AIRCRAFT CHATTEL MORTGAGE
AND SECURITY AGREEMENT
This AIRCRAFT CHATTEL MORTGAGE AND SECURITY AGREEMENT (this "Chattel
Mortgage"), dated July 31, 1997, between MERCY AIR SERVICE, INC., a corporation
organized and existing under the laws of the State of California having its
chief executive office and principal place of business at 8190 Mango, Fontana,
California 92334 (hereinafter called the "Mortgagor"), as mortgagor, and FINOVA
CAPITAL CORPORATION, a Delaware corporation, having an office at 115 West
Century Road, Paramus, New Jersey 07652 (hereinafter called the "Mortgagee"), as
mortgagee.
W H E R E A S:
(A) The Mortgagor, as borrower, and Mortgagee, as lender, have entered into
a Secured Loan Agreement dated as of July 31, 1997 (as at any time amended or
supplemented, hereinafter referred to as the "Loan Agreement"), providing for
the making of the Loan (hereinafter defined) by the Mortgagee to the Mortgagor;
(B) The Mortgagee has agreed to make the Loan to the Mortgagor to enable,
among other things, the Mortgagor to refinance the existing secured indebtedness
relating to the Aircraft; and
(C) It is a condition precedent to the Mortgagee's obligation to make the
Loan to the Mortgagor under the Loan Agreement that Mortgagor execute and
deliver this Chattel Mortgage for the purposes, among other things, of securing
(i) the payment of all sums which may become payable by the Mortgagor under the
Loan Agreement and this Chattel Mortgage and each other Loan Document
(hereinafter defined), and (ii) the performance of the covenants, undertakings
and obligations of the Mortgagor under the Loan Agreement, this Chattel Mortgage
and each other Loan Document (the payment and performance obligations of the
Mortgagor described in clauses (i) and (ii) above being hereinafter collectively
referred to as the "Obligations"), and for the purpose of subjecting the
properties and assets hereinafter described to the Lien of this Chattel
Mortgage.
NOW, THEREFORE, in consideration of the premises and Mortgagee's making the
Loan and other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound and to secure
the performance of the Obligations, the Mortgagor does hereby grant, bargain,
sell, transfer, convey and mortgage unto the Mortgagee, its successors and
assigns, and gives to the Mortgagee: (i)
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a first priority security interest in and Lien upon the Flight Equipment
(hereinafter defined) and (ii) a first priority security interest in and Lien
upon all the rest of the following described property (the Flight Equipment
together with the rest of the property described below being hereinafter
collectively referred to as the "Mortgaged Property"), to wit:
SCHEDULE OF MORTGAGED PROPERTY
CLAUSE FIRST.
Airframe
One (1) airframe ("Airframe 47135"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 222B N408MA 47135
Helicopter
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 47135.
Engines
Two (2) Avco Lycoming model LTS101-750C-1 Engines (the "47135 Engines")
(each such engine having less than 750 or more rated take-off horsepower or the
equivalent thereof), identified by the following manufacturer serial numbers:
LE-47155AE
LE-47158AE
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 47135 Engines.
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CLAUSE SECOND.
Airframe
One (1) airframe ("Airframe 47516"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 222U N403MA 47516
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 47516.
Engines
Two (2) Avco Lycoming model LTS101-750C-1 Engines (the "47516 Engines")
(each such engine having less than 750 or more rated take-off horsepower or the
equivalent thereof), identified by the following manufacturer serial numbers:
LE-47008AE
LE-47041AE
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 47516 Engines.
CLAUSE THIRD.
Airframe
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One (1) airframe ("Airframe 47526"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 222UT N416MA 47526 Helicopter
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 47526.
Engines
Two (2) Avco Lycoming model LTS101-750C-1 Engines (the "47526 Engines")
(each such engine having less than 750 or more rated take-off horsepower or the
equivalent thereof), identified by the following manufacturer serial numbers:
LE-47075AE
LE-47061AE
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 47526 Engines.
CLAUSE FOURTH.
Airframe
One (1) airframe ("Airframe 47568"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 222U N415MA 47568
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together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 47568.
Engines
Two (2) Avco Lycoming model LTS101-750C-1 Engines (the "47568 Engines")
(each such engine having less than 750 or more rated take-off horsepower or the
equivalent thereof), identified by the following manufacturer serial numbers:
LE-47063AE
LE-47140AE
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 47568 Engines.
CLAUSE FIFTH.
Airframe
One (1) airframe ("Airframe 33060"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 412 N401MA 33060
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 33060.
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Engines
Two (2) Pratt & Whitney Canada model PT6T-3B Engines (the "33060 Engines")
(each such engine having 750 or more rated take-off horsepower or the equivalent
thereof), identified by the following manufacturer serial numbers:
61584
61585
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 33060 Engines.
CLAUSE SIXTH.
Airframe
One (1) airframe ("Airframe 36009"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 412 N586AC 36009
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 36009.
Engines
Two (2) Pratt & Whitney Canada model PT6T-3B Engines (the "36009 Engines")
(each such engine having 750 or more rated take-off horsepower or the equivalent
thereof), identified by the following manufacturer serial numbers:
63209
63210
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together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 36009 Engines.
CLAUSE SEVENTH.
All property which shall be subjected to the Lien of this Chattel Mortgage
by a supplemental chattel mortgage in substantially the form of Schedule II
hereto.
The Airframe and Engines referred to in Clauses First, Second Third,
Fourth, Fifth and Sixth and all property which shall be identified as an
Airframe or an Engine in, and subjected to the Lien of this Chattel Mortgage by,
a supplemental chattel mortgage as provided in this Clause Seventh are
hereinafter collectively referred to as the "Flight Equipment."
CLAUSE EIGHTH.
All warranties, service contracts, product agreements and maintenance
service plans of any manufacturer or of any maintenance or overhaul agency of or
for the Flight Equipment, or any subcontractor or supplier or vendor thereof, to
the extent assignable or enforceable, and any and all rights of the Mortgagor to
compel performance of the terms of such warranties, service contracts, product
agreements and maintenance service plans in respect of any of the Flight
Equipment.
CLAUSE NINTH.
All substitutions, replacements, proceeds (including, but not limited to,
insurance proceeds) and renewals of all property subjected or required to be
subjected to the Lien hereof and all property which shall hereafter become
physically attached to or incorporated in all property subjected or required to
be subjected to the Lien hereof, in each case whether the same are now owned by
the Mortgagor or shall hereafter be acquired by it.
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CLAUSE TENTH.
All monies deposited from time to time with the Mortgagee (including, but
not limited to, insurance proceeds pursuant to Section 2.1 hereof and all
Maintenance Reserves).
CLAUSE ELEVENTH.
All records, logs, manuals and documents or other materials of any kind
relating to the condition, use, location, maintenance of or repairs or overhauls
to all or any part of the Flight Equipment.
CLAUSE TWELFTH.
All insurance policies covering the Flight Equipment which are carried or
maintained to satisfy the terms of this Chattel Mortgage.
CLAUSE THIRTEENTH.
All right, title and interest of Mortgagor in and to any lease, hire,
Service Contract or other agreement for the use of the aircraft (including, but
not limited to the right to receive any rent, insurance proceeds or other
amounts thereunder).
CLAUSE FOURTEENTH.
All Proceeds of any of the foregoing.
Title to or a Lien upon all property mortgaged hereby, or intended to be,
and which is hereafter acquired by the Mortgagor or to which it may at any time
hereafter be, in any manner, entitled at law or in equity, and required to be
subjected hereto or intended so to be, shall vest in the Mortgagee, under the
terms and conditions of this Chattel Mortgage, forthwith upon acquisition
thereof by the Mortgagor, and such property shall be as fully embraced within
the provisions of this Chattel Mortgage and subject to the Lien hereof as if
such property were now owned by the Mortgagor and were specifically described
herein and mortgaged hereby.
TO HAVE AND TO HOLD, all and singular said property unto the Mortgagee, its
successors and assigns, as security as aforesaid.
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All of the Mortgaged Property shall secure all of the Obligations.
IT IS HEREBY COVENANTED AND DECLARED by and between the parties hereto and
their respective successors and assigns that the terms upon which the Mortgaged
Property shall be held, used and operated are as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. For all purposes of this Chattel Mortgage, unless
the context otherwise requires:
"AIRCRAFT" shall mean, collectively, Aircraft 47135, Aircraft 47516,
Aircraft 47526, Aircraft 47568, Aircraft 33060 and Aircraft 36009.
"AIRCRAFT 47135" shall mean the airframe and engines described in Clause
FIRST of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 47516" shall mean the airframe and engines described in Clause
SECOND of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 47526" shall mean the airframe and engines described in Clause
THIRD of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 47568" shall mean the airframe and engines described in Clause
FOURTH of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 33060" shall mean the airframe and engines described in Clause
FIFTH of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 36009" shall mean the airframe and engines described in Clause
SIXTH of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT ENGINES", "APPLIANCES" and "SPARE PARTS" shall have the
respective meanings given to these terms in Title 49 of the United States Code
as in effect on the date of this instrument.
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"AIRFRAME" shall mean any of the airframes that constitute a part of any of
the Aircraft.
"CHATTEL MORTGAGE" shall mean this instrument.
"CLOSING DATE" shall mean the date the Loan is advanced under the Loan
Agreement and shall be the date hereof.
"DEFAULT" shall mean an event which, with the passage of time, or giving of
notice, or both, would constitute an Event of Default . "ENGINE" or "ENGINES"
shall mean any or all of the Engines which are part of the Flight Equipment.
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in Schedule
I hereto.
"EVENT OF LOSS" with respect to any of the Aircraft, any of the Airframes
or any Engine shall mean (a) the loss of use of such property due to the
destruction of or damage to such property which renders repair uneconomic or
which renders such property permanently unfit for normal use by Mortgagor for
any reason whatsoever; (b) any damage to such property which results in an
insurance settlement with respect to such property on the basis of an actual, or
a constructive total loss; (c) the theft or disappearance of such property for a
period in excess of 90 days; (d) the confiscation, condemnation, or other
requisition of title to, or use of, such property by any governmental or
purported governmental authority, which in the case of any event referred to in
this clause (d) shall have resulted in the loss of possession of such property
by Mortgagor or loss of title by Mortgagor for a period in excess of 90 days or
(e) the "grounding" of the Aircraft for a period of 90 days due to any law,
rule, regulation, order or other action by the FAA or by any governmental body
(including any court) having jurisdiction affecting such Aircraft.
"EXCLUDED AMOUNTS" means (i) proceeds of public liability insurance in
respect of the Mortgaged Property payable as a result of insurance claims made,
or losses suffered, by Mortgagor, any affiliate of Mortgagor or any director,
officer, employee, representative or agent of Mortgagor or any such affiliate,
(ii) proceeds of insurance maintained with respect to the Mortgaged Property by
Mortgagor or any such affiliate and not required under any other Loan Document,
(iii) any interest paid or payable on any amounts described in clauses (i)
through (ii) of this definition, and (iv) the proceeds from
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the enforcement of the payment of any amount described in clauses (i) through
(ii) of this definition.
"FEDERAL AVIATION ADMINISTRATION" OR "FAA" shall mean the Federal Aviation
Administration, or any successor or substituted governmental authority at the
time having jurisdiction over the Flight Equipment.
"MAINTENANCE RESERVES" shall have the meaning set forth in Section 3.5(B)
hereof.
"FLIGHT EQUIPMENT" shall have the meaning ascribed to such term in the
granting clause SEVENTH hereof.
"FLIGHT HOUR" with respect to each Aircraft, shall mean each hour or
fraction thereof elapsed from the moment the Aircraft leaves the ground through
the moment the Aircraft touches down upon the ground.
"GAAP" shall mean generally accepted accounting principles in the United
States of America and Canada (as such principles may change from time to time)
applied on a consistent basis (except for changes in application in which
Mortgagor's independent certified public accountants concur), applied both to
classification of items and amounts.
"GUARANTOR" shall mean Air Methods Corporation, a corporation organized and
existing under the laws of the State of Delaware.
"GUARANTY" shall mean the continuing Guaranty and Subordination Agreement
dated as of the Closing Date between the Guarantor and the Mortgagee.
"INSURANCE SIDE LETTER" shall mean the side letter dated on or before the
Closing Date between the Mortgagor and the Mortgagee which sets forth the
insurance requirements with respect to the Aircraft.
"LAW" shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any government, any governmental agency or any court.
"LIEN" shall mean any mortgage, pledge, lien, charge, encumbrance, option,
security interest or lease (including any conditional sale agreement, equipment
trust
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agreement, or other title retention agreement) or right or claim of any person,
whether voluntary or involuntary in nature.
"LOAN" shall mean the principal amount of the loan made by the Mortgagee
pursuant to the Loan Agreement, which is outstanding from time to time and due
the Mortgagee under the Loan Agreement and the Notes.
"LOAN AGREEMENT" shall have the meaning ascribed to such term in Paragraph
(A) of the recitals of this Chattel Mortgage.
"LOAN DOCUMENTS" shall mean, collectively, the Loan Agreement, the Note,
this Chattel Mortgage, the Guaranty, the Insurance Side Letter and all other
documents executed in connection with each of the foregoing agreements or
contemplated thereby or the transactions related thereto.
"LOAN TERM" shall mean the period commencing on the Closing Date through
and including that date which shall be the earlier of: (i) the date on which the
Loan together with all fees and sums which may become payable under the Loan
Agreement and under the other Loan Documents becomes repayable, or (ii) the date
on which the Loan becomes payable in full under the provisions of Section 7 or 8
of the Loan Agreement.
"MAINTENANCE RESERVES" shall have the meaning set forth in Section 3.5(B)
hereof.
"MORTGAGOR ORDER" and "MORTGAGOR REQUEST" shall mean, respectively, a
written order or request signed in the name of the Mortgagor by a member of the
Mortgagor and delivered to the Mortgagee in accordance with the terms hereof.
"NOTE" shall mean the Promissory Note, dated the Closing Date, issued by
the Mortgagor to the Mortgagee pursuant to the terms of the Loan Agreement.
"OBLIGATIONS" shall have the meaning set forth in Paragraph (C) of the
recitals of this Chattel Mortgage.
"OFFICER'S CERTIFICATE" shall mean a certificate signed by an authorized
officer of the Mortgagor and delivered to the Mortgagee.
"PERMITTED LIENS" shall mean:
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(i) materialmen's, mechanics', workmen's, repairmen's,
employees' or other like Liens arising in the ordinary course of Mortgagor's
business securing obligations that are not overdue for a period of more than
thirty (30) days or are being contested in good faith by appropriate
proceedings, so long as during such 30-day period there is not, or such
proceedings do not involve, any material risk of the sale, forfeiture or loss of
either of the Airframe or any Engine or any interest therein;
(ii) Liens arising out of any judgment or award against
Mortgagor, unless the judgment secured shall not, within thirty (30) days after
the entry thereof, have been discharged, vacated, reversed or execution thereof
stayed pending appeal or shall not have been discharged, vacated or reversed
within thirty (30) days after the expiration of such stay, so long as during any
such 30-day period there is not, or any such judgment or award does not involve,
any material risk of the sale, forfeiture or loss of either of any Airframe or
any Engine or any interest therein unless Mortgagor shall have provided a bond
or other security in an amount and under terms reasonably satisfactory to
Mortgagee;
(iii) any Liens for Taxes: (a) which the Mortgagor is contesting
in good faith through appropriate proceedings; (b) for which the Mortgagor is
recording reserves in accordance with GAAP or otherwise maintaining reserves;
and (c) which Liens do not involve any material risk of the sale, forfeiture or
loss of any Airframe or Engine or any interest therein;
(iv) any other Lien with respect to which Mortgagor shall have
provided a bond or other security in an amount and under terms reasonably
satisfactory to Mortgagee;
(v) any Lien, lease or Service Contract consented to by the
Mortgagee; and
(vi) the Lien of this Chattel Mortgage.
"PERMITTED SALE" shall mean a sale of any of the Aircraft consented to by
the Mortgagee or a sale of an Aircraft in connection with a prepayment of a
portion of the Loan as set forth in Section 7.2 of the Loan Agreement.
"PROCEEDS" shall have the broadest meaning permissible under the Uniform
Commercial Code of Arizona and shall include all proceeds, whether such proceeds
are money, accounts, instruments, chattel paper, documents, equipment,
inventory, farm products, consumer goods, general intangibles, or deposit
accounts, and, in any event,
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shall include but shall not be limited to (i) all rents, fees, lease payments,
sublease payments and all other amounts due or collected under or in respect of
leases, subleases, all insurance proceed, judgments or awards relating to any of
the foregoing and all goods, documents, instruments, general intangibles,
chattel paper and accounts, wherever located, acquired with the cash proceeds of
such equipment or the proceeds thereof and (ii) any and all payments (in any
form whatsoever) made or due and payable to the Mortgagor, from time to time, in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Mortgaged Property by any governmental
body, authority, bureau or agency (or any person or entity acting under color of
governmental authority).
"REPAYMENT DATE" shall mean each day on which principal or interest is due
on the Loan as set forth in the Loan Agreement.
"SERVICE CONTRACT" shall mean any service contract or wet lease for the
charter of any of the Aircraft.
"SUBSEQUENT AGREEMENT" any credit facility, loan agreement, lease or other
financing document entered into between the Mortgagor or the Guarantor and the
Mortgagee after the date hereof.
"TAXES" shall mean all present and future taxes, levies, imposts, duties or
charges of any nature whatever and wherever imposed, including, without
limitation, value added taxes or similar taxes and any franchise, transfer,
sales, use, business, occupation, excise, personal property, real property,
stamp or other tax imposed by any national or local taxing or fiscal authority
or agency, together with any penalties, additions to tax, fines or interest
thereon, excluding, however, any and all taxes imposed upon or measured by the
income of the Mortgagee; and "TAX" and "TAXATION" shall be construed
accordingly.
"TITLE 49" shall mean Title 49 of the United States Code, and the rules and
regulations promulgated thereunder, as in effect on the date of this Chattel
Mortgage and as modified or amended hereafter, or any successor or substituted
legislation at the time in effect and applicable.
SECTION 1.2 CONSTRUCTION. (A) Unless the context of this Chattel Mortgage
otherwise clearly requires, references to the plural include the singular, the
singular the plural, the part the whole, and "or" has the inclusive meaning
frequently identified by the phrase "and/or." References to "determination" by
Mortgagee include a
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good-faith estimate by Mortgagee (in the case of a quantitative determination)
and a good faith belief by Mortgagee (in the case of a qualitative
determination). References to the terms "acting reasonably" or "reasonably
satisfactory to Mortgagee, acting reasonably" or terms of similar import mean
satisfactory or acceptable to the Mortgagee acting in a reasonable manner but in
accordance with our business practices. The words "herein," "hereunder" and
"hereof" and similar terms in this Chattel Mortgage refer to this Chattel
Mortgage as a whole and not to any particular provision of this Chattel
Mortgage. The Section, Paragraph and other headings contained in this Chattel
Mortgage are for reference purposes only and shall not control or affect the
construction of this Chattel Mortgage or the interpretation thereof in any
respect.
(B) Any defined term contained in this Chattel Mortgage or in any of the
Loan Documents which refers to a document, instrument, agreement or mortgage
shall include any amendments, supplements or modifications entered into from
time to time with respect to such document, instrument, agreement or mortgage.
ARTICLE II
CASH COLLATERAL
SECTION 2.1 A. CASH COLLATERAL. All monies received by the Mortgagee as
proceeds of insurance upon any part of the Mortgaged Property, the Maintenance
Reserves and all monies elsewhere herein provided to be held and applied under
this Section, and all monies, if any, required to be paid to the Mortgagee
hereunder, whose disposition is not elsewhere herein otherwise specifically
provided for (all such monies being hereinafter sometimes called the "Cash
Collateral"), shall be held by the Mortgagee and applied by the Mortgagee from
time to time as provided herein and in the Loan Agreement. Unless otherwise
expressly set forth herein to the contrary, Mortgagee shall have no obligation
to segregate Cash Collateral.
B. PROCEEDS OF INSURANCE USED FOR REPAIR. Provided an Event of Default
shall not have occurred and be continuing, to the extent that any Cash
Collateral is the proceeds of insurance upon any part of the Mortgaged Property
not subject to an Event of Loss, the same may be withdrawn by the Mortgagor and
shall be paid by the Mortgagee, upon Mortgagor Order, (a) to reimburse the
Mortgagor for, and up to an amount not exceeding, expenditures made to repair
and/or restore the property damaged as required hereunder, but only upon receipt
by the Mortgagee of (1) a Mortgagor Request for the withdrawal and payment of
specified proceeds of insurance then included in the Cash Collateral, and (2) an
Officer's Certificate, dated not more than five days prior to the
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application for such withdrawal, stating that expenditures have been made by the
Mortgagor in a specified amount for one or more of the purposes aforesaid, which
shall be briefly described, and also stating that no part of such expenditures
has been or is then being used in any other previous or then pending
application, as the basis for the withdrawal of any Cash Collateral from the
Mortgagee hereunder; or (b) directly to the vendor or contractor who has
provided parts and/or labor, specified proceeds of insurance then included in
the Cash Collateral, upon receipt by the Mortgagee of a Mortgagor Request for
withdrawal and payment of such insurance proceeds and upon receipt by Mortgagee
of an invoice for payment for such labor or parts used to repair the Flight
Equipment, and for which an insurance payment has been made to Mortgagee.
ARTICLE III
PARTICULAR COVENANTS OF THE MORTGAGOR
The Mortgagor covenants, agrees, represents and warrants in particular as
hereinafter in this Article set forth:
SECTION 3.1 WARRANTY AND COVENANT OF TITLE. At the time of the execution
and delivery of this instrument, the Mortgagor owns the Flight Equipment subject
to no Lien, except Permitted Liens, and has full power and authority to grant,
bargain, sell, transfer, convey and mortgage, and give a security interest in,
the Flight Equipment in the manner and form as set forth in this Chattel
Mortgage. Except for a Permitted Sale, the Mortgagor is and shall remain the
legal owner, free and clear of all Liens, of the Flight Equipment.
The Mortgagor hereby does and will forever warrant and defend the title to
and possession of the Mortgaged Property against the claims and demands of all
persons whomsoever, except the claims and demands under the Permitted Liens.
Mortgagor shall preserve and maintain the security interest in the Mortgaged
Property granted by Mortgagor to Mortgagee hereunder. Mortgagor: (a) shall
execute, deliver and file all documents and take all actions necessary to at all
times keep the Lien and security interest granted herein with respect to the
Mortgaged Property, at the Mortgagor's expense, a duly perfected first priority
security interest in and Lien upon the Flight Equipment, and a duly perfected
first priority security interest in and Lien upon all of the other Mortgaged
Property as constituted from time to time, superior to the rights of all third
parties (except Permitted Liens) to the fullest extent permitted by applicable
law, and (b) shall obtain any authorization, approval, license, or consent of
any competent governmental or judicial authority, including, without limitation,
the FAA Aircraft Registry which may be or
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become necessary in order for the Mortgagee to obtain the full benefits of this
Chattel Mortgage and all rights and powers granted or to be granted herein.
SECTION 3.2 RECORDING. (A) The Mortgagor, at its own expense, will record,
re-record, register, re-register, file and re-file this Chattel Mortgage and
each and every supplemental chattel mortgage and such other financing statements
or other instruments in all such jurisdictions and offices as the Mortgagee
reasonably shall from time to time require in order that: (a) the Lien hereof as
a first priority lien on the Flight Equipment and on all of the other Mortgaged
Property, subject to Permitted Liens, (b) the security for the Obligations, and
(c) the rights and remedies of the Mortgagee, may be established, confirmed,
maintained and protected.
(B) The Mortgagor hereby appoints Mortgagee as its irrevocable attorney in
fact (said agency coupled with an interest) to take all such action and execute
all such documents in Mortgagee's own name or in the name of the Mortgagor that
is necessary to carry out the purposes of Paragraph 3.2(A).
(C) Except for a Permitted Sale, the Aircraft shall at all times be
registered in the United States in the name of the Mortgagor.
SECTION 3.3 TO KEEP IN EFFECT AUTHORIZATIONS; TO PAY TAXES. The Mortgagor
will obtain and maintain, or cause to be obtained or maintained, in full force
and effect, any authorization, approval, license, or consent of any governmental
or judicial authority including, without limitation, registration of the
Aircraft with the FAA Aircraft Registry, which may be or become necessary in
order to obtain the full benefits of this Chattel Mortgage and all rights and
remedies granted or to be granted herein, and will not create or suffer to exist
any Lien upon the Mortgaged Property or any part thereof or upon the income
therefrom other than Permitted Liens; and the Mortgagor will from time to time
pay or cause to be paid as they become due and payable all taxes, assessments
and governmental charges lawfully levied or assessed or imposed upon the Lien of
the Mortgagee so that the Lien of this Chattel Mortgage shall at all times be
wholly preserved at the cost of the Mortgagor and without expense to the
Mortgagee; and the Mortgagor will not suffer any other matter or thing
whatsoever whereby the Lien of or security interest created by this Chattel
Mortgage might be impaired.
SECTION 3.4 INDEMNIFICATION. The Mortgagor shall assume liability for and
indemnify, protect, save, and keep harmless the Mortgagee, its officers,
directors, agents, and employees from and against any and all liabilities,
losses, damages, taxes (excluding, however, any and all taxes imposed upon or
measured by the income of the
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Mortgagee), claims, actions, suits, reasonable costs and expenses of whatsoever
kind (excluding, however, (i) any and all taxes imposed upon or measured by the
income of the Mortgagee and (ii) any liabilities, losses, damages or claims
directly resulting from the gross negligence or willful misconduct of the
Mortgagee), including, without limitation, reasonable legal fees and
disbursements, imposed on, incurred by, or asserted against the Mortgagee, its
stockholders, officers, directors, agents and employees in any way relating to
or arising out of the purchase, ownership, delivery, possession, use, operation,
condition, performance, quality, suitability, airworthiness, maintenance,
registration, loss, confiscation, seizure, requisition, lease, sale, or other
disposition of the Mortgaged Property or any part thereof, or this Chattel
Mortgage or any other Loan Document or any of the instruments or agreements to
be entered into by the parties pursuant hereto or thereto.
SECTION 3.5 TO MAINTAIN FLIGHT EQUIPMENT. (A) The Mortgagor shall at all
times maintain, preserve and keep (or cause to be maintained, preserved and
kept) all of the Flight Equipment as from time to time constituted and every
part thereof in good order and repair (ordinary wear and tear excepted): (i) in
order to maintain and preserve at all times the FAA Certificate of Airworthiness
("COA"); (ii) in conformity with Title 49, all FAA regulations, all other local
aviation authority requirements and all other applicable Law; (iii) in
accordance with the Mortgagor's or manufacturer's FAA approved maintenance
program; and (iv) to the extent the Mortgagor or Lessee owns or leases aircraft
of a similar make and model as the Aircraft, in accordance with the same
standards employed by the Mortgagor with respect to such other aircraft. In
complying with items (i), (ii), (iii) and (iv) of the previous sentence the
Mortgagor will make, or cause to be made, all needed and proper service and
repairs to the Flight Equipment, including the completion or termination of all
airworthiness directives and mandatory manufacturer's service bulletins. The
Mortgagor shall perform, or cause to be performed, all other maintenance,
service and repairs to the Flight Equipment necessary to obtain and maintain all
licenses, permits, certificates, registrations or other documents required by
any insurance policy or any governmental authority having jurisdiction regarding
the Flight Equipment.
(B) The Mortgagor will maintain accounting reserves based upon each
Aircraft's hourly usage in the amounts not less than the amounts set forth on
Schedule III attached hereto or in such amounts required pursuant to GAAP
(provided, however, that in all instances such reserves shall properly reflect
the cost of maintaining the Aircraft based on overhaul and maintenance costs in
accordance with industry standards). In the event that the consolidated
financial statements provided by the Guarantor to the Mortgagee pursuant to the
terms of the Guaranty reflect losses in any four successive
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quarterly reporting periods (as determined by the Mortgagee in its reasonable
discretion by examination of the financial statements delivered to the Mortgagee
by the Guarantor pursuant to the terms of the Guaranty) (the "Loss Period"), the
Mortgagor shall pay to the Mortgagee on each Repayment Date for all periods of
time after the Loss Period until the occurrence of the Financial Correction
(defined below), an aggregate amount equal to the product of: (i) the number of
Flight Hours incurred during the prior one month period multiplied by the
greater of: (a) the amounts set forth on Schedule III attached hereto or (b) the
rates employed by the Mortgagor in calculating the accounting reserves for each
Aircraft (the aggregate amount of all such payments less the aggregate amount of
all distributions made by the Mortgagee to the Mortgagor for Covered Maintenance
(defined below) being hereinafter collectively referred to as the "Maintenance
Reserves"). Unless an Event of Default shall have occurred and be continuing,
within five Banking Days after receipt by the Mortgagee of: (i) a certificate of
an officer of the Mortgagor stating that Covered Maintenance has been performed
on an Airframe, an Engine or any other Part, and the cost thereof, or stating
that advance payments are required by a third-party maintenance provider under a
contract covering any such work, and the amount of such payments; and (ii)
appropriate documentation with respect to such work or payments, the Mortgagee
shall pay to the Mortgagor an amount equal to the lesser of: (a) the actual cost
of such work or such advance payment, as the case may be, and (b) the aggregate
amount of the Maintenance Reserves. Upon the satisfaction in full of the
Obligations, any amounts paid to Mortgagee as Maintenance Reserves and not used
to reimburse the Mortgagor for Covered Maintenance or applied by the Mortgagee
as cash collateral after the occurrence of an Event of Default shall be paid to
Mortgagor. The Mortgagee shall deposit the Maintenance Reserves in a separate
interest-bearing account. Any interest accruing to the Maintenance Reserves in
the interest bearing account shall included as a part of the Maintenance
Reserves. If, after the occurrence of an Event of Default, the Mortgagee applies
all or any portion of the Maintenance Reserves to satisfy the Obligations, the
Mortgagor shall be obligated to replenish such Maintenance Reserves upon receipt
of written notice from the Mortgagee informing the Mortgagor that the
Maintenance Reserves have been applied to the Obligations.
(C) "Covered Maintenance" means, with respect to any Airframe, Engine, or
life limited Part, any scheduled mid-life inspection, overhaul or replacement
which is required under the manufacturer's approved maintenance program (but
excluding any maintenance required as a result of foreign object damage,
mishandling, faulty maintenance, accidental damage, abuse, modification or
alteration, or any cost which is covered by insurance or warranty); PROVIDED,
HOWEVER, that the cost of Covered Maintenance shall be limited to the actual
cost of replacement parts plus labor costs charged to the Mortgagor and shall in
no event include late charges, interest or other
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similar amounts; provided, further, however, that to the extent the Mortgagor or
any affiliate of the Mortgagor performs any overhaul or other work which
constitutes Covered Maintenance, the hourly labor charge shall be computed at
the prevailing industry standard (determined by the Mortgagee in its reasonable
discretion) for the performance of such overhaul or other work performed by the
Mortgagor. "Financial Correction" means, after any Loss Period, if the the
Mortgagor records profits (as determined by the Mortgagee in its reasonable
discretion by examination of the financial statements delivered to the Mortgagee
by the Guarantor pursuant to the terms of the Guaranty) which in the aggregate
exceed the aggregate amount of losses recorded for the Loss Period during any
period of time equal to or less than four consecutive quarterly periods.
(D) The Mortgagor will replace or will cause to be replaced all or any part
of the Flight Equipment (including, without limitation, any Engine, but
excluding the entire Aircraft under circumstances constituting an Event of Loss
with respect to the Aircraft) that may be retired (whether by expropriation,
wearing out, loss or destruction or other cause), or may be in any way rendered
unfit for use, with a replacement part of comparable grade, quality and utility,
which replacement part shall be in the same or better serviceable condition by
standards of the FAA as the unit so retired or rendered unfit for use assuming
such replaced part was maintained in accordance with the provisions hereof and
will, with respect to replacement engines, execute and deliver to Mortgagee a
supplemental mortgage in the form of Schedule II attached hereto and such other
documents as may be necessary to accord Mortgagee a first priority Lien under
this Mortgage with respect thereto and to subject such replacement property to
the Lien of this Mortgage as Mortgaged Property. Except as specifically
permitted in this Section 3.5(D), the Mortgagor shall not alter or modify the
Flight Equipment without the prior written consent of the Mortgagee.
(E) The Mortgagor will advise the Mortgagee of the receipt by the Mortgagor
of any notice from the FAA as to any violation of or failure to comply with
Title 49 or any order, rule, directive or regulation of the FAA.
SECTION 3.6 TO INSURE. (A) The Mortgagor shall at all times procure and
maintain, or cause to be procured and maintained, on the Flight Equipment,
without liability and at no cost to the Mortgagee, policies of insurance in such
form, of such type and with insurers reasonably satisfactory to the Mortgagee
and in compliance with the Insurance Side Letter.
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(B) All proceeds of insurance paid to the Mortgagee shall be held and paid
over or applied by the Mortgagee as provided in Section 2.1 and, if an Event of
Default has occurred and is continuing, Article 4.
SECTION 3.7 RECORDS; INFORMATION. The Mortgagor will at all times maintain,
or cause to be maintained, the Records: (i) in accordance with the rules and
regulations of the FAA; (ii) to accurately disclose the use, maintenance,
condition and the income generated by the Flight Equipment; (iii) to enable the
Mortgagor to determine the accounting reserves specified in the first sentence
of Section 3.5(B) and (iv) in order to enable the Mortgagee to complete any
internal or other reports required in connection with the maintenance of the
Loan; provided, however, that the Mortgagor's obligations under this clause (iv)
shall not extend beyond the reports: (a) that the Mortgagor and the Guarantor
are obligated to provide pursuant to any other credit or lease agreement, (b)
that the Mortgagor prepares in the ordinary course of its business or (c) that
are required under the terms of this Chattel Mortgage. Mortgagor shall provide
to the Mortgagee: (a) quarterly maintenance reports on or before the sixtieth
(60th) after the end of each of the first three calendar quarters and (b) on or
before the ninetieth (90th) day after the end of the last quarter for any given
year; (b) monthly usage reports on each Repayment Date setting forth the total
Flight Hours flown for each Aircraft and each Engine for the one month period
immediately prior to such Repayment Date; (c) upon request of the Mortgagee,
copies of all or a portion of the Records or any other information then
available to Mortgagor regarding the location, use and maintenance of the
Aircraft.
SECTION 3.8 INSPECTIONS. Mortgagor shall permit the Mortgagee or any
representative designated by Mortgagee: (a) to inspect the Flight Equipment,
upon Mortgagee's request annually during the Loan Term; provided that Mortgagee
shall provide not less than ten (10) days prior written notice of its intention
to exercise (either by itself or by its designate) such rights, and (b) to
inspect and appraise the Flight Equipment, upon Mortgagee's request, at any time
after the occurrence of an Event of Default, or whenever there has been, in
Mortgagee's reasonable judgment, a material, adverse change in the condition of
the Mortgaged Property or in the financial condition of Mortgagor. Mortgagor
shall permit the Mortgagee or any representative designated by Mortgagee at the
times of the inspection referred to in the immediately preceding sentence, to
inspect the Records, books of account, reports and other papers of the Mortgagor
related to the Mortgaged Property and to make copies and extracts therefrom and
Mortgagor will afford and procure a reasonable opportunity to make any such
inspection and the Mortgagor will furnish the Mortgagee with any and all such
other information and copies of documents and print-outs of data related to the
Mortgaged Property stored on any electronic or data processing medium under the
control of the
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Mortgagor as the Mortgagee may reasonably request, with respect to any Mortgaged
Property and the financial records of the Mortgagor related to the Mortgaged
Property and will permit Mortgagee to discuss any of the foregoing with any
officer or accountant of the Mortgagor, all at such reasonable times and as
often as may be reasonably requested. All inspections and appraisals as are
permitted in the first sentence of this Section 3.8 shall be at the reasonable
cost and expense of Mortgagor, shall be conducted by Mortgagee's in-house
technical representative or by an independent appraiser selected by Mortgagee,
in the presence of a representative of Mortgagor (except in the case of an
inspection or appraisal after the occurrence of an Event of Default). Mortgagee
may require, and Mortgagor shall permit, the Flight Equipment and the Records to
be inspected and appraised by an appraiser selected by Mortgagee at any other
time, at Mortgagee's sole cost and expense.
SECTION 3.9 CITIZENSHIP, ETC. The Mortgagor is as of the date hereof and
will at all times remain a citizen of the United States as defined in 49 U.S.C.
ss. 40102(a)(15).
SECTION 3.10 INSIGNIA. The Mortgagor will plainly, distinctly and
conspicuously place, and leave in the cockpit of the Aircraft and on each
Engine, a plate, insignia or other identification bearing the following words in
letters of a size reasonable under the circumstances and acceptable to the
Mortgagee as follows:
"Owned by Mercy Air Service, Inc. and subject to a Perfected
Security Interest in Favor of FINOVA Capital Corporation."
SECTION 3.11 OPERATION. The Flight Equipment will be operated at all times:
(a) by a currently certificated pilot having the minimum total pilot hours
required by the FAA or as required by the insurance required to be maintained by
Mortgagor under this Mortgage, whichever is stricter, (b) in compliance with the
FAA approved flight manual relating to the Flight Equipment, (c) in compliance
with all FAA rules and regulations and (d) to the extent applicable, in
compliance with any maintenance service plan then in effect with respect to the
Aircraft. The Mortgagor shall not permit the Flight Equipment to be operated in
violation of: (i) the Certificate of Airworthiness for the Aircraft; (ii) any
applicable Law or (iii) any provision of any insurance policy in effect with
respect to the Aircraft or in any jurisdiction where all of the insurance
required hereunder shall not remain in full force and effect. The Flight
Equipment shall only be operated or used by the Mortgagor in the conduct of its
business.
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SECTION 3.12 NO SALE, ALTERATION OR MODIFICATION. (A) Except as expressly
permitted by the Loan Agreement pursuant to a Permitted Sale, Mortgagor shall
not sell, lease, convey, transfer or encumber (other than with Permitted Liens)
or otherwise dispose of all or any part of the Mortgaged Property, or cause or
permit another to do any of the foregoing with respect to any of the Mortgaged
Property, and shall not modify or cause or permit any modification to any of the
Flight Equipment. Mortgagor shall not make or cause to be made or cause or
permit another to make any change or alteration in any registration, filing, or
recordation of any of the Flight Equipment from the registration, filing, or
recordation required by this Chattel Mortgage, or consent to the Flight
Equipment being operated by pilots other than those currently certified by the
appropriate governmental authorities.
ARTICLE IV
REMEDIES
SECTION 4.1 EVENT OF DEFAULT. An Event of Default shall occur hereunder if
any event defined as an Event of Default on Schedule I hereto shall occur.
SECTION 4.2 REMEDIES. Upon the occurrence and continuance of any Event of
Default, the Mortgagee may, at its option, do one, several, or all of the
following, as the Mortgagee, in its sole discretion, shall then elect:
(i) exercise all the rights and remedies granted to secured parties by
the provisions of the Arizona Uniform Commercial Code (whether or not the
Uniform Commercial Code is in effect in the same form in the jurisdiction
where Mortgagee's rights and remedies are asserted) or under the provisions
of any applicable law;
(ii) accelerate the entire principal balance then due and owing under
the Loan Agreement and this Chattel Mortgage, whereupon all such amounts,
accrued interest thereon, and all other amounts due and owing hereunder and
thereunder shall become immediately due and payable;
(iii) institute legal proceedings to foreclose upon and against the
security interest granted in and by this Chattel Mortgage and to recover
judgment for all amounts then due as set forth in subparagraph (ii) of this
Section 4.2;
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(iv) institute legal proceedings for the specific performance of any
covenant or agreement herein contained or in the Loan Agreement or in aid
of the execution of any power herein granted and Mortgagee shall be
entitled as of right to the appointment of a receiver of all or any part of
the Mortgaged Property;
(v) institute legal proceedings for the sale or otherwise for the
enforcement of any right, under the judgment of any court of competent
jurisdiction, of or concerning any of the Mortgaged Property;
(vi) personally, or by agents or attorneys, take possession of all or
any part of the Mortgaged Property and demand, sue for, collect or receive
any money or property at any time payable or receivable on account of or in
exchange for, or make any compromise or settlement deemed desirable with
respect to, any of the Mortgaged Property or any sum payable in connection
therewith;
(vii) to the extent permitted by law, enter any place where the
Mortgaged Property may be found or where Mortgagee reasonably believes some
or all thereof may be kept and personally, or by agents or attorneys, take
possession of any part or all of the Mortgaged Property without being
responsible for loss or damage caused thereby, and sell or dispose of all
or any part of the same, free from any and all claims of the Mortgagor or
of any other party claiming by, through, or under the Mortgagor, at law or
in equity, at one or more public or private sales on such terms as the
Mortgagee may fix, with or without any previous demand or notice to the
Mortgagor or advertisement of any such sale or other disposal except as
otherwise expressly herein provided to the contrary, any notice or demand
and right of equity of redemption otherwise required by or available to the
Mortgagor under applicable law is hereby waived by the Mortgagor to the
fullest extent permitted by applicable law; and/or
(viii) apply any Cash Collateral, including but not limited to the the
Maintenance Reserves and any insurance proceeds held by the Mortgagee to
the satisfaction of the Obligations.
SECTION 4.3 WAIVER OF BONDS, ETC. If Mortgagee seeks to take possession of
any or all of the Mortgaged Property or avail itself of any provisional remedy
by court process, the Mortgagor hereby irrevocably waives any bonds and any
surety or security required by any statute, court rule or otherwise as an
incident to such possession or
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remedy, and waives any demand for possession of the Mortgaged Property prior to
the commencement of any suit or action to recover same.
SECTION 4.4 WAIVER OF APPRAISEMENT. The Mortgagor agrees, to the full
extent that it may lawfully so agree, that neither it nor anyone claiming
through or under it will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption law now or hereafter in
force in any locality where any property subject to the Lien hereof may be
situated, in order to prevent, hinder or delay the enforcement or foreclosure of
this Chattel Mortgage, or the absolute sale of the Mortgaged Property or any
part thereof, or the final and absolute putting into possession thereof,
immediately after such sale, of the purchasers thereof; and the Mortgagor, for
itself and all who may at any time claim through or under it, hereby waives, to
the full extent that it may be lawful so to do, the benefit of all such laws,
and any and all right to have any of the properties or assets comprising the
Mortgaged Property marshaled upon any such sale, and agrees that the Mortgagee,
or any court having jurisdiction to foreclose the Lien hereof, may sell the
Mortgaged Property in its entirety or in such parcels as the Mortgagor may
determine.
SECTION 4.5 MULTIPLE SALES. The power of sale hereunder shall not be
exhausted by one or more sales, and the Mortgagee may from time to time adjourn
any sale to be made pursuant hereto. The Mortgaged Property need not be present
at the time and place of sale.
SECTION 4.6 DELIVERY OF MORTGAGED PROPERTY. If the Mortgagee shall demand
possession of the Mortgaged Property or any part thereof pursuant to this
Chattel Mortgage, or any records, including print-outs of data stored on any
electronic or data processing medium, relating to the Mortgaged Property, the
Mortgagor shall, at its own expense, forthwith cause such Mortgaged Property or
any part thereof or any such records designated by the Mortgagee to be assembled
and made available and/or delivered to the Mortgagee at any place reasonably
designated by the Mortgagee.
SECTION 4.7 NOTICES. In addition to any other notices required by law, the
Mortgagee shall give to Mortgagor at least ten (10) days prior written notice of
each public sale or any date after which a private sale or other intended
disposition hereunder shall occur, and the Mortgagor hereby covenants and agrees
that a notice, which shall be sent in accordance with the provisions of Section
7.1 hereof, at least ten (10) days before the date of any such act shall be
deemed to be commercially reasonable notice for such act within the meaning of
Section 9-504 of the Uniform Commercial Code and, specifically, reasonable
notification of the time and place of any public sale hereunder
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and reasonable notification of the time after which any private sale or other
intended disposition to be made hereunder is to be made.
SECTION 4.8 MORTGAGEE REPAIRING AND MANAGING MORTGAGED PROPERTY. Upon every
such taking of possession, the Mortgagee may, but shall have no obligation to,
from time to time, at the expense of the Mortgagor, make all such repairs,
replacements, alterations, additions and improvements to and of the Mortgaged
Property as the Mortgagee may deem proper to protect its interests hereunder. In
each such case, the Mortgagee shall have the right to manage and control the
Mortgaged Property and to carry on the business and to exercise all rights and
powers of the Mortgagor in respect thereof as the Mortgagee shall deem best,
including the right to enter into any and all such agreements with respect to
the leasing and/or operation of the Mortgaged Property or any part thereof as
the Mortgagee may see fit; and the Mortgagee shall be entitled to collect and
receive all rents, issues, profits, revenues and other income of the same and
every part thereof. Such rents, issues, profits, revenues and other income shall
be applied to pay the expenses of holding and operating the Mortgaged Property
and of conducting the business thereof, and of all maintenance, repairs,
replacements, alterations, additions and improvements, and to make all payments
which the Mortgagee may be required or may elect to make, if any, for taxes,
assessments, insurance and other proper charges upon the Mortgaged Property or
any part thereof, and all other payments which the Mortgagee may be required or
authorized to make under any provision of this Chattel Mortgage. The remainder
of such rents, issues, profits, revenues and other income shall be applied only
in accordance with Section 4.10 hereof.
SECTION 4.9 DELIVERY TO PURCHASER. Upon the completion of any sale under
this Article, the Mortgagor shall deliver all of the property sold to the
purchaser or purchasers at such sale on the date of sale, or within a reasonable
time thereafter if it shall be impractical to make immediate delivery, but in
any event full title and right of possession to such property shall pass to such
purchaser or purchasers forthwith upon the completion of such sale.
Nevertheless, if so requested by the Mortgagee or by any purchaser, the
Mortgagor shall confirm any such sale or transfer by executing and delivering to
such purchaser all proper instruments of conveyance and transfer and releases as
may be designated in any such request.
Every such sale shall operate to divest all right, title, interest, claim
and demand whatsoever of the Mortgagor and any person claiming such interest by,
through or under the Mortgagor, in and to the property so sold, and shall be a
perpetual bar, both at law and in equity, against the Mortgagor and all such
persons and their respective successors or assigns.
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SECTION 4.10 APPLICATION OF PROCEEDS. The proceeds of any sale, rental or
other use of the Mortgaged Property, or any part thereof, under this Article,
together with any other sums then held by the Mortgagee, as part of the
Mortgaged Property, shall be applied as follows:
(A) FIRST. To the payment of the costs and expenses of such sale and
the exercise of Mortgagee's remedies hereunder, including brokers' fees or
sales commissions, a reasonable compensation to the Mortgagee's agents,
legal fees of Mortgagee's attorneys and counsel, and all other charges,
expenses, liabilities and advances incurred or made by the Mortgagee in
connection therewith, and to the payment of all taxes, assessments or
Liens, if any, prior to the Lien of this Chattel Mortgage, except any
taxes, assessments or Liens subject to which such sale shall have been
made;
(B) SECOND. To the payment of amounts due under the Loan Agreement and
under the other Loan Documents; and
(C) THIRD. The surplus, if any, shall be paid to Mortgagor.
SECTION 4.11 MORTGAGEE MAY PURCHASE. At any public sale under this Article,
to the extent permitted by applicable law the Mortgagee or its nominee may bid
for and purchase the property offered for sale, and, upon compliance with the
terms of sale, may hold, retain and dispose of such property without further
accountability therefor. Mortgagee need not be present at such sale. For the
purpose of making payment for the Mortgaged Property or any part thereof so
purchased, any claim for any amounts owing under the Notes, the Loan Agreement
or hereunder may be used by Mortgagee as a credit against the purchase price.
SECTION 4.12 RIGHT TO POSSESSION. The right of the Mortgagee to take
possession of and sell or operate and manage the Mortgaged Property in
compliance with the provisions of this Chattel Mortgage shall not be adversely
affected by the provisions of the Federal Bankruptcy Code as at any time amended
or of any provision of any succeeding act to the same effect.
SECTION 4.13 REMEDIES CUMULATIVE, ETC. (A) Each right, power, and remedy
specifically given to the Mortgagee herein, or otherwise existing shall be
cumulative and shall be in addition to every other right, power, and remedy
specifically given herein, or in the Loan Agreement or now or hereafter existing
at law, in equity, or otherwise; and each right, power and remedy, whether
specifically given herein or under
- 27 -
the Loan Agreement or otherwise existing, may be exercised from time to time and
as often and in such order as may be deemed expedient by the Mortgagee; and the
exercise of any right, power or remedy shall not be construed to be a waiver of
the right to exercise at the same time or thereafter any other right, power or
remedy.
(B) No delay or omission by the Mortgagee in the exercise of any right
or power, or in the pursuance of any remedy, shall impair any such right,
power, or remedy or be construed to be a waiver of any default on the part
of the Mortgagor or to be an acquiescence therein.
(C) No waiver by the Mortgagee of any breach or Default or Event of
Default by the Mortgagor under this Chattel Mortgage shall be deemed a
waiver of any other previous breach or default or any thereafter occurring.
(D) The invalidity of any remedy in any jurisdiction shall not
invalidate such remedy in any other jurisdiction. The invalidity or
unenforceability of any of the remedies herein provided in any jurisdiction
shall not in any way affect the right to the enforcement in such
jurisdiction or elsewhere of any of the other remedies herein provided.
SECTION 4.14 MORTGAGEE'S RIGHT TO PERFORM AND INCUR EXPENSES. At any time
and from time to time after an Event of Default has occurred, if the Mortgagor
fails to perform or fulfill or is not the performing or fulfilling any of its
undertakings or obligations contained herein, Mortgagee shall have the right,
but shall not be obligated: (i) to effect such performance or compliance and
(ii) to incur such expenses relative thereto or to the enforcement of
Mortgagee's rights as against, or the preservation, protection, reconditioning,
storage or sale of, the Mortgaged Property including, but without limitation,
such sums as are specified in Section 4.8 and 4.10 FIRST hereof. The amount of
any such expenses and other reasonable costs of Mortgagee incurred as
hereinabove provided shall become payable by the Mortgagor to the Mortgagee as
of the date on which Mortgagee shall pay the same, together with interest
thereon from said date of payment at the rate of 2% over the Interest Rate
specified in the Notes (but in no event higher than the highest rate permitted
by applicable law), until the same shall be repaid.
SECTION 4.15 ADVANCES ARE SECURED. All such costs and expenses incurred
shall become part of the Mortgagor's obligations and shall become part of the
indebtedness secured under this Chattel Mortgage. The Mortgagee shall have the
right (but shall not be obligated) to use and apply any Cash Collateral at any
time held by it for the repayment of all such advances, costs or expenses.
However, no such use of any Cash
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Collateral, nor the making by Mortgagee of any advance in payment of any such
expense, shall relieve the Mortgagor from any Default hereunder.
SECTION 4.16 AGENCY. The Mortgagor hereby appoints Mortgagee, such
appointment being immediately and without further notice or action effective
upon the occurrence of an Event of Default, as the Mortgagor's irrevocable
attorney-in-fact and agent (such appointment being coupled with an interest)
either in the Mortgagee's own name or in the name of the Mortgagor, to (i) incur
and to pay the costs and expenses aforesaid; (ii) make claim for, collect,
compromise and bring suit in respect of all claims relating to the Mortgaged
Property; (iii) execute and endorse all documents, checks or drafts received in
payment of any and all such expenses or any losses or damages under any
insurance policies maintained with respect to any Mortgaged Property; (iv)
execute financing statements in the Mortgagor's name as debtor; and (v) take any
action which the Mortgagor could take as owner of the Flight Equipment in and of
the realization by the Mortgagee of any of its rights and remedies herein
provided.
ARTICLE V
DEFEASANCE
SECTION 5.1 PAYMENT OF INDEBTEDNESS; SATISFACTION. If the Mortgagor shall
pay and discharge all of the Obligations then, upon Mortgagor Request, this
Chattel Mortgage and the Lien, rights and interests hereby granted shall cease,
terminate and become null and void, and the Mortgagee shall execute and deliver
to the Mortgagor such instruments of satisfaction and discharge of this Chattel
Mortgage, and the Lien hereof, as may be reasonably requested by Mortgagor, and
pay and deliver to the Mortgagor upon Mortgagor Order all monies and other
personal property then held as collateral security (but excluding any monies
received by Mortgagee in payment of the Obligations) by the Mortgagee hereunder.
All such instruments and documents of release or discharge shall be prepared and
filed at the sole cost and expense of Mortgagor and shall be reasonably
satisfactory in form and substance to the Mortgagee.
ARTICLE VI
SUNDRY PROVISIONS
SECTION 6.1 NOTICES. Except as otherwise specifically provided to the
contrary herein:
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(A) Every notice or demand under this Chattel Mortgage required or
permitted to be given by the Mortgagee or the Mortgagor shall be in writing
and may be given or made by registered mail, return receipt requested, or
by internationally recognized overnight courier service.
(B) Every notice or demand shall be sent, in the case of a notice sent
by internationally recognized overnight courier service or registered mail,
to the Mortgagee or to the Mortgagor at their respective address set out in
the preamble hereof.
(C) Every notice or demand shall, except so far as otherwise expressly
provided by this Chattel Mortgage, be deemed to have been received, in the
case of a notice or demand sent by internationally recognized overnight
courier service or registered mail, when actually delivered to Mortgagee or
the Mortgagor at their respective addresses referred to in Section 6.1(B),
or as of the date on which receipt of such notice or demand delivered by
internationally recognized overnight courier or registered mail is refused
or such overnight courier or the U.S. Postal Service advises that such
notice or demand is not deliverable at such address with respect to the
Mortgagee or Mortgagor, as the case may be.
(D) Subject to the terms hereof, Mortgagee or the Mortgagor may change
its address by giving notice in accordance with this Section 6.1.
SECTION 6.2 COUNTERPARTS. This Chattel Mortgage may be executed in any
number of counterparts, and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same Chattel Mortgage.
SECTION 6.3 GOVERNING LAW; CONSENT TO JURISDICTION. THIS CHATTEL MORTGAGE
SHALL BE DEEMED TO HAVE BEEN NEGOTIATED AND MADE IN, AND SHALL BE GOVERNED AND
INTERPRETED UNDER THE LAWS OF, THE STATE OF ARIZONA APPLICABLE TO AGREEMENTS
MADE BY RESIDENTS THEREOF TO BE WHOLLY PERFORMED THEREIN. The Mortgagor and the
Mortgagee hereby agree that all actions or proceedings initiated by the
Mortgagor and arising directly or indirectly out of this Chattel Mortgage shall
be litigated exclusively in the Superior Court of Arizona, Maricopa County, or
the United States District Court for the District of Arizona (the "Arizona
Courts"), and that any action initiated by the Mortgagee and arising directly or
indirectly out of this Chattel Mortgage may be litigated in any jurisdiction, at
Mortgagee's discretion. The Mortgagor and the Mortgagee hereby: (a) expressly
submit and consent in advance to the
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jurisdiction and venue of the Arizona Courts in any action or proceeding
commenced by the Mortgagor or the Mortgagee in any of the Arizona Courts and (b)
agree that jurisdiction and venue is proper in such courts. Each of the
Mortgagor and the Mortgagee waives any claim that Phoenix, Arizona or the
District of Arizona is an inconvenient forum or an improper forum based on lack
of venue. Should either of the Mortgagor or Mortgagee, as the case may be, after
being properly served, fail to appear or answer any summons, complaint, process
or paper so served within 30 days after service thereof, each of the Mortgagor
and the Mortgagee acknowledges that as a result thereof, an order and/or
judgment may be entered by the Mortgagee or the Mortgagor against the other as
demanded or pleaded for in such summons, complaint, process or papers. The
choice of forum set forth herein shall not be deemed to preclude the enforcement
by the Mortgagee or the Mortgagor, as the case may be, of any judgment in any
other appropriate jurisdiction.
SECTION 6.4 CAPTIONS AND PARAGRAPH HEADINGS. In construing any provision of
this Chattel Mortgage, no account shall be taken of the identity of the party
who prepared this Chattel Mortgage and no presumption shall arise as a result
thereof. Captions and paragraph headings used herein are for convenience only
and are not part of this Chattel Mortgage and shall not be used in construing
it.
SECTION 6.5 DELIVERY. This Chattel Mortgage is intended to and shall be
deemed to be delivered by the Mortgagor to the Mortgagee and accepted by the
Mortgagee in Arizona.
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IN WITNESS WHEREOF, the Mortgagor and the Mortgagee have caused this
instrument to be duly executed as of the day and year first above written.
FINOVA CAPITAL CORPORATION MERCY AIR SERVICE, INC.
By: /s/ Pamela Marchant By: /s/ David L. Dolstein
-------------------------------- --------------------------------
Title: Vice President Title: President
----------------------------- -----------------------------
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SCHEDULE I
EVENTS OF DEFAULT
The occurrence of any of the following, each of which is an Event of
Default:
1. (i) The failure of the Mortgagor to pay when due and payable any
principal portion of the Loan or accrued interest thereon within ten (10) days
of the due date thereof (whether by reason of stated maturity or due date,
notice of prepayment, cancellation, acceleration or otherwise);
(ii) The failure of the Mortgagor to pay when due and payable any
amounts (other than principal or interest) due with respect to the Loan
Agreement, the Note, or this Chattel Mortgage, or other sums which may become
due hereunder or under any Loan Document within fifteen (15) days after delivery
of notice thereof from the Mortgagee to the Mortgagor;
2. (i) Any lapse of, or failure to maintain, insurance coverage on the
Aircraft required to be maintained under this Chattel Mortgage and the Insurance
Side Letter;
(ii) Any failure of the Mortgagor to perform its obligations set forth
in Sections 10.2, 10.5, 10.6 or 10.8 of the Loan Agreement;
(iii) Any failure by the Mortgagor to perform or cause to be performed
its obligations as set forth in this Chattel Mortgage concerning the preparation
or recordation of any document or instrument required by the Mortgagee for the
maintenance or perfection of any lien on the Mortgaged Property;
(iv) Any failure of the Mortgagor to perform or cause to be performed its
obligations set forth in this Chattel Mortgage concerning the maintenance of the
Aircraft within thirty (30) days after notice thereof from the Lender; or
(v) Any failure by either the Mortgagor or the Guarantor to fulfill any
other covenant or to perform any other obligation on its part to be performed
under any Loan Document to which it is a party and such failure is not cured
within thirty (30) days after notice thereof from the Mortgagee;
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3. Any representation or warranty made by the Mortgagor or the Guarantor in
the Loan Agreement or any other Loan Document or any financial statement shall
prove to have been untrue, inaccurate or incomplete in any material respect at
the time when made or when effective and such party fails to do that which shall
be necessary in order that said representation or warranty shall be true,
accurate or complete within thirty (30) days after the earlier of actual
knowledge thereof by an officer of the Mortgagor or the Guarantor or of receipt
of notice thereof;
4. Any approval required from or to be issued by the Mortgagor or by the
Guarantor in connection with the Loan Agreement or under any Loan Document or
the transactions contemplated herein or therein, shall be revoked, rescinded,
suspended or otherwise limited in effect and same shall not have been reinstated
within thirty (30) days after the first effective date of such revocation,
rescission, suspension or limitation;
5. Either of the Mortgagor or the Guarantor shall file a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking readjustment of its
debts or for any other relief under any bankruptcy, insolvency, or other similar
act or law of any jurisdiction, domestic or foreign, now or hereafter existing,
or any action by either of the Mortgagor or the Guarantor indicating its consent
to, approval of, or acquiescence in, any such petition or proceeding; or if
either of the Mortgagor or the Guarantor shall apply or sustain the appointment
by consent or acquiescence of, a receiver or trustee for either of the Mortgagor
or the Guarantor or for all or a substantial part of their respective
properties; or if either of the Mortgagor or the Guarantor shall make an
assignment for the benefit of its creditors, or if either of the Mortgagor or
the Guarantor shall fail to pay or becomes unable to pay its debts as they
mature;
6. An involuntary petition against either of the Mortgagor or the Guarantor
in bankruptcy or seeking readjustment of its debts or for any other relief under
any bankruptcy, insolvency, or other similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing; or a receiver or trustee shall
be involuntarily appointed for either of the Mortgagor or the Guarantor or for
all or a substantial part of its property; or a warrant of attachment, execution
or similar process against any substantial part of the property of either of the
Mortgagor or the Guarantor shall be served on either of the Mortgagor or the
Guarantor and such events continues for sixty (60) days undismissed, unbonded or
undischarged;
7. The Loan Agreement or any Loan Document shall at any time after its
respective execution and delivery and for any reason cease to be in full force
and effect or any certificate, instrument or documents issued and executed
pursuant hereto or thereto shall
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for any reason cease to be effective to constitute a valid and perfected first
priority Lien and security interest in and to the Mortgaged Property except for
Permitted Liens;
8. A material, adverse change in the financial condition of either of the
Mortgagor or the Guarantor shall occur;
9. An "Event of Default" under and as defined in the Wells Fargo Loan
Agreement shall have occurred and be continuing (for purposes of this Schedule I
"Wells Fargo Loan Agreement shall mean: (a) collectively, the Letter Agreement
dated October 21, 1996 between Wells Fargo Bank (Colorado) ("Wells Fargo") and
the Guarantor and the Promissory Note executed and delivered by the Guarantor to
Wells Fargo in connection therewith) (item (a) being hereinafter referred to as
the "Original Wells Fargo Facility") and (b) any subsequent working capital
facility entered into by the Guarantor which replaces: (i) the Original Wells
Fargo Facility or (ii) any working capital facility that is subsequent to the
Original Wells Fargo Facility;
10. If an event of default occurs under a Subsequent Agreement occurs; or
11. If at any time during the Loan Term, the Mortgagor is not the wholly
owned subsidiary of the Guarantor.
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SCHEDULE II
FORM OF
SUPPLEMENTAL CHATTEL MORTGAGE
This SUPPLEMENTAL CHATTEL MORTGAGE, dated , 19 , from MERCY AIR SERVICE,
INC., a corporation organized and existing under the laws of the State of
California having its chief executive office and principal place of business at
8190 Mango, Fontana, California 92334 (hereinafter called the "Mortgagor"), as
mortgagor, and FINOVA CAPITAL CORPORATION, a Delaware corporation, having an
office at 115 West Century Road, Paramus, New Jersey 07652 (hereinafter called
the "Mortgagee"), as mortgagee.
WHEREAS, the Mortgagor has heretofore executed and delivered to the
Mortgagee an Aircraft Chattel Mortgage and Security Agreement dated July , 1997
(hereinafter, as at any time supplemented or amended, called the "Original
Mortgage," terms defined therein, unless otherwise defined herein, being used
herein as therein defined), covering certain Flight Equipment of the Mortgagor,
to secure its Obligations, as defined in the Original Mortgage;
WHEREAS, the Mortgagor is the legal and beneficial owner, free and clear of
all mortgages, security interests, Liens, charges and encumbrances, other than
the Lien of the Original Mortgage and Liens permitted by the Original Mortgage,
of the additional flight equipment hereinbelow described, and desires to execute
and deliver this Supplemental Chattel Mortgage.
NOW, THEREFORE, THIS INSTRUMENT WITNESSETH that to secure the Obligations
and for the purpose of specifically subjecting such property to, and of
confirming, the Lien of the Original Mortgage, the Mortgagor does hereby grant,
bargain, sell, transfer, convey and mortgage unto the Mortgagee, its successors
and assigns, and gives to the Mortgagee a security interest in, the following
described property, to wit:
AIRFRAME
( ) Airframe, identified as follows:
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FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
together with all aircraft engines, appliances, equipment, jet fuel, instruments
and accessories (including, without limitation, radio and radar), whether now
owned or hereafter acquired from time to time thereto belonging, owned by the
Mortgagor and installed in or appurtenant to said airframe.
AIRCRAFT ENGINES
( ) aircraft engines, each such engine having 750 or more take-off
horsepower or the equivalent thereof, identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
together with all equipment and accessories thereto belonging, by whomsoever
manufactured, owned by the Mortgagor and installed in or appurtenant to said
aircraft engines.
Together with all substitutions, replacements and renewals of the property
above described, and all property which shall hereafter become physically
attached to or incorporated in the property above described, whether the same
are now owned by the Mortgagor or shall hereafter be acquired by it.
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Together with all rents, issues, profits, proceeds (including insurance
proceeds) revenues and other income of such property, except for Excluded
Amounts, and all of the estate, right, title and interest of every nature
whatsoever of the Mortgagor, at law or in equity, in and to such property and
every part and parcel thereof.
TO HAVE AND TO HOLD all and singular the property aforesaid unto the
Mortgagee, its successors and assigns, as security as aforesaid and for the uses
and purposes and subject to the covenants, agreements, provisions and conditions
set forth in the Original Mortgage.
This instrument shall be construed as supplemental to the Original Mortgage
and shall form a part thereof, and the Original Mortgage and each Supplemental
Chattel Mortgage heretofore executed and delivered, which are hereby, by
reference, incorporated herein, are hereby ratified, approved and confirmed.
This instrument may be simultaneously executed in several counterparts,
each of which shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same Supplemental Chattel Mortgage.
This Supplemental Chattel Mortgage is intended to be and shall be deemed to
be delivered by the Mortgagor to the Mortgagee and accepted by the Mortgagee in
Phoenix, Arizona.
This instrument shall be effective on the date hereof.
IN WITNESS WHEREOF, the Mortgagor has caused this instrument to be duly
executed.
MERCY AIR SERVICE, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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