AIRCRAFT CHATTEL MORTGAGE
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. N527MC)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of April
25, 2000 (this "MORTGAGE"), and entered into by and between ATLAS FREIGHTER
LEASING III, INC., a Delaware corporation (the "COMPANY" OR "LESSOR"), and
BANKERS TRUST COMPANY, as administrative agent for and representative of (in
such capacity, the "AGENT") the financial institutions (the "LENDERS") party to
the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
The Company has entered into a credit agreement dated as of April
25, 2000, (said credit agreement, as it may be amended, restated, supplemented
or otherwise modified from time to time, being the "CREDIT AGREEMENT") with the
Lenders and the Agent, pursuant to which the Lenders have agreed, on the terms
and conditions set forth in the Credit Agreement, to make term loans to the
Company in the principal amount of up to $300 million (the "LOANS") to enable
the Company to refinance certain indebtedness currently encumbering the Aircraft
Collateral (as defined below). The indebtedness with respect to the Loans made
by the Lenders is to be evidenced by certain promissory notes of the Company to
the order of the Lenders of even date herewith issued under and pursuant to the
Credit Agreement (such promissory notes, as they may be amended, modified,
supplemented, renewed, converted or extended from time to time, being the
"NOTES"). It is a condition precedent to the making by the Lenders of the Loans
under the Credit Agreement that this Mortgage be executed, delivered and filed
for recordation.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to make the Loans, the Company hereby agrees with the Agent
as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together
with accrued interest thereon, and all other amounts from time to time payable
by the Company under the Credit Agreement, this Mortgage and the other Loan
Documents (as defined below) (including payment of amounts that would become due
but for the operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code), and to secure performance of all obligations and
covenants of the Company under the Credit Agreement, this Mortgage and the other
Loan Documents (all such payment and performance obligations of the Com-
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pany, the "SECURED OBLIGATIONS"), the Company hereby mortgages to the Agent, for
the benefit of the Lenders, and their respective successors and assigns, and
hereby grants and assigns to the Agent, for the benefit of the Lenders, and
their respective successors and assigns, a first priority security interest in
the Aircraft (the "AIRCRAFT COLLATERAL") and a first priority security interest
in all estate, right, title and interest of the Company in, to and under, the
other below described property wherever the same may be located (the "AIRCRAFT
RELATED COLLATERAL"):
(a) Aircraft Collateral. All of the Company's right, title and interest
in and to:
(i) the airframe (the Aircraft except for the Engines or engines from
time to time installed thereon) that is described on Schedule I hereto and
any replacement airframe that may be substituted for such airframe in
accordance with the provisions of Section 4(f) hereof or Section 9.21B of
the Credit Agreement, together with any and all Parts (as hereinafter
defined) incorporated or installed in or attached to such airframe and all
Parts removed from such airframe until such Parts are replaced in
accordance with Section 4(e) hereof (such airframe, together with any
replacement airframe and all such Parts, hereinafter referred to as the
"AIRFRAME");
(ii) each of the engines that are listed in Schedule II hereto or which
are described in a Supplemental Chattel Mortgage (a "SUPPLEMENTAL CHATTEL
MORTGAGE") substantially in the form of Exhibit A attached hereto,
supplementing this Mortgage, and listed by manufacturer's serial numbers
in such Schedule or in such Supplemental Chattel Mortgage, whether or not
from time to time installed on the Airframe or on any other airframe or
aircraft, and any replacement engine that may be substituted for such
engine in accordance with the provisions of Section 4(f) hereof or Section
9.21A of the Credit Agreement, together, in each case, with any and all
Parts incorporated or installed in or attached thereto and any and all
Parts removed therefrom, until such Parts are replaced in accordance with
Section 4(e) hereof (each such engine, and replacement engine, together
with any and all such Parts, hereinafter referred to as an "ENGINE" and
collectively, the "Engines");
(iii) all appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment of whatever nature (other than complete
Engines or engines), that may from time to time be incorporated or
installed in or attached to the Airframe or any Engine, including all such
appliances, parts, instruments, appurtenances, accessories, furnishings
and other equipment purchased by the Company for incorporation or
installation in or attachment to the Airframe or any Engine pursuant to
the terms of any agreement whether or not identified in a Supplemental
Chattel Mortgage (collectively referred to herein as "PARTS"); and
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(iv) all records, logs and other materials required by applicable law
or regulation to be maintained and all other records, logs and materials
maintained in the ordinary course of business with respect to the
properties described in paragraphs (i), (ii) and (iii) above (together
with such Airframe and Engines, the "AIRCRAFT").
(b) Aircraft Related Collateral. All of the Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other income of
the property subject or required to be subject to the lien of this
Mortgage including, without limitation, all payments or proceeds payable
to the Company after termination of the Lease with respect to the Aircraft
as the result of the sale, lease or other disposition thereof, and all
estate, right, title and interest of every nature whatsoever of the
Company in and to the same and every part thereof;
(ii) all monies and securities deposited or required to be deposited
with the Agent pursuant to any term of this Mortgage and held or required
to be held by the Agent hereunder or paid to the Agent in accordance with
the terms of the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of the
Company (including such indemnities, rights of assignment, rights and
remedies for breach of any warranty and/or claims for damages, rights to
receive title to parts and materials to the extent same relates to the
Aircraft including any agreement assigned therewith;
(iv) all amounts payable to the Company by any manufacturer, supplier
or vendor of any of the Aircraft Collateral or any component thereof
pursuant to any warranty or indemnity covering any such Aircraft
Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any loss, confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to the Company under the Lease or to the Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent (as defined
in the Lease), Supplemental Rent (as defined in the Lease), insurance
proceeds, requisition, indemnity and other payments of any kind
thereunder, and including all rights of the Company, as lessor, to execute
any election or option or to give any notice, consent, waiver or approval
under or in respect of the Lease or to accept any surrender of any of the
Aircraft or any part thereof, as well as any rights, powers or remedies on
the part of
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the Lessor, whether arising under the Lease or by statute or at law or in
equity, or otherwise, arising out of any Lease Event of Default (as
defined in the Lease), including, without limitation, all rights under
Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described above,
including, without limitation, all payments under insurance proceeds or
payment under any indemnity, payable by reason of any loss or damage to
the Aircraft or any Engine.
The Company shall deliver to the Agent an executed chattel paper
original counterpart of each Lease and the Lease Supplements covering the
Aircraft. All property referred to in this granting clause, whenever acquired by
the Lessor under the Lease, shall secure all Secured Obligations. The Company
does hereby warrant and represent that it has not assigned or pledged, and
hereby covenants that it will not assign or pledge, so long as the assignment
hereunder shall remain in effect, any of its right, title or interest hereby
assigned to anyone other than the Agent, and that it will not, except as
provided herein or in the Credit Agreement, enter into any agreement amending or
supplementing any purchase agreement, modification agreement to the extent such
agreement relates to the Aircraft, or execute any waiver or modification of, or
consent under, any such agreement, or settle or compromise any claim arising
under any such agreement or submit or consent to the submission of any dispute,
difference or other matter arising under or in any respect of any such agreement
to arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall
have the following meanings for all purposes of this Mortgage and shall be
equally applicable to both the singular and the plural forms of such terms.
Terms defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined.
"ACCEPTABLE ALTERNATE AIRFRAME" means a Boeing 747-200 which is
in cargo configuration capable of immediate operation in the business of the
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds and is
of the equivalent or greater residual value, condition, utility, airworthiness,
and remaining useful life and which shall have been maintained, serviced,
repaired and overhauled in substantially the same manner as required under the
Lease without in any way discriminating against such airframe.
"ACCEPTABLE ALTERNATE ENGINE" means a General Electric CF6-50E2
aircraft engine or an engine of the same or another manufacturer of equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and suitable for installation and use on the Airframe; provided,
that such engine shall be of the same make, model and manufacturer as the other
engines installed on the Airframe, shall be an engine of a type then
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being utilized by the Lessee on other Boeing 747-200 aircraft operated by the
Lessee, and shall have been maintained, serviced, repaired and overhauled in
substantially the same manner as required under the Lease without in any way
discriminating against such engine.
"ACMI CONTRACT" means (i) any contract entered into by the Lessee
pursuant to which the Lessee furnishes the aircraft, crew, maintenance and
insurance and customers bear all other operating expenses and (ii) any similar
contract in which the customer provides the flight crew, all in accordance with
the Lessee's historical practices.
"ACT" means the Federal Aviation Act of 1958, as amended and
recodified in ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, or any similar legislation of the
United States enacted to supersede, amend or supplement such Act and the rules
and regulations promulgated thereunder.
"AGENT" has the meaning specified in the first paragraph of this
instrument.
"AIRCRAFT" has the meaning specified in Section 1 hereof.
"AIRCRAFT COLLATERAL" has the meaning specified in Section 1
hereof.
"AIRCRAFT RELATED COLLATERAL" has the meaning specified in
Section 1 hereof.
"AIRFRAME" has the meaning specified in Section 1 hereof.
"COMPANY" has the meaning specified in the first paragraph of
this instrument. "CREDIT AGREEMENT" has the meaning specified in the Preliminary
Statements.
"DOMESTIC AIR CARRIER" means any United States "domestic air
carrier," as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor regulations.
"ENGINE" has the meaning specified in Section 1 hereof.
"EVENT OF DEFAULT" means any Event of Default as defined in the
Credit Agreement.
"LEASE" means that certain Lease Agreement, dated as of April 25,
2000, by and between Atlas Freighter Leasing III, Inc., as Lessor, and Atlas
Air, Inc., as Lessee, for the lease of the Aircraft, together with any
amendments, modifications, supplements or additions thereto.
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"LESSEE" means Atlas Air, Inc., a Delaware corporation.
"LESSOR" has the meaning specified in the first paragraph of this
Mortgage.
"LOANS" has the meaning specified in the Preliminary Statements.
"MORTGAGE" has the meaning specified in the first paragraph of
this instrument.
"NOTES" has the meaning specified in the Preliminary Statements.
"PARTS" has the meaning specified in Section 1 hereof.
"SECURED OBLIGATIONS" has the meaning specified in Section 1
hereof.
"SUPPLEMENTAL CHATTEL MORTGAGE" has the meaning specified in
Section 1 hereof.
SECTION 3. Representations and Warranties.
The Company hereby represents and warrants that, in the case of
the Airframe or each Engine initially or subsequently mortgaged hereunder on the
date the Airframe or such Engine is mortgaged hereunder as follows:
(a) The Company has good and marketable title to the Aircraft
Collateral free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft Collateral and
Aircraft Related Collateral intended by the terms hereof and in the manner
aforesaid and has not assigned or pledged any of its right, title or interest
hereby assigned to anyone other than the Agent.
(b) The Company is a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name of
the Company in accordance with the Act; and the Airframe is not registered under
the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case
may be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft or such
Engine(s) as the case may be.
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(e) An airworthiness certificate has been duly issued under the
Act for the Aircraft (evidence of which has been supplied to the Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft and Engines are in such condition so as to
comply with the requirements of Section 4(c) hereof; and the insurance required
by Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a
Supplemental Chattel Mortgage constitutes the legally valid and binding
obligation of the Company enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first priority
mortgage on and security interest in the Aircraft Collateral, securing the
payment and performance of the Secured Obligations.
(h) The Company has delivered to the Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the States of
Colorado and New York and such other states as may be required with respect to
that portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related Collateral;
and except for the filings described in this paragraph and in paragraph (d)
above of this Section 3, no filing or recording of any instrument shall be
required to establish and perfect a first priority security interest in the
Aircraft Collateral and Aircraft Related Collateral under the laws of the United
States or any State thereof.
(i) The chief place of business and the chief executive office of
the Company is located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 4. Covenants.
The Company hereby covenants that so long as this Mortgage is in
effect:
(a) Liens. The Company will not directly or indirectly create,
incur, assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Aircraft Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted Encumbrances,
including the Lease. The Company will promptly, at its own expense, take such
action as may be necessary to duly discharge any such Lien not excepted above if
the same shall arise at any time.
(b) Taxes. The Company will pay, and hereby indemnifies the Agent
from and against, any and all fees and taxes, levies, imposts, duties, charges
or withholdings, to-
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gether with any penalties, fines or interest thereon (any of the foregoing for
the purposes of this Section 4(b) being called a "TAX"), which may from time to
time be imposed on or asserted against the Agent or any Lender or the Airframe
or any Engine or any part thereof or interest therein by any Federal, state or
local government or other taxing authority in the United States or by any
foreign government or subdivision thereof or by any foreign taxing authority in
connection with, relating to or resulting from: (i) the Airframe or any Engine
or any part thereof of interest therein; (ii) the manufacture, purchase,
ownership, mortgaging, lease, sublease, use, storage, maintenance, sale or other
disposition of the Airframe or any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Mortgage; provided, however, that there shall be
excluded from any indemnification any Lessor Tax (as defined in the Lease) and
unless the payment of any such Tax shall be a condition to the enforceability of
this Mortgage or the perfection of the lien hereof or unless proceedings shall
have been commenced to foreclose any lien which may have attached as security
for such Tax, nothing in this Section shall require the payment of any Tax so
long as and to extent that validity thereof shall be contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
the Company shall have set aside on its books adequate reserves with respect
thereto in accordance with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. The Company, at its
own cost and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft to be duly registered and remain duly registered in
the United States of America in the name of the Company in accordance with the
Act; and (iii) will cause the Lessee to service, repair, inspect, test,
maintain, overhaul the Airframe and each Engine and install replacement
equipment and parts on the Aircraft and each Engine (A) so as to keep the
Airframe and each Engine in such operating condition as may be required to
permit the Airframe and each Engine to be utilized in commercial operations, (B)
so as to enable the airworthiness certification of the Airframe to be maintained
in good standing at all times under the Act, except when aircraft of the same
type, model or series as the Airframe (powered by engines of the same type as
those with which the Airframe shall be equipped at the time of grounding)
registered in the United States have been grounded by the FAA; provided,
however, that if following its issuance, the United States FAA airworthiness
certificate of the Aircraft shall be withdrawn, then subject to the provisions
of Section 4(f) hereof, so long as the Company is diligently taking or causing
to be taken all necessary action to promptly correct the condition which caused
such withdrawal, no Event of Default shall arise from such withdrawal, (C) in
accordance with the Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same care used
by the Lessee with respect to the same or similar aircraft and engines owned or
operated by the Lessee so as to keep the same in as good operating condition as
when originally mortgaged hereunder, ordinary wear and tear excepted, which
practices
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shall at all times be at or above the standard of the industry in the United
States for prudent maintenance of similar equipment, and (D) in such manner as
may be necessary to maintain in full force all warranties of the manufacturers
thereof. The Company shall maintain, or shall cause Lessee to maintain, all
records, logs and other materials which may be required to permit the Airframe
and each Engine to be so utilized.
The Company will comply in all material respects with all
airworthiness directives, mandatory notes or modifications or similar
requirements affecting the same (including those issued by the manufacturer or
supplier) in such condition so as to comply with the provisions of this Mortgage
and the rules and regulations of the FAA from time to time in force and
applicable to the Aircraft and Engines. Neither the Airframe nor any Engine will
be maintained, used or operated in violation of any law or any rule, regulation
or order of any government or governmental authority having jurisdiction
(domestic or foreign), or in violation of any airworthiness certificate, license
or registration relating to the Airframe or such Engine issued by any such
authority, and in the event that such laws, rules, regulations or orders require
alteration of the Airframe or any Engine, the Company, at its own cost and
expense, will conform thereto or obtain conformance therewith and will maintain
the same in proper operating condition under such laws, rules, regulations and
orders; provided, however, that the Company may, in good faith (after having
delivered to the Agent an Officer's Certificate stating the facts with respect
thereto), contest the validity or application of any such law, rule, regulation
or order in any reasonable manner which does not, in the Agent's opinion,
adversely affect the interests under this Mortgage of the Agent or any Lender.
The Company will not operate, use or locate the Airframe or
any Engine, (I) in any area in which any insurance required to be maintained
pursuant to Section 4(g) shall not be at the time in full force and effect, or
in any area excluded from coverage by an insurance policy in effect with respect
to the Airframe or such Engine, except in the case of a requisition for use by
the United States of America, and then only if Company obtains indemnity or "war
risk" insurance in lieu of such insurance from the United States of America
against the risks and in the amounts required by said Section covering such
area, or (II) in any recognized or threatened area of hostilities unless fully
covered to the Agent's satisfaction by war risk and political risk and allied
perils insurance or unless the Airframe or such Engine is operated or used under
contract with the Government of the United States of America under which
contract that Government provides "war risk" insurance or assumes liabilities
for any damages, loss, destruction or failure to return possession of the
Airframe or such Engine at the end of the term of such contract and for injury
to persons or damage to property of others.
The Company shall not use the Aircraft nor suffer it to be
used in any manner or for any purpose excepted from any of the insurance on or
in respect of the Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or
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permit to be done, anything which, or admit to do anything the admission of
which, may invalidate any of such insurance.
(d) Possession. The Company will not, without the prior
written consent of the Agent, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish possession or control of, or transfer the right,
title or interest of the Company in, the Airframe or any Engine except that the
Company may enter into and perform all provisions and terms of the Lease and the
Lessee or the Company, unless a Potential Event of Default or Event of Default
shall have occurred and be continuing, without the prior written consent of the
Agent, may take the following actions so long as the actions to be taken shall
not deprive the Agent of the first priority Lien of this Mortgage on the assets
subject hereto and so long as the actions to be taken shall not deprive the
Company as Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft nor shall such actions deprive the Agent of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
as assignee of the Company's rights under this Mortgage:
(i) transfer possession of the Airframe or any Engine other
than by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by the Company or the Lessee in the
ordinary course of business that do not contemplate or require the
transfer of title to, use for the remainder of its useful life, or
registration of the Airframe or title to, or use for the remainder of
its useful life of such Engine; provided, however, that if the
Company's title to or use for the remainder of its useful life, of the
Airframe or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss with
respect to the Airframe or such Engine and the Company shall comply
with Section 4(f) in respect thereof;
(iv) install an Engine on an airframe that is owned by the
Lessee, provided that such airframe is free and clear of all Liens on
property of the Lessee except (A) Liens permitted under the Lease, (B)
Liens that apply only to the engines (other than the Engines),
appliances, parts, instruments, appurtenances, accessories, furnishings
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and other equipment (other than Parts) installed on such airframe (but
not to the airframe as an entirety), and (C) the rights of any Domestic
Air Carrier, under normal interchange agreements which are customary in
the airline industry and do not contemplate or require the transfer of
title to such airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to the Lessee or
owned by the Lessee subject to a conditional sale or other security
agreement, provided that: (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease or conditional
sale or other security agreement covering such airframe and except
Liens of the type permitted by clause (iv) above and (B) the Agent
shall have received from the lessor, conditional vendor or secured
party and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party of such airframe a written
agreement (which may be the lease, conditional sale agreement or
mortgage covering such airframe), whereby such lessor, conditional
vendor or secured party and each of the purchasers, mortgagees and
encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in any
Engine by reason of such Engine being installed on such airframe at any
time when such Engine is subject to this Mortgage;
(vi) install an Engine on an airframe owned or leased by the
Lessee subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided, that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and the Company shall comply with Section
4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines or engines
installed thereon with any third party pursuant to which the Company
has operational control of the Airframe and any Engines installed
thereon, such operation to be performed solely by individuals under the
operational control of the Company possessing all current certificates
and licenses that would be required under the applicable laws of the
United States for the performance by such employees of similar
functions within the United States; provided, that the Company's
obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate to, and the Leases shall be made expressly subject and
subordinate to, the lien and security interest of this
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Mortgage and all of the Agent's rights hereunder and the Company shall remain
primarily liable hereunder for the performance of all the terms of this Mortgage
to the same extent as if such transfer had not occurred, and any such instrument
of transfer shall include appropriate provisions for the maintenance and
insurance of the Airframe or such Engine, and any such instrument of transfer
(other than the Lease) shall expressly prohibit any further transfer of the
Airframe or such Engine or any assignment of the rights thereunder; and provided
further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any way
discharge or diminish any of the Company's obligations to the Agent hereunder or
under the Credit Agreement. In the event that the Agent shall have received from
the lessor, conditional vendor or secured party of any airframe leased to the
Lessee or purchased by the Lessee subject to a conditional sale or other
security agreement, a written agreement complying with clause (B) of Section
4(d)(v), and the lease or conditional sale or other security agreement covering
such airframe also covers an engine, engines or spare engines owned by the
lessor under such lease, conditionally owned by the conditional vendor under
such conditional sale agreement, or subject to such security agreement, the
Agent hereby agrees for the benefit of such lessor, conditional vendor or
secured party that the Agent will not acquire or claim, as against such lessor,
conditional vendor or secured party, any right, title or interest in any such
engine or spare engine as the result of such engine or spare engine being
installed on the Airframe at any time while such engine or spare engine is
subject to such lease or conditional sale or other security agreement and owned
by such lessor, conditionally owned by such conditional vendor or subject to
such security agreement.
(e) Replacement and Pooling of Parts; Alterations,
Modifications and Additions.
(i) Except as otherwise provided in Section 4(e)(iv), the
Company, at its own cost and expense, will promptly replace all Parts,
that may from time to time be incorporated or installed in or attached
to the Airframe or any Engine and that 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.
In addition, in the ordinary course of maintenance, service, repair or
testing, the Company at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use; provided,
that, except as otherwise provided in Section 4(e)(iv), the Company at
its own cost and expense shall replace such Parts as promptly as
practicable. All replacement Parts shall be owned by the Company free
and clear of all Liens (except Permitted Encumbrances and the Lease,
and for pooling arrangements to the extent permitted by Section
4(e)(ii)), and shall be in as good operating condition as, and shall
have a value and utility at least equal to, the Parts replaced assuming
such
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property were in the condition and repair required to be maintained by
the terms hereof.
All Parts at any time removed from the Airframe or any Engine
shall remain the property of the Company and shall remain subject to
the lien and security interest of this Mortgage, no matter where
located until such time as such Parts shall be replaced by parts that
have been incorporated or installed in or attached to the Airframe or
any Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Airframe or any Engine
as above provided, without further act, (A) title to such replacement
Part shall vest in and such replacement part shall become the property
of the Company and shall become subject to the lien and security
interest of this Mortgage and shall be deemed part of the Airframe or
such Engine for all purposes hereof to the same extent as the property
originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of
the Company and shall thereupon become free and clear of all rights of
the Agent hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine as
provided in Section 4(e)(i) may be subjected by the Company or the
Lessee to a normal pooling arrangement of the type customary in the
airline industry entered into by the Lessee in the ordinary course of
its business and entered into with Domestic Air Carriers that are not
the subject of any bankruptcy, insolvency, or similar proceeding,
voluntary or involuntary, provided that the Part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe
or such Engine in accordance with Section 4(e)(i) as promptly as
possible after the removal of such removed part. In addition, any
replacement Part when incorporated or installed in or attached to the
Airframe or any Engine in accordance with Section 4(e)(i) may be owned
subject to such a pooling arrangement, provided that the Company, at
its expense, as promptly thereafter as possible, either (A) causes such
replacement Part to become subject to the lien and security interest of
this Mortgage in accordance with Section 4(e)(i) by the Company's
acquiring title thereto for the benefit of the Agent free and clear of
all Liens (except Permitted Encumbrances and the Lease) or (B) replaces
such replacement Part by incorporating or installing in or attaching to
the Airframe or such Engine a further replacement Part owned by the
Company free and clear of all Liens (except Permitted Encumbrances and
the Lease).
(iii) The Company, at its own cost and expense, shall make or
cause to be made such alterations and modifications in and additions to
the Airframe and the Engines as may be required from time to time to
meet the standards of the FAA or other governmental authority having
jurisdiction; provided, that the Company may, in good
-14-
faith, contest the validity or application of any such standard in any
reasonable matter that shall not adversely affect the Lien of this
Mortgage or Lenders' interests therein. The Company also agrees, at its
own cost and expense, to make or cause to be made such alterations and
modifications in and additions to the Airframe and the Engines as may
be required from time to time to meet the standards or requirements of
any directive issued by a manufacturer relating to the Airframe or any
Engine. In addition, so long as no Potential Event of Default or Event
of Default shall have occurred and be continuing, the Company, at its
own cost and expense, may from time to time make such alterations and
modifications in and additions to the Airframe and any Engine as the
Company may deem desirable in the proper conduct of its business or to
accommodate the business of the Lessee, provided that no such
alteration, modification or addition diminishes the value or utility or
impairs the condition or airworthiness of the Airframe or such Engine
below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition,
assuming that the Airframe or such Engine were then in the condition
and airworthiness required to be maintained by the terms of this
Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become the
property of, and title to such parts shall vest in the Company and
shall be subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, the Company may remove
and not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date
hereof, on the date the Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the terms
of Section 4(c) hereof or any other provision of this Mortgage and (C)
can be removed from the Airframe or such Engine without diminishing or
impairing the value, utility or airworthiness that the Airframe or such
Engine would have had at such time had such alteration, modification or
addition not occurred, assuming that the Aircraft Collateral was
otherwise in the condition required by this Mortgage. Upon the removal
by the Company of any such Part, as above provided, title thereto
shall, without further act, be free and clear of all rights of the
Agent hereunder and such Part shall no longer be deemed a Part
hereunder.
(v) The Company will ensure that, pursuant to the terms of the
Leases, all obligations of the Company pursuant to this Section 4(e)
shall be performed by the Lessee, at the Lessee's own cost and expense,
and all Parts and alterations, improve-
-15-
ments or modifications in and additions to the Aircraft shall become
subject to the Lien of this Mortgage and shall be leased to the Lessee
under the applicable Lease.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an
Airframe or an Engine, the Company will promptly notify the Agent
thereof in writing (in any event within five (5) days of such
occurrence) and will, not later than 180 days after the receipt of
Proceeds in connection with such Event of Loss, mortgage hereunder, by
complying with all of the terms of subsection (ii) below and otherwise
taking all necessary actions to provide that the Company (and the Agent
upon foreclosure of the Company's interest in the Lease) will continue
to be entitled to the benefits of Section 1110 of the Bankruptcy Code
with respect to the replacement airframe or engine referred to below,
an Acceptable Alternate Airframe or Acceptable Alternate Engine free of
all Liens (other than Permitted Encumbrances and the Lease). Upon
compliance with the preceding sentence within such 180-day period, the
Agent will execute and deliver to the Company a partial release, in
recordable form, releasing the lien of this Mortgage to the extent that
it covers such Airframe or Engine with respect to which such Event of
Loss has occurred. Such Acceptable Alternate Airframe or Acceptable
Alternate Engine shall thereupon constitute an "Airframe" or an
"Engine," as the case may be, for all purposes hereof and shall be
deemed to constitute part of the Aircraft.
(ii) Whenever the Company shall subject any Airframe or Engine
to the lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), the Company will on or prior thereto:
(A) deliver to the Agent and duly file for recording
under the Act, a Supplemental Chattel Mortgage substantially
in the form of Exhibit A hereto duly executed by the Company
appropriately describing such engine to be subjected to the
lien and security interest of this Mortgage;
(B) deliver to the Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of
the States of Colorado and New York (or such other States as
may be required at such time) covering the security interest
created by this Mortgage to perfect the security interest of
the Agent in the Airframe or Engine to be subjected to the
lien and security interest of this Mortgage;
(C) deliver to the Agent an Officers' Certificate
dated the date of execution of said Supplemental Chattel
Mortgage, stating:
-16-
(I) that the representations and warranties
contained in Section 3 hereof are true and correct on
and as of such date of execution with respect to such
Airframe or Engine and the Company;
(II) that, upon consummation of the terms of
this Section 4(f), no Potential Event of Default or
Event of Default will exist; and
(III) that all conditions precedent
contemplated in this Section 4(f)(ii) have been
complied with;
(D) furnish the Agent with evidence of compliance
with the insurance provisions of Section 4(g) hereof with
respect to such Airframe or Engine as the Agent may reasonably
request;
(E) furnish the Agent with a warranty (as to title)
▇▇▇▇ of sale, in form and substance reasonably satisfactory to
the Agent with respect to such Airframe or Engine;
(F) furnish the Agent with such evidence of title
such as the ▇▇▇▇ of sale as the Agent may reasonably request
concerning such Airframe or Engine;
(G) cause to be delivered to the Agent an appraisal
by the Approved Appraisers relating to the Airframe or Engine
to be subjected to the lien and the security interest of this
Mortgage stating that it has a value and utility at least
equal to, and in as good operating condition as the Airframe
or Engine subject to such Event of Loss immediately prior to
such Event of Loss, assuming compliance by the Company with
all the terms of this Mortgage with respect to such Airframe
or Engine; and
(H) cause to be delivered to the Agent an opinion or
opinions of counsel dated the date of execution of such
Supplemental Chattel Mortgage, stating:
(I) that the Airframe or Engine specifically
described in said Supplemental Chattel Mortgage, is
free and clear of all recorded Liens,
(II) that said Supplemental Chattel Mortgage
(1) has been duly authorized, executed and delivered
by Company, and (2) creates a valid, perfected and
first priority security interest in and to the
Airframe or Engine described in said Supplemental
Chattel Mortgage, enforceable against all third
parties and securing the payment of all obligations
-17-
purported to be secured thereby and that all action
required to perfect fully such security interest has
been taken and completed,
(III) that said Supplemental Chattel
Mortgage has been duly filed for recordation in
accordance with the provisions of the Act to continue
the perfection and priority of the security interest
intended to be created by the Mortgage,
(IV) that the Company (and the Agent upon
succeeding to the Company's interest in the Lease)
will continue to be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to
the lease of the Airframe or Engine described in said
Supplemental Chattel Mortgage, and
(V) as to such other matters as the Agent
may reasonably request.
Promptly upon the recording of each Supplemental
Chattel Mortgage under the Act, the Company will
cause to be delivered to the Agent an opinion of
counsel for the Company as to the due recording of
such Supplemental Chattel Mortgage in accordance with
the Act.
(iii) With respect to the Airframe or any Engine as between
the Agent and the Company, any payments on account of an Event of Loss
(other than insurance proceeds or other payments the application of
which is provided for in Section 4(g) below and under the terms of the
Credit Agreement) received from any government authority or other
person shall be applied as follows:
(A) if such payments are received with respect to an
Event of Loss to an Airframe or Engine that has been or is
being replaced by the Company pursuant to the terms hereof, so
long as there shall exist no Event of Default or Potential
Event of Default, such payment shall be paid over to or
retained by the Company or the Lessee upon satisfaction of the
conditions for replacement contained in paragraph (ii) above
and until such time shall be held by the Agent in accordance
with the provisions hereof as security for the Secured
Obligations; and
(B) if such payments are received with respect to an
Event of Loss with respect to which no replacement is being
effected, such payments shall be applied to the prepayment of
the Notes required pursuant to the terms of the
-18-
Credit Agreement and shall be held pursuant to the terms of
this Mortgage, and the balance, if any, shall be paid over to
or retained by the Company.
(C) In the event of a requisition for use by the
United States Government of the Airframe or any Engine, the
Company shall promptly notify the Agent of such requisition
and all of the Company's obligations under this Mortgage shall
continue to the same extent as if such requisition had not
occurred. Any payments received by the Agent or the Company
from the United States Government for the use of the Airframe
or such Engine, shall be paid over to, or retained by, the
Company.
(D) Any amount referred to in paragraph (iii) or (iv)
of this Section 4(f) that is payable to or retained by the
Company shall not be paid to the Company or retained by the
Company, if at the time of such payment or retention any Event
of Default or a Potential Event of Default shall have occurred
and be continuing, but shall be held by or paid over to the
Agent as security for the obligations of the Company under
this Mortgage and the other Loan Documents, and, if the Agent
shall declare the Credit Agreement to be in default, shall be
applied against the Company's obligations hereunder and
thereunder as and when due. At such time as there shall not be
continuing any such Event of Default or Potential Event of
Default, such amount shall be paid to the Company to the
extent not previously applied in accordance with the preceding
sentence. In addition, and whether or not there shall exist an
Event of Default or Potential Event of Default, until such
time as the Company shall request to be paid any amount
referred to in paragraph (iii) or (iv) in order to effect the
mortgaging hereunder of a replacement Airframe or Engine, any
amounts referred to in paragraphs (iii) or (iv) of this
Section 4(f) shall be held by the Agent as security for the
obligations of the Company under this Mortgage and the other
Loan Documents.
(g) Insurance.
(i) The Company will cause the Lessee at all times to carry
and maintain on or with respect to the Aircraft, at the Lessee's own
cost and expense, public liability (including without limitation,
contractual liability, cargo liability, passenger legal liability,
bodily injury and product liability, but excluding manufacturer's
product liability) and property damage insurance with insurers of
recognized responsibility and reputation in amounts, of the type and
covering the risks customarily carried with respect to similar aircraft
by corporations engaged in the same or similar business and similarly
situated with the Lessee but in no event in an amount less than
$500,000,000 per occurrence (which shall include war risk, governmental
confiscation and expro-
-19-
priation and allied perils coverage). During any period when the
Aircraft is on the ground and not in operation, the Lessee may carry or
cause to be carried, in lieu of insurance required by this Section,
insurance otherwise conforming with the provisions of this Section
except that the amounts of coverage shall not be required to exceed the
amounts of comprehensive airline liability insurance, and the scope of
risk covered and type of insurance shall be the same, as are
customarily carried with respect to similar aircraft on the ground by
corporations engaged in the same or similar business and similarly
situated with the Lessee. Any policies of insurance carried in
accordance with this Section 4(g) and any policies taken out in
substitution or replacement of any such policies (A) shall be amended
to name the Agent and the Lenders as additional named insureds, (B)
shall be primary without right of contribution from any other insurance
which is carried by the Lessee, (C) shall expressly provide that all
provisions thereof, except the limits of the liability, shall operate
in the same manner as if there were a separate policy covering each
insured, and (D) shall provide that the insurer shall waive any right
of subrogation against the Agent or the Lenders.
(ii) The Company will cause the Lessee at all times to carry
and maintain with insurers of recognized responsibility and reputation
on or with respect to the Aircraft, at the Lessee's own cost and
expense, aircraft ground and flight all-risk hull insurance as well as
fire and extended coverage insurance on Engines and other equipment
while removed from the Airframe or airframe (which shall include war
risk, governmental confiscation and expropriation (other than by the
United States Government) and allied perils including (A) strikes,
riots, civil commotions or labor disturbances, (B) any malicious act or
act of sabotage and (C) hijacking (air piracy) or any unlawful seizure
or wrongful exercise of control of the Aircraft or crew in flight
(including any attempt at such seizure or control) made by any person
or persons aboard the Aircraft or another aircraft acting without the
consent of the insured, if and to the extent the same shall be
maintained by the Lessee with respect to similar aircraft owned or
operated by the Lessee on the same routes or if the Aircraft or another
aircraft is operated on routes where the custom is for Domestic
Carriers similarly situated with the Lessee flying comparable routes
with similar aircraft to carry such insurance, of the type usually
carried by corporations engaged in the same or similar business and
similarly situated with the Lessee; provided, that such insurance
(including any self-insurance to the extent permitted below) shall at
all times be for an amount not less than the greater of the amount
required by the applicable Lease and $50,000,000. During any period
when the Aircraft is on the ground and not in operation the Lessee may
carry or cause to be carried, in lieu of the insurance required by this
Section, insurance otherwise conforming hereto except that the scope of
risk covered and type of insurance shall be the same as are from time
to time customarily carried with respect to similar aircraft or spare
engines by corporations engaged in the same or similar
-20-
business and similarly situated with the Lessee for aircraft on the
ground in an amount at least equal to the applicable amount provided
above. All such insurance shall name the Agent and the Lenders as
additional insureds and loss payees to the extent their interest may
appear and shall provide that any loss to the Airframe or an Engine in
excess of $2,000,000 (and, if a Potential Event of Default or Event of
Default has occurred and is continuing, any such loss) shall be payable
to the Agent for the benefit of the Lenders; and shall be primary
without right of contribution from any other insurance that is carried
by the Agent with respect to its interest therein.
The Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts as
are then applicable to other similar aircraft or spare engines in the
Lessee's fleet that are of a value comparable to the Aircraft, and as
are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with the
Lessee; provided, however, that the Company shall not permit the Lessee
to self-insure in an amount in excess of $1,000,000 without the prior
written consent of the Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name the
Agent and the Lenders as additional named insureds, but without the
Agent or the Lenders being thereby liable for premiums; (B) provide
that in respect of the interest of the Agent or the Lenders in such
policies the insurance shall not be invalidated by any action or
inaction of the Lessee and shall insure the interests of the Agent and
the Lenders regardless of any breach or violation by the Lessee or any
Person (other than the Agent) of any warranty, declaration or condition
contained in such policies; (C) provide that if such insurance is
cancelled, or if any material change is made in the coverage that
affects the interest of the Agent or any Lender, or if such insurance
is allowed to lapse for nonpayment of premium, such cancellation,
change or lapse shall not be effective as to the Agent for thirty (30)
days (seven (7) days, or such shorter or longer period as may from time
to time be customarily available in the industry, in the case of any
war risk and allied perils coverage) after receipt by the Agent of
written notice from such insurers of such cancellation, change or
lapse; (D) be in full force and effect throughout any geographical
areas at any time traversed by the Aircraft and shall be payable in
U.S. dollars; (E) waive any right of the insurers to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise
in respect of any liability of the Agent; and (F) waive all rights of
subrogation against the Agent.
(iv) In the case of a lease or contract with the United States
or any agency or instrumentality thereof in respect of the Airframe or
any Engine, a valid agreement by the United States or such agency or
instrumentality to indemnify the Lessee against
-21-
the same risks against which the Lessee is required hereunder to insure
shall be considered adequate insurance with respect to the Airframe or
such Engine to the extent of the risks and in the amounts that are the
subject of any such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on
or prior to January 31, the Company will cause the Lessee to furnish to
the Agent (A) a report signed by a firm of independent aircraft
insurance brokers, appointed by the Lessee and not objected to by the
Agent, describing in reasonable detail acceptable to the Agent the
insurance then carried and maintained on or with respect to the
Aircraft and the Engines and stating that in the opinion of such firm
such insurance complies with the terms of this Section 4(g) and is
adequate to protect the interests of the Lessee, the Company and the
Agent, and (B) certificates of the insurer or insurers evidencing the
insurance covered by the report. The Company will cause the Lessee to
cause such brokers to advise the Agent in writing (x) promptly of any
default in the payment of any premium and of any other act or omission
on the part of the Lessee of which such firm has knowledge and which
might invalidate or render unenforceable, in whole or in part, any
insurance on the Aircraft or any Engine and (y) at least thirty (30)
days prior to the expiration or termination date, or date of
effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(vi) All insurance payments and other payments received by the
Agent or the Company from insurance referred to in paragraph (ii) above
shall be, if received by the Company, immediately paid to the Agent and
shall be held by the Agent as security for the Secured Obligations and
all other obligations required to be paid in accordance with the terms
of this Mortgage and the Credit Agreement and such payments shall be
paid to the Company upon compliance by the Company with the terms of
Subsection 4(f) with respect to the replacement of an airframe or an
engine, as the case may be, provided that no Potential Event of Default
or Event of Default shall have occurred and be continuing.
All insurance payments and other payments received by the
Agent or the Company from insurance referred to in paragraph (ii) above
and paid other than as a result of an Event of Loss shall be paid by
the Agent to or be retained by the Company, and promptly applied by the
Company to the extent necessary to repair the damage to the Airframe or
the Engine for which such insurance was paid, provided that the Agent
shall not be required to make any such payment to the Company if a
Potential Event of Default or Event of Default has occurred and is
continuing, but shall be held or paid over to the Agent as security for
the obligations of the Company under this Mortgage and the other Loan
Documents, and, if the Agent shall declare the Credit Agreement to be
in default, shall be applied against the Company's obligations
hereunder and thereunder as and when due. Retention by the Agent of any
amounts pursuant to the pre-
-22-
ceding sentence shall not relieve the Company of its obligations to
make promptly all repairs and replacements required by Sections 4(c)
and (e) hereof and to pay for the same with the Company's funds or
cause payment of the same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit the Agent or
any Lender from obtaining insurance with respect to the Aircraft for
its own account. The Company may, at its own expense, carry insurance
with respect to its interest in the Aircraft in amounts in excess of
that required to be maintained by this Section 4(g). No insurance
maintained by the Agent or any Lender shall prevent the Company from
causing the Lessee to carry the insurance required or permitted by this
Section or adversely affect such insurance or the cost thereof.
Proceeds of any such insurance carried by the Agent or any Lender shall
be paid as provided in the insurance policy relating thereto and the
Agent shall have no duty to obtain any such insurance.
(h) Inspection. The Company will permit, and cause the Lessee
to permit, any officers, employees or authorized representatives of the Agent to
inspect, at the Lessee's cost and expense under the Lease, the Aircraft
Collateral and Aircraft Related Collateral, or any part thereof, and to examine,
copy or make extracts from, any and all books, records and documents in the
possession of the Company relating to such Collateral or any part thereof and
performance of this Mortgage, all at such reasonable times and as often as may
be requested. The Agent shall have no duty to make any such inspection or
examination and shall not incur any liability or obligation by reason of making
or not making any such inspection or examination.
(i) Insignia. The Company shall, at its own cost and expense,
or pursuant to the Lease, cause the Airframe and each Engine included in the
Aircraft Collateral to be legibly marked (in a reasonably prominent location,
which in the case of the Airframe shall be adjacent to the airworthiness
certificate) with such a plate, disk, or other marking of customary size, and
bearing the legend "Owned by Atlas Freighter Leasing III, Inc., and Mortgaged to
Bankers Trust Company, as Agent" or such other legend, as shall in the opinion
of the Agent be appropriate or desirable to evidence the fact that it is subject
to the lien and security interest created by this Mortgage. The Company shall
not remove or deface, or permit to be removed or defaced, any such plate, disk,
or other marking or the identifying manufacturer's serial number, and, in the
event of such removal or defacement, shall promptly cause such plate, disk, or
other marking or serial number to be promptly replaced. Except as provided
above, the Company shall not allow the name of any person, association or
corporation to be placed on the Airframe or any Engine as a designation that
might be interpreted as a claim of ownership or of any security interest
therein, except that any permitted lessee may place its customary colors and
insignia or the insignia of the manufacturer on the Airframe or any Engine.
-23-
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing,
then the Agent may, without notice of any kind to the Company, exercise in
respect of the Aircraft Collateral and Aircraft Related Collateral, (i) all the
rights and remedies of a secured party on default under the Uniform Commercial
Code as in effect at the time in any applicable jurisdiction (whether or not the
Uniform Commercial Code applies to the affected Aircraft Collateral), (ii) any
and all remedies under the Leases and all of the rights and remedies of the
Lessor under the Lease, (iii) all the rights and remedies provided for in this
Mortgage, the Credit Agreement and any other Loan Document, and in any other
agreement between the Company and the Agent, and (iv) such other rights and
remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing,
the Agent may, without notice, take possession of the Aircraft Collateral or any
part thereof and may exclude the Company and the Lessee, and all persons
claiming under the Company or the Lessee, wholly or partly therefrom. At the
request of the Agent, the Company shall promptly deliver or cause the Lessee to
deliver to the Agent or to whomsoever the Agent shall designate, at such time or
times and place or places as the Agent may specify, and fly or cause to be flown
to such airport or airports in the United States as the Agent may specify,
without risk or expense to the Agent, the Aircraft Collateral or any part
thereof. In addition, the Company will provide, or cause the Lessee to provide,
without cost or expense to the Agent, storage facilities for the Aircraft
Collateral. If the Company or the Lessee shall for any reason fail to deliver
the Aircraft Collateral or any part thereof after demand by the Agent, the Agent
may, without being responsible for loss or damage, (i) obtain a judgment
conferring on the Agent the right to immediate possession or requiring the
Company and the Lessee to deliver immediate possession of the Aircraft
Collateral or any part thereof to the Agent, the entry of which judgment the
Company hereby specifically consents and the Lessor's consent to which will be
obtained by the Company under the Lease, or (ii) with or without such judgment,
pursue the Aircraft Collateral or any part thereof wherever it may be found and
may enter any of the premises of the Company and the Lessee where the Aircraft
Collateral may be and search for the Aircraft Collateral and take possession of
and remove the same. The Company agrees to pay to the Agent, upon demand, all
expenses incurred in taking any such action; and all such expenses shall, until
paid, be secured by the lien of this Mortgage. Upon every such taking of
possession, the Agent may, from time to time, make all such reasonable
expenditures for maintenance, insurance, repairs, replacements, alterations,
additions and improvements to and of the Aircraft Collateral, as it may deem
proper. In each such case, the Agent shall have the right to maintain, use,
operate, store, lease, control or manage the Aircraft Collateral or any part
thereof and to carry on the business and exercise all rights and powers of
Company relating to the Aircraft Collateral, as the Agent shall deem best,
including the right to enter into any and all such agreements with respect to
the maintenance, use, operation, storage, leasing,
-24-
control, management or disposition of the Aircraft Collateral or any part
thereof as the Agent may determine. Further, after the occurrence and during the
continuation of an Event of Default, the Agent shall be entitled to collect and
receive directly all tolls, rents, revenues, issues, income, products and
profits of the Aircraft Collateral or any part thereof, including without
limitation, all payments under any of the Leases. Such tolls, rents, revenues,
issues, income, products and profits shall be applied to pay the expenses of the
use, operation, storage, leasing, control, management or disposition of the
Aircraft Collateral, and of all maintenance, insurance, repairs, replacements,
alterations, additions and improvements, and to make all payments that the Agent
may be required or may elect to make, if any, for taxes, assessments, or other
proper charges upon the Aircraft Collateral and all other payments that the
Agent may be required or authorized to make under any provision of this
Mortgage, as well as just and reasonable compensation for the services of the
Agent and of all persons properly engaged and employed for such purposes by the
Agent.
(c) The Agent, with or without taking possession of the
Aircraft Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales,
as an entirety or in separate lots or parcels, the Aircraft Collateral
or any part thereof, at public or private sale, at such place or places
and at such time or times and upon such terms, including terms of
credit (which may include the retention of title by the Agent to the
property so sold), as the Agent may determine, whether or not the
Aircraft Collateral shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein granted
or for the foreclosure of this Mortgage and the sale of the Aircraft
Collateral under the judgment or decree of a court of competent
jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing,
the Company agrees to the fullest extent that it lawfully may, that it and the
Lessee will not (and hereby irrevocably waives its right to) at any time plead,
or claim the benefit or advantage of, any appraisement, valuation, stay,
extension, moratorium, or redemption law now or hereafter in force, in order to
prevent or hinder the enforcement of this Mortgage or the absolute sale of the
Aircraft Collateral. The Company, for itself and all who may claim under it,
waives, to the extent that it lawfully may, all right to have all or any portion
of the Aircraft Collateral marshalled upon any foreclosure hereof.
(e) Each and every remedy of the Agent shall be cumulative and
shall not be exclusive of any other remedies provided now or hereafter at law,
in equity or otherwise.
-25-
The Company shall reimburse the Agent, upon demand, for all fees and other
expenses paid or incurred by the Agent in exercising any rights, powers or
remedies granted hereby. All such fees and expenses shall, until paid, be
secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to the
exclusion of the Company, to declare the Lease in default in accordance with its
terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease
(including, without limitation, amounts received in connection with the exercise
by the Lessee of any purchase option or Event of Loss) and the proceeds of any
sale, lease or other disposition of all or any of the Aircraft Collateral or
Aircraft Related Collateral under this Mortgage and all other sums realized by
the Agent pursuant to this Mortgage or any proceedings hereunder shall be
applied in the following order of priority:
First: To the payment of the costs and expenses of such sale,
lease, disposition or other realization, including reasonable
compensation to the Agent's agents and counsel, and all expenses,
liabilities and advances made or incurred by the Agent in connection
therewith, including, without limitation, taxes upon or with respect to
the sale, lease, disposition or realization and the payment of taxes
and Liens, if any, prior to the lien and security interest of this
Mortgage (except any taxes or Liens to which the respective sale,
lease, disposition or realization shall have been subject) and to the
payment of expenses and the reimbursement of payments incurred or made
by the Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid
on the Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which
payment shall be applied to the principal installments of the Notes in
the manner specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by the
Company under the Credit Agreement, this Mortgage or any other Loan
Document, and otherwise to the Company or to such other Person(s) as
may lawfully be entitled, or as any court of competent jurisdiction may
direct, the remainder.
-26-
SECTION 7. Agent as Attorney.
The Company hereby irrevocably appoints the Agent the true and
lawful attorney of the Company (with full power of substitution) in the name,
place and stead of, and at the expense of, the Company at any time after the
occurrence and during the continuation of an Event of Default (i) to ask,
demand, collect, ▇▇▇ for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Aircraft Collateral and Aircraft Related Collateral, (ii) to make all necessary
transfers of all or any part of the Aircraft Collateral and Aircraft Related
Collateral in connection with any sale, lease or other disposition made pursuant
hereto, (iii) to execute and deliver for value all necessary or appropriate
bills of sale, assignments and other instruments in connection with any such
sale, lease or other disposition, and (iv) generally to do, at the Agent's
option and the Company's cost and expense, at any time, or from time to time,
all acts and things that the Agent deems necessary to protect, preserve or
realize upon the Aircraft Collateral and Aircraft Related Collateral and the
Agent's security interest therein, in order to effect the intent of this
Mortgage, all as fully and effectively as the Company might do, the Company
hereby ratifying and confirming all that its said attorney (or any substitute)
shall lawfully do hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by the Agent to be held and applied under
this Section, and all monies if any, required to be paid to the Agent hereunder,
which disposition is not elsewhere herein otherwise specifically provided for,
shall be held by the Agent and applied from time to time as provided herein and
in the Credit Agreement and the other Loan Documents and shall be held in an
account in the name of the Agent and invested in Cash Equivalents for the
benefit and at the risk of the Company.
SECTION 9. Agent's Right to Perform.
If the Company fails to make any payment required to be made
by it hereunder or fails to perform or comply with any of its agreements
contained herein, the Agent may itself make such payment or perform or comply
with such agreement (including, without limitation, the agreement of the Company
to maintain insurance pursuant to Section 4(g) hereof), and the amount of such
payment and the amount of the reasonable expenses of the Agent incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the rate
specified in the Credit Agreement from time to time, shall be payable by the
Company to the Agent on demand and shall constitute additional indebtedness
secured by the lien and security interest of this Mortgage.
-27-
SECTION 10. Further Assurances.
The Company at its expense will promptly and duly execute and
deliver such documents and assurances and take such action as may be necessary
or desirable, or as the Agent may from time to time request, in order to correct
any defect, error or omission which may at any time hereafter be discovered in
the contents of this Mortgage or in the execution or delivery hereof, and/or in
order to more effectively carry out the intent and purpose of this Mortgage and
to establish, protect and perfect the rights, remedies and security interests
created or intended to be created in favor of the Agent hereunder, including,
without limitation, the execution, delivery and filing of any instruments with
the FAA and of any Uniform Commercial Code financing and continuation statements
with respect to the security interests created hereby, in form and substance
satisfactory to the Agent, in such jurisdictions as the Agent may reasonably
request. The Company hereby authorizes the Agent to file any such statements
without the signature of the Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in
the Aircraft Collateral and Aircraft Related Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of the Secured
Obligations, (b) be binding upon the Company, its successors and assigns and (c)
inure, together with the rights and remedies of the Agent hereunder, to the
benefit of the Agent and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), the Agent or any Lender
may, subject to any restrictions contained in the Credit Agreement, assign or
otherwise transfer any of its interests in the Credit Agreement or in any Note
to any other person or entity, and such other benefits in respect thereof
granted to the Agent or any Lender herein or otherwise. Upon the indefeasible
payment in full of the Secured Obligations, the security interest granted hereby
shall terminate and all rights to the Aircraft Collateral and Aircraft Related
Collateral shall revert to Company. Upon any such termination, the Agent will
execute and deliver to the Company, at the Company's expense, such instruments
of release and termination as the Company may reasonably request to evidence
such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the Company
hereby waives any provision of law which renders any provision hereof prohibited
or unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or
-28-
terminated orally, but only by an instrument in writing signed by the Company
and the Agent. The captions and headings in this Mortgage are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against the Company with
respect to this Mortgage may be brought in any state or federal court of
competent jurisdiction in the State of New York or Colorado and by execution and
delivery of this Mortgage Company accepts for itself and in connection with the
Aircraft Collateral and Aircraft Related Collateral, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Mortgage. The Company hereby agrees that service of process in any
such proceeding in any such court may be made by registered or certified mail
return receipt requested to the Company at its address provided on the signature
pages of the Mortgage, such service being hereby acknowledged by the Company to
be effective and binding service in every respect. A copy of any such process so
served shall be mailed by registered mail to the Company, at its address
specified in Section 15 hereof, except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity of
service of process. If any agent appointed by the Company refuses to accept
service, the Company hereby agrees that service upon it by mail shall constitute
sufficient notice. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Company in the courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR AIRCRAFT COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder
shall be in writing (including facsimile communication) and mailed or telecopied
or delivered to the Com-
-29-
pany or the Agent, as the case may be, addressed to it at the address of such
party specified on the signature page hereof, or as to either party at such
other address as shall be designated by such party in a written notice to each
other party complying as to delivery with the terms of this Section 15. All such
notices and other communications shall, when mailed, be effective when deposited
in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same Mortgage.
[Remainder of page intentionally left blank.]
-30-
IN WITNESS WHEREOF, the Company and the Agent have caused this
Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING III, INC.
By:
--------------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing III, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President -
Strategic Planning and Treasurer
BANKERS TRUST COMPANY, as Agent
By:
--------------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
------------ ----- ------------- ------------
Boeing 747-2D7B 22471 N527MC
SCHEDULE II
to Security Agreement
and Chattel Mortgage
ENGINES
Manufacturer's
Manufacturer Model Serial Number
------------ ----- -------------
General Electric CF6-50E2 528420
General Electric CF6-50E2 517532
General Electric CF6-50E2 455793
General Electric CF6-50E2 455430
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated April 25, 2000,
between Atlas Freighter Leasing III, Inc., a Delaware corporation (the
"Company"), and Bankers Trust Company, as Administrative Agent for and
representative of (in such capacity, the "Agent") the financial institutions
(the "Lenders") party to the Credit Agreement dated as of April 25, 2000, among
the Company, the Lenders and the Agent.
The Company and the Agent have heretofore entered into a
Security Agreement and Chattel Mortgage dated April 25, 2000, (the "Mortgage")
and the terms defined therein and not otherwise defined herein are used herein
as therein defined. The Mortgage provides for the execution and delivery of
supplements thereto substantially in the form hereof, for the purpose of
particularly describing each Engine subjected to the lien of the Mortgage
pursuant to Section 4(f) thereof, and shall specifically mortgage such Engine to
the Agent.
The Mortgage relates to the Engine(s) described below and a
counterpart of the Mortgage has been recorded by the Federal Aviation
Administration on April __, 2000, and has been assigned Conveyance No.
____________.
NOW, THEREFORE, that, to secure the due and punctual payment
and performance of the Secured Obligations and in consideration of the premises
and of the covenants contained in the Mortgage, the Company hereby mortgages to
the Agent, its successors and assigns, and grants and assigns to the Agent, its
successors and assigns, a first priority purchase money security interest in all
estate, right, title and interest of the Company in and to the property
described in Schedule I annexed hereto (whether or not such Engine shall be
installed on or attached to the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as
supplemental to the Mortgage and shall form a part thereof, and the Mortgage is
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED
IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT
STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
A-1
This Supplemental Chattel Mortgage may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Remainder of page intentionally left blank]
A-2
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Chattel Mortgage to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date first above
written.
ATLAS FREIGHTER LEASING III, INC.
By:
-----------------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing III, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President -
Strategic Planning and Treasurer
BANKERS TRUST COMPANY, as Agent
By:
-----------------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇-▇
▇▇▇▇▇▇▇▇ ▇-▇
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
Manufacturer Model Manufacturer's Serial Number
------------ ----- ----------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
