEREAS, the Company, ATA Holdings Corp., certain lenders, the Collateral
Agent, Citibank, N.A., as Agent, Air Transportation Stabilization Board and
certain other institutions are parties to a Loan Agreement dated as of November
20, 2002 (as amended, modified, restated or otherwise supplemented from time to
time in accordance with its terms, the "Loan Agreement") providing, subject to
the terms and conditions thereof, for a single term loan (the "Loan") to be made
by such lenders;
WHEREAS, it is a condition precedent to the making of the Loan that the
Company shall have executed and delivered to the Collateral Agent this Security
Agreement;
WHEREAS, the Company wishes to execute this Security Agreement to satisfy
the condition described in the preceding paragraph and to grant certain first
priority perfected security interests in the Collateral in favor of the
Collateral Agent for the ratable benefit and security of the Board, the Lenders
and the Participants; and
WHEREAS, all things necessary to make this Security Agreement the legal,
valid and binding obligation of the Company and the Collateral Agent, for the
uses and purposes herein set forth, in accordance with its terms, have been done
and performed and have happened;
GRANTING CLAUSE
NOW, THEREFORE, THIS MORTGAGE AND SECURITY AGREEMENT WITNESSETH, that, to
secure the prompt payment of the principal of, interest on, and all other
amounts due with respect to, the Loan and to secure the performance and
observance by the Obligors under the Loan Agreement of all the agreements,
covenants and provisions contained herein, in the Loan Agreement and in the
other Loan Documents, and the prompt payment of any and all amounts from time to
time owing hereunder, under the Loan Agreement and the other Loan Documents, and
for the uses and purposes and subject to the terms and provisions hereof, and in
consideration of the premises and of the covenants herein contained, and of
other good and valuable consideration the receipt and adequacy whereof are
hereby acknowledged, the Company has granted, bargained, sold, assigned,
transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant,
bargain, sell, assign, transfer, convey, mortgage, pledge and confirm unto the
Collateral Agent, its successors and assigns, for the ratable security and
benefit of the Board, the Lenders and the Participants, a first priority
security interest in and first priority mortgage Lien on all estate, right,
title and interest of the Company in, to and under the following described
property, rights, interests and privileges whether now owned or hereafter
acquired, and wherever located (which collectively, including all property
hereafter specifically subjected to the Lien of the Security Documents by any
instrument supplemental hereto, are herein called the "Collateral"):
(1) each Aircraft (including, without limitation, each Airframe, each
Engine (each such Engine having 750 or more rated take-off horsepower or the
equivalent thereof) and each Propeller (each such Propeller capable of absorbing
750 or more related takeoff shaft horse power or the equivalent thereof)) as the
same is now and will hereafter be constituted, whether now owned or hereafter
acquired, and in the case of such Engines or Propellers, whether or not any such
Engine or Propeller shall be installed in or attached to any Airframe or any
other airframe and all substitutions or replacements therefor, as provided in
this Security Agreement, together with all Parts of whatever nature which are
from time to time included in the "Airframe", the "Engines" or the "Propellers",
whether now owned or hereafter acquired, and all renewals, substitutions,
replacements, additions, improvements, accessories and accumulations with
respect to any of the foregoing;
(2) each Spare Engine (each such Spare Engine having 750 or more rated
take-off horsepower or the equivalent thereof) as the same is now and will
hereafter be constituted, whether now owned or hereafter acquired, and whether
or not any such Spare Engine shall be installed in or attached to any Airframe
or any other airframe and all substitutions or replacements therefor, as
provided in this Security Agreement, together with all Parts of whatever nature
which are from time to time included in the "Spare Engines", whether now owned
or hereafter acquired, and all renewals, substitutions, replacements, additions,
improvements, accessories and accumulations with respect to any of the
foregoing;
(3) all Spare Parts and Appliances whether now owned or hereafter acquired
by the Company that are appropriate for installation or use on, in or with a
Boeing model 757-200, 757-300 or 737-800 aircraft, or on any engine or Appliance
utilized on any such aircraft and without regard to whether any such Spare Parts
or Appliances are appropriate for installation or use on, in or with any other
type or model of aircraft ("Qualified Spare Parts") including any replacements,
substitutions or renewals therefor, and accessions thereto, including but not
limited to Qualified Spare Parts (by way of illustration and not limitation)
described on Exhibit D attached hereto and incorporated herein by reference and
located at the Designated Locations described on Exhibit E attached hereto and
incorporated herein by reference or any supplement or amendment thereto supplied
hereunder or in any Security Agreement Supplement (Pledged Spare Parts) executed
and delivered from time to time hereunder; provided that the following shall be
excluded from the Lien under this paragraph (3) of this Granting Clause of this
Security Agreement: (a) any Qualified Spare Part so long as it is incorporated
in, installed on or attached or appurtenant to an aircraft or engine, (b) any
Qualified Spare Part leased to, loaned to or held on consignment by, the Company
and (c) any and all Expendables (such Qualified Spare Parts and any
replacements, substitutions or renewals therefor and accessions thereto, giving
effect to such exclusion, the "Pledged Spare Parts");
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(4) without limiting the generality of the foregoing, all requisition
proceeds (including, without limitation, all payments and proceeds or other
revenues or income under the Civil Reserve Air Fleet Program) with respect to
any Aircraft, any Airframe, any Engine, any Propeller, any Spare Engine, any
Pledged Spare Part or any Part thereof or any other property described in any
paragraph of this Granting Clause and all insurance proceeds with respect to any
Aircraft, any Airframe, any Engine, any Propeller, any Spare Engine, any Pledged
Spare Part or any Part thereof or any other property described in any paragraph
of this Granting Clause from insurance required to be maintained by the Company
under Section 2.04, but excluding any insurance maintained by the Company and
not required under Section 2.04 and all proceeds from the sale or disposition of
any Aircraft, any Airframe, any Engine, any Propeller, any Spare Engine, any
Pledged Spare Part or any Part thereof or any other property described in any
paragraph of this Granting Clause;
(5) the Purchase Agreements, the Warranty Bills of Sale and the FAA Bills
of Sale;
(6) the rights of the Company under any warranty, indemnity or agreement,
express or implied, regarding title, materials, workmanship, design or patent
infringement or related matters in respect of any Aircraft, any Airframe, any
Engine, any Propeller, any Spare Engine or any Part thereof or any Pledged Spare
Part;
(7) all repair, maintenance and inventory records, logs, manuals and all
other documents and materials similar thereto (including, without limitation,
any such records, logs, manuals, documents and materials that are in electronic
format or are computer print-outs) at any time maintained, created or used by
the Company, and all records, logs, documents and other materials required at
any time to be maintained by the Company pursuant to the FAA or under the
Federal Aviation Act, in each case with respect to any Airframe, any Engine, any
Propeller, any Spare Engine or any Part thereof or any of the Pledged Spare
Parts ("Records");
(8) all Pledged Accounts and Pledged Equipment, in each case, whether now
owned or existing or hereafter acquired or arising, and all proceeds, products,
accessions, rents, profits, income, benefits, indemnification proceeds,
substitutions and replacements of and to any of such Collateral and, to the
extent related to such Collateral, all books, correspondence, credit files,
records, invoices and other papers (including, without limitation, all tapes,
cards, computer runs and other papers and documents in the possession or under
the control of the Company or any computer bureau or service company from time
to time acting for the Company) (collectively, the "UCC Collateral") provided,
that if any of the Pledged Equipment is subject to a lease, title retention or
security agreement and cannot be transferred or encumbered by the Company
without resulting in the termination of such agreement or causing a default
thereunder, then the grant of a security interest therein in accordance with
this Security Agreement (a) shall exclude such Pledged Equipment and (b) shall
include the Company's right, title and interest in, to and under such lease,
title retention or security agreement, together with the benefits of all
deposits and payments now or hereafter made thereunder by or on behalf of the
Company and subject to all of the terms and conditions of such lease or
agreement and the liens and security interests thereunder;
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(9) all moneys and securities now or hereafter paid or deposited or
required to be paid or deposited to or with the Collateral Agent by or for the
account of the Company pursuant to any term hereof or of any other Loan Document
and held or required to be held by the Collateral Agent hereunder or thereunder;
(10) all right, title, interest, claims and demands of the Company, in, to
and under any lease of any Aircraft; and
(11) all proceeds (including, without limitation, Proceeds) of the
foregoing.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, and for the uses and purposes and
subject to the terms and provisions set forth in this Security Agreement.
(1) It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Company shall remain liable under each of the Loan
Documents to which it is a party to perform all of the obligations assumed by it
thereunder, all in accordance with and pursuant to the terms and provisions
thereof, and the Collateral Agent shall have no obligation or liability under
any of the Loan Documents by reason of or arising out of the assignment
hereunder, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any obligations of the Company under any of the Loan
Documents to which the Company is a party, or, except as herein expressly
provided, to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or present or file any claim, or take
any action to collect or enforce the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
(2) The Company does hereby constitute the Collateral Agent as its
true and lawful attorney, irrevocably, for good and valuable consideration and
coupled with an interest and with full power of substitution (in its name or
otherwise) subject to the terms and conditions of this Security Agreement, to
ask, require, demand, receive, sue for, compound and give acquittance for any
and all moneys and claims for moneys due and to become due to it under or
arising out of the Loan Documents, to endorse any checks or other instruments or
orders in connection therewith, to file any claims or take any action or
institute any proceedings which the Collateral Agent may deem to be necessary or
advisable in the premises as fully as the Company itself could do.
(3) The Company agrees that at any time and from time to time, at its
sole cost and expense, upon the written request of the Collateral Agent, it will
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promptly and duly execute, deliver, file and record (as applicable) any and all
such further agreements, certificates, instruments and documents as may be
necessary or desirable or which the Collateral Agent may reasonably request in
order to create, preserve, perfect, confirm or validate the security interests
in the Collateral or to enable the Collateral Agent to obtain the full benefits
of this Security Agreement and the other Security Documents or to enable the
Collateral Agent lawfully to enforce any of its rights, powers, and remedies
hereunder or thereunder with respect to any of the Collateral, it being
acknowledged and agreed that the Collateral Agent is expressly authorized to
unilaterally exercise or cause to be exercised any and all rights of a secured
party hereunder or under applicable law, including the filing of UCC financing
statements (or amendment thereto) in respect of any of the Collateral.
Notwithstanding any contrary provision in this Security Agreement or the other
Security Documents, the Company shall not be obligated to perfect the security
interest of the Collateral Agent in motor vehicles for which the Company has a
Certificate of Title and which are a part of the Pledged Equipment ("Vehicle
Collateral"), except as follows: the Company will cause the Lien of the
Collateral Agent to be perfected on any Vehicle Collateral acquired: (a) after
the date of this Security Agreement at a cost in excess of $50,000; or (b) at
any time while the aggregate book value of all of Vehicle Collateral on which
the Collateral Agent does not have a perfected Lien, net of depreciation and as
determined in accordance with GAAP, exceeds $150,000 or while an Event of
Default or Specified Default exists. In addition, the Company, at the request of
the Collateral Agent made at any time after the occurrence of and during the
continuance of any Event of Default or Specified Default, shall cause the Lien
of the Collateral Agent to be perfected on all Vehicle Collateral.
(4) The Company does hereby warrant and represent that (a) it has not
assigned or pledged, and hereby covenants that it will not (i) assign or pledge
to any Person other than the Collateral Agent, so long as the Lien of the
Security Documents has not been discharged in accordance with the terms hereof,
any of its rights, titles or interests hereby assigned (including, with respect
to the Pledged Accounts, any rights of the Company under any supporting
obligation, instrument or other document evidencing or supporting its right to
payment in respect of the Pledged Accounts) and (ii) subject to the provisions
of the Loan Agreement, except as provided hereunder or except in a manner that
does not adversely affect the Collateral Agent, the Board, the Participants and
the Lenders, (A) enter into any agreement amending or supplementing any Security
Document or, except in the ordinary course of business of the Company, any other
material agreement assigned or pledged hereunder, (B) execute any waiver or
modification of, or consent under, the terms of, or during the continuance of an
Event of Default, exercise any rights, powers or privileges under, any Security
Document, or (C) during the continuance of an Event of Default, settle or
compromise any claim arising under any Security Document, submit or consent to
the submission of any dispute, difference or other matter arising under or in
respect of any Security Document, or to arbitration thereunder; (b) Exhibit D is
in all material respects a true and correct summary description by type of all
Pledged Spare Parts located at any Designated Location owned by the Company as
of the date hereof; (c) all of the Pledged Spare Parts are or will (upon
becoming subject to the Lien of the Security Documents) be maintained by or on
behalf of the Company at the Designated Locations, subject to Section 2.03
hereof; (d) Exhibit E sets forth a true and complete list of all locations at
which the Company maintains Qualified Spare Parts; (e) the Company has full
power, authority and legal right to assign and pledge all of the Collateral, and
the Company owns and has good and marketable title to the Collateral now subject
to the Lien of the Security Documents, free and clear of any Liens, except for
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the Lien of the Security Documents and except for Permitted Liens; (f) the
Company's location (as such term is used in Section 9-307 of the UCC) is Indiana
and the full and correct legal name and mailing address of the Company are
correctly set forth in Annex A to the Loan Agreement; (g) the Collateral Agent
is entitled to the benefits of Section 1110 of the Bankruptcy Code with respect
to the right to take possession of the Aircraft, Spare Engines and Pledged Spare
Parts, in each case only to the extent that such Aircraft, Spare Engine or
Pledged Spare Part, as the case may be, was first placed in service after
October 22, 1994, and to enforce any of its other rights or remedies as provided
in this Security Agreement in the event of a case under Chapter 11 of the
Bankruptcy Code in which the Company is a debtor all subject to the provisions
and limitations of the Bankruptcy Code; and (h) excepting motor vehicles for
which the Company has a Certificate of Title, and except for the filing of UCC
financing statements and such documents with the FAA as may be necessary or
advisable, no registration, recordation or filing with any Governmental
Authority is required in connection with the execution and delivery of this
Security Agreement and the other Security Documents or is necessary for the
validity or enforceability hereof or thereof or for the perfection or
enforcement of the security interests created hereunder or thereunder.
(5) It is hereby further agreed that any and all property of the type
described or referred to in the Granting Clause hereof which is hereafter
acquired by the Company shall ipso facto, and without any other conveyance,
assignment or act on the part of the Company or the Collateral Agent, become and
be subject to the Lien herein granted as fully and completely as though
specifically described herein.
IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the parties hereto
as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. (a) For all purposes of this Security Agreement,
except as otherwise expressly provided or unless the context
otherwise requires:
(i) each of the "Company", "Collateral Agent", or any other Person
includes, without prejudice to the provisions of any Loan Documents, any
successor in interest to it and any permitted transferee, permitted purchaser or
permitted assignee of it;
(ii) the terms defined in this Article 1 have the meanings assigned to them
in this Article 1, and include the plural as well as the singular;
(iii) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles in
the United States;
(iv) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Security Agreement as a whole and not to any
particular Article, Section or other subdivision;
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(v) all references in this Security Agreement to Articles, Sections and
Exhibits refer to Articles, Sections and Exhibits of this Security Agreement;
and
(vi) all references in this Security Agreement to Exhibits refer to such
Exhibits as such Exhibits may be amended, supplemented or otherwise modified
from time to time in accordance with the terms hereof.
(b) The terms "aircraft", "aircraft engine", "appliance", "cargo" and
"propeller" shall have the respective meanings ascribed thereto in Section 40102
of Chapter 401 of Title 49 of the United States Code and the term "engine" shall
include an "aircraft engine" as defined therein.
(c) The term "UCC" means the Uniform Commercial Code as in effect on
the date hereof in the State of New York; provided, however, that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of any security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York, then
for purposes of the provisions hereof relating to such perfection or the effect
of perfection or non-perfection of any security interest the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction and
references to Article 9 of the UCC shall include such Article however numbered
in any relevant jurisdiction.
(d) The terms "Account", "Equipment", "Fixtures", "Goods", "Proceeds"
and "Inventory" shall have the respective meanings ascribed thereto in Article 9
of the UCC.
(e) For all purposes of this Security Agreement, the following
capitalized terms have the following respective meanings:
"Acceptable Alternate Engine" means a Rolls-Royce RB211-22B-02 or General
Electric CT7-98 engine or an engine of either such or another manufacturer of
equivalent or greater value and utility (without regard to hours and cycles),
and suitable for installation and use on the relevant Airframe or an airframe,
as applicable; provided that such engine shall (i) be of the same make, model
and manufacturer as (A) the other Engine pledged with such Airframe or (B) the
Spare Engine replaced by such engine and (ii) be an engine of a type then being
utilized by the Company on other L1011-50/500 or Saab 340B aircraft owned by the
Company.
"Acceptable Alternate Propeller" means a Hamilton Standard propeller or a
propeller of the same or another manufacturer of equivalent or greater value and
utility (without regard to hours and cycles), and suitable for installation and
use on the relevant Airframe or an airframe, as applicable; provided that such
propeller shall (i) be of the same make, model and manufacturer as the other
Propeller pledged with such Airframe, and (ii) be a propeller of a type then
being utilized by the Company on other Saab 340B aircraft operated by the
Company.
"Account Debtor" means each Person obligated on an Account.
"Additional Insured" means each Lender, the Board, the Collateral Agent,
the Agent, the Loan Administrator, the Govco Administrative Agent, each
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Participant, the Company in its capacity as lessor under any Permitted Lease,
and each of their respective Affiliates, successors and permitted assigns, and
the respective directors, officers and employees of each of the foregoing.
"Aircraft" means each Airframe together with the Engines and Propellers
relating to such Airframe as specified on Exhibit B hereto, and all Records
relating to such Aircraft.
"Airframe" means: (i) each of the aircraft (excluding Engines or
Propellers, or engines or propellers either initially or from time to time
installed thereon) specified by United States Registration Number and
Manufacturer's serial number on Exhibit B hereto and on any Security Agreement
Supplement (Aircraft) executed and delivered from time to time hereunder; (ii)
any Replacement Airframe which may from time to time be substituted pursuant to
clause (B)(2) of Section 3.01(a)(i) hereof and (iii) in either case any and all
Parts which are from time to time incorporated or installed in or attached
thereto or which have been removed therefrom, unless the Lien of the Security
Documents shall not be applicable to such Part in accordance with Section 2.02.
"Appliances" means an instrument, equipment, apparatus, a part, an
appurtenance, or an accessory used, capable of being used, or intended to be
used in operating or controlling aircraft in flight, including a parachute,
communication equipment, and another mechanism installed in or attached to
aircraft during flight, and not part of an aircraft, engine, or Propeller.
"Bankruptcy Default" means any event or condition which is or upon notice,
lapse of time or both would, unless cured or waived, become an Event of Default
under clause (f), (g), (p) or (q) of Section 7.1 of the Loan Agreement.
"Card Receivables" means all rights to payment of monetary obligations, now
or hereafter existing and whether or not earned by performance, arising out of
the use of a credit or charge card to purchase property or services from the
Company.
"Certificated Air Carrier" means a Person holding an air carrier operating
certificate issued by the Secretary of Transportation of the United States
pursuant to Chapter 447 of Title 49 of the United States Code or any analogous
successor provision of the United States Code, for aircraft capable of carrying
ten or more individuals or 6,000 pounds or more of cargo.
"Civil Reserve Air Fleet Program" means the Civil Reserve Air Fleet Program
administered by the United States Government pursuant to Executive Order No.
11490, as amended, or any substantially similar program.
"Closing Date" means the date of this Security Agreement.
"Collateral" has the meaning assigned thereto in the Granting Clause
hereof.
"Company" has the meaning assigned thereto in the preamble to this
Agreement.
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"Designated Locations" means the locations in the United States designated
from time to time by the Company at which it may keep Pledged Spare Parts, which
initially shall be the locations set forth in Exhibit E and shall include the
additional locations designated by the Company pursuant to Section 2.03 hereof.
"Eligible Investment" means (i) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof having
maturities no later than 90 days following the date of such investment; (ii) any
obligation which is a direct obligation of or guaranteed by any state of the
U.S. or any subdivision thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's;
(iii) any commercial paper issued by a U.S. obligor and having the highest
rating published by Moody's or Standard & Poor's; (iv) any money market
investment instrument relying upon the credit and backing of any bank or trust
company which is a member of the Federal Reserve System and which has a combined
capital (including capital reserves to the extent not included in capital) and
surplus and undivided profits of not less than $250,000,000 (including the
Collateral Agent and its Affiliates if such requirements as to Federal Reserve
System membership and combined capital and surplus and undivided profits are
satisfied), including, without limitation, certificates of deposit, time and
other interest-bearing deposits, bankers' acceptances, commercial paper, loan
and mortgage participation certificates and documented discount notes
accompanied by irrevocable letters of credit and money market fund investing
solely in securities backed by the full faith and credit of the United States;
or (v) repurchase agreements collateralized by any of the foregoing.
"Engine" means (i) each of the engines listed by Manufacturer's serial
number on Exhibit B hereto and on any Security Agreement Supplement (Aircraft)
or Security Agreement Supplement (Engine/Propeller) executed and delivered from
time to time hereunder, and whether or not either initially or from time to time
installed on any Airframe or any other airframe; (ii) any Replacement Engine
which may from time to time be substituted for any of such Engines pursuant to
the terms hereof; and (iii) in either case, any and all Parts which are from
time to time incorporated or installed in or attached to any such engine and any
and all Parts removed therefrom unless the Lien of the Security Documents shall
not apply to such Parts in accordance with Section 2.02, and all Records
relating to such Engine.
"Event of Loss" means, with respect to any Aircraft, Airframe, Engine,
Propeller, Spare Engine or any Pledged Spare Part, any of the following events
with respect to such property: (i) the loss of such property or of the use
thereof due to the destruction of or damage to such property which renders
repair uneconomic or which renders such property permanently unfit for normal
use for any reason whatsoever; (ii) any damage to such property which results in
an insurance settlement with respect to such property on the basis of a total
loss or a constructive or compromised total loss; (iii) the theft or
disappearance of such property for the lesser of (A) a period in excess of
ninety (90) consecutive days, (B) the period to the date when the Net Insurance
Proceeds with respect to such property are paid to the Collateral Agent, or (C)
the period to the date when the Company has confirmed to the Collateral Agent in
writing that it cannot recover such property; (iv) the confiscation,
9
condemnation or seizure of, or requisition of, title to, or use of, such
property by any Governmental Authority or purported Governmental Authority
(other than a requisition of title, or for use, by the United States Government
or by any other government of registry of such Aircraft, or any agency or
instrumentality of any thereof, which is governed by clause (vi) below), which
shall have resulted in the loss of possession of such property by the Company or
any lessee permitted pursuant to Section 2.01(b) hereof with respect to such
Aircraft or Spare Engine, or pursuant to Section 2.03(b) hereof with respect to
such Pledged Spare Part, for a period in excess of sixty (60) consecutive days
or shall have resulted in the loss of title of such property by the Company; (v)
as a result of any law, rule, regulation, order or other action by the FAA or
other Governmental Authority of the government of registry of such Aircraft, use
of such property in the normal course of the business of air transportation
shall have been prohibited for a period of sixty (60) consecutive days (a
"grounding"); (vi) the requisition of title, or for use, by (x) the United
States Government or (y) any other government of registry of such Aircraft or
any instrumentality or agency of any thereof, which shall have occurred while
the Loan remains outstanding and shall continue, (A) in the case of such a
requisition of title, for a period in excess of fifteen (15) days, or (B) in the
case of such a requisition for use under (x), beyond the Loan Maturity Date, or
(C) in the case of such a requisition for use under (y), for a period in excess
of six (6) months; and (vii) with respect to an Engine, Propeller or Spare
Engine only, any requisition of title to such Engine, Propeller or such Spare
Engine, as applicable, or other event which constitutes an Event of Loss
pursuant to Section 3.01(b) or 3.01(f) hereof. An Event of Loss with respect to
an Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe of such Aircraft.
"Excluded Equipment" means, collectively, the following: (a) all of the
Aircraft and Airframes and any other aircraft of any sort, make or model; (b)
all of the Engines and Propellers, and any other aircraft engine and propeller
of any sort, make or model; (c) all of the Spare Engines, including any
Replacement Engine; (d) all Spare Parts, all Appliances and all Expendables, and
all other parts, appliances, instruments, accessory, avionics, furnishings,
seats, cargo containers and other equipment of any nature, which is or may be
incorporated, used or installed in or attached to any aircraft, aircraft engine
or propeller; (e) all Equipment which is now or hereafter leased by the Company
(whether under a Capital Lease, an operating lease or any other type of lease),
including without limitation all Equipment which is leased by the Company
pursuant to leases with any of the Existing Equipment Lessors; (f) all Equipment
subject to Liens described in Schedule 6.1 to the Loan Agreement or in Section
6.1(a)(ii) of the Loan Agreement; (g) all Passenger Convenience Equipment; (h)
all Fixtures which are leasehold improvements, and any Equipment which is
released as part of the Collateral by the Collateral Agent; and (i) all parts
and components of, and accessions, accessories and appurtenances of whatever
nature attached to or intended to be attached to any of the Equipment identified
in the foregoing items (a) through (h).
"Existing Equipment Lessors" means, collectively, the following: Sanwa
Leasing; Fleet Leasing Corporation; Fleet Capital Leasing - Technology Finance;
Ameritech Credit Corporation; Key Equipment Finance; Aviation Financial
Services; Steelcase Financial Services; Tynan Equipment Co., Inc.; Compaq
Financial Services Corporation; Keycorp Leasing, a division of Keycorp Capital
Inc.; KeyCorp Leasing, a division of Key Corporate Capital Inc.; Fleet National
10
Bank (Shawmut); Firstar Bank, N.A.; Wells Fargo Bank, N.A., as Owner Trustee;
Wilmington Trust Company; U.S. Bancorp Leasing & Financial; AMR Leasing
Corporation; Unionbanc Leasing Corporation; GATX Third Aircraft Corporation;
First Security Bank, National Association; First Fidelity Bank, as Indenture
Trustee and First Union National Bank as successor; Shawmut Bank; Provident
Commercial Group; Summit Bank; Fleet Business Credit Corp.; Keycorp Leasing;
Wells Fargo Financial Leasing, Inc.; Citicorp Del Lease, Inc.; and NCR
Corporation.
"Expendables" means those Spare Parts of a type normally used only once and
thereby consumed or otherwise discarded including all Parts which have a limited
life or repair cycle and are not classified as Fixed Assets in accordance with
GAAP.
"FAA" means the United States Federal Aviation Administration or any
successor thereto administering the functions of the Federal Aviation
Administration under the Federal Aviation Act.
"FAA Bills of Sale" means, collectively, each bill of sale on AC Form
8050-2 or such other form as in effect on the date thereof executed by the
applicable Manufacturer in favor of the Company in respect of each Aircraft.
"Federal Aviation Act" means Subtitle VII of Title 49 of the United States
Code relating to aviation, as amended from time to time, or any similar
legislation of the United States enacted to supersede, amend or supplement such
Subtitle.
"Insurance Brokers" has the meaning assigned thereto in Section 2.04(d).
"Loss Payment Date" has the meaning assigned thereto in clause (B)(1) of
Section 3.01(a)(i).
"Manufacturer" means with respect to each Airframe, Engine, Propeller,
Spare Engine and Pledged Spare Part, the manufacturer thereof, and its
successors and assigns.
"Mortgage and Security Agreement" or "this Agreement" means this Security
Agreement.
"Parts" means, in respect of any Airframe, any Engine, any Propeller, any
Spare Engine or any Pledged Spare Part, any and all Appliances, parts,
instruments, appurtenances, accessories, avionics, furnishings, seats and other
equipment of whatever nature (other than (i) complete Engines, Propellers, Spare
Engines, engines or propellers, (ii) any items leased by the Company from a
third party, (iii) any Passenger Convenience Equipment and (iv) cargo
containers) which may from time to time be incorporated or installed in or
attached to such Airframe, Engine, Propeller, Spare Engine or such Pledged Spare
Part.
"Passenger Convenience Equipment" means severable components or systems
installed on or affixed to any Airframe that are used to provide individual
telecommunications or electronic entertainment to passengers aboard an Aircraft,
11
if and for so long as such equipment shall be owned by, or shall be subject to a
security interest, license or other interest of, another Person (other than any
Affiliate of the Company) in accordance with the provisions of Section 2.02(d)
hereof.
"Payment Default" means any event or condition which is or upon notice,
lapse of time or both would, unless cured or waived, become an Event of Default
under Section 7.1(a) of the Loan Agreement.
"Permitted Air Carrier" means any Certificated Air Carrier or any air
carrier principally domiciled in a country listed on Exhibit F hereto.
"Permitted Lease" means a lease permitted under Section 2.01(b) hereof.
"Permitted Lessee" means the lessee under a Permitted Lease.
"Permitted Liens" means those Liens permitted under clauses (i), (ii),
(iii) and (v) of the definition of Permitted Encumbrances contained in the Loan
Agreement.
"Pledged Accounts" means all of the Accounts of the Company, now existing,
or hereafter arising; provided, however, that Pledged Accounts shall not include
(i) any Card Receivables (whether owed by a card holder or a third party
processor of Card Receivables), now existing, or hereafter arising, to the
extent, and for so long as such Card Receivables are subject to a security
interest in favor of any Card Receivables processor; (ii) proceeds of the
Company's membership interest in BATA Leasing, LLC; and (iii) rents which are
payable to the Company in respect to the leasing of any Excluded Equipment which
is identified in section (e) and (f) of the definition of Excluded Equipment,
and Accounts which arise from the sale or other disposition of any Excluded
Equipment which is not any of the Aircraft, Engines, Spare Engines, Propellers
or Spare Parts.
"Pledged Equipment" means all Equipment now owned or hereafter acquired by
the Company, excluding all Excluded Equipment, now owned or hereafter acquired
by the Company.
"Pledged Spare Parts" has the meaning assigned thereto in paragraph (3) of
the Granting Clause hereof.
"Propeller" means (i) each of the Hamilton Standard propellers listed by
Manufacturer's serial number on Exhibit B hereto and on any Security Agreement
Supplement (Aircraft) or Security Agreement Supplement (Engine/Propeller)
executed and delivered from time to time hereunder, and whether or not either
initially or from time to time installed on any Airframe or any other airframe;
(ii) any Replacement Propeller which may from time to time be substituted for
any of such Propellers pursuant to the terms hereof; and (iii) in either case,
any and all Parts which are from time to time incorporated or installed in or
attached to any such propeller and any and all Parts removed therefrom unless
the Lien of the Security Documents shall not apply to such Parts in accordance
with Section 2.02.
12
"Purchase Agreements" means, collectively, (i) with respect to each
Airframe, the agreement between the Company and the applicable Manufacturer
relating to the purchase by the Company of such Airframe, as originally executed
or as modified, amended or supplemented in accordance with the terms thereof,
but only insofar as the foregoing relates to such Airframe and to such
Manufacturer's warranty obligations with respect thereto and (ii) with respect
to each Engine, Propeller or Spare Engine, the agreement between the Company and
the applicable Manufacturer relating to the purchase by the Company of such
Engine, Propeller or such Spare Engine, as applicable, as originally executed or
as modified, amended or supplemented in accordance with the terms thereof, but
only insofar as the foregoing relates to such Engine, Propeller or such Spare
Engine, as applicable, and to such Manufacturer's warranty obligations with
respect thereto.
"Qualified Spare Parts" has the meaning assigned thereto in paragraph (3)
of the Granting Clause hereof.
"Records" has the meaning assigned thereto in paragraph (7) of the Granting
Clause hereof.
"Replacement Airframe" means any airframe substituted for an airframe in
accordance with Section 3.01(a)(i) hereof.
"Replacement Engine" means any engine substituted for an Engine or Spare
Engine in accordance with Sections 2.01(d), 3.01(a)(i) or 3.01(b) hereof.
"Replacement Propeller" means any propeller substituted for a Propeller in
accordance with Sections 2.01(d), 3.01(a)(i) or 3.01(b) hereof.
"Security Agreement Supplement (Aircraft)" means a supplement to this
Security Agreement in the form of Exhibit A1.
"Security Agreement Supplement (Engine/Propeller)" means a supplement to
this Security Agreement in the form of Exhibit A2.
"Security Agreement Supplement (Pledged Spare Parts)" means a supplement to
this Security Agreement in the form of Exhibit A3.
"Security Documents" means, collectively, this Security Agreement, any
Security Agreement Supplement (Aircraft), any Security Agreement Supplement
(Engine/Propeller), any Security Agreement Supplement (Pledged Spare Parts), and
any additional pledge agreements, security agreements, supplements or other
agreements delivered pursuant to the Loan Documents to secure the obligations of
the Obligors thereunder, and each certificate, instrument, financing statement
or other document executed, delivered, filed or recorded by, on behalf, or in
respect of (as applicable) any Obligor, in connection with or pursuant to the
foregoing.
"Spare Engine" means (i) each of the engines listed by Manufacturer's
serial number on Exhibit C hereto and on any Security Agreement Supplement
13
(Engine/Propeller) executed and delivered from time to time hereunder, and
whether or not either initially or from time to time installed on any Airframe
or any other airframe; (ii) any Replacement Engine which may from time to time
be substituted for any of such Spare Engines pursuant to the terms hereof; and
(iii) in either case, any and all Parts which are from time to time incorporated
or installed in or attached to any such engine and any and all Parts removed
therefrom, unless the Lien of the Security Documents shall not apply to such
Parts in accordance with Section 2.02.
"Spare Part" means an accessory, appurtenance, or part of an aircraft
(except an engine or propeller), engine (except a propeller), spare engine,
propeller, or Appliance, that is to be installed at a later time on an aircraft,
engine, propeller or Appliance.
"Specified Default" means a Payment Default or a Bankruptcy Default.
"UCC Collateral" has the meaning assigned thereto in paragraph (8) of the
Granting Clause hereof.
"United States" or "U.S." means the United States of America.
"United States Government" means the federal government of the United
States or any instrumentality or agency thereof.
"Warranty Bills of Sale" means, collectively, each full warranty bill of
sale delivered to the Company from the applicable Manufacturer in respect of
each Airframe, Engine, Propeller and Spare Engine.
"Wet Lease" means any arrangement whereby the Company (or any Permitted
Lessee) agrees to furnish the Airframe and Engines or Propellers or engines or
propellers installed thereon to a third party pursuant to which such Airframe
and Engines or Propellers or engines or propellers (i) shall remain in the
operational control of the Company (or such Permitted Lessee) and (ii) shall be
maintained, insured and otherwise used and operated in accordance with the
provisions hereof.
(f) Capitalized terms which are defined in the Loan Agreement and which are
not otherwise defined herein shall have the meanings assigned to such terms in
the Loan Agreement.
ARTICLE 2
COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
Section 2.01 Aircraft Registration, Maintenance and Operation; Possession
and Permitted Leases; Insignia.
(a) (i) Registration and Maintenance. The Company, at its own cost and
expense, shall (or shall cause any Permitted Lessee to): (A) on or prior to the
14
Closing Date, cause each Aircraft to be duly registered in the Company's name,
and, subject to subparagraph (iii) of this Section 2.01(a), to remain duly
registered in the Company's name under the Federal Aviation Act; (B) maintain,
service, repair, and overhaul (or cause to be maintained, serviced, repaired,
and overhauled) each Aircraft (and any engine which is not an Engine and any
propeller which is not a Propeller but which, in either case, is installed on
any Aircraft), Spare Engine and each of the Pledged Spare Parts (x) so as at all
times to keep each Aircraft in as good an operating condition as when initially
subjected to the Lien hereof, ordinary wear and tear excepted, and as may be
necessary to enable the airworthiness certification for such Aircraft to be
maintained in good standing at all times (other than during temporary periods of
maintenance, overhaul or storage in accordance with applicable regulations)
under the Federal Aviation Act or the applicable laws of any other jurisdiction
in which such Aircraft may then be registered from time to time and in
substantially the same manner as the Company (or any Permitted Lessee)
maintains, services, repairs or overhauls similar aircraft, engines or
propellers operated by the Company (or Permitted Lessee) in similar
circumstances; (y) so as to keep the Spare Engines in an airworthy condition and
suitable for installation and operation on an Airframe in accordance with any
applicable maintenance program and in compliance with all applicable
airworthiness directives; and (z) so as to maintain the Pledged Spare Parts in
good working order and condition and shall perform all maintenance thereon
necessary for that purpose and in accordance with the requirements of each of
the Manufacturer's manuals and mandatory service bulletins and each of the
Manufacturer's non-mandatory service bulletins which relate to airworthiness,
excluding Pledged Spare Parts that have become worn out or obsolete or unfit for
use and are not reasonably repairable; (C) maintain or cause to be maintained
all Records, logs and other materials required to be maintained by the FAA or
any other applicable regulatory agency or body in respect of each Aircraft,
Spare Engine and each of the Pledged Spare Parts; and (D) promptly furnish or
cause to be furnished to the Collateral Agent, the Board or any Lender such
information as may be required to enable the Collateral Agent, the Board or any
Lender to file any reports required to be filed by the Collateral Agent, the
Board or any Lender with any Governmental Authority because of such person's
interest in the Aircraft, Spare Engines or Pledged Spare Parts hereunder.
(ii) Operation of Aircraft and Spare Engines. The Company will not (or
permit any Permitted Lessee to) maintain, use, store, service, repair, overhaul
or operate any Aircraft or any Spare Engine in material violation of any law,
rule, regulation, treaty, order or certificate of any government or Governmental
Authority (domestic or foreign) having jurisdiction, or in violation of any
airworthiness certificate or material violation of any license or registration
relating to such Aircraft or Spare Engine issued by any such authority. In the
event that any such law, rule, regulation, treaty, order, certificate, license
or registration requires alteration of any Aircraft or Spare Engine, the Company
will, at its sole cost and expense, conform thereto or obtain conformance
therewith. Notwithstanding the foregoing, the Company or any Permitted Lessee
may contest in good faith the validity or application of any such law, rule,
regulation, treaty, order, certificate, license or registration in any
reasonable manner which does not materially adversely affect the Collateral
Agent, the Board or any Lender, or any of their respective legal and economic
interests in or to any of the Aircraft, Spare Engines or any Loan Documents,
including the Lien of the Security Documents. In every case, operation, use,
storage, maintenance, servicing, repair or overhaul of the Aircraft is subject
to compliance by the Company with the provisions of Section 2.04. If the
indemnities or insurance from the United States Government specified in Section
2.04(g), or some combination thereof in amounts equal to amounts required by
15
Section 2.04(g), have not been obtained (unless indemnities or insurance in
amounts so required are available in the commercial aviation insurance market
and are obtained), the Company will not operate or locate any Aircraft or Spare
Engine, or permit any Permitted Lessee or any other Person to operate or locate
any Aircraft or Spare Engine, in or to any area excluded from coverage by any
insurance required to be maintained by the terms of Section 2.04; provided,
however, that the failure of the Company to comply with the provisions of this
Section 2.01(a)(ii) shall not give rise to an Event of Default where such
failure is attributable to a hijacking, medical emergency, equipment
malfunction, weather conditions, navigational error or act of terrorism and the
Company (or such Permitted Lessee, as the case may be) is taking all reasonable
steps to remedy such failure as soon as practicable.
(iii) Reregistration. (A) So long as the Lien of the Security Documents
shall not have been discharged and no Specified Default or Event of Default
shall have occurred or be continuing, if the Company has requested the
Collateral Agent's consent to registration of any Aircraft in the name of the
Company (or, if appropriate, in the name of a Permitted Lessee as a "lessee"),
at the Company's own cost and expense, under the laws of (1) any country listed
on Exhibit G with which the United States then maintains normal diplomatic
relations or, if Taiwan, the United States then maintains diplomatic relations
at least as good as those in effect on the Closing Date (a "Scheduled Country"),
or (2) any other country with which the United States maintains diplomatic
relations, and the Collateral Agent has determined, based on the information
contemplated below, that the laws of such other country would provide
substantially equivalent protection (including the right to take possession of
such Aircraft in the event of the bankruptcy of the Company or such Permitted
Lessee, if any) for the rights of lenders to that enjoyed by the Collateral
Agent under the Security Documents as provided under United States law, the
Collateral Agent will not (subject to the terms of this Section 2.01) in the
case of either (1) or (2) above, unreasonably withhold its consent to such
change of registration. Such consent shall only be given if the Collateral Agent
shall have received reasonable evidence that after giving effect to such
re-registration the Collateral Agent shall possess a Lien and security interest
over such Aircraft with priority and perfection (to the extent perfection is a
relevant concept in such country) to substantially the same extent as is
available under the corresponding laws of the United States (it being agreed
that the lack of such reasonable evidence shall constitute sole reasonable
grounds to withhold such consent with respect to a Scheduled Country or a
country mentioned in clause (2) above.
(B) Prior to any such re-registration under the laws of a Scheduled Country
or the United States, the Collateral Agent shall have received (1) an Officer's
Certificate from the Company certifying that the conditions of this Section
2.01(a)(iii) have been satisfied and (2) a favorable opinion of counsel (which
opinion and counsel shall be reasonably satisfactory to the Collateral Agent)
addressed to the Collateral Agent to the effect that (I) the laws of the new
country of registration will recognize the Company's right of ownership with
respect to such Aircraft and will give effect to the priority and perfection (to
the extent perfection is a relevant concept in such country) of the Lien and
security interest created by this Security Agreement (or the Company shall enter
into such other instrument as shall be necessary to convey a valid and
enforceable first priority perfected security interest (except for Permitted
Liens) to the Collateral Agent, such instrument to be in form and substance
reasonably satisfactory to the Collateral Agent), (II) this Security Agreement
(or such other instrument) and the Collateral Agent's Lien and right to
16
repossession thereunder is valid and enforceable under the laws of such country
and (III) all filing, recording and other action necessary to perfect (to the
extent perfection is a relevant concept in such country) and protect the Lien of
the Security Documents (or other such instrument) in such new jurisdiction
either has been accomplished prior to such change in the country of registry or,
if such opinion cannot under applicable law be given at the time of
registration, are specified in such opinion and the Company undertakes to
accomplish such filing, recording or other action as soon as practicable (but in
any event no later than five (5) Business Days) after giving effect to such
change in registry (in which case a further opinion shall be received by the
Collateral Agent immediately thereafter to the effect that all such recording,
filing and other action have been accomplished).
(C) Prior to any such re-registration under the laws of any country other
than the U.S. or a Scheduled Country, the Collateral Agent shall have received
(1) an Officer's Certificate from the Company certifying that the conditions of
this Section 2.01(a)(iii) have been satisfied and (2) a favorable opinion of
counsel (which opinion and counsel shall be reasonably satisfactory to the
Collateral Agent) in the new jurisdiction of registry covering the matters set
forth in the preceding paragraph and addressed to it, and to the effect that (I)
the terms (including, without limitation, the governing law, service of process
and jurisdictional submission provisions thereof) of this Security Agreement (or
such other instrument) are legal, valid, binding and enforceable in such
jurisdiction, (II) that it is not necessary for the Collateral Agent to register
or qualify to do business in such jurisdiction, (III) that there is no tort
liability of the lender of an aircraft or engine not in possession thereof under
the laws of such jurisdiction other than tort liability which might have been
imposed on such lender under the laws of the United States or any state thereof
(it being understood that, such opinion shall be waived if insurance reasonably
satisfactory to Collateral Agent is provided, at the Company's expense, to cover
such risk), (IV) (unless the Company shall have agreed to provide insurance
covering the risk of requisition of use or title of such Aircraft by the
government of such jurisdiction so long as such Aircraft is registered under the
laws of such jurisdiction) that the laws of such jurisdiction require fair
compensation by the government of such jurisdiction payable in currency freely
convertible into Dollars for the loss of use or title of such Aircraft in the
event of the requisition by such government of such use or title, (V) if a
Permitted Lease is then in effect, the laws of the new jurisdiction of registry
do not provide the Permitted Lessee or any third party possessory rights which
would, upon the Company's bankruptcy or insolvency or other Event of Default
(assuming that at such time the Permitted Lessee is not subject to a proceeding
or final order under applicable bankruptcy, insolvency or reorganization laws of
such jurisdiction), prevent the return of such Aircraft in accordance with the
terms of this Security Agreement (or such other instrument) (such opinion to be
subject to customary qualifications and exceptions in the relevant domicile of
the Permitted Lessee but only to the extent that they do not deny the Collateral
Agent the practical realization of its rights and benefits pursuant to this
Security Agreement (or such other instrument)), and (VI) to such further effect
with respect to such other matters as the Collateral Agent may reasonably
request.
(D) In addition to the opinion contemplated above, prior to any such
re-registration under the laws of any country other than the U.S. or a Scheduled
Country, the Collateral Agent shall have received assurances, reasonably
satisfactory to it, to the effect that (1) the insurance provisions of this
Security Agreement will have been complied with after giving effect to such
change of registry, (2) the original indemnities (and any additional indemnities
for which the Company is then willing to enter into a binding agreement to
17
indemnify) in favor of the Collateral Agent, the Board, the Lenders and the
Participants under the Loan Agreement afford each such party substantially the
same protection as provided prior to such change of registry, (3) such change
will not result in the imposition of, or increase in the amount of, any Tax for
which the Company is not required to indemnify, or is not then willing to enter
into a binding agreement to indemnify, the Collateral Agent, the Board, the
Lenders or the Participants and (4) such new country of registry imposes
aircraft maintenance standards not materially less stringent than those of the
FAA or the Civil Aviation Authority of the United Kingdom, France, Germany,
Japan or Canada.
(E) In connection with any such re-registration, the Company shall, at its
cost and to the extent permitted by the laws of such country, cause the
interests of the Collateral Agent in such Aircraft to be duly registered or
recorded under the laws of such country and at all times thereafter to remain so
duly registered or recorded unless and until changed as provided herein, and
shall, at its sole cost and expense, cause to be done at all times all other
acts (including the filing, recording and delivery of any document or instrument
and the payment of any sum) necessary or, by reference to prudent industry
practice in such country, advisable in order to establish the Collateral Agent's
interest in and to such Aircraft as against the Company, any Permitted Lessee or
any third parties in such jurisdiction.
(F) The Collateral Agent shall execute and deliver, at the Company's
expense, all such documents as the Company may reasonably request and otherwise
cooperate with the Company for the purpose of effecting, continuing or (as
provided in this Section 2.01(a)(iii)) changing the registration of such
Aircraft as may be permissible hereunder.
(G) The Company shall pay all reasonable fees and expenses of the
Collateral Agent, the Board or any Lender in connection with any change of
registry of any Aircraft.
(b) Possession and Permitted Leases. (i) The Company will not, without the
prior written consent of the Collateral Agent, lease or otherwise in any manner
deliver, transfer or relinquish possession of any Airframe, Engine, Propeller or
any Spare Engine or install or permit any Engine, Propeller or any Spare Engine
to be installed on any airframe other than an Airframe; provided that, so long
as (x) no Specified Default or Event of Default shall have occurred and be
continuing at the time of such lease, delivery, transfer or relinquishment of
possession or installation and (y) such action shall not deprive the Collateral
Agent of the first priority perfected Lien of the Security Documents on any
Aircraft, any Airframe, any Engine, Propeller or any Spare Engine, the Company
(or, except with respect to subparagraph (H) below, any Permitted Lessee) may,
without the prior written consent of Collateral Agent:
(A) subject the Airframes, the Engines, the Propellers or engines or
propellers then installed thereon and the Spare Engines to normal interchange
agreements or any Engine, Propeller or any Spare Engine to normal pooling or
similar arrangements, in each case customary in the airline industry and entered
into by the Company (or any Permitted Lessee) in the ordinary course of its
business; provided, that (1) no such agreement or arrangement contemplates or
requires the transfer of title to any Airframe, any Engine, any Propeller or any
Spare Engine, (2) if the Company's title to any Airframe, any Engine, any
Propeller or any Spare Engine shall be divested under any such agreement or
18
arrangement, such divestiture shall be deemed to be an Event of Loss with
respect to such Airframe, Engine, Propeller or Spare Engine, as applicable, and
the Company shall (or shall cause any Permitted Lessee to) comply with Section
3.01 hereof in respect thereof and (3) no such Airframe interchange arrangement
shall (I) be for a period in excess of 5 days or (II) result in such
Certificated Air Carrier, Permitted Lessee or other approved air carrier
obtaining possessory rights for a period in excess of 5 days with respect to, or
a Lien on, any Airframe, Engines, Spare Engines, Propellers, engine(s) or
propeller(s) then installed on such Airframe;
(B) deliver possession of any Airframe, any Engine, any Propeller or any
Spare Engine to the Manufacturer thereof or to any other Person for testing,
service, repair, maintenance or overhaul work on such Airframe, such Engine,
such Propeller or such Spare Engine or any part thereof or for alterations or
modifications in or additions to such Airframe, such Engine, such Propeller or
such Spare Engine to the extent required or permitted by the terms hereof;
(C) install an Engine, a Propeller or Spare Engine on an airframe owned by
the Company (or any Permitted Lessee) which airframe is free and clear of all
Liens, except: (1) Permitted Liens and those which apply only to the engines
(other than Engines or Spare Engines), propellers (other than Propellers),
Appliances, parts, instruments, appurtenances, accessories, furnishings and
other equipment (other than Parts) installed on such airframe (but not to the
airframe as an entirety), (2) the rights of third parties under interchange
agreements which would be permitted under clause (A) above, provided that
Company's title to such Engine, Propeller or Spare Engine shall not be divested
as a result thereof and (3) mortgage Liens or other security interests,
provided, that (as regards this clause (3)), such mortgage Liens or other
security interests effectively provide that such Engine, Propeller or Spare
Engine shall not become subject to the Lien of such mortgage or security
interest, notwithstanding the installation thereof on such airframe;
(D) install an Engine, Propeller or Spare Engine on an airframe leased to
the Company (or any Permitted Lessee) or purchased by the Company (or any
Permitted Lessee) subject to a conditional sale or other security agreement,
provided that (1) such airframe is free and clear of all Liens, except: (x) the
rights of the parties to the lease or conditional sale or other security
agreement covering such airframe, or their assignees, and (y) Liens of the type
permitted by subparagraph (C) of this Section 2.01(b)(i) and (2) such lease,
conditional sale or other security agreement effectively provides that such
Engine, Propeller or Spare Engine shall not become subject to the Lien of such
lease, conditional sale or other security agreement, notwithstanding the
installation thereof on such airframe;
(E) install an Engine, Propeller or Spare Engine on an airframe owned by
the Company (or any Permitted Lessee), leased to the Company (or any Permitted
Lessee) or purchased by the Company (or any Permitted Lessee) subject to a
conditional sale or other security agreement under circumstances where neither
subparagraph (C) nor subparagraph (D) of this Section 2.01(b)(i) is applicable,
provided that any divestiture of title to such Engine, Propeller or Spare Engine
resulting from such installation shall be deemed an Event of Loss with respect
to such Engine, Propeller or Spare Engine and the Company shall (or shall cause
19
any Permitted Lessee to) comply with Section 3.01(b) hereof in respect thereof,
the Collateral Agent not intending hereby to waive any right or interest it may
have to or in such Engine, Propeller or Spare Engine under applicable law until
compliance by the Company with such Section 3.01(b);
(F) transfer (or permit any Permitted Lessee to transfer) possession of any
Airframe, Engine, Propeller or any Spare Engine to the United States of America
or any instrumentality or agency thereof pursuant to the Civil Reserve Air Fleet
Program so long as the Company (or any Permitted Lessee) shall notify the
Collateral Agent (1) prior to transferring possession of any such Airframe,
Engine, Propeller or any such Spare Engine to the United States of America or
any agency or instrumentality thereof pursuant to the Civil Reserve Air Fleet
Program and (2) of the name and the address of the Contracting Office
Representative for the Air Mobility Command of the United States Air Force to
whom notice must be given pursuant to Section 4.01(a) hereof;
(G) transfer possession of any Airframe, Engine, Propeller or any Spare
Engine to the United States of America or any instrumentality or agency thereof
pursuant to a lease, contract or other instrument, a copy of which shall be
provided to the Collateral Agent; or
(H) the Company may, at any time so long as no Specified Default or Event
of Default shall have occurred and be continuing, enter into a lease of any
Aircraft or any Spare Engine with (1) a Certificated Air Carrier, (2) any
airline domiciled and principally located in a country listed on Exhibit F
hereto, or (3) any other Person approved in writing by the Collateral Agent;
provided that (I) no such lease shall be permitted to a lessee that is subject
to a proceeding or final order under applicable bankruptcy, insolvency or
reorganization laws on the date the lease is entered into, (II) in the case of a
lease under subclause (2) or (3) above, on the date of such lease or any renewal
or extension thereof, the United States and the country in which such lessee is
domiciled and principally located maintain diplomatic relations (which for
purposes of this clause (H) shall include Taiwan and any other country that is
similarly situated), (III) in the case only of a lease to any Person under
subclause (3) above, the Collateral Agent receives at the time of such lease an
opinion of counsel (in form and from counsel reasonably satisfactory to the
Collateral Agent) to the effect that (w) the terms of the proposed lease will be
legal, valid, binding and (subject to customary exceptions in foreign opinions
generally) enforceable in accordance with its terms against the proposed lessee
in the country in which the proposed lessee is principally based, (x) there
exist no possessory rights in favor of the lessee under such lease under the
laws of such lessee's country of domicile that would, upon bankruptcy or
insolvency of or other default by the Company and assuming at such time such
lessee is not insolvent or bankrupt, prevent the return or repossession of such
Aircraft or such Spare Engine in accordance with the lease and when permitted by
the terms of Section 4 upon the exercise by the Collateral Agent of its remedies
pursuant to such Section, (y) the laws of such lessee's country of domicile
require fair compensation by the government of such jurisdiction payable in
currency freely convertible into Dollars for the loss of use of such Aircraft or
such Spare Engine in the event of the requisition by such government of such
use, and (z) in the case of an Airframe or Spare Engine, the laws of such
lessee's country of domicile would give recognition to the Company's title to
20
the applicable Aircraft of which such Airframe is a part or such Spare Engine,
to the registry of the applicable Aircraft of which such Airframe is a part or
such Spare Engine (if such country maintains a registry for engines) in the name
of the Company (or the proposed lessee, as "lessee", as appropriate), and to the
Lien of the Security Documents, (IV) if the lessee under such lease is a
governmental entity, such lessee has waived all rights of sovereign immunity,
and (V) if the lessee is a Certificated Air Carrier and the Aircraft or such
Spare Engine was first placed in service after October 22, 1994, the Company
will be entitled as lessor to the benefits of Section 1110 of the Bankruptcy
Code with respect to such Aircraft or such Spare Engine in connection with a
proceeding under Chapter 11 of the Bankruptcy Code in which the lessee is the
debtor.
(ii) The rights of any Permitted Lessee or other transferee (other than a
transferee where the transfer is of an Engine, a Propeller or Spare Engine which
is to be an Event of Loss) shall be (and the sublease, assignment or other
transfer document under which such transfer or sublease is governed shall
explicitly provide that) during the period of such possession, subject and
subordinate to, all the terms of the Security Documents (and any Permitted Lease
shall expressly state that it is so subject and subordinate), including, without
limitation, the covenants contained in this Article 2, including the inspection
rights contained in Section 2.05 and the Collateral Agent's right to repossess
such Aircraft or such Spare Engine and to avoid and terminate any lease upon
such repossession, and the Company shall remain primarily liable for the
performance of all of the terms of the Security Documents, and the terms of any
such Permitted Lease shall not permit any Permitted Lessee to take any action
not permitted to be taken by the Company in the Security Documents with respect
to such Aircraft or such Spare Engine. No pooling agreement, Permitted Lease or
other relinquishment of possession of any Airframe, any Engine, any Propeller or
any Spare Engine shall in any way discharge or diminish any of the Company's
obligations to the Collateral Agent under the Security Documents or constitute a
waiver of Collateral Agent's rights or remedies hereunder or thereunder. The
Collateral Agent agrees, for the benefit of the Company (and any Permitted
Lessee) and for the benefit of any mortgagee or other holder of a security
interest in any engine or propeller owned by the Company (or any Permitted
Lessee), any lessor of any engine (other than an Engine) or propeller (other
than a Propeller) leased to the Company (or any Permitted Lessee) and any
conditional vendor of any engine (other than an Engine or Spare Engine) or
propeller (other than a Propeller) purchased by the Company (or any Permitted
Lessee) subject to a conditional sale agreement or any other security agreement,
that no interest shall be created under this Security Agreement in any engine or
propeller so owned, leased or purchased and that neither the Collateral Agent
nor its successors or assigns will acquire or claim, as against the Company (or
any Permitted Lessee) or any such mortgagee, lessor or conditional vendor or
other holder of a security interest or any successor or assignee of any thereof,
any right, title or interest in such engine or propeller as the result of such
engine or propeller being installed on any Airframe. The Company shall provide
the Collateral Agent with a copy of any Permitted Lease having a term of more
than one (1) year upon entering into such Permitted Lease.
(iii) In connection with any Permitted Lease, all necessary action shall be
taken by the Company at its expense which is required to continue the Collateral
Agent's security interest in the Aircraft, Airframes, Engines, Propellers and
Spare Engines, and such Permitted Lease and all other necessary documents shall
21
be duly filed, registered or recorded in such public offices as may be required
to fully preserve the priority of the security interest of the Collateral Agent
in the Aircraft, Airframes, Engines, Propellers and Spare Engines.
(iv) Any Wet Lease shall not constitute a delivery, transfer or
relinquishment of possession for purposes of this Section 2.01. The Collateral
Agent acknowledges that any consolidation or merger of the Company or
conveyance, transfer or lease of all or substantially all of the Company's
assets, in each case as permitted by the Loan Documents, shall not be prohibited
by this Section 2.01.
(v) No Permitted Lease entered into pursuant to this Section 2.01(b) shall
permit any subleasing of any Aircraft or any Spare Engine.
(c) Insignia. Within ninety (90) days after (x) the Closing Date (with
respect to Aircraft, Engines and Spare Engines covered by the Lien of the
Security Documents as of the Closing Date), and (y) the date on which any
Security Agreement Supplement (Aircraft), Security Agreement Supplement
(Engine/Propeller) or Security Agreement Supplement (Spare Engine) is delivered
(with respect to such additional Collateral), and so long as any Aircraft,
Engines or Spare Engines are subject to the Lien of the Security Documents, the
Company agrees to affix and maintain (or cause to be affixed and maintained) in
the cockpit of each Airframe adjacent to the registration certificate therein,
on each Engine and on each Spare Engine a nameplate bearing the inscription:
"THIS [AIRCRAFT/ENGINE] IS MORTGAGED TO
CITIBANK, N.A.
AS COLLATERAL AGENT, FOR THE BENEFIT AND SECURITY OF THE AIR TRANSPORTATION
STABILIZATION BOARD, THE LENDERS AND THE PARTICIPANTS"
(such nameplate to be replaced, if necessary, with a nameplate reflecting
the name of any successor collateral agent, in each case as permitted under the
Loan Documents). Except as above provided, the Company will not allow the name
of any Person other than the Company to be placed on any Airframe, any Engine,
any Propeller or on any Spare Engine as a designation that might be interpreted
as a claim of ownership or of any rights therein.
(d) Substitution of Engines/Propellers. The Company may at any time, at its
sole cost and expense, replace any Engine, any Propeller or any Spare Engine
subjected to the Lien hereof by causing an Acceptable Alternate Engine or an
Acceptable Alternate Propeller, as the case may be, to be substituted for such
Engine, Propeller or Spare Engine, as the case may be, hereunder in accordance
with the provisions of Section 3.01(b) hereof to the same extent as if an Event
of Loss has occurred with respect to such Engine, such Propeller or such Spare
Engine.
(e) Additional Aircraft-related Collateral. The Company may at any time, at
its sole cost and expense, subject additional airframes, engines and propellers
to the Lien of the Security Documents by entering into any one or more Security
Agreement Supplements and otherwise complying with the terms of Section 5.14 of
the Loan Agreement with respect to such additional collateral.
22
Section 2.02 Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Replacement of Parts. The Company, at its own cost and expense, will
promptly replace or cause to be replaced all Parts which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason whatsoever, except
as otherwise provided in Section 2.02(c). All replacement Parts shall be owned
by the Company free and clear of all Liens (except Permitted Liens, pooling
arrangements permitted by Section 2.02(b) hereof and replacement Parts
temporarily installed on an emergency basis) and shall be in as good an
operating condition as, 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. All Parts at any time removed
from any Airframe, any Engine, any Propeller or any Spare Engine shall remain
the property of the Company and subject to the Lien of the Security Documents,
no matter where located, until such time as such Parts shall be replaced by
Parts which meet the requirements for replacement Parts specified above as
certified to the Collateral Agent by an Officer's Certificate from the Company.
Immediately upon any replacement Part becoming incorporated or installed in or
attached to any Airframe, any Engine, any Propeller or any Spare Engine, without
further act (subject only to Permitted Liens and any pooling arrangement
permitted by Section 2.02(b) hereof and except any replacement Part temporarily
installed on an emergency basis), (i) such replacement Part shall become the
property of the Company and subject to the Lien of the Security Documents and be
deemed a Part for all purposes hereof to the same extent as the Part originally
incorporated or installed in or attached to such Airframe, such Engine, such
Propeller or such Spare Engine and (ii) the replaced Part shall be free and
clear of all rights of the Collateral Agent and shall no longer be deemed a Part
or Spare Part hereunder.
(b) Pooling of Parts. Any Part removed from any Airframe, any Engine, any
Propeller or any Spare Engine as provided in Section 2.02(a) hereof may be
subjected by the Company (or any Permitted Lessee) to a pooling arrangement of
the type which is permitted by clause (A) of Section 2.01(b)(i) hereof;
provided, that the Part replacing such removed Part shall be incorporated or
installed in or attached to such Airframe, Engine, Propeller or Spare Engine in
accordance with Section 2.02(a) as promptly as practicable after the removal of
such removed Part. In addition, any replacement Part when incorporated or
installed in or attached to an Airframe, an Engine, a Propeller or a Spare
Engine in accordance with such Section may be owned by any third party subject
to such a pooling arrangement, provided, that the Company (or any Permitted
Lessee), at its expense, as promptly thereafter as practicable, either (i)
causes such replacement Part to become subject to the Lien of the Security
Documents, free and clear of all Liens other than Permitted Liens or (ii)
replaces such replacement Part with a further replacement Part owned by the
Company (or any Permitted Lessee) which shall become the property of the Company
and subject to the Lien of the Security Documents, free and clear of all Liens
other than Permitted Liens.
(c) Alterations, Modifications and Additions. The Company, at its own
expense, will make (or cause to be made) such alterations and modifications in
and additions to the Airframes, Engines, Propellers and Spare Engines as may be
required to be made from time to time so as to comply with any law, rule,
regulation or order of any regulatory agency or body of any jurisdiction in
which any Aircraft may then be registered; provided, however, that the Company
23
or any Permitted Lessee may, in good faith, and by appropriate proceedings
contest the validity or application of any such law, rule, regulation or order
in any reasonable manner which does not materially adversely affect the
Collateral Agent, the Board or any Lender or any of their respective legal and
economic interests in or to such Airframe, Engine, Propeller or Spare Engine, or
subject any such Person to risk of any material civil or any criminal penalties
or involve any material risk of loss or forfeiture of title to such Aircraft,
Engine, Propeller or such Spare Engine. In addition, the Company (or any
Permitted Lessee), at its own expense, may from time to time make such
alterations and modifications in and additions to any Airframe, any Engine, any
Propeller or any Spare Engine as the Company (or any Permitted Lessee) may deem
desirable in the proper conduct of its business, including removal of Parts
which the Company (or any Permitted Lessee) deems to be obsolete or no longer
suitable or appropriate for use on such Airframe, such Engine, such Propeller or
such Spare Engine (such parts, "Obsolete Parts"); provided that no such
alteration, modification, removal or addition impairs the condition or
airworthiness of such Airframe, such Engine, such Propeller or such Spare
Engine, or materially diminishes the value or utility of such Airframe, such
Engine, such Propeller or such Spare Engine below the condition, airworthiness,
value or utility thereof immediately prior to such alteration, modification,
removal or addition assuming such Airframe, such Engine, such Propeller or such
Spare Engine was then in the condition required to be maintained by the terms of
this Security Agreement. In addition, the value (but not the utility, condition
or airworthiness) of any Airframe, any Engine, any Propeller or any Spare Engine
may be reduced by the value, if any, of Obsolete Parts which shall have been
removed so long as the aggregate value of all Obsolete Parts which shall have
been removed and not replaced shall not exceed the Obsolete Parts Cap. All Parts
incorporated or installed in or attached or added to an Airframe, an Engine, a
Propeller or a Spare Engine as the result of such alteration, modification or
addition (except those parts which are excluded from the definition of Parts or
which may be removed by the Company pursuant to the next sentence) (the
"Additional Parts") shall, without further act, become subject to the Lien of
the Security Documents. Notwithstanding the foregoing sentence, the Company (or
any Permitted Lessee) may, at its own expense, so long as no Event of Default
shall have occurred and be continuing, remove or suffer to be removed any
Additional Part, provided that such Additional Part (i) is in addition to, and
not in replacement of or substitution for, any Part originally incorporated or
installed in or attached to such Airframe, any Engine, any Propeller or any
Spare Engine at the time of delivery thereof hereunder or any Part in
replacement of or substitution for any such Part, (ii) is not required to be
incorporated or installed in or attached or added to any Airframe, any Engine,
any Propeller or any Spare Engine pursuant to the first sentence of this
paragraph (c) and (iii) can be removed from such Airframe, such Engine, such
Propeller or such Spare Engine without diminishing the condition, airworthiness,
value or utility of the Airframe, such Engine, such Propeller or such Spare
Engine which such Airframe, such Engine, such Propeller or such Spare Engine
would have had at such time had such alteration, modification or addition not
occurred. Upon the removal thereof as provided above, such Additional Part shall
no longer be deemed to be subject to the Lien of the Security Documents or part
of the Airframe, Engine, Propeller or Spare Engine from which it was removed.
(d) Certain Matters Regarding Passenger Convenience Equipment. The Company
may at any time and from time to time install on any Airframe, subject to the
requirements of Section 2.02(c) above, Passenger Convenience Equipment that is
(i) owned by another Person and leased to the Company, (ii) sold to the Company
24
by another Person subject to a conditional sale contract or other retained
security interest, (iii) leased to the Company pursuant to a lease which is
subject to a security interest in favor of another Person or (iv) installed on
the applicable Aircraft subject to a license granted to the Company by another
Person, and in any such case (A) the Collateral Agent will not acquire or claim,
as against any such other Person, any right, title or interest in any such
Passenger Convenience Equipment solely as a result of its installation on such
Airframe, (B) the Company shall notify such Person of Collateral Agent's
interest in such Aircraft, and (C) the Company shall procure that, upon the
occurrence of any default under the applicable lease, conditional sale
agreement, security agreement or license, such Person shall not be entitled to
repossess such Passenger Convenience Equipment unless it shall, in connection
with such repossession, undertake to restore such Aircraft to the condition it
had been in had the installation of such Passenger Convenience Equipment not
occurred.
Section 2.03 Pledged Spare Parts Use, Possession and Designated Locations.
(a) The Company shall have the right, at any time and from time to time at
its own cost and expense, without any release from or consent by the Collateral
Agent, to deal with the Pledged Spare Parts in any manner consistent with the
Company's ordinary course of business, including without limitation any of the
following:
(i) to incorporate in, install on or attach or make appurtenant to any
aircraft, engine or Appliance leased to or owned by the Company (whether or not
subject to any Lien) or any Pledged Spare Part, free from the Lien of the
Security Documents;
(ii) to dismantle any Pledged Spare Part that has become worn out or
obsolete or unfit for use, and to sell or dispose of any such Pledged Spare Part
or any salvage resulting from such dismantling, free from the Lien of the
Security Documents; and
(iii) to transfer any or all of the Pledged Spare Parts located at one or
more Designated Locations to one or more other Designated Locations.
(b) Without the prior consent of the Collateral Agent, the Company will not
sell, lease, transfer or relinquish possession of any Pledged Spare Part to
anyone other than the Company, except as permitted by the provisions of this
Section 2.03 and except that the Company shall have the right in the ordinary
course of business, (i) to transfer possession of any Pledged Spare Part to the
Manufacturer thereof or any service provider for testing, overhaul, repairs,
maintenance, alterations or modifications purposes or (ii) to subject any
Pledged Spare Part to an interchange or pooling, exchange, borrowing or
maintenance servicing arrangement customary in the airline industry and entered
into in the ordinary course of business; provided, however, that if the
Company's title to any such Pledged Spare Part shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be an Event of
Loss with respect to such Pledged Spare Part subject to the provisions of
Section 3.01(c).
(c) The Company shall maintain and keep the Pledged Spare Parts at one or
more of the Designated Locations, except as otherwise permitted under this
Section 2.03. If any Pledged Spare Part, at any time and for any reason, is
located at any other than a Designated Location or if the Company wishes to
25
subject additional Qualified Spare Parts to the Lien of the Security Documents
and such Qualified Spare Parts are not located at any Designated Location, the
Company will promptly furnish to the Collateral Agent the following:
(i) a Security Agreement Supplement (Pledged Spare Parts) duly executed by
the Company, identifying each location that is to become a Designated Location
and specifically subjecting the Pledged Spare Parts at such location to the Lien
of the Security Documents;
(ii) a legal opinion from counsel (which opinion and counsel shall be
reasonably satisfactory to the Collateral Agent), dated the date of execution of
said Security Agreement Supplement (Pledged Spare Parts), stating that said
Security Agreement Supplement (Pledged Spare Parts) has been duly filed for
recording in accordance with the provisions of the Federal Aviation Act, and
either: (A) no other filing or recording is required in any other place within
the United States in order to perfect the Lien of the Security Documents on the
Qualified Spare Parts held at the Designated Locations specified in such
Security Agreement Supplement (Pledged Spare Parts) under the laws of the United
States, or (B) if any such filing or recording shall be required that said
filing has been accomplished in such other manner and places, which shall be
specified in such legal opinion, as are necessary to perfect the Lien of the
Security Documents; and
(iii) an Officer's Certificate stating that in the opinion of the officer
executing the Officers' Certificate, all conditions precedent provided for in
this Security Agreement relating to the subjection of such property to the Lien
of the Security Documents have been complied with.
The Company shall, on an ongoing basis, effect any filings or recordings
(or amend any existing filings or recordings) which are necessary or desirable
to perfect the security interest of the Collateral Agent in the Qualified Spare
Parts which are being subjected to the Lien hereof in accordance with this
Section 2.03 and shall promptly deliver copies of any such filings or recordings
to the Collateral Agent.
Section 2.04 Insurance.
(a) Public Liability and Property Damage Insurance. (i) Except as provided
in clause (ii) of this Section 2.04(a), and subject to self-insurance to the
extent permitted by Section 2.04(e) hereof at all times, the Company will carry
or cause to be carried with respect to each Aircraft and each Spare Engine at
its or any Permitted Lessee's expense (A) comprehensive airline liability
(including, without limitation, passenger, contractual, bodily injury, and
property damage liability and product liability) insurance (exclusive of
Manufacturer's product liability insurance), (B) cargo liability insurance and
(C) war risk liability insurance in each case (I) in an amount per occurrence
not less than the greater of (x) the amounts of comprehensive airline liability
insurance from time to time applicable per occurrence to aircraft and engines
owned or leased and operated by the Company of the same type as such Aircraft
and such Spare Engines and (y) the Minimum Liability Insurance Amount, (II) of
the same type (subject, however, to Section 2.04(h)) and covering at least the
26
same risks as from time to time are applicable to aircraft and engines owned or
leased and operated by the Company of the same type as such Aircraft and such
Spare Engines, and (III) which is maintained in effect with insurers (or
reinsurers) of nationally or internationally recognized reputation and
reasonably believed to be financially sound.
(ii) During any period that an Airframe, Engine, Propeller or Spare Engine,
as the case may be, is on the ground and not in operation, the Company may carry
or cause to be carried as to such non-operating property, in lieu of the
insurance required by clause (i) above, and subject to the self-insurance to the
extent permitted by Section 2.04(e) hereof, insurance by insurers of recognized
reputation and reasonably believed to be financially sound otherwise conforming
with the provisions of clause (i) except that (A) the amounts of coverage shall
not be required to exceed the amounts of comprehensive airline liability
insurance from time to time applicable to property owned or leased by the
Company of the same type as such non-operating property and which is on the
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
property owned or leased by the Company of the same type as such non-operating
property and which is on the ground and not in operation.
(iii) The Company will carry or cause to be carried at all times
comprehensive airline liability insurance, including, without limitation,
property damage liability insurance with respect to the Pledged Spare Parts and
Pledged Equipment, which is (A) of amount and scope as may be customarily
maintained by similar corporations engaged in the same or similar business and
similarly situated as the Company for property similar to the Pledged Spare
Parts and Pledged Equipment, (B) maintained in effect with insurers (or
reinsurers) of nationally or internationally recognized reputation and
reasonably believed to be financially sound and (C) with such retentions as the
Company customarily maintains (provided, however, that any self-insurance
retention or deductible shall not exceed $1,000,000 per occurrence).
(b) Insurance Against Loss or Damage to an Aircraft, a Spare Engine, etc.
(i) With respect to Aircraft only, subject to the provisions of Section
2.04(e) hereof permitting self-insurance, the Company shall maintain or cause to
be maintained in effect, at its or any Permitted Lessee's expense, with insurers
of recognized reputation and reasonably believed to be financially sound (A)
"all-risk" aircraft hull insurance covering each Aircraft, (B) "all-risk"
coverage of Spare Engines, Engines, Propellers and Parts (while such Spare
Engines, Engines, Propellers and Parts are temporarily removed from such
Aircraft and not replaced by similar components) and (C) "all-risk" coverage
with respect to Pledged Spare Parts and Pledged Equipment, in such forms and
amounts and with such retentions as the Company customarily maintains with
respect to similar property owned or operated by the Company (provided, however,
that any self-insurance retention or deductible shall not exceed $1,000,000 per
occurrence); provided, that such insurance shall at all times while such
Aircraft and Spare Engines are subject to the Security Documents be for an
amount (taking into account self-insurance to the extent permitted by Section
2.04(e) hereof) not less than the Insured Amount for such Aircraft and Spare
Engines. In the case of a loss with respect to an engine (other than an Engine
or Spare Engine) or propeller (other than a Propeller) installed on any
Airframe, the Collateral Agent shall, subject to Section 2.6(c) of the Loan
27
Agreement, as promptly as practicable remit any payment made to it of any
insurance proceeds in respect of such loss to the Company or any other third
party identified, to the Collateral Agent by the Company in an Officer's
Certificate, entitled to receive such proceeds.
(ii) All losses will be adjusted by the Company (giving due regard to the
interest of the Collateral Agent) with the insurers; provided, however, that
during a period when any Specified Default or Event of Default shall have
occurred and be continuing, the Company shall not agree to any such adjustment
without the prior written consent of the Collateral Agent. As between the
Collateral Agent and the Company, it is agreed that all proceeds of insurance
maintained in compliance with the preceding paragraph and received as the result
of the occurrence of an Event of Loss will be applied in accordance with Section
3.01.
(c) War-Risk, Hijacking and Related Perils Insurance.
(i) The Company shall at all times maintain hull coverage, in an amount not
less than the Insured Amount for each Aircraft and Spare Engine, for war risk,
hijacking and related perils at least as broad as Lloyd's of London Form LSW555B
as in effect on the date hereof, or its substantive equivalent as reasonably
determined by the Collateral Agent (such determination to be made after
consultation with the Company's insurance broker).
(ii) At all times when Section 2.04(a)(ii) shall not apply, the Company
shall maintain or cause to be maintained world-wide liability coverage of
war-risk, hijacking and related perils insurance at least as broad as AVN 52D as
in effect on the date hereof, or its substantive equivalent as reasonably
determined by the Collateral Agent (such determination to be made after
consultation with the Company's insurance broker) in an amount, subject to the
provisions of Section 2.04(e), not less than the Minimum Liability Insurance
Amount.
(d) Reports, Certificates, etc. The Company will furnish, or cause to be
furnished, to the Collateral Agent on or before the Closing Date, and each
annual renewal of the applicable insurances, (i) a report, signed by an
authorized representative of Aon Risk Services, Inc. or any other independent
firm of insurance brokers reasonably acceptable to the Collateral Agent which
brokers may be regularly retained by the Company (the "Insurance Brokers"),
describing in reasonable detail the hull and liability insurance (and property
insurance for detached engines, parts and other items) then carried and
maintained with respect to the Collateral and stating the opinion of such firm
that (A) such insurance complies with the terms hereof, (B) all premiums in
connection with such insurance then due have been paid and (C) such insurance
together with any self-insurance permitted hereby provides coverages against
risks that are customarily insured against by Certificated Air Carriers and that
such coverages are in substantially similar forms, are of such types and have
limits as are customarily carried by Certificated Air Carriers; and (ii) a
certificate of insurance evidencing the due compliance with the terms of this
Section 2.04 relating to insurance with respect to the Collateral. The Company
will cause such Insurance Broker to agree to advise the Collateral Agent in
writing of any default in the payment of any premium and of any act or omission
on the part of the Company of which it has knowledge and which might invalidate
or render unenforceable, in whole or in part, any insurance on the applicable
Collateral and to advise the Collateral Agent in writing at least thirty (30)
days (twenty (20) days in the case of lapse for nonpayment of premiums and seven
(7) days in the case of war risk and allied perils coverage) prior to the
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cancellation (but not expiration), lapse for non-payment of premium or material
adverse change of any insurance maintained pursuant to this Section 2.04;
provided that if the notice period specified above is not reasonably obtainable,
the Company will cause the Insurance Broker to provide for as long a period of
prior notice as shall then be reasonably obtainable. In addition, the Company
will also cause such Insurance Broker to deliver to the Collateral Agent on or
prior to the date of expiration of any insurance policy referenced in a
previously delivered certificate of insurance, a new certificate of insurance,
substantially in the same form as delivered by the Company to the Collateral
Agent on the Closing Date except for changes in the report or the coverage
consistent with the terms hereof. In the event that the Company shall fail to
maintain or cause to be maintained insurance as herein provided, the Collateral
Agent may, at its sole option, but shall be under no duty to, procure such
insurance on behalf of the Company and, in such event, the Company shall, upon
demand, reimburse the Collateral Agent for the cost thereof to the Collateral
Agent, together with interest on such cost at the Overdue Rate from the date of
such payment by the Collateral Agent to the date of reimbursement without waiver
of any other rights the Collateral Agent may have; provided, however, that no
exercise by the Collateral Agent of said option shall affect the provisions of
this Security Agreement or the other Loan Documents, including the provisions
that failure by the Company to maintain the prescribed insurance shall
constitute an Event of Default. Upon receipt of any notices or reports, the
Collateral Agent shall as promptly as practicable forward copies of the same to
the Agent, the Loan Administrator, the Board, each of the Lenders and each of
the Participants. The Collateral Agent shall have no responsibility for
independently verifying the accuracy or completeness of any information
contained in any report or certificate provided by the Insurance Brokers.
(e) Self-Insurance. The Company (but no Permitted Lessee) may self-insure
the risks required to be insured against pursuant to this Section 2.04 under a
program applicable to all aircraft (whether owned or leased) in the Company's
fleet, but in no case shall the aggregate amount of such self-insurance in
regard to Sections 2.04(a) and 2.04(b) hereof exceed for any calendar year, with
respect to all of the aircraft (whether owned or leased) in the Company's fleet
(including, without limitation, the Aircraft) $2,500,000. In addition to the
foregoing right to self-insure, the Company (and any Permitted Lessee) may
self-insure, to the extent of any applicable mandatory minimum per aircraft (or,
if applicable, per annum or other period) the hull or liability insurance
deductible imposed by the aircraft hull or liability insurer, which are
commensurate with the standard deductibles in the aircraft insurance industry.
(f) Additional Insurance by the Company. The Company (and, if applicable,
any Permitted Lessee) may at its own expense carry insurance with respect to its
interest in the Aircraft, Engines, Propellers, Spare Engines and Pledged Spare
Parts in amounts in excess of that required to be maintained by this Section
2.04; provided, however, that such insurance does not prevent the Company (or
such Permitted Lessee) from carrying the insurance required or permitted by this
Section 2.04 or adversely affect such insurance or the cost thereof; and
provided, further, that the proceeds of such insurance shall be subject to
Section 2.6(c) of the Loan Agreement.
(g) Indemnification by Government in Lieu of Insurance. Notwithstanding any
provisions of this Section 2.04 requiring insurance, the Collateral Agent agrees
to accept, in lieu of insurance against any risk with respect to the Aircraft or
Spare Engines, indemnification from, or insurance provided by, the United States
29
Government, against such risk in an amount which, when added to the amount of
insurance against such risk maintained by the Company (or any Permitted Lessee)
shall be at least equal to the amount of insurance against such risk otherwise
required by this Section 2.04 (taking into account self-insurance permitted by
Section 2.04(e) hereof). Any such indemnification or insurance provided by the
United States Government shall provide substantially similar protection as the
insurance required by this Section 2.04. The Company shall furnish to the
Collateral Agent, in advance of attachment of such indemnity or insurance, an
Officer's Certificate stating that such indemnification or insurance complies
with the preceding sentence, and promptly following such attachment, an
Officer's Certificate confirming in reasonable detail the amount and scope of
such indemnification or insurance and an FAA Certificate of Insurance confirming
that such insurance has been obtained from the United States Government in
compliance with this Section 2.4.
(h) Terms of Insurance Policies. Any policies carried in accordance with
Sections 2.04(a) through 2.04(c) hereof covering the applicable Collateral, and
any policies taken out in substitution or replacement for any such policies, (i)
shall name the Additional Insureds as additional insureds and, for purposes of
Sections 2.04(b), 2.04(c)(i) and 2.04(i), the Collateral Agent as sole loss
payee, as their respective interests may appear (but without imposing on any
such party liability to pay premiums with respect to such insurance), (ii) may
provide for self-insurance to the extent permitted in Section 2.04(e) hereof,
(iii) shall provide that if the insurers cancel such insurance for any reason
whatever, or if the same is allowed to lapse for non-payment of premium or if
any material change is made in the insurance which adversely affects the
interest of any Additional Insured, such lapse, cancellation or change shall not
be effective as to any Additional Insured for thirty (30) days (twenty (20) days
in the case of lapse for non-payment of premiums and seven (7) days in the case
of war risk and allied perils coverage) after receipt by such Additional Insured
of written notice by such insurers of such lapse, cancellation or change;
provided, however, that if any notice period specified above is not reasonably
obtainable, such policies shall provide for as long a period of prior notice as
shall then be reasonably obtainable, (iv) shall provide that in respect of the
respective interests of each Additional Insured in such policies the insurance
shall not be invalidated by any action or inaction of the Company (or any
Permitted Lessee) or any other Person and shall insure the respective interests
of the Additional Insureds, as they appear, regardless of any breach or
violation of any warranty, declaration or condition contained in such policies
by the Company (or any Permitted Lessee) or by any other Person, (v) shall be
primary without any right of contribution from any other insurance which is
carried by any Additional Insured, (vi) 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 Additional Insured,
(vii) shall waive any right of the insurers to set-off, recoupment or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of any Additional Insured, (viii) in the case of hull
insurance policies carried in accordance with this Section 2.04, shall name the
Collateral Agent as sole loss payee in accordance with the provisions of clause
(ix), (ix) shall provide that in the event of a loss involving an Aircraft,
Airframe, Engine, Propeller or Spare Engine the proceeds in respect of such loss
for such Aircraft, Airframe, Engine, Propeller or Spare Engine shall be payable
to the Collateral Agent and shall be applied in accordance with Section 2.6(c)
of the Loan Agreement), (x) shall waive any right of the insurers to subrogation
against any Additional Insured, and (xi) shall provide for a 50/50 claims
settlement per AVS 103 or its equivalent.
30
(i) Application of Payments During Existence of a Specified Default or an
Event of Default. Any amount referred to in this Section 2.04 which is payable
to or retainable by the Company (or any Permitted Lessee) shall not be paid to
or retained by the Company (or any Permitted Lessee) if at the time of such
payment or retention a Specified Default or an Event of Default shall have
occurred and be continuing, but shall be held by or paid over to the Collateral
Agent and applied against the obligations of the Company under the Loan
Documents. At such time as there shall not be continuing any such Specified
Default or Event of Default, such amount shall be paid to the Company to the
extent not previously applied in accordance with the preceding sentence. Prior
to remitting any such funds to the Company, the Collateral Agent shall be
authorized to request and receive an Officer's Certificate from the Company
certifying that no Specified Default or Event of Default has occurred and is
continuing.
Section 2.05 Inspection. (a) At reasonable times not more often than once
in any twelve (12) month period, and upon at least ten (10) days prior written
notice to the Company (provided, however, that if a Specified Default or Event
of Default shall have occurred and be continuing, any such inspection shall be
at reasonable times without any limit on the number of times and upon at least
three (3) Business Days' prior written notice to and at the expense of the
Company), the Collateral Agent or the Board or their respective authorized
representatives may inspect the Aircraft, Spare Engines and Pledged Spare Parts
and inspect and make copies of the books and of the Company and any Permitted
Lessee required to be maintained by the FAA or other applicable regulatory
agency or body (at the Company's risk and expense). Any such inspection of any
Aircraft, any Spare Engine or any Pledged Spare Part shall be subject to the
Company's (or any Permitted Lessee's) safety and security rules applicable at
the location of such Collateral and, so long as no Specified Default of Event of
Default shall have occurred and be continuing, no exercise of such inspection
right shall interfere with the normal operation or maintenance of such
Collateral by, or the normal business operations of, the Company (or any
Permitted Lessee). Neither the Collateral Agent nor the Board shall have any
duty to make any such inspection and shall incur no liability or obligation by
reason of not making any such inspection.
(b) The Collateral Agent may by written notice to the Company request
notice of the next scheduled heavy maintenance visit of any Aircraft and the
Company shall permit observation of such visit subject to the terms and
conditions set forth above.
Section 2.06 UCC Collateral. The Company shall:
(a) upon the occurrence and during the continuance of an Event of Default
and upon the request of the Collateral Agent, promptly (i) notify each Account
Debtor in respect of the Pledged Accounts that such Accounts have been assigned
to the Collateral Agent hereunder, and that any payments due or to become due in
respect thereof are to be made directly to the Collateral Agent or its designee
(it being understood and agreed that the foregoing shall not limit the rights of
the Collateral Agent upon the occurrence and during the continuance of an Event
of Default to so notify the Account Debtors without giving prior notice to or
making a demand upon the Company including, without limitation, any notices
required to be given under the Anti-Assignment Act (41 U.S.C. ss. 15 and 31
U.S.C. ss. 3727)) and (ii) transfer to the Collateral Agent or its designee all
funds received by it from or on behalf of an Account Debtor in respect of the
Pledged Accounts (it being acknowledged and agreed that the Company shall be
31
deemed to be holding all such funds as trustee for the Collateral Agent and, as
such, shall not commingle such funds with other funds of the Company);
(b) upon the acquisition after the date hereof by the Company of any
additional or replacement Pledged Equipment covered by a certificate of title or
ownership, cause the Collateral Agent to be listed as the lienholder on such
certificate of title and take such other steps as may be required under the law
applicable to perfection of a security interest in such property to perfect such
security interest, and within thirty (30) days of the acquisition thereof
deliver evidence of the same to the Collateral Agent;
(c) (i) keep full and accurate books and records relating to the UCC
Collateral, including, without limitation, a current and complete list of all
Account Debtors obligated on any of the Pledged Accounts, along with their
respective names, addresses, telephone numbers, account or other identification
numbers and the balance and aging of their respective Pledged Accounts, copies
of which list the Company shall deliver to the Collateral Agent promptly after
the end of each fiscal quarter of the Company and as soon as practicable
following the Collateral Agent's request, and (ii) stamp or otherwise mark such
books and records in such manner as may be required to perfect the security
interest in such Collateral or at the request of the Collateral Agent in order
to reflect the security interests granted by this Security Agreement;
(d) permit representatives of the Collateral Agent, upon reasonable notice,
at any time during normal business hours to inspect the Pledged Equipment and to
inspect and make abstracts from its books and records pertaining to the UCC
Collateral, and permit representatives of the Collateral Agent to be present at
the Company's place of business to receive copies of all communications and
remittances relating to the UCC Collateral, and forward copies of any notices or
communications received by the Company with respect to the UCC Collateral, all
in such manner as may be deemed necessary or advisable;
(e) if it wishes to subject any additional Accounts, Equipment or other
Goods to the Lien of the Security Documents, at its sole cost and expense, amend
or supplement this Agreement to include such Accounts, Equipment or other Goods
(which amendment or supplement shall constitute a "Security Agreement
Supplement" under the Loan Agreement), and the Collateral Agent shall take, and
the Company shall authorize the Collateral Agent to take (to the extent such
authorization is necessary or required), at the Company's sole cost and expense
such action (including, without limitation, filing UCC financing statements and
the provision of requisite notices of assignment pursuant to applicable law and
the terms and conditions of any military charter contracts renewed or entered
into after the Closing Date) that may be deemed necessary or desirable in order
to perfect and protect the security interest to be created in such Accounts or
Goods and the Company shall otherwise comply with the terms of Section 5.14 of
the Loan Agreement with respect to such additional collateral;
(f) use commercially reasonable efforts to cause to be collected from its
Account Debtors, as and when due all amounts owing under or on account of each
of its Pledged Accounts (including, without limitation, Pledged Accounts which
32
are delinquent, which shall be collected in accordance with lawful collection
procedures) and shall apply forthwith upon receipt thereof all such amounts as
are so collected to the outstanding balance of such Pledged Accounts;
(g) keep the UCC Collateral (as applicable) in good working order and
repair, ordinary wear and tear excepted, and not use such Collateral in
violation of law or any policy of insurance thereon;
(h) not change (i) its name, identity or corporate structure in any manner,
(ii) the location of its chief executive office or (iii) its jurisdiction of
organization in any manner unless it shall have given the Collateral Agent at
least thirty (30) days' prior written notice thereof; and
(i) not change the location of any UCC Collateral owned by it if such
change would cause the security interests of the Collateral Agent in such
Collateral to lapse or cease to be perfected.
Section 2.07 Liens. The Company will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to any Collateral,
except Permitted Liens. The Company shall promptly, at its own expense, take
such action as may be necessary to duly discharge any Lien (other than a
Permitted Liens) arising at any time.
Section 2.08 Performance. The Company shall perform and observe all of its
agreements, covenants and obligations contained in the Loan Agreement and the
Notes, all of which are hereby incorporated by reference herein.
Section 2.09 Further Assurances. The Company agrees that it will promptly
correct any defect or error that may be discovered in any document delivered in
connection with the Security Documents to which it is a party or in the
execution, acknowledgment or recordation thereof.
ARTICLE 3
EVENT OF LOSS
Section 3.01 (a) Event of Loss with Respect to an Aircraft.
(i) Upon the occurrence of an Event of Loss with respect to any Airframe or
any Airframe and the Engines, Propellers, Spare Engines and/or engines then
installed on any Airframe, the Company shall:
(A) forthwith (and in any event, within five (5) Business Days after such
occurrence) give the Collateral Agent written notice of such Event of Loss; and
(B) not later than the earlier of (x) 60 days after the occurrence of such
Event of Loss or (y) the fifth (5th) Business Day following notification to the
Company of receipt by the loss payee of the insurance proceeds with respect to
such Event of Loss, give the Collateral Agent written notice of its election to
perform one of the following options (it being understood that the failure to
33
give such notice shall be deemed to be an election of the option set forth in
subclause (1) below):
(1) Not later than the earlier of (x) the Business Day next succeeding the
one hundred eightieth (180th) day following the occurrence of such Event of Loss
or (y) the first Interest Payment Date that is at least three (3) Business Days
after receipt by the loss payee of the insurance proceeds with respect to such
Event of Loss (but not earlier than the first Business Day next succeeding the
thirtieth (30th) day following the occurrence of such Event of Loss) (the
applicable day being the "Loss Payment Date"), the Company shall, to the extent
not paid to the Collateral Agent as insurance proceeds, pay or cause to be paid
to the Collateral Agent the insurance proceeds in respect of such Event of Loss.
Upon receipt of the insurance proceeds from the Company or the relevant
insurance provider, the Collateral Agent shall apply such insurance proceeds on
behalf of the Company as a prepayment in accordance with Section 2.6(c) of the
Loan Agreement. If such insurance proceeds are less than the Insured Amount, the
Company shall pay or cause to be paid to the Collateral Agent the difference
between the Insured Amount and the amount of such proceeds; or
(2) Not later than the Business Day next succeeding the one hundred
eightieth (180th) day following the occurrence of such Event of Loss, the
Company shall substitute an aircraft (together with engines and, if applicable,
propellers installed thereon) in accordance with the terms hereof subject to the
provisions of Section 2.6(c) of the Loan Agreement, provided that if (x) a
Specified Default or Event of Default shall have occurred and be continuing as
of such election date or (y) the Company shall have elected to make a
substitution under this clause (2) and shall fail for any reason to make such
substitution in accordance with the terms hereof, then the Company shall make
the payments required by clause (1) above on such date.
(ii) At such time as the Company shall have complied fully with the
provisions of clause (1) above, the Collateral Agent shall release from the Lien
of the Security Documents such Aircraft by executing and delivering to the
Company all documents and instruments, prepared at the Company's sole cost and
expense, as the Company may reasonably request to evidence such release.
(iii) The Company's right to substitute any Replacement Airframe,
Replacement Engine and Replacement Propeller as provided in Clause (B)(2) of
Section 3.01(a)(i) shall be subject to the fulfillment, at the Company's sole
cost and expense, of the following conditions precedent:
(A) on the date when any Replacement Airframe, Replacement Engine and
Replacement Propeller is subjected to the Lien of the Security Documents (such
date being referred to in this Section 3.01 as the "Replacement Closing Date"),
the following documents shall have been duly authorized, executed and delivered
by the respective party or parties thereto and shall be in full force and
effect, and an executed counterpart of each thereof shall have been delivered by
the Company to the Collateral Agent:
34
(I) a Security Agreement Supplement (Aircraft) covering each such
Replacement Airframe, Replacement Engine and Replacement Propeller shall have
been duly filed for recordation pursuant to the Federal Aviation Act or such
other applicable law of such jurisdiction other than the United States in which
each such Replacement Airframe, Replacement Engine and Replacement Propeller is
to be registered in accordance with Section 2.01(a)(iii), as the case may be;
and
(II) UCC financing statements (and any similar statements or other
documents required to be filed or delivered pursuant to the laws of the
jurisdiction in which each such Replacement Airframe, Replacement Engine and
Replacement Propeller, may be registered in accordance with Section
2.01(a)(iii)) as may be necessary or advisable to protect the security interests
of the Collateral Agent in each such Replacement Airframe, Replacement Engine
and Replacement Propeller;
(B) each Replacement Airframe shall be one or more airframes, shall be of
the same Manufacturer and type as the Aircraft (unless consented to by the
Collateral Agent) and shall have been manufactured by the Manufacturer in or
after the year that the Aircraft subject of the Event of Loss was manufactured
and each Replacement Engine shall be the engine applicable to such airframe or
airframes, as the case may be, of the same Manufacturer and type as the Engine
to be replaced and each Replacement Propeller shall be the propeller applicable
to such engine or engines, as the case may be, of the same Manufacturer and type
as the Propeller to be replaced and the Collateral Agent shall have received an
Appraisal Report from an Appraiser of each such Replacement Airframe,
Replacement Engine and Replacement Propeller, dated within ten (10) Business
Days of the Replacement Closing Date, evidencing that such Replacement Airframe,
Replacement Engine or Replacement Propeller, as the case may be, is of at least
the same value as the original Airframe, Engine or Propeller, as the case may
be, at the time of replacement (assuming the original Airframe, Engine or
Propeller, as the case may be, was in the condition and state of repair required
by this Security Agreement);
(C) the Collateral Agent shall have received satisfactory evidence as to
the compliance with Section 2.04 with respect to each such Replacement Airframe,
Replacement Engine and Replacement Propeller;
(D) the Collateral Agent, at the expense of the Company, shall have
received (acting directly or by authorization to its special counsel) (I) an
opinion of counsel to the Company (which opinion and counsel shall be reasonably
satisfactory to the Collateral Agent), addressed to the Collateral Agent, to the
effect that each Replacement Airframe, Replacement Engine and Replacement
Propeller, if any, has been made subject to the Lien of the Security Documents,
that all required action has been taken in order to maintain, and such action
shall maintain, the effectiveness, perfection and priority (to the extent the
same existed immediately prior to the occurrence of such Event of Loss, assuming
the Company was in compliance with all relevant terms hereof) of the security
interests in each such Airframe, Engine and Propeller and title thereto created
by this Security Agreement and that, except as may have been effected by a
change in law, the protections afforded to the Collateral Agent by Section 1110
35
of the Bankruptcy Code will not be less than such protections immediately prior
to the occurrence of such Event of Loss (assuming the Company was in compliance
with all relevant terms hereof) and (II) an opinion of qualified FAA counsel (or
counsel in any jurisdiction outside the United States where the Aircraft may be
registered in accordance with Section 2.01(a)(iii)) (which opinion and counsel
shall be reasonably satisfactory to the Collateral Agent), addressed to the
Collateral Agent, as to, in the case of FAA counsel, the due recordation of the
Security Agreement Supplement (Aircraft) and all other documents or instruments
the recordation of which is necessary to perfect and protect the rights of the
Collateral Agent in each such Replacement Airframe, Replacement Engine and
Replacement Propeller or, in the case of counsel in another jurisdiction, the
taking of all action necessary in such jurisdiction for such purposes;
(E) the representation contained in Section 4.6 of the Loan Agreement with
respect to each such Replacement Airframe, Replacement Engine and Replacement
Propeller shall be true and correct; and
(F) the Collateral Agent shall have received an Officer's Certificate of
the Company stating that all conditions precedent provided for in this Section
3.01(a) relating to such replacement have been complied with and representing
that any such Replacement Engine or Replacement Propeller is an Acceptable
Alternate Engine or Acceptable Alternate Propeller, as applicable, and
authorizing the Collateral Agent to rely on such Officer's Certificate.
(iv) Upon satisfaction of all conditions to such substitution, (A) the
Collateral Agent shall execute and deliver to the Company such documents and
instruments, prepared by the Company at the Company's sole cost and expense, as
the Company shall reasonably request to evidence the release of each such
replaced Airframe, Engine, Propeller or Spare Engine from the Lien of the
Security Documents, (B) the Collateral Agent shall assign to the Company all
claims it may have against any other Person relating to any Event of Loss giving
rise to such substitution and (C) subject to Section 2.6(c) of the Loan
Agreement, the Company shall receive all insurance proceeds and proceeds in
respect of any Event of Loss giving rise to such replacement. For all purposes
hereof, the property so substituted shall be deemed to be subjected to the Lien
of the Security Documents and shall be deemed an "Aircraft", "Airframe",
"Engine" or "Propeller", as the case may be, as defined herein.
(b) Event of Loss with Respect to an Engine, a Propeller or Spare Engine.
(i) Upon the occurrence of an Event of Loss with respect to an Engine or a
Propeller under circumstances in which there has not occurred an Event of Loss
with respect to an Airframe to which such Engine or Propeller was attached, or
an Event of Loss with respect to a Spare Engine not installed on any Airframe,
the Company shall forthwith (and in any event, within five (5) Business Days
after such occurrence) give the Collateral Agent written notice thereof and
shall, within one hundred and eighty (180) days after the occurrence of such
Event of Loss, substitute an Acceptable Alternate Engine or Acceptable Alternate
Propeller, as the case may be, free and clear of all Liens (other than Permitted
Liens) and cause such Acceptable Alternate Engine or Acceptable Alternate
Propeller, as the case may be, to be subjected to the Lien of the Security
36
Documents. The Company's right to make a replacement hereunder shall be subject
to the fulfillment (which may be simultaneous with such replacement) of the
following conditions precedent at the Company's sole cost and expense and the
Collateral Agent agrees to cooperate with the Company to the extent necessary to
enable it to timely satisfy such conditions:
(A) the following documents shall be duly authorized, executed and
delivered by the respective party or parties thereto, and an executed
counterpart of each shall be delivered to the Collateral Agent:
(I) a Security Agreement Supplement (Engine/Propeller) covering the
Replacement Engine or Replacement Propeller, as the case may be, which shall
have been duly filed for recordation by the Company pursuant to the Federal
Aviation Act (or such other applicable law of the jurisdiction other than the
United States in which such Aircraft of which such Engine or Propeller is a
part) is registered in accordance with Section 2.01(a)(iii); and
(II) UCC financing statements covering the security interests created by
this Security Agreement (and any similar statements or other documents required
to be filed or delivered pursuant to the laws of the jurisdiction in which such
Aircraft may be registered) as may be necessary or advisable to perfect the
security interests of the Collateral Agent in the Replacement Engine or
Replacement Propeller, as the case may be;
(B) the Company shall cause to be delivered to the Collateral Agent, an
opinion of counsel (which opinion and counsel shall be reasonably satisfactory
to the Collateral Agent) to the effect that the Lien of the Security Documents
continues to be in full force and effect, that the Replacement Engine or
Replacement Propeller, as the case may be, has duly been made subject to the
Lien of the Security Documents, that all required action has been taken in order
to maintain, and such action shall maintain, the effectiveness, perfection and
priority (to the extent the same existed, immediately prior to the occurrence of
such Event of Loss, assuming the Company was in compliance with all relevant
terms hereof) of the security interest on such Engine, Propeller or Spare
Engine, as applicable, and title thereto created by this Security Agreement and
that, except as may have been effected by a change in law, the protections
afforded to the Collateral Agent by Section 1110 of the Bankruptcy Code will not
be less than such protections immediately prior to the occurrence of such Event
of Loss (assuming the Company was in compliance with all relevant terms hereof);
(C) an opinion of qualified FAA counsel (or counsel in any jurisdiction
outside the United States where such Aircraft may be registered in accordance
with Section 2.01(a)(iii)) (which opinion and counsel shall be reasonably
satisfactory to the Collateral Agent), addressed to the Collateral Agent, as to,
in the case of FAA counsel, the due recordation of the Security Agreement
Supplement (Engine/Propeller) and all other documents or instruments the
recordation of which is necessary to perfect and protect the rights of the
Collateral Agent in the Replacement Engine or Replacement Propeller, as the case
37
may be or in the case of counsel in another jurisdiction, the taking of all
action necessary in such jurisdiction for such purposes;
(D) the representation contained in Section 4.6 of the Loan Agreement with
respect to each such Replacement Engine and Replacement Propeller shall be true
and correct; and
(E) the Company shall deliver to the Collateral Agent an Officer's
Certificate stating that in the opinion of such signer, all conditions precedent
provided for in this Section 3.01(b) relating to such replacement have been
complied with and representing that such alternate engine or alternate propeller
is an Acceptable Alternate Engine or Acceptable Alternate Propeller, as
applicable, and authorizing the Collateral Agent to rely on such Officer's
Certificate.
(ii) Upon satisfaction of all conditions to such substitution, (x) the
Collateral Agent shall execute and deliver to the Company such documents and
instruments, prepared at the Company's sole cost and expense, as the Company
shall reasonably request to evidence the release of such replaced Engine,
replaced Propeller or replaced Spare Engine, as the case may be, from the Lien
of the Security Documents, (y) the Collateral Agent shall assign to the Company
all claims it may have against any other Person relating to any Event of Loss
giving rise to such substitution and (z) subject to Section 2.6(c) of the Loan
Agreement, the Company shall receive all insurance proceeds and proceeds in
respect of any Event of Loss giving rise to such replacement. For all purposes
hereof, each such replacement engine and replacement propeller shall be deemed
to be subjected to the Lien of the Security Documents and shall be deemed an
"Engine", a "Spare Engine" or a "Propeller", as the case may be.
(c) Event of Loss with Respect to Pledged Spare Parts. As between the
Company and the Collateral Agent, all insurance proceeds received in respect of
Pledged Spare Parts, whether as a result of the occurrence of an Event of Loss,
or property damage or loss not constituting an Event of Loss, under policies
required to be maintained by the Company pursuant to Section 2.04 will be
applied in accordance with the provisions of Section 2.6(c) of the Loan
Agreement. If either the Collateral Agent or the Company receives a payment of
such insurance proceeds in excess of its entitlement pursuant to the preceding
sentence, it shall cause such payment to be applied in accordance with Section
2.6(c) of the Loan Agreement.
(d) Application of Payments from Governmental Authorities for Requisition
of Title, etc. Any payments (other than insurance proceeds the application of
which is provided for in Section 2.04) received at any time by the Collateral
Agent or by the Company from any Governmental Authority or other Person with
respect to an Event of Loss, other than a requisition for use by the United
States Government or other government of registry of an Aircraft or any
instrumentality or agency of any thereof not constituting an Event of Loss, will
be applied as follows:
(i) if payments are received with respect to an Airframe (or an Airframe
and any Engine, any Propeller, any Spare Engine or engines or propellers then
installed thereon), (A) unless the same are replaced pursuant to clause (B)(2)
38
of Section 3.01(a)(i), such payments shall be paid and applied in accordance
with clause (B)(1) of Section 3.01(a)(i); or (B) if such property is replaced
pursuant to clause (B)(2) of Section 3.01(a)(i), such payments shall, subject to
Section 2.6(c) of the Loan Agreement, be paid over to or retained by, the
Company; provided, that the Company shall have fully performed or, concurrently
therewith will fully perform, the terms of Section 3.01(a)(iii) with respect to
the Event of Loss for which such payments are made;
(ii) if such payments are received with respect to an Engine, Propeller or
Spare Engine under circumstances contemplated by Section 3.01(b) hereof, such
payments shall be paid in accordance with Section 2.6(c) of the Loan Agreement;
and
(iii) if such payments are received with respect to any Pledged Spare Part
under circumstances contemplated by Section 3.01(c) hereof, such payments shall
be paid in accordance with Section 2.6(c) of the Loan Agreement.
(e) Requisition for Use of an Aircraft by the United States Government or
Government of Registry of an Aircraft. In the event of the requisition for use
of any Airframe and the Engines or engines or Propellers or propellers installed
on such Airframe by the United States Government or any other government of
registry of such Aircraft or any instrumentality or agency of any thereof, the
Company shall promptly notify the Collateral Agent of such requisition, and all
of the Company's obligations under this Security Agreement with respect to such
Aircraft shall continue to the same extent as if such requisition had not
occurred. Subject to the rights of the Collateral Agent, upon the occurrence and
during the continuance of a Specified Default or Event of Default, all payments
received by the Collateral Agent or the Company from such government for the use
of such Airframe and Engines or engines or Propellers or propellers shall be
paid over to, or retained by, the Company (or, if directed by the Company, any
Permitted Lessee).
(f) Requisition for Use of an Engine, a Propeller or Spare Engine by the
United States Government or the Government of Registry of an Aircraft. In the
event of the requisition for use of an Engine, a Propeller or Spare Engine by
the United States Government or any other government of registry of the
applicable Aircraft or any agency or instrumentality of any thereof (other than
in the circumstances contemplated by subsection (e)), the Company shall replace
(or cause any Permitted Lessee to replace) such Engine, Propeller or Spare
Engine hereunder and Collateral Agent and the Company (or Permitted Lessee as
the case may be) shall comply with the terms of Section 3.01(b) hereof to the
same extent as if an Event of Loss had occurred at the time of such requisition
with respect to such Engine, such Propeller or such Spare Engine. Upon
compliance with, and subject to the rights of the Collateral Agent pursuant to,
Section 3.01(b) hereof, any payments received by Collateral Agent or the Company
from such government with respect to such requisition shall be paid over to, or
retained by the Company.
(g) Application of Payments During Existence of Specified Defaults and
Events of Default. Any amount referred to in this Section 3.01 which is payable
to or retainable by the Company (or any Permitted Lessee) shall not be paid to
or retained by the Company (or any Permitted Lessee) if at the time of such
payment or retention a Specified Default or any Event of Default shall have
39
occurred and be continuing, but shall be held by or paid over to Collateral
Agent and applied against the obligations of the Company (or such Permitted
Lessee) under the Loan Documents. At such time as there shall not be continuing
any such Specified Default or Event of Default, such amount shall be paid to the
Company to the extent not previously applied in accordance with the preceding
sentence. Prior to remitting any such funds to the Company, the Collateral Agent
shall be authorized to request and receive an Officer's Certificate from the
Company certifying that no Specified Default or Event of Default has occurred
and is continuing.
(h) Treatment of Insurance Proceeds in Accordance with Loan Agreement.
Notwithstanding anything to the contrary contained herein, any insurance
proceeds and any proceeds received in connection with a requisition of title by
any Governmental Authority payable to the Company or the loss payee as a result
of an Event of Loss with respect to all or any portion of the Collateral shall
be subject to Section 2.6(c) of the Loan Agreement without regard to whether the
Company elects pursuant to this Section 3.01 to substitute an aircraft,
Replacement Airframe, Replacement Engine, Replacement Propeller, Acceptable
Alternate Engine, Acceptable Alternate Propeller, Pledged Spare Parts or other
Collateral, as the case may be, in respect of Collateral which has suffered an
Event of Loss.
ARTICLE 4
REMEDIES
Section 4.01 Remedies Available to Collateral Agent.
(a) For the purpose of enforcing any and all rights and remedies under this
Security Agreement, after an Event of Default shall have occurred and so long as
such Event of Default shall be continuing: (i) upon the written demand of the
Collateral Agent and at the Company's expense, the Company shall promptly
deliver possession of any Collateral as the Collateral Agent may so demand to
the Collateral Agent or its designee in the manner and condition required by,
and otherwise in accordance with all the provisions of, this Security Agreement,
or the Collateral Agent at its option may enter upon the premises where all or
any part of the Collateral is located and take immediate possession of and
remove the same by summary proceedings or otherwise (and at the Collateral
Agent's option, store the same at the Company's premises until disposal thereof
by the Collateral Agent), all without liability accruing to the Collateral Agent
(other than that caused by the Collateral Agent's willful misconduct or gross
negligence as actually and finally determined by a final, non-appealable
judgment of a court of competent jurisdiction) for or by reason of such entry or
taking of possession or removing whether for the restoration of damage to
property caused by such action or otherwise; and (ii) the Company shall, at the
request of the Collateral Agent, promptly execute and deliver to the Collateral
Agent such instruments or other documents as may be necessary or advisable to
enable the Collateral Agent or an agent or representative designated by the
Collateral Agent, at such time or times and place or places as the Collateral
Agent may specify, to obtain possession of all or any part of the Collateral the
possession of which the Collateral Agent shall at the time be entitled to
hereunder; provided, that during any period any Aircraft is activated under the
Civil Reserve Air Fleet Program in accordance with the provisions of Section
2.01(b)(i)(F) hereof and in the possession of the government of the United
States of America or an instrumentality or agency thereof, the Collateral Agent
shall not, on account of any Event of Default, be entitled to exercise any of
its rights under this Section 4.01 against the Collateral in such manner as to
40
limit the Company's control of the associated Airframe or any Engines installed
thereon, unless at least sixty (60) days' (or such lesser period as may then be
applicable under the Air Mobility Command program of the United States
Government) prior written notice of Default hereunder shall have been given by
the Collateral Agent to the Company with a copy addressed to the Contracting
Office Representative for the Air Mobility Command of the United States Air
Force under the contract with the Company relating to such Aircraft.
(b) After an Event of Default shall have occurred and so long as such Event
of Default shall be continuing, then and in every such case the Collateral
Agent, as holder of a security interest in the Collateral may, and when required
pursuant to the provisions of Section 7.2 of the Loan Agreement shall, exercise,
any or all of the rights and powers and pursue any and all of the remedies
accorded to a secured party under the UCC and under any other applicable law,
may recover judgment in its own name as Collateral Agent against the Collateral
and may take possession of all or any part of the Collateral and may exclude the
Company and all Persons claiming under any of them wholly or partly therefrom.
Any proceeds received or realized by the Collateral Agent at any time pursuant
to the exercise of remedies hereunder shall be promptly transferred by the
Collateral Agent to the account of the Agent specified in Section 2.9(a) of the
Loan Agreement for application in accordance with the priority of payments set
forth in Section 2.9(e) of the Loan Agreement.
(c) So long as an Event of Default shall have occurred and be continuing,
the Collateral Agent may, if at the time such action may be lawful and always
subject to compliance with any mandatory legal requirements, either with or
without taking possession, and either before or after taking possession and
without instituting any legal proceedings whatsoever, and having first given
notice of such sale by registered mail to the Company, at least 20 days prior to
the date of such sale, and any other notice which may be required by law, sell
and dispose of the Collateral, or any part thereof, or interest therein, at
public auction or private sale, in one lot as an entirety or in separate lots,
and either for cash or on credit and on such terms as the Collateral Agent may
determine, and at any place (whether or not it be the location of the Collateral
or any part thereof) and time designated in the notice above referred to.
(d) Any such sale may be adjourned from time to time by announcement at the
time and place appointed for such sale, or for any such adjourned sale, without
further notice, and the Collateral Agent or any Lender may bid and become the
purchaser at any such sale and each Lender shall be entitled at any public
auction sale to credit against any purchase price bid at such public auction
sale by such Lender all or any part of any unpaid obligations owing to such
Lender secured by the Lien of the Security Documents.
(e) If an Event of Default has occurred and is continuing, the Collateral
Agent shall also be entitled to pursue all or any part of the Collateral
wherever it may be found and may enter any of the premises of the Company or any
other Person wherever the Collateral may be or be supposed to be and search for
the Collateral and take possession of any item of the Collateral pursuant to
this Section 4.01(e). The Collateral Agent may, from time to time, at the
expense of the Company, make all such expenditures for the collection,
maintenance, insurance, repairs, replacements, alterations, additions and
improvements to and of the Collateral, as it may deem proper. In each such case,
the Collateral Agent shall have the right to collect, maintain, use, insure,
operate, store, lease, control or manage the Collateral, and to carry on
business and exercise all rights and powers of the Company relating to the
Collateral as the Collateral Agent shall deem appropriate, including the right
41
to enter into any and all such agreements with respect to the collection,
maintenance, use, insurance, operation, storage, leasing, control or management
of the Collateral or any part thereof. The Collateral Agent shall be entitled to
collect, sue for and receive directly all monies due or to become due, tolls,
rents, issues, profits, products, revenues or other income pursuant to this
Section 4.01(e). In accordance with the terms of this Section 4.01(e), such
monies due or to become due, tolls, rents, issues, profits, products, revenues
and other income shall be applied to pay the expenses of collecting, using,
operating, storing, leasing, controlling or managing the Collateral, and of all
maintenance, insurance, repairs, replacements, alterations, additions and
improvements, and to make all payments which the Collateral Agent may be
required or may elect to make, if any, for taxes, assessments, insurance or
other proper charges upon the Collateral or any part thereof (including the
employment of engineers and accountants to examine, inspect and make reports
upon the properties and books and records of the Company), and all other
payments which the Collateral Agent may be required or authorized to make under
any provision of this Security Agreement, including this Section 4.01(e), as
well as just and reasonable compensation for the services of the Collateral
Agent, and of all persons properly engaged and employed by the Collateral Agent.
(f) Subject to Section 4.01(c), the Collateral Agent may proceed to protect
and enforce this Security Agreement by suit or suits or proceedings in equity,
at law or in bankruptcy, and whether for the specific performance of any
covenant or agreement herein contained or in execution or aid of any power
herein granted; or for foreclosure hereunder, or for the appointment of a
receiver or receivers for the Collateral or any part thereof, or for the
recovery of judgment for the indebtedness secured by the Lien created under this
Security Agreement or for the enforcement of any other proper, legal or
equitable remedy available under applicable law.
(g) Each and every right, power and remedy herein given to the Collateral
Agent specifically or otherwise in this Security Agreement shall be cumulative
and shall be in addition to every other right, power and remedy herein
specifically given or now or hereafter existing at law, in equity or by statute,
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time and as often in such order
as may be deemed expedient by the Collateral Agent, and the exercise or the
beginning of the exercise of any 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 Collateral Agent in the exercise of
any right, remedy or power or in pursuing 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 Company or to be an acquiescence therein.
(h) Upon and during the continuance of an Event of Default the Collateral
Agent shall be entitled to undertake an acceptance of all or a part of the
Collateral in satisfaction of all or a specified part of the Obligations
pursuant to and in accordance with the provisions of Sections 9-620 and 9-621 of
the UCC and, if pursuant to such Sections and after such Event of Default the
Company consents to such acceptance, which consent shall not be unreasonably
withheld, then the Company shall execute and deliver such deeds of conveyance,
assignments and other documents or instruments (including any notices or
applications to the FAA or any other Governmental Authority having jurisdiction
over the Collateral subject to such conveyance) as shall be reasonably required
to effectuate the transfer of such Collateral, together with the certificates,
42
if any, representing the same and any other rights of the Company with respect
thereto, to the Collateral Agent or any designee or designees selected by the
Collateral Agent.
Section 4.02 Expenses. The Company agrees that it will upon demand pay to
the Collateral Agent:
(a) the amount of any taxes payable by reason of the Collateral Agent's
security interests in respect of the Collateral or to free any of the Collateral
from any Lien thereon; and
(b) the amount of any and all reasonable out-of-pocket expenses, including,
but not limited to, any excise, property, transfer, sales and use taxes imposed
by any state, federal or other local authority on any of the Collateral, and
reasonable fees and disbursements of counsel and of any other experts payable in
connection with the enforcement of this Security Agreement after and during the
continuance of any Event of Default, including such expenses as are incurred in
connection with:
(i) the collection, sale or other disposition of the Collateral;
(ii) any action taken by the Collateral Agent to effect compliance on
behalf of the Company in respect of a failure by the Company to comply with the
provisions of this Security Agreement which results (or is likely to result) in
the diminution of the value of the Collateral or the validity, perfection, rank
or value of the Collateral Agent's security interest in the Collateral;
(iii) protecting, storing, warehousing, appraising, insuring, handling,
maintaining, shipping, overhauling and repairing the Collateral; or
(iv) the exercise by the Collateral Agent of any of the rights or powers
conferred upon it hereunder.
Any such amount not paid to the Collateral Agent on demand shall bear
interest for each day until paid at a rate per annum equal to the sum of 2% per
annum plus the Applicable Tranche A Interest Rate for such day.
Section 4.03 Waiver of Claims. (a) Except as otherwise provided in this
Security Agreement, the Company hereby waives, to the maximum extent permitted
by applicable law, notice and judicial hearing in connection with the Collateral
Agent's taking possession, retention, disposition or sale of any Collateral,
including any and all prior notice and hearing for any prejudgment remedy or
remedies and any such right which the Company would otherwise have under any
applicable law, and the Company hereby further waives, to the maximum extent
permitted by law:
(i) provided that the actions taken comply, in all material respects, with
applicable law, including but not limited to all applicable provisions of the
UCC, all claims, damages and demands against the Collateral Agent, the Board,
the Lenders and the Participants arising out of such taking of possession,
retention, disposition or sale of the Collateral except such claims, damages and
43
demands as may arise out of such Person's own gross negligence or willful
misconduct as actually and finally determined by a final non-appealable judgment
of a court of competent jurisdiction and only to the extent of direct (as
opposed to special, indirect, consequential or punitive) damages;
(ii) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the Collateral Agent's
rights hereunder; and
(iii) all rights of redemption, appraisal, 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
or other disposition of any part of the Collateral, and the Company, 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; provided, however, that the
actions taken by the Collateral Agent as described in Section 4.03 herein
comply, in all material respects, with applicable law, including but not limited
to all applicable provisions of the UCC.
(b) The Company, for itself and all who claim through it, hereby waives all
right to have the Collateral marshaled upon any foreclosure hereof and agrees
that any court having jurisdiction to foreclose this Security Agreement may
order the sale of the Collateral as an entity.
Section 4.04 Discontinuance of Proceedings. In case the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Security Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Collateral Agent, then and in every such
case the Company, the Collateral Agent and each Lender shall be restored to
their former positions and rights hereunder with respect to the Collateral
subject to the security interest and Lien created under the Security Documents
and all rights, remedies and powers of the Collateral Agent shall continue as if
no such proceeding had been instituted.
ARTICLE 5
TERMINATION OF SECURITY AGREEMENT
Section 5.01 Termination of Security Agreement. This Security Agreement
shall terminate upon payment and performance in full of all of the obligations
hereby secured. Upon termination, the Company shall direct, at the Company's
sole cost and expense, the Collateral Agent to execute and deliver, at the
Company's sole cost and expense, to or as directed in writing by the Company
appropriate instruments reasonably required to release all the property included
in the Collateral from the Lien of the Security Documents and the Collateral
Agent shall execute and deliver such instruments as aforesaid; provided,
however, that this Security Agreement shall earlier terminate and this Security
Agreement shall be of no further force or effect upon any sale or other final
disposition by the Collateral Agent of all property constituting part of the
Collateral and the final distribution by the Collateral Agent of all monies or
44
other property or proceeds constituting part of the Collateral in accordance
with the terms hereof. Except as aforesaid otherwise provided, this Security
Agreement shall continue in full force and effect in accordance with the terms
hereof.
ARTICLE 6
MISCELLANEOUS
Section 6.01 Notices. All notices and other communication 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 telecopy as follows:
if to the Company, to:
American Trans Air, Inc.
7337 West Washington Street
Indianapolis, Indiana 46231
Attention: 317-247-4000
Facsimile: 317-247-7091
if to the Collateral Agent, to:
Citibank, N.A., Agency and Trust
111 Wall Street, 14th Floor
New York, NY 10043
Attention: Fernando Moreyra
Facsimile: 212-657-2762
Either party hereto may change its address or telecopy number for notices
and other communications hereunder by notice to the other party hereto. All
notices and other communications given to either party hereto in accordance with
the provisions of this Security Agreement shall be deemed to have been given on
the date of receipt.
Section 6.02 GOVERNING LAW. THIS SECURITY AGREEMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK; PROVIDED THAT IN
THE EVENT THE BOARD BECOMES A LENDER PURSUANT TO THE BOARD GUARANTEE, THE RIGHTS
AND OBLIGATIONS OF THE BOARD HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE FEDERAL LAW OF THE UNITED STATES OF AMERICA, IF AND TO THE
EXTENT SUCH FEDERAL LAW IS APPLICABLE, AND OTHERWISE IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK. THE PROVISIONS OF SECTION 10.11 OF THE LOAN AGREEMENT
45
ARE INCORPORATED HEREIN MUTATIS MUTANDIS, AS IF FULLY SET FORTH HEREIN.
Section 6.03 Execution in Counterparts. This Security Agreement may be
executed in any number of counterparts, each of which shall be an original but
such counterparts shall together constitute but one instrument.
Section 6.04 Amendments. This Security Agreement may be amended in
accordance with the provisions set forth in Section 10.1 of the Loan Agreement.
Section 6.05 Documentation. The Company shall provide the Collateral Agent
with copies of all documents executed in connection with the Security Documents.
Section 6.06 Cash Collateral. (a) Any amounts held by the Collateral Agent
pursuant to the provisions of this Agreement shall be invested by the Collateral
Agent from time to time in Eligible Investments as directed in an Officer's
Certificate from the Company so long as the Collateral Agent may acquire the
same using commercially reasonable efforts. The parties hereto agree that the
Collateral Agent and/or an Affiliate of the Collateral Agent may charge and/or
collect fees and expenses in connection with the purchase of Eligible
Investments or for other services rendered to the parties hereto (provided that
such charges, fees and expenses are on terms consistent with terms negotiated at
arm's length). Neither the Collateral Agent nor any of its Affiliates shall be
required to account for any profits or benefits described in the preceding
sentence. All Eligible Investments held by the Collateral Agent pursuant to this
Section 6.05 shall be registered in the name of, payable to the order of, or
specially endorsed to, the Collateral Agent. Any income realized as a result of
any such investment, net of the Collateral Agent's reasonable fees and expenses
in making such investment, shall be held and applied by the Collateral Agent in
the same manner as the principal amount of such investment is to be applied and
any losses, net of earnings and such reasonable fees and expenses, shall be
charged against the principal amount invested. All taxes on any income so
realized shall be charged to the Company. The Collateral Agent shall not be
liable for any loss resulting from any investment to be made by it under this
Agreement other than by reason of its willful misconduct or gross negligence as
actually and finally determined in a final, non-appealable judgment of a court
of competent jurisdiction.
(b) Neither the Collateral Agent nor any of its Affiliates assume any duty
or liability for monitoring the rating of the selected investment. In the event
an investment selection is not made, the amounts held by the Collateral Agent
pursuant to the provisions of this Security Agreement shall not be invested and
the Collateral Agent shall not incur any liability for interest or income
thereon.
(c) The Collateral Agent shall have no obligation to invest or reinvest
amounts to be held by the Collateral Agent if all or a portion of such amounts
are deposited with the Collateral Agent after 11:00 a.m. (New York time) on the
day of the deposit. Instructions to invest or reinvest that are received after
11:00 a.m. (New York time) will be treated as if received on the following
Business Day in New York.
46
(d) The Collateral Agent shall have the power to sell or liquidate the
foregoing investments whenever the Collateral Agent shall be required to
distribute the amounts held pursuant to the terms of this Security Agreement or
as otherwise contemplated in this Security Agreement. Requests or instructions
received after 11:00 a.m. (New York time) by the Collateral Agent to liquidate
such amounts will be treated as if received on the following Business Day in New
York.
(e) The Collateral Agent shall have no responsibility for any investment
losses resulting from the investment, reinvestment or liquidation of the amounts
held by the Collateral Agent pursuant to the terms of this Security Agreement
provided that the Collateral Agent has made such investment, reinvestment or
liquidation of the trust assets in accordance with the terms, and subject to the
conditions, of this Security Agreement.
(f) Each of the parties to this Security Agreement acknowledge that
non-deposit investment products are not obligations of, or guaranteed by,
Citibank, N.A. or Citigroup North America, Inc., nor any of their affiliates;
are not FDIC insured; and are subject to investment risks, including the
possible loss of principal amount invested in one of the money market funds made
available by the Collateral Agent and selected by the Company.
(g) Any investment direction contained herein may be executed through an
affiliated broker or dealer of the Collateral Agent and any such affiliated
broker or dealer shall be entitled to such broker's or dealer's usual and
customary fees for such execution.
(h) The Eligible Investments may be held by the Collateral Agent directly
or through any clearing agency or depository (collectively, the "Clearing
Agency") including, without limitation, the Federal Reserve/Treasury Book-Entry
System for United States and federal agency securities, and The Depository Trust
Company. The Collateral Agent shall not have any responsibility or liability for
the actions or omissions to act on the part of any Clearing Agency.
(i) Notwithstanding anything contained herein to the contrary, the parties
hereto hereby agree and acknowledge that due to the potential conflict of
interest, the Collateral Agent will not purchase Citigroup North America, Inc.
or any affiliate's commercial paper (collectively, "Citigroup Paper") unless the
Collateral Agent is specifically instructed to purchase Citigroup Paper in an
Officer's Certificate from the Company. Any instruction for the purchase of
Citigroup Paper must be given by the Company on a transaction by transaction
basis in the manner set forth in the preceding sentence.
47
IN WITNESS WHEREOF, the parties to hereto have caused this Mortgage and
Security Agreement to be duly executed by their respective officers thereunto
duly authorized.
AMERICAN TRANS AIR, INC.
By: /s/Kenneth K. Wolff
Name: Kenneth K. Wolff
Title: Executive Vice President & CFO
CITIBANK, N.A.,
as Collateral Agent
By: /s/Edward C. Morelli
Name: Edward C. Morelli
Title: Vice President
EXHIBIT A1 to Mortgage and Security Agreement
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (AIRCRAFT) NO. ( )
This MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (AIRCRAFT) NO. (___) dated
__________ (herein called this "Security Agreement Supplement") made by AMERICAN
TRANS AIR, INC., an Indiana corporation (herein called the "Company"), in favor
of CITIBANK, N.A., as Collateral Agent for, and directed by, the Board and the
Lenders (as defined in the Loan Agreement (as defined in the Security Agreement
(as defined below))) (the "Collateral Agent").
WITNESSETH:
WHEREAS, the Company has heretofore executed and delivered to the
Collateral Agent a Mortgage and Security Agreement dated as of November 20, 2002
(as amended, modified, restated or otherwise supplemented from time to time in
accordance with its terms, the "Security Agreement"), covering, inter alia,
Aircraft, Airframes, Engines and Propellers of the Company;
WHEREAS, terms that are defined in the Security Agreement or the Loan
Agreement (as such term is defined in the Security Agreement) and which are not
otherwise defined herein shall have the meanings assigned to such terms in the
Security Agreement or the Loan Agreement;
WHEREAS, the Security Agreement has been recorded, pursuant to the Federal
Aviation Act, by the FAA at Oklahoma City, Oklahoma, on ________ and assigned
Conveyance No. _________; and
WHEREAS, the Security Agreement provides for the execution and delivery
from time to time of Mortgage and Security Agreement Supplements, each
substantially in the form hereof, for the purpose of subjecting an aircraft,
airframe, engine and/or propeller to the Lien of the Security Agreement.
NOW, THEREFORE, this Security Agreement Supplement Witnesseth, that to
secure the prompt payment of the principal of, interest on, and all other
amounts due with respect to the Loan and to secure the performance and
observance by the Company of all the agreements, covenants and provisions
contained in the Security Agreement, in the Loan Agreement and in the other Loan
Documents and the prompt payment of any and all amounts from time to time owing
hereunder, under the Loan Agreement and the other Loan Documents, and for the
uses and purposes and subject to the terms and provisions of the Security
Agreement, and in consideration of the premises and of the covenants contained
in the Security Agreement, and of other good and valuable consideration the
receipt and adequacy whereof are hereby acknowledged, the Company has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Collateral Agent, its successors and
assigns, for the security and benefit of the Board, the Lenders and the
Participants, a first priority security interest in and first priority mortgage
Lien on the following described property:
AIRFRAME
One Airframe identified as follows:
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
together with all Parts which are from time to time incorporated or installed in
or attached thereto, unless the Lien of the Security Agreement shall not be
applicable to such Part pursuant to the provisions of the Security Agreement.
AIRCRAFT ENGINES
[____] aircraft engines, each such engine having 750 or more rated take-off
horsepower or the equivalent thereof, whether or not such engines shall be
installed in or attached to the above Airframe or any other Aircraft or
airframe, identified as follows:
Manufacturer's
Manufacturer Model Serial Number
PROPELLERS
[____] propellers, each such propeller capable of absorbing 750 or more
rated take-off shaft horsepower or the equivalent thereof, whether or not such
propellers shall be installed in or attached to the above Engines or any other
engine, identified as follows:
Manufacturer's
Manufacturer Model Serial Number
in each case, together with all Parts which are from time to time incorporated
or installed in or attached thereto, unless the Lien of the Security Agreement
shall not be applicable to such Part pursuant to the provisions of the Security
Agreement.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.
This Security Agreement Supplement shall be construed as a supplemental
Security Agreement and shall form a part thereof, and the Security Agreement is
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.
IN WITNESS WHEREOF, the Company caused this Mortgage and Security Agreement
Supplement (Aircraft) No. (__) to be duly executed by one of its officers,
thereunto duly authorized, on the day and year first above written.
AMERICAN TRANS AIR, INC.
By:
-------------------------------
Name:
Title:
EXHIBIT A2 to Mortgage and Security Agreement
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (ENGINE/PROPELLER) NO. ( )
This MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (ENGINE/PROPELLER) NO. (__)
dated ______________ (herein called this "Security Agreement Supplement") made
by American Trans Air, Inc., an Indiana corporation (herein called the
"Company"), in favor of CITIBANK, N.A., as Collateral Agent for, and directed
by, the Board and the Lenders (as defined in the Loan Agreement (as defined in
the Security Agreement (as defined below))) (the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the
Collateral Agent a Mortgage and Security Agreement dated as of November 20, 2002
(as amended, modified, restated or otherwise supplemented from time to time in
accordance with its terms, the "Security Agreement"), covering, inter alia,
Engines, Propellers and Spare Engines of the Company;
WHEREAS, terms that are defined in the Security Agreement or the Loan
Agreement (as such term is defined in the Security Agreement) and which are not
otherwise defined herein shall have the meanings assigned to such terms in the
Security Agreement or the Loan Agreement;
WHEREAS, the Security Agreement has been recorded, pursuant to the Federal
Aviation Act, by the FAA at Oklahoma City, Oklahoma, on ________ and assigned
Conveyance No. _________; and
WHEREAS, the Security Agreement provides for the execution and delivery
from time to time of Mortgage and Security Agreement Supplements, each
substantially in the form hereof, for the purpose of subjecting engines and/or
propellers to the Lien of the Security Agreement.
NOW, THEREFORE, this Security Agreement Supplement Witnesseth, that to
secure the prompt payment of the principal of, interest on and all other amounts
due with respect to the Loan and to secure the performance and observance by the
Company of all the agreements, covenants and provisions contained in the
Security Agreement, in the Loan Agreement and in the other Loan Documents and
the prompt payment of any and all amounts from time to time owing hereunder,
under the Loan Agreement and the other Loan Documents and for the uses and
purposes and subject to the terms and provisions of the Security Agreement, and
in consideration of the premises and of the covenants contained in the Security
Agreement, and of other good and valuable consideration the receipt and adequacy
whereof are hereby acknowledged, the Company has granted, bargained, sold,
assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does
hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and
confirm, unto the Collateral Agent, its successors and assigns, for the security
and benefit of the Board, the Lenders and the Participants, a first priority
security interest in and first priority mortgage Lien on the following described
property:
AIRCRAFT ENGINES
[____] aircraft engines, each such engine having 750 or more rated take-off
horsepower or the equivalent thereof, whether or not such engines shall be
installed in or attached to any Aircraft or airframe, identified as follows:
Manufacturer's
Manufacturer Model Serial Number
PROPELLERS
[____] propellers, each such propeller capable of absorbing
750 or more rated take-off shaft horsepower or the equivalent thereof, whether
or not such propellers shall be installed in or attached to the above Engines or
any other engine, identified as follows:
Manufacturer's
Manufacturer Model Serial Number
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, unless the Lien of the
Security Agreement shall not be applicable to such Part pursuant to the
provisions of the Security Agreement.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.
This Security Agreement Supplement shall be construed as a supplemental
Security Agreement and shall form a part thereof, and the Security Agreement is
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.
IN WITNESS WHEREOF, the Company has caused this Mortgage and Security
Agreement Supplement (Engine/Propeller) No. (__) to be duly executed by one of
its officers, thereunto duly authorized, on the day and year first above
written.
AMERICAN TRANS AIR, INC.
By:
-----------------------------------
Name:
Title:
EXHIBIT A3 to Mortgage and Security Agreement
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (PLEDGED SPARE PARTS) NO. ( )
This MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (PLEDGED SPARE PARTS) NO.
(__) dated ______________ (herein called this "Security Agreement Supplement")
made by AMERICAN TRANS AIR, INC., an Indiana corporation (herein called the
"Company"), in favor of CITIBANK, N.A., as Collateral Agent for, and directed
by, the Board and the Lenders (as defined in the Loan Agreement (as defined in
the Security Agreement (as defined below))) (the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the
Collateral Agent a Mortgage and Security Agreement dated as of November 20, 2002
(as amended, modified, restated or otherwise supplemented from time to time in
accordance with its terms, the "Security Agreement"), covering, inter alia,
certain Spare Parts and Appliances of the Company;
WHEREAS, terms that are defined in the Security Agreement or the Loan
Agreement (as such term is defined in the Security Agreement) and which are not
otherwise defined herein shall have the meanings assigned to such terms in the
Security Agreement or the Loan Agreement;
WHEREAS, the Security Agreement has been recorded, pursuant to the Federal
Aviation Act, by the FAA at Oklahoma City, Oklahoma, on ________ and assigned
Conveyance No. _________; and
WHEREAS, the Security Agreement provides for the execution and delivery
from time to time of Mortgage and Security Agreement Supplements, each
substantially in the form hereof, for the purpose of subjecting spare parts and
appliances to the Lien of the Security Agreement.
NOW, THEREFORE, this Security Agreement Supplement Witnesseth, that to
secure the prompt payment of the principal of, interest on and all other amounts
due with respect to the Loan and to secure the performance and observance by the
Company of all the agreements, covenants and provisions contained in the
Security Agreement, in the Loan Agreement and in the other Loan Documents and
the prompt payment of any and all amounts from time to time owing hereunder,
under the Loan Agreement and the other Loan Documents and for the uses and
purposes and subject to the terms and provisions of the Security Agreement, and
in consideration of the premises and of the covenants contained in the Security
Agreement, and of other good and valuable consideration the receipt and adequacy
whereof are hereby acknowledged, the Company has granted, bargained, sold,
assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does
hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and
confirm, unto the Collateral Agent, its successors and assigns, for the security
and benefit of the Board, the Lenders and the Participants, a first priority
security interest in and first priority mortgage Lien on the following described
property:
PLEDGED SPARE PARTS
[Describe]
The Pledged Spare Parts described above are located, as of the date hereof,
at [specify locations] (each such location to be included as a Designated
Location).
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.
This Security Agreement Supplement shall be construed as a supplemental
Security Agreement and shall form a part thereof, and the Security Agreement is
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.
IN WITNESS WHEREOF, the Company has caused this Mortgage and Security
Agreement Supplement (Pledged Spare Parts) No. (__) to be duly executed by one
of its officers, thereunto duly authorized, on the day and year first above
written.
AMERICAN TRANS AIR, INC.
By:
--------------------------------------
Name:
Title:
EXHIBIT B to Mortgage and Security Agreement
SCHEDULE OF AIRCRAFT
EXHIBIT C to Mortgage and Security Agreement
SCHEDULE OF SPARE ENGINES
EXHIBIT D to Mortgage and Security Agreement
SUMMARY DESCRIPTION OF PLEDGED SPARE PARTS
Boeing Model 737-83N aircraft (737-800) rotable parts, meaning an
accessory, appurtenance, or part of an aircraft (except an engine or propeller),
engine (except a propeller), spare engine, propeller, or Appliance, that is to
be installed at a later time on an aircraft, engine, propeller or Appliance.
Boeing Model 757-33N (757-200/300) aircraft rotable parts, meaning an
accessory, appurtenance, or part of an aircraft (except an engine or propeller),
engine (except a propeller), spare engine, propeller, or Appliance, that is to
be installed at a later time on an aircraft, engine, propeller or Appliance.
Multi-fleet rotables compatible with B737-800, B757-200, and/or B757-300
aircraft types, meaning an accessory, appurtenance, or part of an aircraft
(except an engine or propeller), engine (except a propeller), spare engine,
propeller, or Appliance, that is to be installed at a later time on an aircraft,
engine, propeller or Appliance.
(this summary description is by way of illustration and not limitation)
EXHIBIT E to Mortgage and Security Agreement
DESIGNATED LOCATIONS
Boston, Massachusetts (BOS)
Logan International Airport
c/o Hudson General
American Airlines Hgr.
East Boston, MA 02128
Chicago, Illinois (MDW)
Midway Airport
ATA Warehouse
6535 South Austin Avenue
Bedford Park, Illinois 60638
Chicago, Illinois (MDW)
Midway Airport
ATA MDW Hangar
5245 W. 55th St.
Chicago, IL 60638
Chicago, Illinois (ORD)
Terminal 5
O'Hare International Airport (P.O. Box 66499)
Gate M4, Lower
Chicago, Illinois 60666
Detroit, Michigan (DTW)
Detroit Metropolitan Airport
ATA Maintenance, Bldg 719
Detroit, MI 48242
Ft. Lauderdale, Florida (FLL) 100 Terminal Drive Terminal No. 2
Ft. Lauderdale / Hollywood International Airport Ft. Lauderdale, FL
33315
Honolulu, Hawaii (HNL)
Honolulu International Airport
ATA Maintenance Office
300 Rodgers Blvd. No. 5
Honolulu, HI 96819
Indianapolis, Indiana (IND)
ATA Distribution Center
4555 West Bradbury Avenue. Suite No. 3
Indianapolis, IN 46241
Indianapolis, Indiana (IND)
ATA IND Hangar
7661 N. Perimeter Rd.
Indianapolis, IN 46241
Las Vegas, Nevada (LAS)
Charter Int'l Terminal
5757 Wayne Newton Blvd.
Las Vegas, NV 89111
Las Vegas, Nevada (LAS)
McCarran International Airport
ATA Maintenance
P.O. Box 11027 Las Vegas, NV 89111
Las Vegas, Nevada (LAS)
Nelles AFB, Bldg #2094
Las Vegas, NV 89191
Los Angeles, California (LAX)
5720 Avion Drive, Unit A
LAX International Airport
Los Angeles, CA 90045
Los Angeles, California (LAX)
c/o Ogden Allied
6951 World Way West
Los Angeles, CA 90045
Milwaukee, Wisconsin (MKE)
201 W. Cargo Way
Milwaukee, WI 53207
Minneapolis, Minnesota (MSP)
3000 E 72nd Street
Bloomington, MN 55450
Minneapolis, Minnesota (MSP)
6300 34th Ave So
Minneapolis, MN 55450
New York City, New York (JFK)
JFK International Airport
Horizon Aviation
Hangar No. 4
Jamaica, NY 11430
Orlando, Florida (MCO)
9043 Tradeport Drive
Orlando, FL 32827-4365
Orlando, Florida (MCO)
9443 Benford Road
Orlando, FL 32827
Philadelphia, Pennsylvania (PHL)
c/o AMR, Inc.
Cargo Unit No. 1
Philadelphia, PA 19152
Philadelphia, Pennsylvania (PHL)
Art Milano
c/o American Trans Air
1343 Bullens Lane
Woodlyn, PA 19094
Phoenix, Arizona (PHX)
Phoenix International Airport
c/o America West Airlines
4000 E. Skyharbor Blvd.
Terminal No. 4
Phoenix, AZ 85034
St. Petersburg/Tampa, Florida (PIE) St. Petersburg-Clearwater Int'l
Airport 4707 140th Avenue North
Suite 307
Clearwater, FL 33762
San Francisco, California (SFO)
San Francisco Int'l Airport
Gate 24, Lower
San Francisco, CA 94128
Sarasota/Bradenton, Florida (SRQ)
c/o Servisair Cargo
Sarasota / Bradenton Airport
8051 N. Tamiani, Trail, Suite 25
Sarasota, FL 34243
EXHIBIT F to Mortgage and Security Agreement
SCHEDULE OF COUNTRIES AUTHORIZED
FOR DOMICILE OF PERMITTED LESSEES
Australia
Austria
Belgium
Brazil
Canada
Chile
Czech Republic
Denmark
Finland
France
Germany
Iceland
Ireland
Italy
Japan
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Republic of China (Taiwan)
South Africa
South Korea
Sweden
Switzerland
United Kingdom
EXHIBIT G to Mortgage and Security Agreement
SCHEDULE OF COUNTRIES AUTHORIZED
FOR AIRCRAFT REGISTRATION
Australia
Austria
Belgium
Brazil
Canada
Chile
Czech Republic
Denmark
Finland
France
Germany
Iceland
Ireland
Italy
Japan
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Republic of China (Taiwan)
South Africa
South Korea
Sweden
Switzerland
United Kingdom