EXHIBIT 10.6
EXECUTION COPY
AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT
DATED AS OF APRIL 27, 2005
MADE BY
WORLD AIR HOLDINGS, INC.,
WORLD AIRWAYS, INC.,
WORLD AIRWAYS PARTS COMPANY, LLC, AND
NORTH AMERICAN AIRLINES, INC.
AS GRANTORS
IN FAVOR OF
CITIBANK, N.A.,
AS COLLATERAL AGENT
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS .......................................................................... 7
Section 1.01 Definitions .................................................................... 7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE GRANTORS ....................................... 17
Section 2.01 Certificated Air Carrier; Maintenance and Location of Spare Parts; Section
1110 ................................................................................ 17
Section 2.02 Title to Collateral; Financing Statements ...................................... 18
Section 2.03 Location of Grantors; UCC Information .......................................... 18
Section 2.04 Perfected First Priority Liens ................................................. 18
Section 2.05 Consents ....................................................................... 19
Section 2.06 Possession of Pledged Equipment ................................................ 19
Section 2.07 Pledged Equity and Pledged Debt ................................................ 19
Section 2.08 Intellectual Property .......................................................... 20
Section 2.09 Deposit and Securities Accounts ................................................ 21
ARTICLE 3 COVENANTS OF THE COMPANY ............................................................. 21
Section 3.01 Maintenance and Operation; Possession; Insignia ................................ 21
Section 3.02 Replacement and Pooling of Parts; Alterations, Modifications and Additions ..... 26
Section 3.03 Use, Possession and Designated Locations of Spare Parts and Pledged
Equipment; Collateral Access Agreement ......................................... 28
Section 3.04 Insurance ...................................................................... 30
Section 3.05 Inspection ..................................................................... 34
Section 3.06 Changes in Locations, Name, etc ................................................ 34
Section 3.07 Pledged Receivables ............................................................ 35
Section 3.08 Pledged Equipment .............................................................. 36
Section 3.09 Delivery and Control of Pledged Equity and Pledged Debt ........................ 36
Section 3.10 Notices ........................................................................ 37
Section 3.11 Intellectual Property Collateral ............................................... 37
Section 3.12 Liens .......................................................................... 39
Section 3.13 Financing Statements ........................................................... 39
Section 3.14 Disposition of Collateral ...................................................... 39
Section 3.15 Further Assurances ............................................................. 39
Section 3.16 Performance .................................................................... 39
ARTICLE 4 EVENT OF LOSS ........................................................................ 40
Section 4.01 Event of Loss; Application of Payments and Proceeds ............................ 40
ARTICLE 5 REMEDIES ............................................................................. 44
Section 5.01 Remedies Available to Collateral Agent ......................................... 44
Section 5.02 Expenses ....................................................................... 46
Section 5.03 Waiver of Claims ............................................................... 47
Section 5.04 Discontinuance of Proceedings................................................... 48
ARTICLE 6 TERMINATION SECURITY AGREEMENT ....................................................... 48
Section 6.01 Termination of Security Agreement .............................................. 48
ARTICLE 7 MISCELLANEOUS ........................................................................ 49
Section 7.01 Notices ........................................................................ 49
Section 7.02 Governing Law .................................................................. 49
Section 7.03 Execution in Counterparts ...................................................... 49
Section 7.04 Amendments ..................................................................... 49
Section 7.05 Documentation .................................................................. 49
Section 7.06 Cash Collateral ................................................................ 49
SCHEDULES
Schedule 1.01 - Spare Engines
Schedule 2.01 - Designated Locations
Schedule 2.03 - UCC Information
Schedule 2.05 - Consents
Schedule 2.06 - Pledged Equipment Locations
Schedule 2.07(a) - Initial Pledged Equity
Schedule 2.07(b) - Initial Pledged Debt
Schedule 2.08 - Intellectual Property Collateral
Schedule 2.09 - Deposit and Securities Accounts
Schedule 3. 01 - Countries Authorized for Domicile of Permitted Lessees
EXHIBITS
Exhibit A1 - Form of Mortgage and Security Agreement Supplement (Spare Engine)
Exhibit A2 - Form of Mortgage and Security Agreement Supplement (Spare Parts)
Exhibit B - Form of Intellectual Property Security Agreement
Exhibit C - Form of Intellectual Property Security Agreement Supplement
AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT (as amended,
modified, restated or otherwise supplemented from time to time in accordance
with the terms hereof, the "Security Agreement" or "Agreement") dated as of
April 27, 2005 made by WORLD AIR HOLDINGS, INC., a Delaware corporation
("Parent"). WORLD AIRWAYS, INC., a Delaware corporation (the "Company"), WORLD
AIRWAYS PARTS COMPANY, LLC, a Delaware limited liability company ("World LLC"),
and NORTH AMERICAN AIRLINES, INC., a Delaware corporation ("North American", and
together with the Parent, the Company, and World LLC the "Grantors") in favor OF
CITIBANK, N.A., acting solely in its capacity as Collateral Agent for the Board,
the Lenders and the Supplemental Guarantor (as such terms are defined in the
Loan Agreement referred to below) and as directed by the Board and the Lenders
(the "Collateral Agent").
WITNESSETH:
WHEREAS, all capitalized terms used and not otherwise defined herein
shall have the respective meanings set forth or referred to in Article 1 hereof;
WHEREAS, the Company, Parent (pursuant to the Joinder referenced
below), Govco Incorporated, as Primary Tranche A Lender, Citibank, N.A., as
Alternate Tranche A Lender and as Agent, Citicorp USA, Inc., as Tranche B
Lender, Citicorp North America, Inc., as Govco Administrative Agent, Phoenix
American Financial Services, Inc., as Loan Administrator, the Collateral Agent
and the Air Transportation Stabilization Board are parties to that certain Loan
Agreement dated as of December 30, 2003 (the "Original Loan Agreement"), as
amended by that certain Amendment No. 1 and Waiver to Loan Agreement (the
"Amendment") of even date herewith (the Amendment together with the Original
Loan Agreement, the "Loan Agreement");
WHEREAS, in connection with the Original Loan Agreement, the
Company, World LLC and the Collateral Agent executed and delivered that certain
Mortgage and Security Agreement dated as of December 30, 2003 (as amended,
modified, restated or otherwise supplemented from time to time in accordance
with its terms prior to the date hereof, the; "Original Security Agreement"),
which was duly recorded pursuant to Subtitle VII of Title 49 of the United
States Code on January 12, 2004, and has been assigned Conveyance No. E003336;
WHEREAS, on January 10, 2005, Parent and the Company consummated a
restructuring transaction pursuant to which all of the outstanding shares of
common stock of the Company were automatically converted into shares of common
stock of Parent, which resulted in the Company becoming a wholly-owned
subsidiary of Parent, and in connection therewith, Parent executed and
delivered, inter alia, that certain Joinder to Mortgage and Security Agreement
dated as of January 10, 2005 (the "Joinder") pursuant to which Parent became a
Grantor under, and agreed to be bound by the terms and provisions of, the
Original Security Agreement;
WHEREAS, pursuant to that certain Stock Purchase Agreement dated as
of April 27, 2005 among Parent, North American, and Xxx XxXxxxxx, individually
and as trustee of the Xxx and Xxxxxx XxXxxxxx Family Trust dated January 15,
2005, as seller, Parent has acquired all
of the outstanding shares (the "Shares") of common stock of North American (the
"Acquisition");
WHEREAS, it is a condition precedent to the Amendment that the
Grantors shall have executed and delivered to the Collateral Agent this Security
Agreement in order to, among other things, add North American as a Grantor;
WHEREAS, this Security Agreement amends and restates the Original
Security Agreement;
WHEREAS, the Grantors wish to execute this Security Agreement to
satisfy the condition described in the preceding paragraph and to grant certain
first priority security interests in the Collateral in favor of the Collateral
Agent for the ratable benefit and security of the Board and the Lenders; and
WHEREAS, all things necessary to make this Security Agreement the
legal, valid and binding obligation of the Grantors and the Collateral Agent,
for the uses and purposes herein set forth, in accordance with its terms, have
been done and performed and have happened.
GRANTING CLAUSE
NOW, THEREFORE, THIS MORTGAGE AND SECURITY AGREEMENT WITNESSETH,
that, to secure the prompt payment of the principal of, interest on, and all
other amounts due with respect to, the Loan, and to secure the performance and
observance by each of the Grantors of all the agreements, covenants and
provisions contained herein, in the Loan Agreement and in the other Loan
Documents, and the prompt payment of any and all amounts from time to time owing
hereunder, under the Loan Agreement and the other Loan Documents, and for the
uses and purposes and subject to the terms and provisions hereof, and in
consideration of the premises and of the covenants herein contained, and of
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, each Grantor has granted, bargained, sold, assigned,
transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant,
bargain, sell, assign, transfer, convey, mortgage, pledge and confirm unto the
Collateral Agent, its successors and assigns, for the ratable security and
benefit of the Board, the Lenders and the Supplemental Guarantor, a security
interest in and mortgage Lien on all estate, right, title and interest of such
Grantor in, to and under the following described property, rights, interests and
privileges, ownership of which is now held or hereafter acquired by such
Grantor, and wherever located (which collectively, including all property
hereafter specifically subjected to the Lien of the Security Documents by any
instrument supplemental hereto, are herein called the "Collateral"):
(1) its Pledged Equipment;
(2) its Pledged Inventory;
(3) its Pledged Receivables and the Related Contracts;
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(4) its Security Collateral;
(5) its Account Collateral;
(6) its Intellectual Property Collateral and all other General
Intangibles;
(7) its Pledged Real Property;
(8) each Spare Engine (each such Spare Engine having 750 or more
rated take-off horsepower or the equivalent thereof) as the same is now
and will hereafter be constituted, whether now owned or hereafter
acquired, and whether or not any such Spare Engine shall be installed in
or attached to any airframe and all substitutions or replacements
therefor, as provided in this Security Agreement, together with all Parts
of whatever nature which are from time to time incorporated or installed
in or attached to the Spare Engines, whether now owned or hereafter
acquired, and all renewals, substitutions, replacements, additions,
improvements, accessories and accumulations with respect to any of the
foregoing;
(9) all Spare Parts, whether now owned or hereafter acquired by
such Grantor, including any replacements, substitutions or renewals
therefor, and Accessions thereto, including but not limited to those spare
parts located at the Designated Locations described on Schedule 2.01
attached hereto and incorporated herein by reference or any supplement or
amendment thereto supplied hereunder or in any Mortgage and Security
Agreement Supplement (Spare Parts) executed and delivered from time to
time hereunder;
(10) without limiting the generality of the foregoing, all
requisition proceeds (including, without limitation, all payments and
proceeds or other revenues or income under the Civil Reserve Air Fleet
Program) with respect to any Collateral and all insurance proceeds with
respect to any loss of or damage to any Collateral;
(11) the Purchase Agreements and the Warranty Bills of Sale;
(12) the rights of such Grantor under any warranty, indemnity or
agreement, express or implied, regarding title, materials, workmanship,
design or patent infringement or related matters in respect of any
Collateral (other than a warranty, indemnity or other such agreement
which, by its terms, cannot be transferred or encumbered without resulting
in its termination or causing a default or breach thereunder);
(13) all repair, maintenance and inventory records, logs, manuals
and all other documents and materials similar thereto (including, without
limitation, any such records, logs, manuals, documents and materials that
are in electronic format or are computer print-outs) at any time
maintained, created or used by such Grantor (including, without
limitation, all records, logs, documents and other materials required at
any time to be maintained by such Grantor pursuant to the FAA or under the
Federal Aviation Act) ("Records");
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(14) all moneys and securities now or hereafter paid or deposited
or required to be paid or deposited to or with the Collateral Agent by or
for the account of such Grantor pursuant to any term hereof or of any
other Loan Document and held or required to be held by the Collateral
Agent hereunder or thereunder;
(15) all right, title, interest, claims and demands of such Grantor
as lessor in, to and under any lease of any Spare Engines or other
Collateral;
(16) all other real and personal property of every kind and nature
of such Grantor; and
(17) all substitutions, replacements, Accessions, and Proceeds of
any of the foregoing; provided, however, that in no event shall this
Security Agreement create a leasehold mortgage or other security or lien
interest with respect to, and the term "Collateral" shall at all times
exclude, the Excluded Assets.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, and for the uses and purposes and
subject to the terms and provisions set forth in this Security Agreement.
(1) It is expressly agreed that, anything herein contained to the
contrary notwithstanding, each Grantor shall remain liable under each of the
contracts and agreements included in the Collateral to which such Grantor is a
party to perform all of the obligations assumed by such Grantor thereunder, all
in accordance with and pursuant to the terms and provisions thereof, and the
Collateral Agent shall have no obligation or liability under any of such
contracts and agreements by reason of or arising out of the collateral
assignment hereunder, nor shall the Collateral Agent be required or obligated in
any manner to perform or fulfill any obligations of such Grantor under any of
such contracts and agreements to which such Grantor is a party, or, except as
herein expressly provided or as may be required by law, to make any payment, or
to make any inquiry as to the nature or sufficiency of any payment received by
it, or present or file any claim, or take any action to collect or enforce the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
(2) Each Grantor does hereby constitute the Collateral Agent as
its true and lawful attorney, irrevocably, for good and valuable consideration
and coupled with an interest and with full power of substitution (in its name or
otherwise) subject to the terms and conditions of this Security Agreement, to
ask, require, demand, receive, xxx for, compound and give acquittance for any
and all moneys and claims for moneys due and to become due to it under or
arising out of the Loan Documents, to endorse any checks or other instruments or
orders in connection therewith, to file any claims or take any action or
institute any proceedings which the Collateral Agent may deem to be necessary or
advisable in the premises as fully as such Grantor itself could do; provided
that the Collateral Agent shall not exercise any of such rights or take any of
such actions except upon the occurrence and during the continuance of an Event
of Default.
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(3) Each Grantor hereby authorizes the Collateral Agent to file
one or more financing or continuation statements, including, without limitation,
a UCC-1 financing statement, and any amendments thereto and continuations
thereof, each of which may indicate that such financing statements cover all
assets or all personal property (or words of similar effect) of such Grantor
other than Excluded Assets, in each case without the signature of such Grantor,
and regardless of whether any particular asset described in such financing
statements falls within the scope of the UCC or the Granting Clause of this
Agreement. Each Grantor ratifies its authorization for the Collateral Agent to
have filed such financing statements, continuation statements or amendments
prior to the date hereof.
(4) Each Grantor agrees that at any time and from time to time, at
its sole cost and expense, upon the written request of the Collateral Agent, it
will promptly and duly execute, deliver, file and record (as applicable) any and
all such further agreements, certificates, instruments and documents as may be
necessary or which the Collateral Agent may reasonably request in order to
create, preserve, perfect (or better perfect), confirm or validate the security
interests in the Collateral or to enable the Collateral Agent to obtain the full
benefits of this Security Agreement and the other Security Documents or to
enable the Collateral Agent lawfully to enforce any of its rights, powers, and
remedies hereunder or thereunder with respect to any of the Collateral (provided
that the Collateral Agent shall not exercise any of such remedies except upon
the occurrence and during the continuance of an Event of Default), including,
without limitation, to enable the Collateral Agent to comply at any time with
the Assignment of Claims Act in respect of an assignment of (i) the Pledged
Receivable owing to the Company under the Air Mobility Command Agreement or (ii)
any Pledged Receivable owing to North American under a North American AMC
Agreement, it being acknowledged and agreed that the Collateral Agent is
expressly authorized to unilaterally exercise or cause to be exercised any and
all rights of a Secured Party hereunder or under applicable law, including the
filing of UCC financing statements (or any amendment thereto) in respect of any
of the Collateral. Without limiting the generality of the foregoing, except as
otherwise provided in clause (5) of this Habendum Clause, each Grantor will: (i)
at the written request of the Collateral Agent during the continuance of a
Specified Default or Event of Default, xxxx conspicuously each document included
in Pledged Inventory, each Chattel Paper included in Pledged Receivables, each
Related Contract, and each of its records pertaining to such Collateral with a
legend, in form and substance reasonably satisfactory to the Collateral Agent,
indicating that such document, Chattel Paper, Related Contract, or Collateral is
subject to the security interest granted hereby; (ii) execute or authenticate
(to the extent required) and file, or authorize the filing of (to the extent
authorization is required) such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as the Collateral
Agent may reasonably request, in order to perfect and preserve the security
interest granted or purported to be granted by such Grantor hereunder; (iii)
take all action reasonably necessary to ensure that the Collateral Agent has
control of Collateral consisting of Deposit Accounts, Securities Accounts,
Commodity Accounts, Investment Property, and at the written request of the
Collateral Agent during the continuance of a Specified Default or Event of
Default, Electronic Chattel Paper and Letter-of-Credit Rights, as provided in
Sections 9-104, 9-105, 9-106 and 9-107 of the UCC; (iv) take all action
reasonably necessary to ensure that the Collateral Agent's security interest is
noted on any Certificate of Title related to any Collateral evidenced by a
Certificate of Title; (v) at the written request of the Collateral Agent, cause
the Collateral Agent to be the beneficiary under all letters of credit that
constitute Collateral, with the exclusive right to make all draws under such
letters of credit, and with all
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rights of a transferee under Section 5-114(e) of the UCC; and (vi) deliver to
the Collateral Agent evidence that all other action that the Collateral Agent
may deem reasonably necessary in order to perfect and protect the security
interest created by such Grantor in the Collateral under this Agreement has been
taken.
(5) Anything herein to the contrary notwithstanding, unless
requested by the Collateral Agent upon the occurrence and during the continuance
of a Specified Default or Event of Default, the Grantors shall not be obligated
to perfect the security interest of the Collateral Agent in any of the following
Collateral: (i) any Deposit Account or Securities Account with respect to which
the Grantors are not required to enter into a Control Agreement pursuant to
Section 5.17 of the Loan Agreement; (ii) any Pledged Real Property which has a
net book value of less than $200,000; and (iii) any Motor Vehicles other than a
Motor Vehicle acquired after the date of this Agreement at a cost in excess of
$200,000.
(6) It is hereby further agreed that any and all property
described or referred to in the Granting Clause hereof which is hereafter
acquired by the Grantors shall ipso facto, and without any other conveyance,
assignment or act on the part of the Grantors or the Collateral Agent, become
and be subject to the Lien herein granted as fully and completely as though
specifically described herein.
(7) Anything herein to the contrary notwithstanding, in no event
shall the security interest granted under this Security Agreement attach to any
(i) Excluded Assets or (ii) any right in any agreement (A) the grant of a
security interest in which would violate the agreement under which such right
arises if such Grantor has failed to obtain a waiver or other relief from such
provision (except to the extent such provision would be rendered ineffective
under Sections 9-406, 9-407, 9-408 or 9-409 of the UCC), so long as such Grantor
has used commercially reasonable efforts to obtain such waiver or other relief
(without obligation to incur more than immaterial costs or expenses in
connection with such commercially reasonable efforts) or (B) to the extent that
the pledge or assignment of such agreement requires the consent of any third
party, unless such third party has consented thereto (except to the extent such
consent requirement would be rendered ineffective under Sections 9-406, 9-407,
9-408 or 9-409 of the UCC), so long as such Grantor has used commercially
reasonable efforts to obtain such consent (without obligation to incur more than
immaterial costs or expenses in connection with such commercially reasonable
efforts); provided, however, that such security interest shall attach
immediately at such time as the relevant provision or requirement is no longer
applicable and, to the extent such agreement is severable, shall attach
immediately to any portion of such agreement that does not result in any of the
consequences specified in (A) or (B) above.
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IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 DEFINITIONS.
(a) For all purposes of this Security Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(i) each of the "Company," "World LLC," "Parent," "North
American," and "Collateral Agent," or any other Person includes, without
prejudice to the provisions of any Loan Documents, any successor in
interest to it and any permitted transferee, permitted purchaser or
permitted assignee of it;
(ii) the terms defined in this Article 1 have the meanings
assigned to them in this Article 1, and include the plural as well as the
singular;
(iii) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles in the United States;
(iv) the words "herein," "hereof and "hereunder" and other
words of similar import refer to this Security Agreement as a whole and
not to any particular Article, Section or other subdivision;
(v) all references in this Security Agreement to Articles,
Sections, Schedules and Exhibits refer to Articles, Sections, Schedules
and Exhibits of this Security Agreement; and
(vi) all references in this Security Agreement to Schedules
and Exhibits refer to such Schedules and Exhibits as such Schedules and
Exhibits may be amended, supplemented or otherwise modified from time to
time in accordance with the terms hereof.
(b) The terms "aircraft," "aircraft engine," "appliance" and
"cargo" shall have the respective meanings ascribed thereto in Section 40102 of
Chapter 401 of Title 49 of the United States Code and the term "engine" shall
include an "aircraft engine" as defined therein.
(c) The term "UCC" means the Uniform Commercial Code as in effect
on the date hereof in the State of New York; provided, however, that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of any security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, then for purposes of the provisions hereof relating to such
perfection or the effect of perfection or non-perfection of any security
interest the term "UCC" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction. References
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herein to Article 9 of the UCC shall include such Article however numbered in
any relevant jurisdiction.
(d) Unless the context otherwise requires, the terms "Accessions,"
"Account," "Certificate of Title," "Chattel Paper," "Commodity Account,"
"Commodity Contract," "Deposit Account," "Electronic Chattel Paper,"
"Equipment," "Fixtures," "General Intangibles," "Goods," "Health-Care Insurance
Receivables," "Instruments," "Inventory," "Investment Property,"
"Letter-of-Credit Right," "Payment Intangibles," "Promissory Note," "Registered
Organization," "Secured Party," "Securities Account," "Security Entitlement,"
"Software" and "Tangible Chattel Paper" shall have the respective meanings
ascribed thereto in Article 9 of the UCC.
(e) Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Loan Agreement.
(f) For all purposes of this Security Agreement, the following
capitalized terms have the following respective meanings:
"Acceptable Alternate Spare Engine" means an engine of at least the
same value, utility and remaining useful life (except for maintenance cycle
condition) as the Spare Engine it is replacing assuming such Spare Engine was of
the value, utility and remaining useful life (except for maintenance cycle
condition) required by the terms of this Security Agreement.
"Account Collateral" means the following property of the Grantors:
(i) the Cash Collateral Account and all Deposit Accounts,
Securities Accounts and Commodity Accounts and all funds and financial assets
from time to time credited thereto (including, without limitation, all cash
equivalents), all interest, dividends, distributions, cash, Instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such funds and financial assets,
and all certificates and Instruments, if any, from time to time representing or
evidencing such Accounts;
(ii) all certificates of deposit and other Instruments from
time to time delivered to or otherwise possessed by the Collateral Agent for or
on behalf of any Grantor, including, without limitation, those delivered or
possessed in substitution for or in addition to any or all of the then existing
Account Collateral; and
(iii) all interest, distributions, cash, Instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the then existing Account
Collateral.
"Account Debtor" means a Person obligated to pay a Grantor in
respect of a Pledged Receivable.
"Acquisition" has the meaning specified in the recitals to this
Agreement.
"Additional Insured" means each Lender, the Board, the Collateral
Agent, the Agent, the Supplemental Guarantor, the Loan Administrator and each of
their respective
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Affiliates, successors and permitted assigns, and the respective directors,
officers and employees of each of the foregoing.
"Additional Parts" has the meaning assigned thereto in Section
3.02(c).
"After-Acquired Intellectual Property" has the meaning assigned
thereto in Section 3.11(f).
"Amendment" has the meaning specified in the recitals to this
Agreement.
"Appliances" means an instrument, Equipment, apparatus, part,
appurtenance, or accessory used, capable of being used, or intended to be used
in operating or controlling aircraft in flight, including a parachute,
communication equipment, and any other mechanism installed in or attached to
aircraft during flight, and not part of an aircraft or engine.
"Bankruptcy Default" means any event or condition which is, or upon
notice, lapse of time or both would, unless cured or waived, become, an Event of
Default under clauses (f), (g), (p) or (q) of Section 7.1 of the Loan Agreement.
"Certificated Air Carrier" means a Person holding an air carrier
operating certificate issued by the Secretary of Transportation of the United
States pursuant to Chapter 447 of Title 49 of the United States Code or any
analogous successor provision of the United States Code, for aircraft capable of
carrying ten or more individuals or 6,000 pounds or more of cargo.
"CFC" means a "controlled foreign corporation" under Section 957 of
the Internal Revenue Code.
"Citigroup Paper" has the meaning assigned thereto in Section
7.06(i).
"Civil Reserve Air Fleet Program" means the Civil Reserve Air Fleet
Program administered by the United States Government pursuant to Executive Order
No. 11490, as amended, or any substantially similar program.
"Clearing Agency" has the meaning assigned thereto in Section
7.06(h).
"Collateral" has the meaning assigned thereto in the Granting Clause
hereof.
"Collateral Agent" has the meaning assigned thereto in the preamble
to this Agreement.
"Company" has the meaning assigned thereto in the preamble to this
Agreement.
"Designated Locations" means (i) the locations in the United States
designated from time to time by a Grantor at which it may keep Spare Parts
(other than Spare parts kept in the Fly Away Kits), which initially shall be the
locations set forth on part (a) of Schedule 2.01, and (ii) with respect to Spare
Parts which are stored in the Fly Away Kits, (A) the aircraft identified on part
(b) of Schedule 2.01 on which such Fly Away Kits may be kept from time to time
(it being acknowledged that no claim is being made against any of such aircraft)
and (B) the
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airports or other locations in the U.S. identified on part (b) of Schedule 2.01
at which such aircraft are generally located while not in actual flight; and in
the case of each of (i) and (ii), the additional locations designated by a
Grantor pursuant to Section 3.03(c) hereof.
"Disposition" has the meaning assigned thereto in Section 3.14.
"Equity Interests" means, with respect to any Person, all Capital
Stock of such Person, all warrants, options or other rights for the purchase or
acquisition from such Person of its Capital Stock, all securities convertible
into or exchangeable for such Person's Capital Stock and all of the other
ownership or profit interests in such Person.
"Event of Loss" means, with respect to any Collateral, any of the
following events with respect to such property (as applicable): (i) the loss of
such property or of the use thereof due to the destruction of or damage to such
property which renders repair uneconomic or which renders such property
permanently unfit for normal use for any reason whatsoever; (ii) any damage to
such property which results in an insurance settlement with respect to such
property on the basis of a total loss or a constructive or compromised total
loss; (iii) the theft or disappearance of such property for the lesser of (A) a
period in excess of sixty (60) consecutive days, (B) the period to the date when
the Net Insurance Proceeds with respect to such property are paid to the
Collateral Agent, or (C) the period to the date when a Grantor has confirmed to
the Collateral Agent in writing that it cannot recover such property; (iv) the
confiscation, condemnation or seizure of, or requisition of, title to such
property by any Governmental Authority or purported Governmental Authority; (v)
the confiscation, condemnation or seizure of, or requisition of, use of such
property by any Governmental Authority or purported Governmental Authority,
which shall have resulted in the loss of possession of such property by a
Grantor for a period in excess of six months; and (vi) any other event which
constitutes an Event of Loss hereunder.
"Excluded Assets" means (i) any of the Company's or any of its
Affiliate's interest in any Capital Lease or Operating Lease of Aircraft Related
Equipment or in any deposits, reserves or other payments or proceeds thereunder,
or in rights to payments, property or proceeds thereunder and (ii) the excluded
deposit accounts identified on Schedule 2.09.
"Expendables" means those Spare Parts of a type normally used only
once and thereby consumed or otherwise discarded, including all Parts which have
a limited life and are not classified as fixed assets in accordance with GAAP.
"FAA" means the United States Federal Aviation Administration or any
successor thereto administering the functions of the Federal Aviation
Administration under the Federal Aviation Act.
"Federal Aviation Act" means Subtitle VII of Title 49 of the United
States Code relating to aviation, as amended from time to time, or any similar
legislation of the United States enacted to supersede, amend or supplement such
subtitle.
"Grantors" has the meaning assigned thereto in the preamble to this
Agreement.
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"Initial Pledged Debt" means all indebtedness for borrowed money
owed to each Grantor and set forth opposite such Grantor's name on and as
otherwise described in Schedule 2.07(b).
"Initial Pledged Equity" means the Equity Interests set forth
opposite each Grantor's name on and as otherwise described in Schedule 2.07(a).
"Insurance Brokers" has the meaning assigned thereto in Section
3.04(c).
"Insured Amount" for any Spare Engine or other item of Collateral as
of any date of determination means an amount equal to its replacement value.
"Insurers" has the meaning assigned thereto in Section 3.04(a)(i).
"Intellectual Property Collateral" means the following property of
the Grantors:
(i) all patents, patent applications, utility models and
statutory invention registrations, all inventions claimed or disclosed
therein and all improvements thereto;
(ii) all trademarks, service marks, domain names, trade dress,
logos, designs, slogans, trade names, business names, corporate names and
other source identifiers, whether registered or unregistered (provided
that no security interest shall be granted in United States intent-to-use
trademark applications to the extent that, and solely during the period in
which, the grant of a security interest therein would impair the validity
or enforceability of such intent-to-use trademark applications under
applicable federal law), together, in each case, with the goodwill
symbolized thereby ("Trademarks");
(iii) all copyrights, whether registered or unregistered,
including, without limitation, copyrights in computer software, internet
websites and the content thereof, whether registered or unregistered;
(iv) all computer software, programs and databases (including,
without limitation, source code, object code and all related applications
and data files), firmware and documentation and materials relating
thereto, together with any and all rights under contracts for maintenance
and service, additional programming, hosting services, testing,
improvements, error corrections, updates and new versions of any of the
foregoing;
(v) all confidential and proprietary information, including,
without limitation, trade secrets, confidential and proprietary know-how,
manufacturing and production processes and techniques, inventions,
research and development information, databases and data, including,
without limitation, technical data, financial, marketing and business
data, pricing and cost information, business and marketing plans and
customer and supplier lists and information, and all other intellectual,
industrial and intangible property of any type, including, without
limitation, industrial designs and mask works;
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(vi) all registrations and applications for registration for
any of the foregoing, including, without limitation, those registrations
and applications for registration set forth on Schedule 2.08 hereto or in
any IP Security Agreement, together with all reissues, divisions,
continuations, continuations-in-part, extensions, renewals and
reexaminations thereof;
(vii) all rights in the foregoing provided by international
treaties or conventions, all rights corresponding thereto throughout the
world and all other rights of any kind whatsoever of such Grantor accruing
thereunder or pertaining thereto;
(viii) all agreements, permits, consents and franchises
relating to the license, development, use or disclosure of any of the
foregoing to which such Grantor, now or hereafter, is a party or a
beneficiary ("IP Agreements"); and
(ix) any and all claims for damages and injunctive relief for
past, present and future infringement, dilution, misappropriation,
violation, misuse or breach with respect to any of the foregoing, with the
right, but not the obligation, to xxx for and collect, or otherwise
recover, such damages.
"IP Agreement" has the meaning assigned thereto in clause (viii) of
the definition of Intellectual Property Collateral.
"IP Security Agreement" means an intellectual property security
agreement in the form of Exhibit B.
"IP Security Agreement Supplement" means a supplement to an IP
Security Agreement in the form of Exhibit C attached hereto.
"Joinder" has the meaning specified in the recitals to this
Agreement.
"Loan Agreement" has the meaning specified in the recitals to this
Agreement.
"Loss Payment Date" has the meaning assigned thereto in clause
(B)(1) of Section 4.01 (a)(i).
"Manufacturer" means with respect to each Spare Engine and Spare
Part, the manufacturer thereof, and its successors and assigns.
"Mortgage and Security Agreement Supplement (Spare Engine)" means a
supplement to this Security Agreement in the form of Exhibit A1.
"Mortgage and Security Agreement Supplement (Spare Parts)" means a
supplement to this Security Agreement in the form of Exhibit A2.
"Motor Vehicle" means any vehicle whose ownership is governed by a
Certificate of Title statute.
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"North American" has the meaning assigned thereto in the preamble to
this Agreement.
"Obsolete Parts" has the meaning assigned thereto in Section
3.02(c).
"Original Loan Agreement" has the meaning specified in the recitals
to this Agreement.
"Original Security Agreement" has the meaning specified in the
recitals to this Agreement.
"Parent" has the meaning assigned thereto in the preamble to this
Agreement.
"Parts" means, with respect to any Spare Engine or any Spare Part,
any and all parts, instruments, appurtenances, accessories and other Equipment
of whatever nature (other than complete Spare Engines or engines) which may from
time to time be incorporated or installed in or attached to such Spare Engine or
such Spare Part.
"Payment Default" means any event or condition which is, or upon
notice, lapse of time or both would, unless cured or waived, become, an Event of
Default under Section 7.1 (a) of the Loan Agreement.
"Permitted Lease" means a lease permitted under the terms of Section
3.01(b)(i)(H).
"Permitted Lessee" means the lessee under a Permitted Lease.
"Permitted Liens" means (i) the Liens permitted under the definition
of Permitted Encumbrances contained in the Loan Agreement, (ii) the Liens
permitted under Section 6.1 of the Loan Agreement and (iii) the Lien of this
Agreement.
"Pledged Debt" has the meaning assigned thereto in clause (iv) of
the definition of Security Collateral.
"Pledged Equipment" means all Equipment in all of its forms,
including, without limitation, all machinery, tools, Motor Vehicles, vessels,
passenger loading bridges, Fixtures, furniture, and all parts thereof and all
Accessions thereto and all Software related thereto (including, without
limitation, Software that is embedded in and is part of the Equipment).
"Pledged Equity" has the meaning assigned thereto in clause (iii) of
the definition of Security Collateral.
"Pledged Inventory" means all Inventory in all of its forms,
including, without limitation, (i) all raw materials, work in process, finished
goods and materials used or consumed in the manufacture, production, preparation
or shipping thereof, (ii) Goods in which such Grantor has an interest en mass or
a joint or other interest or right of any kind (including, without limitation,
Goods in which such Grantor has an interest or right as consignee) and (iii)
Goods that are returned to or repossessed or stopped in transit by such
Grantor), and all Accessions
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thereto and products thereof and documents therefor, and all Software related
thereto (including, without limitation, Software that is embedded in and is part
of the Inventory).
"Pledged Real Property" means all of any Grantor's right, title and
interest in real property other than leasehold interests in real property.
"Pledged Receivables" means all Accounts (including, without
limitation, Health-Care Insurance Receivables), Chattel Paper (including,
without limitation, Tangible Chattel Paper and Electronic Chattel Paper),
Instruments (including, without limitation, Promissory Notes), Letter-of-Credit
Rights, General Intangibles (including, without limitation, Payment Intangibles)
and other obligations of any kind, whether or not arising out of or in
connection with the sale or lease of Goods or the rendering of services and
whether or not earned by performance, including, without limitation, all of the
Company's rights to payment under the Air Mobility Command Agreement and all of
North American's rights under a North American AMC Agreement, in each case which
is not Security Collateral, Account Collateral or Intellectual Property
Collateral.
"Proceeds" has the meaning assigned to such term under Article 9 of
the UCC and, in any event, shall include, but not be limited to, any and all (i)
proceeds of any insurance, indemnity, warranty or guarantee, by reason of loss
or damage to or otherwise, payable to the Collateral Agent or to the Grantors
from time to time with respect to any of the Collateral, (ii) payments (in any
form whatsoever), made or due and payable to the Grantors from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority), (iii) Instruments
delivered in respect of the Collateral, (iv) products of the Collateral, (v) any
and all rights of the Grantors to receive moneys due and to become due from any
Person under or pursuant to any contract or other agreement arising out of the
Collateral, including, all rents, revenues, royalties, license fees, for the
use, or otherwise arising out of the Collateral, (vi) all causes of action,
claims (including tort and commercial tort claims) and warranties now or
hereafter held by each Grantor arising out of any of the Collateral, and (vii)
other amounts from time to time paid or payable on account of any of the
Collateral.
"Purchase Agreements" means, collectively, with respect to each
Spare Engine, the agreement between a Grantor and the applicable Manufacturer or
other seller relating to the purchase by such Grantor of such Spare Engine as
originally executed or as modified, amended or supplemented in accordance with
the terms thereof, but only insofar as the foregoing relates to such Spare
Engine and to such Manufacturer's warranty obligations (if applicable) with
respect thereto.
"Records" has the meaning assigned thereto in paragraph (13) of the
Granting Clause hereof.
"Related Contracts" means, with respect to any Pledged Receivable,
all rights now or hereafter existing in and to all supporting obligations and in
and to all security agreements, mortgages, Liens, leases, letters of credit and
other contracts securing or otherwise relating to such Pledged Receivable, in
each case which is not Security Collateral, Account Collateral or Intellectual
Property Collateral.
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"Replacement Closing Date" has the meaning assigned thereto in
clause (A) of Section 4.01(a)(iii).
"Replacement Engine" means any engine or engines substituted for a
Spare Engine in accordance with Section 3.01(d) and Section 4.01(a) hereof.
"Rotables" means those Spare Parts that can be repeatedly overhauled
and repaired.
"Security Agreement" or "Agreement" means this Mortgage and Security
Agreement.
"Security Collateral" means the following property to the extent not
Account Collateral:
(i) the Initial Pledged Equity and the certificates, if any,
representing the Initial Pledged Equity, and all dividends, distributions,
return of capital, cash, Instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Initial Pledged Equity and all subscription
warrants, rights or options issued thereon or with respect thereto;
(ii) the Initial Pledged Debt and the Instruments, if any,
evidencing the Initial Pledged Debt, and all interest, cash, Instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Initial
Pledged Debt;
(iii) all additional shares of stock and other Equity
Interests from time to time acquired by such Grantor in any manner (such
shares and other Equity Interests, together with the Initial Pledged
Equity, being the "Pledged Equity"), and the certificates, if any,
representing such additional shares or other Equity Interests, and all
dividends, distributions, return of capital, cash, Instruments and other
property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such shares or other Equity
Interests and all subscription warrants, rights or options issued thereon
or with respect thereto; provided, however, that anything to the contrary
contained herein notwithstanding, no Grantor shall be required to pledge
any Equity Interest in any Subsidiary that is a CFC or an Equity Interest
in a U.S. corporation whose assets consist solely of the stock of one or
more CFCs owned or otherwise held by such Grantor which, when aggregated
with all of the other shares of stock in such Subsidiary pledged by the
other Grantors, would result in more than 66% of the shares of stock in
such Subsidiary entitled to vote (within the meaning of Treasury
Regulation Section 1.956-2(c)(2) promulgated under the Internal Revenue
Code) being pledged to the Collateral Agent, under this Agreement
(although all of the shares of stock in such Subsidiary not entitled to
vote (within the meaning of Treasury Regulation Section 1.956-2(c)(2)
promulgated under the Internal Revenue Code) shall be pledged by each of
the Grantors that owns or otherwise holds any such non-voting foreign
stock therein; provided, further, that if as a result of any change in
U.S. tax laws after the date of this Agreement the pledge by such Grantor
of any additional shares of stock in any such
15
Subsidiary to the Collateral Agent would not result in income inclusion
under Section 951 or 956 of the Internal Revenue Code with respect to the
Company and its Subsidiaries, then, promptly after the change in such
laws, all such additional shares of stock shall be so pledged under this
Agreement;
(iv) all additional indebtedness for borrowed money from time
to time owed to such Grantor (such indebtedness, together with the Initial
Pledged Debt, being the "Pledged Debt") and the Instruments, if any,
evidencing such indebtedness, and all interest, cash, Instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
indebtedness; and
(v) all other Investment Property (including, without
limitation, all (A) securities, whether certificated or uncertificated,
(B) Security Entitlements and (C) Commodity Contracts) in which such
Grantor now has, or acquires from time to time hereafter, any right, title
or interest in any manner, and the certificates or Instruments, if any,
representing or evidencing such Investment Property, and all dividends,
distributions, return of capital, interest, distributions, value, cash,
Instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Investment Property and all subscription warrants, rights or options
issued thereon or with respect thereto.
"Shares" has the meaning specified in the recitals to this
Agreement.
"Similar Carriers" has the meaning assigned thereto in Section
3.04(a)(i).
"Spare Engine" means (i) each of the engines listed by
Manufacturer's serial number on Schedule 1.01 hereto and on any Mortgage and
Security Agreement Supplement (Spare Engine) executed and delivered from time to
time hereunder, and whether or not either initially or from time to time
installed on any airframe; (ii) any Replacement Engine which may from time to
time be substituted for any of such Spare Engines pursuant to the terms hereof;
and (iii) in either case, any and all Parts which are from time to time
incorporated or installed in or attached to any such engine and any and all
Parts removed therefrom, unless the Lien of the Security Documents shall not
apply to such Parts in accordance with Section 3.02.
"Spare Part" means an accessory, appurtenance, Appliance, instrument
or part, of whatever nature (including, without limitation, passenger
convenience equipment), relating to an aircraft (except an engine), engine
(except a propeller), or Appliance that is to be installed at a later time on an
aircraft, engine or Appliance; provided, however, that the Lien of this Security
Agreement shall not attach to any Spare Parts so long as such Spare Parts are
incorporated in, installed on or attached or appurtenant to an aircraft or
engine. Spare Parts shall include Expendables and Rotables.
"Specified Default" means a Payment Default or a Bankruptcy Default.
"Tracking System" means the Grantors' Ultramain system and any other
system used by the Grantors for tracking the Grantors' inventory of Spare Parts,
and any and all improvements, upgrades, substitutes or replacement systems.
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"Trademark" has the meaning assigned thereto in clause (ii) of the
definition of Intellectual Property Collateral.
"United States" or "U.S." means the United States of America.
"United States Government" means the federal government of the
United States or any instrumentality or agency thereof.
"Warranty Bills of Sale" means, collectively, each full warranty
xxxx of sale delivered to a Grantor from the applicable Manufacturer (or other
seller) in respect of each Spare Engine.
"Wet Lease" means any arrangement whereby a Grantor (or any
Permitted Lessee) agrees to furnish an aircraft on which a Spare Engine is
installed to a third party pursuant to which such aircraft (i) remains in the
operational control of the Grantors (or such Permitted Lessee) and (ii) is
maintained, insured and otherwise used and operated in accordance with the
provisions hereof.
"World LLC" has the meaning assigned thereto in the preamble to this
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE GRANTORS
Each Grantor hereby represents and warrants as follows (as
applicable):
SECTION 2.01 CERTIFICATED AIR CARRIER; MAINTENANCE AND LOCATION OF
SPARE PARTS; SECTION 1110.
(a) The Company and North American are Certificated Air Carriers,
and the Spare Parts which are subject to this Security Agreement are maintained
by the Company or North American respectively, or by World LLC on the Company's
behalf. The Designated Locations identified on part (a) of Schedule 2.01 hereto
or otherwise identified on a Mortgage and Security Agreement Supplement (Spare
Parts) are the only locations at which Spare Parts (with a value in excess of
$25,000, in the case of North American) are maintained by the Company and North
American or by World LLC on the Company's behalf, other than Spare Parts in the
Fly Away Kits or in transit to or from Designated Locations. The Designated
Locations identified on part (b) of Schedule 2.01 hereto or otherwise identified
on a Mortgage and Security Agreement Supplement (Spare Parts) are (i) the only
aircraft on which Fly Away Kits are kept from time to time and (ii) the only
airports or other locations in the U.S. at which such aircraft are generally
located while not in actual flight.
(b) The Collateral Agent shall be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to a Grantor's Spare Parts and
Spare Engines pledged hereunder, in each case to the extent first placed into
service after October 22, 1994, in the event of a case under Chapter 11 of the
Bankruptcy Code in which such Grantor is a debtor.
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SECTION 2.02 TITLE TO COLLATERAL; FINANCING STATEMENTS. Such Grantor
is the legal and beneficial owner of the Collateral of such Grantor free and
clear of any Liens, other than Permitted Liens. Such Grantor has full power,
authority and legal right to assign and pledge all of the Collateral pledged by
it hereunder. Except as set forth on Schedule 2.03, as of the date hereof, there
is no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction intended to provide notice of a Lien) covering
or purporting to cover any interest of any kind in the Collateral (other than
Pledged Real Property) of such Grantor which would be effective to perfect or
record a Lien on such Collateral, other than financing statements that relate to
(x) transactions for which all secured obligations have been paid in full or are
being paid in full on the date hereof, and there is no commitment on the part of
any Person to advance funds or perform any obligation that would be secured by
the collateral described in such financing statements or (y) Permitted Liens.
SECTION 2.03 LOCATION OF GRANTORS; UCC INFORMATION. Such Grantor's
name, (sufficient to provide the name of such Grantor as a debtor under Section
9-503(a) of the UCC), federal employer identification number and state
organizational identification number are correctly set forth on Schedule 2.03
hereto. Such Grantor is located (within the meaning of Section 9-307 of the UCC)
in Delaware and has its chief executive office at the address and in the state
set forth on Schedule 2.03 hereto. Delaware is the only jurisdiction in which
such Grantor is a Registered Organization. As of the date hereof, the
information set forth on Schedule 2.03 hereto with respect to such Grantor is
true and accurate in all respects. Except as disclosed on Schedule 2.03, as of
the date hereof no Grantor has previously changed its name, location, chief
executive office, type of organization, jurisdiction of organization or
organizational identification number during the five (5) years preceding the
execution of this Agreement from those set forth in herein or on Schedule 2.03.
SECTION 2.04 PERFECTED FIRST PRIORITY LIENS. Other than with respect
to Pledged Real Property, upon (i) the filing of this Agreement with the FAA in
accordance with the Federal Aviation Act and the rules and regulations
thereunder in respect of the Spare Engines and Spare Parts, (ii) the filing of
the UCC-1 financing statement in the appropriate filing office naming such
Grantor as debtor and the Collateral Agent as secured party in respect of the
Collateral, (iii) the recording of the IP Security Agreement with the U.S.
Patent and Trademark Office, the U.S. Copyright Office and any other applicable
U.S. Governmental Authority with respect to the Intellectual Property Collateral
of such Grantor, and (iv) effecting other filings/recordings required to be made
and expressly contemplated hereunder (including, without limitation, in respect
of any Motor Vehicle, endorsing on the Certificate of Title therefor the Lien of
the Collateral Agent thereon), all filings, registrations and recordings
necessary to create, preserve, protect and perfect the security interest granted
by such Grantor to the Collateral Agent hereby in respect of the Collateral of
such Grantor will have been accomplished, and the security interest granted to
the Collateral Agent pursuant to this Agreement in and to the Collateral of such
Grantor will constitute a first priority perfected security interest therein
(and with respect to perfection, to the extent that (A) perfection of the
security interest in respect of such Collateral is required hereunder and (B) a
security interest in such Collateral may be perfected by filing, registration or
recording), prior to the rights of all other Persons therein and subject to no
other Liens other than Permitted Liens. The Grantors acknowledge and agree that,
prior to giving effect to this Agreement, the Collateral Agent had a first
priority perfected security interest granted by Parent, the Company and World
LLC pursuant to the terms of the Original Security
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Agreement and the Joinder in respect of all Collateral referred to therein to
the extent provided thereunder.
SECTION 2.05 CONSENTS. Except as set forth on Schedule 2.05 and
except with respect to Pledged Real Property, no consent of any other party
(including, without limitation, stockholders or creditors of such Grantor) other
than consents that have been obtained, and no consent, authorization, approval,
or other action by, and (except in connection with the perfection of the Liens
created hereby) no notice to or filing with, any Governmental Authority or other
Person is required either (x) for the pledge by such Grantor of its Collateral
pursuant to this Agreement or for its execution, delivery or performance of this
Agreement or (y) for the exercise by the Collateral Agent of the rights and
remedies provided in this Agreement in respect of the Collateral.
SECTION 2.06 POSSESSION OF PLEDGED EQUIPMENT. Such Grantor has
exclusive possession and control of the Pledged Equipment of such Grantor, which
Pledged Equipment is located only at the locations identified on Schedule 2.06
hereto or in transit between such locations. In the case of Pledged Equipment
located on leased premises, leased aircraft or in warehouses, no lessor or
warehouseman of any premises or warehouse upon or in which such Pledged
Equipment is located has (i) to the best knowledge of any Responsible Officer,
issued any warehouse receipt or other receipt in the nature of a warehouse
receipt in respect of any Pledged Equipment, (ii) to the best knowledge of any
Responsible Officer, issued any document for any of such Grantor's Pledged
Equipment and (iii) to the best knowledge of any Responsible Officer, received
notification of any Secured Party's interest (other than the security interest
granted hereunder) in such Grantor's Pledged Equipment.
SECTION 2.07 PLEDGED EQUITY AND PLEDGED DEBT.
(a) The Pledged Equity of any Subsidiary of such Grantor which is
pledged by such Grantor hereunder, including, without limitation, the Pledged
Equity listed on Schedule 2.07(a), has been duly authorized and validly issued
and is fully paid and non-assessable. If any Grantor is an issuer of Pledged
Equity, such Grantor confirms that it has received notice of such security
interest. To the best knowledge of such Grantor, the Pledged Debt pledged by
such Grantor hereunder which has an outstanding principal amount on the date
hereof in excess of $50,000 has been duly authorized, authenticated or issued
and delivered, is the legal, valid and binding obligation of the issuers
thereof, is evidenced by one or more Promissory Notes and is not in default.
(b) The Initial Pledged Equity constitutes all of the Equity
Interests of any Person owned by such Grantor as of the date hereof (other than
Equity Interests not required to be pledged hereunder on the date hereof
pursuant to the terms hereof). The Initial Pledged Debt constitutes all of the
outstanding indebtedness for borrowed money owed to each Grantor by the issuers
thereof (other than indebtedness for borrowed money owed to a Grantor and not
required to be pledged hereunder on the date hereof pursuant to the terms
hereof) and, as of the date hereof, is outstanding in the principal amount
indicated on Schedule 2.07(b) hereto.
(c) With respect to the Initial Pledged Equity in which such
Grantor has any right, title or interest and which is represented by a
certificate or Instrument, such Grantor has
19
delivered such Instruments or certificates to the Collateral Agent in suitable
form for transfer by delivery or accompanied by duly executed Instruments of
transfer or assignment in blank.
(d) With respect to the Initial Pledged Equity in which such
Grantor has any right, title or interest and which constitutes an uncertificated
security (other than an uncertificated security which (x) is not an Equity
Interest in a Subsidiary of such Grantor and (y) has a fair market value,
together with all uncertificated securities of such issuer held by such Grantor,
of less than $50,000), such Grantor has caused the issuer thereof either (A) to
register the Collateral Agent as the registered owner of such security or (B) to
agree in an authenticated record with such Grantor and the Collateral Agent that
such issuer will comply with instructions with respect to such security
originated by the Collateral Agent without further consent of such Grantor.
(e) With respect to any Initial Pledged Debt in which such Grantor
has any right, title or interest and which is represented by an Instrument
(other than an Instrument representing Pledged Debt (x) issued by a Person other
than a Subsidiary of such Grantor and (y) which has a value, together with all
other Instruments representing Pledged Debt issued by the same issuer and held
by such Grantor, of less than $50,000), such Grantor has delivered such
Instrument to the Collateral Agent accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Collateral Agent.
(f) (i) Upon the filing of the UCC-1 financing statement in the
appropriate filing office naming such Grantor as debtor and the Collateral Agent
as secured party in respect of the Collateral and (ii) the taking of the actions
described in subsections (c), (d) and (e) of this Section 2.07, as applicable,
the security interest granted to the Collateral Agent pursuant to this Agreement
in and to the Initial Pledged Equity and the Initial Pledged Debt will
constitute a first priority perfected security interest therein (to the extent
perfection is required hereunder), prior to the rights of all other Persons
therein and subject to no other Liens other than Permitted Liens. The Grantors
acknowledge and agree that, prior to giving effect to this Agreement, the
Collateral Agent had a first priority perfected security interest granted by
Parent, the Company and World LLC pursuant to the terms of the Original Security
Agreement and the Joinder in respect of all of the Initial Pledged Equity and
the Initial Pledged Debt referred to therein to the extent provided thereunder.
SECTION 2.08 INTELLECTUAL PROPERTY. Schedule 2.08 sets forth all
material Intellectual Property Collateral of such Grantor which is the subject
of a registration or application for registration with the U.S. Patent and
Trademark Office, the U.S. Copyright Office and any other applicable U.S.
Governmental Authority. With respect to each material IP Agreement included in
the Collateral: (i) such IP Agreement is valid and binding and in full force and
effect with respect to such Grantor; (ii) to the extent that Section 9-408 of
the UCC is applicable thereto or such IP Agreement permits the assignment of
such Grantor's rights thereunder, such IP Agreement will not cease to be valid
and binding and in full force and effect with respect to such Grantor on terms
identical to those currently in effect as a result of the rights and interest
granted herein, nor will the grant of such rights and interest constitute a
breach or default under such IP Agreement or otherwise give any party thereto a
right to terminate such IP Agreement; (iii) no Grantor has received any notice
of termination, cancellation or received any notice of a breach or default under
such IP Agreement; (iv) except as set forth on Schedule 2.08,
20
no Grantor has granted to any other third party any rights under such IP
Agreement; and (v) no Grantor nor, to the best knowledge of such Grantor, any
other party to such IP Agreement, is in breach or default thereof in any
material respect, and, to the best knowledge of such Grantor, no event has
occurred that, with notice or lapse of time or both, would constitute such a
breach or default or permit termination, modification or acceleration under such
IP Agreement.
SECTION 2.09 DEPOSIT AND SECURITIES ACCOUNTS. Schedule 2.09 lists
all of the Deposit Accounts and Securities Accounts maintained by such Grantor
on the date hereof. Other than the excluded deposit accounts identified on
Schedule 2.09, each such Deposit Account or Securities Account is maintained
with a financial institution which has entered into a Control Agreement with
such Grantor and the Collateral Agent relating to such Deposit Account or
Securities Account, as the case may be, other than a Deposit Account or
Securities Account not required to be subject to a Control Agreement pursuant to
Section 5.17 of the Loan Agreement.
ARTICLE 3
COVENANTS OF THE COMPANY
Each Grantor covenants and agrees as follows:
SECTION 3.01 MAINTENANCE AND OPERATION; POSSESSION; INSIGNIA.
(a) Maintenance and Operation of Spare Engines.
(i) Such Grantor, at its own cost and expense, shall: (A)
maintain, service, repair, and overhaul (or cause to be maintained,
serviced, repaired, and overhauled) each Spare Engine and each of the
material Spare Parts (x) so as to keep the Spare Engines in an airworthy
condition and suitable for installation and operation on the aircraft in
the Company's fleet in accordance with any applicable maintenance program
and in compliance with all applicable airworthiness directives; and (y) so
as to maintain in or return the Spare Parts to good working order and
condition and shall perform all maintenance thereon necessary for that
purpose and in accordance with the requirements of each of the
Manufacturer's manuals and mandatory service bulletins, excluding Spare
Engines or Spare Parts that have become worn out or obsolete or unfit for
use and are not reasonably repairable; and (B) maintain or cause to be
maintained all Records, logs and other materials required by the FAA or
any other applicable regulatory agency or body to be maintained in respect
of each Spare Engine and each of the Spare Parts.
(ii) Such Grantor will not (or permit any Permitted Lessee to)
maintain, use, store, service, repair, overhaul or operate any Spare
Engine in violation of any (A) law, rule, regulation, treaty, order or
certificate of any government or Governmental Authority (domestic or
foreign) having jurisdiction, (B) airworthiness certificate or (C) license
or registration relating to such Spare Engine issued by any such
authority. In the event that any such law, rule, regulation, treaty,
order, certificate, license or registration requires alteration of any
Spare Engine, such Grantor will, at its sole cost and expense, conform
thereto or obtain conformance therewith other than to the extent that such
Grantor has determined in good faith that such Spare Engine is obsolete
21
or not reasonably repairable. Notwithstanding the foregoing, such Grantor
or any Permitted Lessee may contest in good faith the validity or
application of any such law, rule, regulation, treaty, order, certificate,
license or registration in any reasonable manner which does not materially
adversely affect the Collateral Agent, the Board or any Lender, or any of
their respective legal and economic interests in or to any of the Spare
Engines, including the Lien of the Security Documents. In every case,
operation, use, storage, maintenance, servicing, repair or overhaul of
each Spare Engine is subject to compliance by such Grantor with the
provisions of Section 3.04. If the indemnities or insurance from the
United States Government specified in Section 3.04(f), or some combination
thereof in amounts equal to amounts required by Section 3.04, have not
been obtained (unless indemnities or insurance in amounts so required are
available in the commercial aviation insurance market and are obtained),
such Grantor will not operate or locate any Spare Engine in or to any area
excluded from coverage by any insurance required to be maintained by the
terms of Section 3.04; provided, however, that the failure of any Grantor
to comply with the provisions of this Section 3.01(a)(ii) shall not give
rise to an Event of Default where such failure is attributable to a
hijacking, medical emergency, equipment malfunction, weather conditions,
navigational error or act of terrorism and such Grantor is taking all
reasonable steps to remedy such failure as soon as practicable.
(b) Possession of Spare Engines.
(i) Such Grantor will not, without the prior written consent
of the Collateral Agent, lease or otherwise in any manner deliver,
transfer or relinquish possession of any Spare Engine or install or permit
any Spare Engine to be installed on any airframe; provided, however, that
so long as (x) no Specified Default or Event of Default shall have
occurred and be continuing at the time of such delivery, transfer or
relinquishment of possession or installation and (y) such action shall not
deprive the Collateral Agent of the first priority perfected Lien of the
Security Documents on any Spare Engine, such Grantor or any Permitted
Lessee (except with respect to clause (H)) may, without the prior written
consent of Collateral Agent:
(A) subject any Spare Engine to normal pooling or
similar arrangements, in each case customary in the airline industry
and entered into by such Grantor in the ordinary course of its
business; provided, that (1) no such arrangement contemplates or
requires the transfer of title to any Spare Engine and (2) if such
Grantor's title to any Spare Engine shall be divested under any such
arrangement, such divestiture shall be deemed to be an Event of Loss
with respect to such Spare Engine, and such Grantor shall comply
with Section 4.01 hereof in respect thereof;
(B) deliver possession of any Spare Engine to the
Manufacturer thereof or to any other Person for testing, service,
repair, maintenance or overhaul work on such Spare Engine or any
part thereof or for alterations or modifications in or additions to
such Spare Engine to the extent required or permitted by the terms
hereof;
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(C) install a Spare Engine on an airframe registered in
the United States owned by a Grantor, so long as such airframe is
free and clear of all Liens other than (1) Permitted Liens and those
which apply only to the engines (other than Spare Engines),
Appliances, parts, instruments, appurtenances, accessories,
furnishings and other Equipment (other than Parts) installed on such
airframe (but not to the airframe as an entirety), (2) the rights of
third parties under interchange agreements customary in the airline
industry and entered into by such Grantor in the ordinary course of
its business, provided that such Grantor's title to such Spare
Engine shall not be divested as a result thereof and (3) mortgage
Liens or other security interests, provided, that (as regards this
clause (3)), such mortgage Liens or other security interests
effectively provide that such Spare Engine shall not become subject
to the Lien of such mortgage or security interest, notwithstanding
the installation thereof on such airframe;
(D) install a Spare Engine on an airframe registered in
the United States leased to a Grantor (or a Permitted Lessee) or
purchased by such Grantor (or a Permitted Lessee) subject to a
conditional sale or other security agreement, so long as (1) such
airframe is free and clear of all Liens, other than (x) the rights
of the parties to the lease or conditional sale or other security
agreement covering such airframe, or their assignees, and (y) Liens
of the type permitted by clause (C) of this Section 3.01(b)(i) and
(2) such lease, conditional sale or other security agreement
effectively provides that such Spare Engine shall not become subject
to the Lien of such lease, conditional sale or other security
agreement, notwithstanding the installation thereof on such
airframe;
(E) install a Spare Engine on an airframe registered in
the United States owned by a Grantor (or a Permitted Lessee), leased
to such Grantor or purchased by such Grantor subject to a
conditional sale or other security agreement under circumstances
where neither clause (C) nor clause (D) of this Section 3.01(b)(i)
is applicable, provided that any divestiture of title to such Spare
Engine resulting from such installation shall be deemed an Event of
Loss with respect to such Spare Engine, and such Grantor shall
comply with Section 4.01 (a) hereof in respect thereof, the
Collateral Agent not intending hereby to waive any right or interest
it may have to or in such Spare Engine under applicable law until
compliance by such Grantor with such Section 4.01 (a);
(F) transfer (or permit any Permitted Lessee to
transfer) possession of any Spare Engine to the United States
Government or any instrumentality or agency thereof pursuant to the
Civil Reserve Air Fleet Program so long as such Grantor shall notify
the Collateral Agent (1) prior to or contemporaneously with
transferring possession of any such Spare Engine to the United
States Government or any agency or instrumentality thereof pursuant
to the Civil Reserve Air Fleet Program and (2) of the name and the
address of the Contracting Office Representative for the Air
Mobility Command to whom notice must be given pursuant to Section
5.01(b) hereof;
23
(G) transfer possession of any Spare Engine to the
United States Government or any instrumentality or agency thereof
pursuant to a lease, contract or other instrument, a copy of which
shall be provided to the Collateral Agent; or
(H) enter into a lease of any Spare Engine with (1) a
Certificated Air Carrier, (2) any airline domiciled and principally
located in a country listed on Schedule 3.01 hereto, or (3) any
other Person approved in writing by the Collateral Agent; provided
that (I) no such lease shall be permitted to a lessee that is
subject to a proceeding or final order under applicable bankruptcy,
insolvency or reorganization laws on the date the lease is entered
into, (II) in the case of a lease under subclause (2) or (3) above,
on the date of such lease or any renewal or extension thereof, the
United States and the country in which such lessee is domiciled and
principally located maintain normal diplomatic relations (which for
purposes of this clause (H) shall include Taiwan), (III) in the case
only of a lease to any Person under subclause (3) above, the
Collateral Agent receives at the time of such lease an opinion of
counsel (in form and from counsel reasonably satisfactory to the
Collateral Agent) to the effect that (w) the terms of the proposed
lease will be legal, valid, binding and (subject to customary
exceptions in foreign opinions generally that are of a nature
accepted by financiers) enforceable in accordance with its terms
against the proposed lessee in the country in which the proposed
lessee is principally based, (x) there exist no possessory rights in
favor of the lessee under such lease under the laws of such lessee's
country of domicile that would, upon bankruptcy or insolvency of or
other default by such Grantor and assuming at such time such lessee
is not insolvent or bankrupt, prevent the return or repossession of
such Spare Engine in accordance with the lease and when permitted by
the terms of Article 5 upon the exercise by the Collateral Agent of
its remedies pursuant to such Article, (y) the laws of such lessee's
country of domicile require fair compensation by the government of
such jurisdiction payable in currency freely convertible into
Dollars for the loss of use of such Spare Engine in the event of the
requisition by such government of such use, and (z) the laws of such
lessee's country of domicile would give recognition to such
Grantor's title to the Spare Engine, to the registration of the
Spare Engine (if such country maintains a registry for engines) in
the name of such Grantor (or the proposed lessee, as "lessee", as
appropriate), and to the Lien of the Security Documents, (IV) if the
lessee under such lease is a governmental entity, such lessee has
waived all rights of sovereign immunity, and (V) if the lessee is a
Certificated Air Carrier, such Grantor will be entitled as lessor to
the benefits of Section 1110 of the Bankruptcy Code with respect to
such Spare Engine in connection with a proceeding under Chapter 11
of the Bankruptcy Code in which the lessee is the debtor.
(ii) The rights of any transferee (other than a transferee
where the transfer is of a Spare Engine which is to be an Event of Loss)
shall be (and the assignment or other transfer document under which such
transfer is governed shall explicitly provide that) during the period of
such possession, subject and subordinate to, all the terms of the Security
Documents, including, without limitation, the covenants
24
contained in this Article 3, including the inspection rights contained in
Section 3.05 and the Collateral Agent's right to repossess such Spare
Engine. No pooling agreement, Permitted Lease or other relinquishment of
possession of any Spare Engine shall in any way discharge or diminish such
Grantor's obligations to the Collateral Agent under the Security Documents
or constitute a waiver of the Collateral Agent's rights or remedies
hereunder or thereunder.
(iii) In connection with any Permitted Lease, all necessary
action shall be taken by such Grantor at its expense which is required to
continue the Collateral Agent's security interest in the applicable Spare
Engine, and such Permitted Lease and all other necessary documents shall
be duly filed, registered or recorded in such public offices as may be
required to fully preserve the priority of the security interest of the
Collateral Agent in such Spare Engine. Any Wet Lease shall not constitute
a delivery, transfer or relinquishment of possession for purposes of this
Section 3.01. The Collateral Agent acknowledges that any consolidation or
merger of such Grantor or conveyance, transfer or lease of all or
substantially all of such Grantor's assets, in each case as permitted by
the Loan Documents, shall not be prohibited by this Section 3.01. No
Permitted Lease entered into pursuant to this Section 3.01(b) shall permit
any subleasing of the Spare Engines without the prior written consent of
the Grantor and the Collateral Agent.
(iv) Any Permitted Lease having a term in excess of one (1)
year shall be assigned by such Grantor to the Collateral Agent as
additional Collateral hereunder; provided that, except upon the occurrence
and during the continuance of a Specified Default or Event of Default, (A)
such Grantor shall be entitled to retain the rental payments made to such
Grantor under such Permitted Lease, and (B) the rights of such Grantor as
lessor under any Permitted Lease shall not vest (to the exclusion of such
Grantor) in the Collateral Agent. Upon the occurrence of a default under
such Permitted Lease, such Grantor and the Collateral Agent shall have the
right, acting separately or together, to enforce the terms of such
Permitted Lease; provided, however, that upon the occurrence and during
the continuance of a Specified Default or Event of Default, the Collateral
Agent shall have the exclusive right to enforce the terms of such
Permitted Lease. In the event of the expiration or termination of the
Permitted Lease, at such Grantor's request, the Collateral Agent shall
release its interest in such Permitted Lease.
(c) Insignia. Within ninety (90) days after (x) the date hereof
(with respect to Spare Engines covered by the Lien of the Security Documents as
of the date hereof), and (y) the date on which any Mortgage and Security
Agreement Supplement (Spare Engine) is delivered (with respect to such
additional Collateral), and so long as any Spare Engines are subject to the Lien
of the Security Documents, such Grantor agrees to affix and maintain (or cause
to be affixed and maintained) on each Spare Engine a nameplate bearing the
inscription:
25
THIS ENGINE IS MORTGAGED TO
CITIBANK, N.A.,
AS COLLATERAL AGENT
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor collateral agent, in each case as permitted under the Loan
Documents). Except as above provided, such Grantor will not allow the name of
any Person other than the Grantors to be placed on any Spare Engine as a
designation that might be interpreted as a claim of ownership or of any rights
therein. The Company represents and warrants that the requirements of this
3.01(c) have been satisfied with respect to the Spare Engines covered by the
Lien of the Original Security Agreement.
(d) Substitution of Spare Engines. Such Grantor may at any time,
at its sole cost and expense, replace any Spare Engine subjected to the Lien
hereof by causing one or more Acceptable Alternate Spare Engines to be
substituted for such Spare Engine hereunder in accordance with the provisions of
Section 4.01 (a) hereof to the same extent as if an Event of Loss had occurred
with respect to such Spare Engine.
SECTION 3.02 REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS.
(a) Replacement of Parts. Such Grantor, at its own cost and
expense, will promptly replace or cause to be replaced all Parts of each Spare
Engine 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, except as otherwise provided in Section 3.02(c). All
replacement parts shall be owned by such Grantor free and clear of all Liens
(except Permitted Liens, pooling arrangements permitted by Section 3.02(b)
hereof and replacement parts temporarily installed on an emergency basis) and
shall be in good operating condition, and shall have a value and utility at
least equal to, the Parts replaced, assuming such replaced Parts were in the
condition and repair required to be maintained by the terms hereof. All Parts at
any time removed from any Spare Engine shall remain the property of such Grantor
and subject to the Lien of the Security Documents, no matter where located,
until such time as such Parts shall be replaced by parts which meet the
requirements for replacement parts specified above. Immediately upon any
replacement part becoming incorporated or installed in or attached to any Spare
Engine, without further act (subject only to Permitted Liens and any pooling
arrangement permitted by Section 3.02(b) hereof and except any replacement part
temporarily installed on an emergency basis), (i) such replacement part shall
become the property of such Grantor and subject to the Lien of the Security
Documents and be deemed a Part for all purposes hereof to the same extent as the
Part originally incorporated or installed in or attached to such Spare Engine
and (ii) the replaced Part shall be free and clear of all rights of the
Collateral Agent and shall no longer be deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from any Spare Engine as
provided in Section 3.02(a) hereof may be subjected by such Grantor to a pooling
arrangement of the type which is permitted by clause (iii) of Section 3.03(b)
hereof; provided, that the part replacing such removed Part shall be
incorporated or installed in or attached to such Spare Engine in accordance
26
with Section 3.02(a) as promptly as practicable after the removal of such
removed Part. In addition, any replacement part when incorporated or installed
in or attached to a Spare Engine in accordance with such Section may be owned by
any third party subject to a pooling arrangement, provided, that such Grantor
(or any Permitted Lessee), at its expense, as promptly thereafter as
practicable, either (i) causes such replacement part to become subject to the
Lien of the Security Documents, free and clear of all Liens other than Permitted
Liens or (ii) replaces such replacement part with a further replacement part
owned by such Grantor (or any Permitted Lessee) which shall become the property
of such Grantor and subject to the Lien of the Security Documents, free and
clear of all Liens other than Permitted Liens.
(c) Alterations, Modifications and Additions. Such Grantor, at its
own expense, will make (or cause to be made) such alterations and modifications
in and additions to the Spare Engines as may be required to be made from time to
time so as to comply with any law, rule, regulation or order of any regulatory
agency or body of any jurisdiction in which any aircraft may then be registered;
provided, however, that such Grantor (or any Permitted Lessee) may, in good
faith, and by appropriate proceedings contest the validity or application of any
such law, rule, regulation or order in any reasonable manner which does not
materially adversely affect the Collateral Agent, the Board or any Lender or any
of their respective legal and economic interests in or to such Spare Engine, or
subject any such Person to risk of any material civil or any criminal penalties
or involve any material risk of loss or forfeiture of title to such Spare
Engine. In addition, such Grantor (or any Permitted Lessee), at its own expense,
may from time to time make such alterations and modifications in and additions
to any Spare Engine as such Grantor (or any Permitted Lessee) may deem desirable
in the proper conduct of its business, including removal of Parts which such
Grantor (or any Permitted Lessee) deem to be obsolete or no longer suitable or
appropriate for use on such Spare Engine (such parts, "Obsolete Parts"):
provided that no such alteration, modification, removal or addition, after
giving effect to the installation of Additional Parts (as defined below),
impairs the condition or airworthiness of such Spare Engine, or materially
diminishes the value or utility of such Spare Engine below the condition,
airworthiness, value or utility thereof immediately prior to such alteration,
modification, removal or addition assuming such Spare Engine was then in the
condition required to be maintained by the terms of this Security Agreement. In
addition, the value (but not the utility, condition or airworthiness) of any
Spare Engine may be reduced by the value, if any, of Obsolete Parts which shall
have been removed so long as the aggregate fair market value of all Obsolete
Parts which shall have been removed and not replaced shall not exceed 1.5% of
the then Appraised Value of such Spare Engine (as shown in the most recent
Appraisal Report delivered on or prior to such date) unless such Spare Engine
has become worn out, obsolete or unfit for use and not easily repairable as
provided in Section 3.01(a)(i) above. All Parts incorporated or installed in or
attached or added to a Spare Engine as the result of such alteration,
modification or addition (except those parts which are excluded from the
definition of Parts or which may be removed by such Grantor pursuant to the next
sentence) (the "Additional Parts") shall, without further act, become subject to
the Lien of the Security Documents. Notwithstanding the foregoing sentence, such
Grantor may, at its own expense, so long as no Event of Default shall have
occurred and be continuing, remove or suffer to be removed any Additional Part,
provided that such Additional Part (i) is in addition to, and not in replacement
of or substitution for, any Part originally incorporated or installed in or
attached to any Spare Engine at the time of delivery thereof hereunder or any
part in replacement of or substitution for any such Part, (ii) is not required
to be incorporated or installed in or attached or added to any
27
Spare Engine pursuant to the first sentence of this paragraph (c) and (iii) can
be removed from such Spare Engine without diminishing the condition,
airworthiness, value or utility of such Spare Engine which such Spare Engine
would have had at such time had such alteration, modification or addition not
occurred. Upon the removal thereof as provided above, such Additional Part shall
no longer be deemed to be subject to the Lien of the Security Documents or part
of the Spare Engine from which it was removed.
SECTION 3.03 USE, POSSESSION AND DESIGNATED LOCATIONS OF SPARE PARTS
AND PLEDGED EQUIPMENT; COLLATERAL ACCESS AGREEMENT.
(a) Such Grantor shall have the right, at any time and from time
to time at its own cost and expense, without the necessity of obtaining any
release from or consent by the Collateral Agent, to deal with the Spare Parts
and the Pledged Equipment in any manner consistent with such Grantor's ordinary
course of business, including without limitation any of the following:
(i) with respect to the Spare Parts, to incorporate in,
install on or attach or make appurtenant to any aircraft, engine or
Appliance leased to or owned by such Grantor (whether or not subject to
any Lien) any Spare Part, free from the Lien of the Security Documents;
(ii) with respect to the Spare Parts or the Pledged Equipment,
to dismantle any Spare Part or Pledged Equipment that has become worn out
or obsolete or unfit for use, and to sell or dispose of any such Spare
Part or Pledged Equipment or any salvage resulting from such dismantling,
free from the Lien of the Security Documents; and
(iii) with respect to the Spare Parts, (A) to transfer any or
all of the Spare Parts located at one or more Designated Locations to one
or more other Designated Locations and (B) to refurbish, maintain and
replace Spare Parts in the Fly Away Kits.
(b) Without the prior consent of the Collateral Agent, such
Grantor will not sell, lease, transfer or relinquish possession of any Spare
Part or any Pledged Equipment to any Person (other than the other Grantor),
except as permitted by the provisions of this Section 3.03 and except that such
Grantor shall have the right in the ordinary course of business, (i) to transfer
possession of any Spare Part or any Pledged Equipment to the Manufacturer
thereof or any service provider for testing, overhaul, repairs, maintenance,
alterations or modifications purposes, (ii) to sell any of the same in the
ordinary course of business or when determined to be obsolete or unrepairable or
(iii) to subject any Spare Part to an interchange or pooling, exchange,
borrowing or maintenance servicing arrangement customary in the airline industry
and entered into in the ordinary course of business. So long as no Specified
Default or Event of Default shall have occurred and be continuing, and subject
to such Grantor's obligations under Section 4.01 hereof and Section 2.6(c) of
the Loan Agreement, such Grantor shall be entitled to retain all payments
received by it in respect of any warranty, indemnity or similar agreement
relating to Spare Parts, Pledged Equipment and Spare Engines and deal with the
counterparties to such agreements with respect to its rights thereunder in such
manner as the Grantors deem appropriate.
28
(c) Such Grantor shall maintain and keep the Spare Parts at one or
more of the Designated Locations, except as otherwise permitted under this
Section 3.03 (it being understood and agreed that Spare Parts maintained in a
Fly Away Kit shall be deemed to be located at a Designated Location so long as
(x) the aircraft upon which such Fly Away Kit is kept and (y) the airport or
other locations in the U.S. at which such aircraft when in the U.S. is generally
located while not in actual flight are identified as Designated Locations on
Schedule 2.01 hereto. If any material Spare Part (other than a Spare Part in a
Fly Away Kit aboard an aircraft outside the U.S.), at any time and for any
reason, is stored at any location other than a Designated Location, such Grantor
will promptly furnish to the Collateral Agent the following:
(i) a Mortgage and Security Agreement Supplement (Spare Parts)
duly executed by such Grantor identifying each location (and aircraft, as
applicable) that is to become a Designated Location and specifically
subjecting the Spare Parts at such location to the Lien of the Security
Documents;
(ii) other than with respect to Spare Parts maintained in a
Fly Away Kit, a legal opinion from counsel (which opinion and counsel
(which may be in-house counsel to such Grantor) shall be reasonably
satisfactory to the Collateral Agent), dated the date of execution of said
Mortgage and Security Agreement Supplement (Spare Parts), stating that
said Mortgage and Security Agreement Supplement (Spare Parts) has been
duly filed for recording in accordance with the provisions of the Federal
Aviation Act, and either: (A) no other filing or recording is required in
any other place within the United States in order to perfect the Lien of
the Security Documents on the Spare Parts (or spare parts) held at the
Designated Locations specified in such Mortgage and Security Agreement
Supplement (Spare Parts) under the laws of the United States, or (B) if
any such filing or recording shall be required that said filing has been
accomplished in such other manner and places, which shall be specified in
such legal opinion, as are necessary to perfect the Lien of the Security
Documents; and
(iii) an Officer's Certificate stating that in the opinion of
the officer executing the Officers' Certificate, all conditions precedent
provided for in this Security Agreement relating to the subjection of such
property to the Lien of the Security Documents have been complied with.
(d) Such Grantor shall, on an ongoing basis, effect any filings or
recordings (or amend or continue any existing filings or recordings) which are
necessary or desirable to perfect the security interest of the Collateral Agent
in the Spare Parts and the Pledged Equipment which are being subjected to the
Lien hereof in accordance with this Section 3.03 and shall promptly deliver
copies of any such filings or recordings to the Collateral Agent.
(e) In the event that any Pledged Inventory, Pledged Equipment or
Spare Parts are located in a warehouse or on real property leased by such
Grantor and have an aggregate Appraised Value, together with all other Pledged
Inventory, Pledged Equipment or Spare Parts at such location, of more than
$1,000,000, such Grantor will, to the extent required under the Loan Agreement,
use its reasonable commercial efforts to ensure that such warehouse or leased
property is subject to a Collateral Access Agreement executed by the lessor,
warehouseman, or other third party, as the case may be, for the benefit of the
Collateral Agent, and that such
29
Collateral is segregated or otherwise separately identifiable from goods of
others, if any, stored on the premises.
SECTION 3.04 INSURANCE.
(a) Public Liability and Property Damage Insurance.
(i) Except as provided in clause (ii) of this Section 3.04(a),
such Grantor, or Parent on behalf of Grantor, will carry or cause to be
carried with respect to each Spare Engine at its expense (A) comprehensive
airline liability (including, without limitation, passenger, contractual,
bodily injury, and property damage liability and product liability)
insurance (exclusive of Manufacturer's product liability insurance) of a
type and in an amount comparable to the type and amounts of comprehensive
airline liability insurance from time to time carried by similarly
situated U.S. Air Carriers owning and operating similar aircraft and
engines ("Similar Carriers"), which is maintained in effect with insurers
of internationally recognized reputation and reasonably believed to be
financially sound ("Insurers") and (B) war risk, hijacking and allied
perils liability insurance of a scope and in an amount then being carried
by Similar Carriers, which may be effected by combining insurance
available in commercial insurance markets with coverage of the type
described in Section 3.04(f) (it being agreed that such Grantor's
obligations under this clause (IV) shall be subject in any event and at
all times to whether such coverage is available on commercially reasonable
terms through a combination of commercial insurance coverage and coverage
of the type described in Section 3.04(f)).
(ii) During any period that a Spare Engine is on the ground
and not in operation, such Grantor may carry or cause to be carried as to
such non-operating property, in lieu of the insurance required by clause
(i) above, insurance by Insurers otherwise conforming with the provisions
of clause (i) except that (A) the amounts of coverage shall not be
required to exceed the amounts of comprehensive airline liability
insurance from time to time applicable to property owned or leased by such
Grantor of the same type as such non-operating property and which is on
the ground and not in operation; and (B) the scope of the risks covered
and the type of insurance shall be the same as from time to time shall be
applicable to property owned or leased by Similar Carriers of the same
type as such non-operating property and which is on the ground and not in
operation.
(iii) Such Grantor will carry or cause to be carried at all
times, (x) with respect to the Spare Parts, comprehensive airline
liability insurance, including, without limitation, property damage
liability insurance and (y) with respect to the Pledged Equipment,
comprehensive property damage liability insurance, in each case, which is
(A) of amount and scope as may be customarily maintained by Similar
Carriers for property similar to the Spare Parts and Pledged Equipment and
(B) maintained in effect with Insurers.
(b) Insurance Against Loss or Damage to a Spare Engine, etc. Such
Grantor shall maintain or cause to be maintained in effect, at its (or a
Permitted Lessee's) expense, with
30
insurers of nationally recognized reputation and reasonably believed to be
financially sound, "all-risk" insurance coverage of Spare Engines (while such
Spare Engines are either installed on any airframe or not installed on an
airframe) and "all-risk" insurance coverage of Spare Parts and Pledged
Equipment, in each case in such forms as are customarily maintained with respect
to similar property owned or operated by Similar Carriers and in an amount of
coverage not less than the Insured Amount therefor. In addition, such Grantor
shall maintain with Insurers in respect of the Spare Engines war risk and allied
perils insurance of a scope carried by Similar Carriers in an amount equal to
the amount of "all-risk" coverage therefor, unless and to the extent that
Section 3.04(a)(ii) shall apply (it being agreed that such Grantor obligations
under this sentence shall be subject in any event and at all times to whether
such coverage is available on commercially reasonable terms through a
combination of commercial insurance coverage with Insurers and coverage of the
type described in Section 3.04(f)). All losses will be adjusted by such Grantor
(giving due regard to the interest of the Collateral Agent) with the insurers;
provided, however, that during a period when any Specified Default or Event of
Default shall have occurred and be continuing, such Grantor shall not agree to
any such adjustment without the prior written consent of the Collateral Agent.
As between the Collateral Agent and such Grantor, it is agreed that all proceeds
of insurance maintained in compliance with the preceding paragraph and received
as the result of the occurrence of an Event of Loss will be applied in
accordance with Section 4.01.
(c) Reports, Certificates, etc. North American will furnish, or
cause to be furnished, to the Collateral Agent on or before the date hereof, and
each Grantor will furnish, or cause to be furnished, to the Collateral Agent on
or before each annual renewal of the applicable insurances, (i) a report, signed
by a recognized independent firm of insurance brokers reasonably acceptable to
the Collateral Agent which brokers may be regularly retained by such Grantor
(the "Insurance Brokers"), describing in reasonable detail the property and
liability insurance then carried and maintained with respect to the Collateral
and stating the opinion of such firm that (A) such insurance complies with the
terms hereof, (B) all premiums in connection with such insurance then due have
been paid and (C) such insurance together with any self-insurance permitted
hereby provides coverages against risks that are customarily insured against by
Similar Carriers and that such coverages are in substantially similar forms, are
of such types and have limits as are customarily carried by Similar Carriers;
and (ii) a certificate of insurance evidencing the due compliance with the terms
of this Section 3.04 relating to insurance with respect to the Collateral. To
the extent that the insurance obligations of this Section 3.04 are satisfied in
part with the coverage described in Section 3.04(f), the Insurance Broker's
report and certificate need not certify such coverage but may instead refer to
the FAA Certificate of Insurance (which the Insurance Broker shall attach to its
report). Such Grantor will cause such Insurance Broker to agree to advise the
Collateral Agent in writing of any default in the payment of any premium and of
any act or omission on the part of such Grantor of which it has knowledge and
which might invalidate or render unenforceable, in whole or in part, any
insurance on the applicable Collateral and to advise the Collateral Agent in
writing at least thirty (30) days (twenty (20) days in the case of lapse for
nonpayment of premiums and seven (7) days in the case of war risk and allied
perils coverage) prior to the cancellation (but not expiration), lapse for
non-payment of premium or material adverse change of any insurance maintained
pursuant to this Section 3.04; provided that if the war risk notice period
specified above is not reasonably obtainable, such Grantor will cause the
Insurance Broker to provide for as long a period of prior notice as shall then
be reasonably obtainable. In the event that such Grantor shall fail to maintain
or cause to be
31
maintained insurance as herein provided, the Collateral Agent may, at its sole
option, but shall be under no duty to, procure such insurance on behalf of such
Grantor (and shall give notice to such Grantor of such event) and, in such
event, such Grantor shall, upon demand, reimburse the Collateral Agent for the
cost thereof to the Collateral Agent, together with interest on such cost at the
interest rate determined in accordance with Section 2.7(e) of the Loan Agreement
from the date of such payment by the Collateral Agent to the date of
reimbursement without waiver of any other rights the Collateral Agent may have;
provided, however, that no exercise by the Collateral Agent of said option shall
affect the provisions of this Security Agreement or the other Loan Documents,
including the provisions that failure by such Grantor to maintain the prescribed
insurance shall constitute an Event of Default. Upon receipt of any notices or
reports, the Collateral Agent shall as promptly as practicable forward copies of
the same to the Agent, the Loan Administrator, the Board and each of the
Lenders. The Collateral Agent shall have no responsibility for independently
verifying the accuracy or completeness of any information contained in any
report or certificate provided by the Insurance Brokers.
(d) Self-Insurance. Such Grantor (but no Permitted Lessee) may
self-insure the risks required to be insured against pursuant to this Section
3.04 under a program applicable to all aircraft and engines (whether owned or
leased) in such Grantor's fleet, but in no case shall the aggregate amount of
such self-insurance in regard to Section 3.04(a) and Section 3.04(b) hereof for
any calendar year, with respect to all of the aircraft and engines (whether
owned or leased) in such Grantor's fleet, exceed $500,000. In addition to the
foregoing right to self-insure, such Grantor may self-insure the risks required
to be insured against pursuant to this Section 3.04 in an amount equal to any
applicable minimum per occurrence (or, if applicable, annual (or other) period)
deductible imposed by its property or liability Insurer, which are commensurate
with the standard deductibles in the aircraft insurance industry.
(e) Additional Insurance by such Grantor. Such Grantor may at its
own expense carry insurance with respect to its interest in the Spare Engines
and Spare Parts in amounts in excess of that required to be maintained by this
Section 3.04; provided, however, that such insurance does not prevent such
Grantor from carrying the insurance required or permitted by this Section 3.04
or adversely affect such insurance or the cost thereof; and provided, further,
that the proceeds of such insurance shall be subject to Section 2.6(c) of the
Loan Agreement.
(f) Indemnification by Government in Lieu of Insurance.
Notwithstanding any provisions of this Section 3.04 requiring insurance, the
Collateral Agent agrees to accept, in lieu of insurance required by the terms of
this Section 3.04, indemnification from, or insurance provided by, the United
States Government, against such risk in an amount which, when added to the
amount of insurance against such risk maintained by such Grantor shall be at
least equal to the amount of insurance against such risk otherwise required by
this Section 3.04 (taking into account self-insurance permitted by Section
3.04(d) hereof). Any such indemnification or insurance provided by the United
States Government shall provide substantially similar protection as the
insurance required by this Section 3.04 (other than Section 3.04(g) to the
extent that any of the provisions of such section are generally unavailable from
the United States Government). Such Grantor shall furnish to the Collateral
Agent a copy of any FAA Certificate of Insurance (if such certificates are then
being furnished by the FAA), and at the request of the Collateral Agent, an
Officer's Certificate confirming in reasonable detail the amount and scope
32
of such indemnification or insurance and certifying that such indemnification or
insurance complies with the terms of this Section 3.04(f).
(g) Terms of Insurance Policies. Any insurance policies covering
Collateral (and any policies taken out in substitution or replacement for any
such policies) (i) shall name the Additional Insureds as additional insureds, as
their respective interests may appear (but without imposing on any such party
liability to pay premiums with respect to such insurance), (ii) shall name the
Collateral Agent as sole loss payee in respect of any casualty insurance
maintained with respect to Collateral; provided, so long as the Insurers shall
not have received notice of a Specified Default or an Event of Default, in
respect of any casualty occurrence the insurance proceeds of which are less than
$1,000,000, such insurance proceeds shall be paid directly to such Grantor,
(iii) may provide for self-insurance to the extent permitted in Section 3.04(d)
hereof, (iv) shall provide that if the insurers cancel such insurance for any
reason whatever, or if the same is allowed to lapse for non-payment of premium
or if any material change is made in the insurance which adversely affects the
interest of any Additional Insured, such lapse, cancellation or change shall not
be effective as to any Additional Insured for thirty (30) days (twenty (20) days
in the case of lapse for non-payment of premiums and seven (7) days in the case
of war risk and allied perils coverage) after receipt by such Additional Insured
of written notice by such insurers of such lapse, cancellation or change;
provided, however, that if the war risk notice period specified above is not
reasonably obtainable, such policies shall provide for as long a period of prior
notice as shall then be reasonably obtainable, (v) shall provide that in respect
of the respective interests of each Additional Insured in such policies the
insurance shall not be invalidated by any action or inaction of such Grantor or
any other Person and shall insure the respective interests of the Additional
Insureds, as they appear, regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by such Grantor or by any
other Person, (vi) shall be primary without any right of contribution from any
other insurance which is carried by any Additional Insured, (vii) shall
expressly provide that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each Additional Insured, (viii) shall waive any right of the insurers
to set-off, recoupment or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any Additional Insured,
(ix) shall waive any right of the insurers to subrogation against any Additional
Insured, and (x) shall provide for a 50/50 claims settlement per AVS 103 or its
equivalent, except that if coverage required under this Section 3.04 is then
being provided under Section 3.04(f), such claims settlement shall be made
pursuant to provisions then generally in effect with respect to commercial
aviation insurance.
(h) Application of Payments During Existence of a Specified
Default or an Event of Default. Any amount referred to in this Section 3.04
which is payable to or retainable by such Grantor (or any Permitted Lessee)
shall not be paid to or retained by such Grantor (or any Permitted Lessee) if at
the time of such payment or retention a Specified Default or an Event of Default
shall have occurred and be continuing, but shall, so long as such Specified
Default or an Event of Default is continuing, be held by or paid over to the
Collateral Agent and, at the direction of the Board (or if the Board Guarantee
is no longer in effect, the Requisite Lenders), subject to applicable law, be
applied against the obligations of such Grantor under the Loan Documents. At
such time as there shall not be continuing any such Specified Default or Event
of Default, such amount shall be paid to such Grantor to the extent not
previously applied in accordance with the preceding sentence. Prior to remitting
any such funds to such Grantor, the
33
Collateral Agent shall be authorized to request and receive an Officer's
Certificate from the Company certifying that no Specified Default or Event of
Default has occurred and is continuing.
(i) Obligations under Loan Agreement. Nothing in this Section 3.04
shall be construed as limiting the Company's obligations under Section 5.4(b) of
the Loan Agreement to maintain insurance coverages in accordance with the terms
thereof, including, without limitation, to maintain insurance with respect to
other Collateral not specifically identified in subsections (a) and (b) of this
Section 3.04.
SECTION 3.05 INSPECTION.
(a) Subject to subsection (b), at reasonable times but not more
often than twice in any twelve (12) month period, and upon at least ten (10)
days prior written notice to such Grantor (provided, however, that if an Event
of Default shall have occurred and be continuing, any such inspection shall be
at reasonable times without any limit on the number of times and upon at least
one (1) Business Day's prior written notice to and at the expense of such
Grantor), the Collateral Agent or the Board or their respective authorized
representatives may inspect the Collateral, inspect and make copies of the books
and records of such Grantor relating to the Collateral, including books and
records required to be maintained by the FAA or other applicable regulatory
agency or body, and access the Tracking System (with assistance from such
Grantor's personnel and at such Grantor's risk and expense). Any inspection of
Spare Engines or Spare Parts shall be subject to such Grantor's safety and
security rules applicable at the location of such Collateral. So long as no
Default or Event of Default shall have occurred and be continuing, no exercise
of such inspection right shall be unduly disruptive to the business of such
Grantor. Neither the Collateral Agent nor the Board shall have any duty to make
any such inspection and shall incur no liability or obligation by reason of not
making any such inspection.
(b) Such Grantor shall at all times properly maintain the Tracking
System and its perpetual inventory procedures for the Spare Engines and Spare
Parts that provide a continuous internal audit of the Spare Engines and Spare
Parts. Notwithstanding subsection (a), at any time during normal business hours
and upon reasonable notice to such Grantor but not more than quarterly
(provided, however, that if an Event of Default shall have occurred and be
continuing any such inspection shall be at reasonable times without any limit on
the number of times and upon at least one (1) Business Day's prior written
notice to and at the expense of such Grantor), the Collateral Agent shall be
entitled to inspect the Tracking System to ensure such Grantor's compliance with
the terms hereof. Such inspection right shall not be exercised in a manner which
is unduly disruptive to the normal operation or maintenance of the Tracking
System or the normal business operations of such Grantor.
SECTION 3.06 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not,
except upon thirty (30) days' prior written notice to the Collateral Agent and
delivery to the Collateral Agent of all additional financing statements and
other documents in recordable form (and with all required signatures thereon)
reasonably requested by the Collateral Agent to maintain the validity,
perfection and priority of the security interests provided for herein, (i)
change its
34
jurisdiction of organization (or take any other action to become a Registered
Organization in any other jurisdiction) or the location of its chief executive
office; or (ii) change its name.
SECTION 3.07 PLEDGED RECEIVABLES.
(a) Except with respect to intercompany Pledged Receivables among
the Grantors, such Grantors will not, without the Collateral Agent's prior
written consent, grant any extension of the time of payment under or in respect
of any of the Pledged Receivables or Related Contracts of such Grantor,
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partly, any Person liable for the payment thereof, or allow
any credit or discount whatsoever thereon, other than any of the foregoing with
respect to Pledged Receivables consisting of Accounts which are done in the
ordinary course of business and trade or other customary discounts granted in
the ordinary course of business of such Grantor.
(b) Such Grantor shall keep full and accurate books and records
relating to the Pledged Receivables, including, without limitation, a current
and complete list of all Account Debtors, along with their respective names,
addresses, telephone numbers, account or other identification numbers and the
balance and aging of their respective Pledged Receivables, copies of which list
the such Grantor shall deliver to the Collateral Agent promptly after the end of
each fiscal quarter of such Grantor and as soon as practicable following the
Collateral Agent's request therefor, and (ii) stamp or otherwise xxxx or code
such books and records in such manner as may be required to perfect the security
interest in such Collateral or at the request of the Collateral Agent in order
to reflect the security interests granted by this Security Agreement.
(c) Such Grantor shall use commercially reasonable efforts to
cause to be collected from its Account Debtors, as and when due, all amounts
owing under or on account of the Pledged Receivables (including, without
limitation, a Pledged Receivable which is delinquent, which shall be collected
in accordance with lawful collection procedures to the extent commercially
reasonable) and shall apply forthwith upon receipt thereof all such amounts as
are: so collected to the outstanding balance of the Pledged Receivable.
(d) Upon the occurrence and during the continuance of an Event of
Default and upon the request of the Collateral Agent, such Grantor shall
promptly (i) notify the Account Debtors in respect of the Pledged Receivables
that the Pledged Receivables have been assigned to the Collateral Agent
hereunder, and that any payments due or to become due in respect thereof are to
be made directly to the Collateral Agent or its designee (it being understood
and agreed that the foregoing shall not limit the rights of the Collateral Agent
upon the occurrence and during the continuance of an Event of Default to so
notify the Account Debtors without giving prior notice to or making a demand
upon such Grantor including, without limitation, any notices required to be
given under the Assignment of Claims Act) and (ii) transfer to the Collateral
Agent or its designee all funds received by it from or on behalf of the Account
Debtors in respect of the Pledged Receivables (it being acknowledged and agreed
that such Grantor shall be deemed to be holding all such funds as trustee for
the Collateral Agent and, as such, shall not commingle such funds with other
funds of such Grantor).
35
SECTION 3.08 PLEDGED EQUIPMENT. Subject to Section 3.03, such
Grantor shall maintain and keep the Pledged Equipment in good working order and
repair, ordinary wear and tear and loss due to casualty excepted, and shall not
use such Collateral in violation of law or any policy of insurance thereon.
Except upon prior written notice to the Collateral Agent and delivery to the
Collateral Agent of a written supplement to Schedule 2.06 showing any additional
locations at which Pledged Equipment shall be kept, such Grantor shall not
transfer Pledged Equipment to any locations other than the locations listed on
Schedule 2.06. Upon the acquisition after the date hereof by such Grantor of any
additional or replacement Pledged Equipment covered by a Certificate of Title or
ownership, such Grantor shall cause the Collateral Agent to be listed as the
lienholder on such Certificate of Title and take such other steps as may be
required under the law applicable to perfection of a security interest in such
property to perfect such security interest, other than to the extent perfection
thereof is not required under clause (3) of the Habendum Clause, and within
thirty (30) days of the acquisition thereof deliver evidence of the same to the
Collateral Agent.
SECTION 3.09 DELIVERY AND CONTROL OF PLEDGED EQUITY AND PLEDGED
DEBT.
(a) Each Grantor shall promptly give written notice to the
Collateral Agent upon the Grantor's acquisition of any right, title or interest
in any Pledged Equity which is represented by a certificate or Instrument, and,
upon the written request of the Collateral Agent, such Grantor shall promptly
deliver such Instruments or certificates to the Collateral Agent in suitable
form for transfer by delivery or accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Collateral Agent.
(b) With respect to any Pledged Equity in which any Grantor
acquires any right, title or interest and which constitutes an uncertificated
security, such Grantor will use commercially reasonable efforts promptly after
the acquisition thereof to cause the issuer thereof either (A) to register the
Collateral Agent as the registered owner of such security or (B) to agree in an
authenticated record with such Grantor and the Collateral Agent that such issuer
will comply with instructions with respect to such security originated by the
Collateral Agent without further consent of such Grantor, such authenticated
record to be in form and substance reasonably satisfactory to the Collateral
Agent; provided, however, that such Grantor shall not be required to comply with
the terms of this subsection (b) so long as (x) such uncertificated security is
not an Equity Interest in a Subsidiary of such Grantor and (y) the fair market
value of such uncertificated security together with all uncertificated
securities of such issuer held by such Grantor, is less than $50,000.
(c) Such Grantor shall be entitled to receive all cash dividends
paid in respect of the Pledged Equity of such Grantor, except upon the
occurrence and during the continuation of a Specified Default or an Event of
Default, in which event, all cash dividends paid in respect of the Pledged
Equity of such Grantor shall be held by or paid over to the Collateral Agent
and, at the direction of the Board (or if the Board Guarantee is no longer in
effect, the Requisite Lenders), subject to applicable law, be applied against
the obligations of such Grantor under the Loan Documents.
(d) Such Grantor will be entitled to exercise all voting, consent
and corporate rights with respect to the Pledged Equity of such Grantor, except
upon the occurrence and during
36
the continuation of a Specified Default or an Event of Default, in which event,
the Collateral Agent shall have the sole right to exercise all voting, consent
and corporate rights with respect to the Pledged Equity of such Grantor.
(e) Each Grantor shall promptly give written notice to the
Collateral Agent upon the Grantor's acquisition of any right, title or interest
in any Pledged Debt which is represented by an Instrument, and, upon the written
request of the Collateral Agent, such Grantor will promptly deliver such
Instruments to the Collateral Agent accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Collateral Agent; provided, however, that such Grantor shall
not be required to comply with the terms of this subsection (e) with respect to
an Instrument representing Pledged Debt (x) issued by a Person other than a
Subsidiary of such Grantor and (y) which has a value, together with all other
Instruments representing Pledged Debt issued by the same issuer and held by such
Grantor, of less than $50,000.
SECTION 3.10 NOTICES. Such Grantor will advise the Collateral Agent
in reasonable detail promptly after it obtains knowledge of any Lien asserted
against any material portion of the Collateral pledged by such Grantor (other
than Permitted Liens).
SECTION 3.11 INTELLECTUAL PROPERTY COLLATERAL.
(a) With respect to each item of such Grantor's Intellectual
Property Collateral that is material to its business, such Grantor agrees to
take, at its expense, all necessary action in the U.S. Patent and Trademark
Office, the U.S. Copyright Office and any other applicable U.S. Governmental
Authority, and such other actions reasonably requested in writing by the
Collateral Agent, to (i) maintain the validity and enforceability of such
Intellectual Property Collateral and maintain such Intellectual Property
Collateral in full force and effect, and (ii) pursue the registration and
maintenance of each patent, trademark, or copyright registration or application,
now or hereafter included in such Intellectual Property Collateral of such
Grantor, including, without limitation, the payment of required fees and taxes,
the filing of responses to office actions issued by the U.S. Patent and
Trademark Office, the U.S. Copyright Office or other applicable U.S.
Governmental Authorities, the filing of applications for renewal or extension,
the filing of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the
filing of divisional, continuation, continuation-in-part, reissue and renewal
applications or extensions, the payment of maintenance fees and, to the extent
that there is, in the Grantor's reasonable judgment, a reasonable probability of
success, the participation in interference, reexamination, opposition,
cancellation, infringement and misappropriation proceedings. Such Grantor shall
not, without the written consent of the Collateral Agent, discontinue use of or
otherwise abandon any Intellectual Property Collateral that is material to such
Grantor's business, or abandon any right to file an application for patent,
trademark, or copyright in any Intellectual Property Collateral that is material
to the Grantor's business, unless such Grantor shall have determined prior to
such cessation of use or abandonment that such use or the pursuit or maintenance
of such Intellectual Property Collateral is no longer desirable in the conduct
of such Grantor's business and that the loss thereof would not be reasonably
likely to have a Material Adverse Effect.
(b) Such Grantor agrees promptly to notify the Collateral Agent if
such Grantor becomes aware (i) that any material item of the Intellectual
Property Collateral has
37
become abandoned, placed in the public domain, invalid or, unenforceable, or of
any adverse determination or development regarding such Grantor's ownership of
any of the material Intellectual Property Collateral or its right to register
the same or to keep and maintain and enforce the same, or (ii) of any adverse
determination or the institution of any proceeding (including, without
limitation, the institution of any proceeding in the U.S. Patent and Trademark
Office or any court) regarding any material item of the Intellectual Property
Collateral.
(c) In the event that any Grantor becomes aware that any item of
the Intellectual Property Collateral that is material to such Grantor's business
is being infringed or misappropriated by a third party, such Grantor shall
promptly notify the Collateral Agent and shall take such actions, at its
expense, as such Grantor or the Collateral Agent deems reasonable and
appropriate under the circumstances to protect or enforce such Intellectual
Property Collateral, including, without limitation, suing for infringement or
misappropriation and seeking an injunction against such infringement or
misappropriation, unless such Grantor shall have determined that such
Intellectual Property Collateral is no longer desirable in the conduct of such
Grantor's business and that the infringement or misappropriation thereof would
not be reasonably likely to have a Material Adverse Effect.
(d) Each Grantor shall use proper statutory notice (where
necessary) in connection with its use of each material item of its Intellectual
Property Collateral. No Grantor shall do or permit any act or knowingly omit to
do any act whereby any of its material Intellectual Property Collateral may
lapse or become invalid or unenforceable or placed in the public domain except
to the extent that it is commercially reasonable to do so.
(e) Each Grantor shall take all reasonable steps which it or the
Collateral Agent deems appropriate under the circumstances to preserve and
protect each material item of its Intellectual Property Collateral, including,
without limitation, maintaining a level of quality with respect to any and all
products or services offered or sold in connection with any of the material
Trademarks, consistent with the level of quality existing on the date hereof,
and take all steps necessary to ensure that all licensed users of any of the
material Trademarks use such consistent standards of quality.
(f) Each Grantor agrees that should it obtain an ownership
interest (or in the case of trademarks, begin use of a trademark) after the date
hereof in any intellectual property (which it does not own or use on the date
hereof) of the type which is similar to the Intellectual Property Collateral
(for purposes of this subsection, "After-Acquired Intellectual Property") the
provisions of this Agreement shall automatically apply to such After-Acquired
Intellectual Property and such After-Acquired Intellectual Property shall
automatically become part of the Intellectual Property Collateral subject to the
terms and conditions of this Agreement with respect thereto. At the end of each
calendar quarter, each Grantor shall give prompt written notice to the
Collateral Agent identifying the After-Acquired Intellectual Property acquired
during such quarter (if any) that is material to its business and the subject of
an application or registration in the U.S. Patent and Trademark Office or the
U.S. Copyright Office, and such Grantor shall, at the request of the Collateral
Agent, execute and deliver to the Collateral Agent, or otherwise authenticate,
an IP Security Agreement Supplement covering such After-Acquired Intellectual
Property which shall be recorded with the U.S. Patent and Trademark Office, the
U.S. Copyright Office and any other applicable Governmental Authorities in the
United States (if
38
any) necessary to perfect the security interest hereunder in such After-Acquired
Intellectual Property.
SECTION 3.12 LIENS. Such Grantor will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to any
Collateral, except Permitted Liens, Such Grantor shall promptly, at its own
expense, take such action as may be necessary to duly discharge any Lien (other
than a Permitted Liens) arising at any time.
SECTION 3.13 FINANCING STATEMENTS. Such Grantor shall not execute,
file or authorize to be filed in any public office any financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction intended to provide notice of a Lien) relating to the Collateral of
such Grantor, except financing statements filed or to be filed in respect of and
covering Permitted Liens and termination statements in respect of Liens of third
parties or as provided by law upon termination of this Agreement.
SECTION 3.14 DISPOSITION OF COLLATERAL. Such Grantor shall not sell,
lease, transfer, assign, convey or otherwise dispose of its Collateral (for
purposes of this subsection, a "Disposition"), except: (i) Dispositions
permitted by Section 3.01, Section 3.02 and Section 3.03 hereof; (ii)
abandonment of Intellectual Property Collateral pursuant to Section 3.11 (a)
hereof; (iii) licensing and sublicensing of Intellectual Property Collateral
consistent with such Grantor's past practices in the ordinary course of
business; (iv) Dispositions of unused, obsolete or worn out property in the
ordinary course of business of such Grantor, (v) Dispositions or consumption of
Inventory in the ordinary course of business of such Grantor; (vi) other
Dispositions effected under and pursuant to Section 6.10 of the Loan Agreement
and with respect to which the Grantor complies with Section 2.6(b) thereof, as
applicable; (vii) Dispositions of property by such Grantor to any other Grantor
(so long as such Disposition shall not deprive the Collateral Agent of its
security interest in such Collateral); and (viii) Dispositions permitted by
Sections 6.6 or 6.9 of the Loan Agreement.
SECTION 3.15 FURTHER ASSURANCES. Such Grantor agrees that it will
notify the Collateral Agent in writing of, and upon the written request of the
Collateral Agent promptly correct, any defect or error that may be discovered in
any document delivered in connection with the Security Documents to which it is
a party or in the execution, acknowledgment or recordation thereof.
SECTION 3.16 PERFORMANCE. The Company shall perform and observe all
of its agreements, covenants and obligations in the Loan Agreement and the Notes
(subject to the notice and cure provisions set forth therein), all of which are
hereby incorporated by reference herein.
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ARTICLE 4
EVENT OF LOSS
SECTION 4.01 EVENT OF LOSS; APPLICATION OF PAYMENTS AND PROCEEDS.
(a) Event of Loss with Respect to a Spare Engine.
(i) Upon the occurrence of an Event of Loss with respect to
any Spare Engine of a Grantor, such Grantor shall:
(A) forthwith (and in any event, within five (5)
Business Days after such occurrence) give the Collateral Agent
written notice of such Event of Loss; and
(B) not later than the earlier of (x) 60 days after the
occurrence of such Event of Loss or (y) the fifth (5th) Business Day
following notification to such Grantor of receipt by the loss payee
of the insurance proceeds with respect to such Event of Loss, give
the Collateral Agent written notice of its election to perform one
of the following options (it being understood that the failure to
give such notice shall be deemed to be an election of the option set
forth in subclause (1) below):
(1) Not later than the earlier of (x) the Business
Day next succeeding the ninetieth (90th) day following the
occurrence of such Event of Loss or (y) the first Interest
Payment Date that is at least three (3) Business Days after
receipt by the loss payee of the insurance proceeds with
respect to such Event of Loss (but not earlier than the first
Business Day next succeeding the thirtieth (30th) day
following the occurrence of such Event of Loss) (the
applicable day being the "Loss Payment Date"), such Grantor
shall, to the extent not paid to the Collateral Agent as
insurance proceeds, pay or cause to be paid to the Collateral
Agent the proceeds of insurance in respect of such Event of
Loss. Upon receipt of such insurance proceeds from such
Grantor or the relevant insurance provider, the Collateral
Agent shall apply such insurance proceeds on behalf of such
Grantor as a prepayment of the Loan in accordance with Section
2.6(c) of the Loan Agreement (without regard to whether the
aggregate amount of all Net Insurance Proceeds and Net
Condemnation Proceeds received by the Company or any of its
Subsidiaries in such Fiscal Year, including the insurance
proceeds received in respect of such Event of Loss, exceeds
the threshold amount set forth in the first sentence of such
Section 2.6(c)). If such insurance proceeds are less than the
Insured Amount, such Grantor shall pay or cause to be paid to
the Collateral Agent the difference between the Insured Amount
and the amount of such proceeds (which payment shall also be
applied on behalf of such Grantor as a prepayment of the Loan
in accordance with Section 2.6(c) of the Loan Agreement); or
40
(2) Not later than the Business Day next
succeeding the ninetieth (90th) day following the occurrence
of such Event of Loss, such Grantor shall substitute one or
more Acceptable Alternate Spare Engines, free and clear of all
Liens (other than Permitted Liens) and cause such Acceptable
Alternate Spare Engines to be subjected to the Lien of the
Security Documents, provided that if (x) a Specified Default
or Event of Default shall have occurred and be continuing as
of such election date or (y) such Grantor shall have elected
to make a substitution under this clause (2) and shall fail
for any reason to make such substitution in accordance with
the terms hereof, then such Grantor shall make the payments
required by clause (1) above on (I) the date of such election
or the date such substitution was required to have been made
in accordance with the terms hereof, as applicable, so long as
the Grantor has received Insurance Proceeds or Condemnation
Proceeds in respect of such Event of Loss prior to such day,
or (II) if the Grantor has not yet received Insurance Proceeds
or Condemnation Proceeds with respect to such Event of Loss
prior to such day, the second (2nd) Business Day after receipt
of such Insurance Proceeds or Condemnation Proceeds.
(ii) At such time as such Grantor shall have complied fully
with the provisions of clause (1) above, the Collateral Agent shall
release from the Lien of the Security Documents such Spare Engine by
executing and delivering to such Grantor all documents and instruments,
prepared at such Grantor's sole cost and expense, as such Grantor may
reasonably request to evidence such release.
(iii) A Grantor's right to substitute any Replacement Engine
as provided in clause (B)(2) of Section 4.01 (a)(i) shall be subject to
the fulfillment (which may be simultaneous with such replacement), at such
Grantor's sole cost and expense, of the following conditions precedent:
(A) on the date when any Replacement Engine is subjected
to the Lien of the Security Documents (such date being referred to
in this Section 4.01 as the "Replacement Closing Date"), the
following documents shall have been duly authorized, executed and
delivered by the respective party or parties thereto and shall be in
full force and effect, and an executed counterpart of each thereof
shall have been delivered by such Grantor to the Collateral Agent:
(I) a Mortgage and Security Agreement Supplement
(Spare Engine) covering such Replacement Engine, which shall
have been duly filed for recordation pursuant to the Federal
Aviation Act; and
(II) UCC financing statements covering such
Replacement Engine, which are then being or shall have been
duly filed for recordation in such places as shall be
required;
(B) each Replacement Engine shall be an Acceptable
Alternate Spare Engine, and the Collateral Agent shall have received
an Appraisal Report
41
from an Appraiser of such Replacement Engine (together with any other
Replacement Engines that are replacing a Spare Engine), dated within ten (10)
Business Days of the Replacement Closing Date, evidencing that such Replacement
Engine is of at least the same value as the replaced Spare Engine at the time of
replacement (assuming the replaced Spare Engine was in the condition and state
of repair required by this Security Agreement);
(C) the Collateral Agent shall have received satisfactory evidence
as to the compliance with Section 3.04 with respect to such Replacement Engine;
(D) the Collateral Agent, at the expense of such Grantor, shall have
received (acting directly or by authorization to its special counsel) (I) an
opinion of counsel to such Grantor (which opinion and counsel (which may be in-
house counsel of such Grantor) shall be reasonably satisfactory to the
Collateral Agent), addressed to the Collateral Agent, to the effect that each
Replacement Engine has been made subject to the Lien of the Security Documents,
that all required action has been taken in order to maintain, and such action
shall maintain, the effectiveness and perfection (other than to the extent
perfection is addressed in the opinion of FAA counsel and to the extent the same
existed immediately prior to the occurrence of such Event of Loss, assuming such
Grantor was in compliance with all relevant terms hereof) of the security
interests in such Spare Engine and title thereto created by this Security
Agreement and that, except as may have been effected by a change in law, the
protections afforded to the Collateral Agent by Section 1110 of the Bankruptcy
Code will not be less than such protections immediately prior to the occurrence
of such Event of Loss (assuming such Grantor was in compliance with all relevant
terms hereof I and (II) an opinion of qualified FAA counsel or counsel in any
jurisdiction outside the United States where the Replacement Engine and/or the
aircraft of which such Replacement Engine is a part is required to be registered
in accordance with applicable law (which opinion and counsel shall be reasonably
satisfactory to the Collateral Agent), addressed to the Collateral Agent,
stating, in the case of FAA counsel, that the Mortgage and Security Agreement
Supplement (Spare Engine), and all other documents or instruments, the
recordation of which is necessary to perfect and protect the rights of the
Collateral Agent in each such Replacement Engine have been duly recorded and
that each such Replacement Engine is free and clear of any liens, security
interests and encumbrances of record with the FAA, in the case of counsel in a
jurisdiction outside the U.S., that all action necessary has been taken in such
jurisdiction for such purposes;
(E) the representations contained in Section 2.02 and Section 2.04
hereof with respect to such Replacement Engine shall be true and correct; and
(F) the Collateral Agent shall have received an Officer's
Certificate of such Grantor stating that all conditions precedent provided for
in this Section 4.01 (a) relating to such replacement have been complied with
and
42
representing that any such Replacement Engine is an Acceptable
Alternate Spare Engine and authorizing the Collateral Agent to rely
on such Officer's Certificate.
(iv) Upon satisfaction of all conditions to such substitution,
(x) the Collateral Agent shall execute and deliver to such Grantor such
documents and instruments, prepared by such Grantor at such Grantor's sole
cost and expense, as such Grantor shall reasonably request to evidence the
release of each such replaced Spare Engine from the Lien of the Security
Documents, (y) the Collateral Agent shall assign to such Grantor all
claims it may have against any other Person relating to any Event of Loss
giving rise to such substitution and (z) subject to Section 2.6(c) of the
Loan Agreement (to the extent that less than 100% of the insurance
proceeds received in respect of the Event of Loss giving rise to such
replacement were used to acquire such Replacement Engine), such Grantor
shall receive all insurance proceeds and other proceeds in respect of any
Event of Loss giving rise to such replacement. For all purposes hereof,
each such Replacement Engine so substituted shall be deemed to be
subjected to the Lien of the Security Documents and shall be deemed a
Spare Engine as defined herein.
(b) Event of Loss with Respect to Other Collateral. As between the
Grantors and the Collateral Agent, all insurance proceeds received in respect of
any Collateral other than Spare Engines, whether as a result of the occurrence
of an Event of Loss, or property damage or loss not constituting an Event of
Loss, will be applied in accordance with the provisions of Section 2.6(c) of the
Loan Agreement.
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for elsewhere in this Section 4.01) received at
any time by the Collateral Agent or by the Grantors from any Governmental
Authority or other Person with respect to an Event of Loss, other than a
requisition for use by the United States Government or other government of
registry of an aircraft or any instrumentality or agency of any thereof not
constituting an Event of Loss, will be applied in accordance with Section 2.6(c)
of the Loan Agreement.
(d) Requisition for Use of a Spare Engine by the United States
Government or the Government of Registry of an Aircraft. In the event of the
requisition for use of a Spare Engine by the United States Government or any
other government of registry of the applicable aircraft or any agency or
instrumentality of any thereof (other than in the circumstances contemplated by
subsection (e)), any payments received by Collateral Agent or the Grantors from
such government with respect to such requisition shall be paid over to, or
retained by the Grantors.
(e) Application of Payments During Existence of Specified Defaults
and Events of Default. Any amount referred to in this Section 4.01 which is
payable to or retainable by the Grantors (or any Permitted Lessee) shall not be
paid to or retained by the Grantors (or any Permitted Lessee) if at the time of
such payment or retention a Specified Default or any Event of Default shall have
occurred and be continuing, but shall be held by or paid over to Collateral
Agent and, at the direction of the Board (or if the Board Guarantee is no longer
in effect, the Requisite Lenders), subject to applicable law, be applied against
the obligations of the Grantors
43
under the Loan Documents. At such time as there shall not be continuing any such
Specified Default or Event of Default, such amount shall be paid to the Grantors
to the extent not previously applied in accordance with the preceding sentence.
Prior to remitting any such funds to the Grantors, the Collateral Agent shall be
authorized to request and receive an Officer's Certificate from the Company
certifying that no Specified Default or Event of Default has occurred and is
continuing.
ARTICLE 5
REMEDIES
SECTION 5.01 REMEDIES AVAILABLE TO COLLATERAL AGENT.
(a) After an Event of Default shall have occurred and so long as
such Event of Default shall be continuing, then and in every such case the
Collateral Agent, as holder of a security interest in the Collateral may, as and
when required pursuant to the provisions of Section 7.2 of the Loan Agreement,
exercise, any or all of the rights and powers and pursue any and all of the
remedies accorded to a Secured Party under the UCC and under any other
applicable law, may recover judgment in its own name as Collateral Agent against
the Collateral and may take possession of all or any part of the Collateral and
may exclude the Grantors and all Persons claiming under any of them wholly or
partly therefrom. Any proceeds received or realized by the Collateral Agent at
any time pursuant to the exercise of remedies hereunder shall be promptly
transferred by the Collateral Agent to the account of the Agent specified in
Section 2.9(a) of the Loan Agreement for application in accordance with the
priority of payments set forth in Section 2.9(e) of the Loan Agreement.
(b) For the purpose of enforcing any and all rights and remedies
under this Security Agreement, after an Event of Default shall have occurred and
so long as such Event of Default shall be continuing, each Grantor agrees that:
(i) upon the written demand of the Collateral Agent and at such Grantor's
expense, such Grantor shall give the Collateral Agent immediate access to the
Tracking System (together with personnel necessary to operate the Tracking
System) and promptly deliver to the Collateral Agent or its designee possession
of any Collateral as the Collateral Agent may so demand in the manner and
condition required by, and otherwise in accordance with all the provisions of,
this Security Agreement, or the Collateral Agent at its option may enter upon
the premises where all or any part of the Collateral is located and take
immediate possession of and remove the same by summary proceedings or otherwise
(and at the Collateral Agent's option, store the same at such Grantor's premises
until disposal thereof by the Collateral Agent), all without liability accruing
to the Collateral Agent (other than that caused by the Collateral Agent's
willful misconduct or gross negligence as actually and finally determined by a
final, non-appealable judgment of a court of competent jurisdiction) for or by
reason of such entry or taking of possession or removing whether for the
restoration of damage to property caused by such action or otherwise; and (ii)
such Grantor shall, at the request of the Collateral Agent, promptly execute and
deliver to the Collateral Agent such instruments or other documents as may be
necessary or advisable to enable the Collateral Agent or an agent or
representative designated by the Collateral Agent, at such time or times and
place or places as the Collateral Agent may specify, to obtain possession of all
or any part of the Collateral the possession of which the Collateral Agent shall
at the time be entitled to hereunder; provided, that
44
during any period any aircraft on which a Spare Engine is installed is activated
under the Civil Reserve Air Fleet Program in accordance with the provisions of
Section 3.01(b)(i)(F) hereof and in the possession of the United States
Government or an instrumentality or agency thereof, the Collateral Agent shall
not, on account of any Event of Default, be entitled to exercise any of its
rights under this Section 5.01 against the Collateral in such manner as to limit
such Grantor's control of the associated aircraft, unless at least sixty (60)
days' (or such greater or lesser period as may then be applicable under the Air
Mobility Command program) prior written notice of Default hereunder shall have
been given by the Collateral Agent to the Company with a copy addressed to the
Contracting Office Representative for the Air Mobility Command under the
contract relating to such aircraft.
(c) So long as an Event of Default shall have occurred and be
continuing, the Collateral Agent may, if at the time such action may be lawful
and always subject to compliance with any mandatory legal requirements, either
with or without taking possession, and either before or after taking possession
and without instituting any legal proceedings whatsoever, and having first given
notice of such sale by registered mail to the Grantors at least 20 days prior to
the date of such sale, and any other notice which may be required by law, sell
and dispose of the Collateral, or any part thereof, or interest therein, at
public auction or private sale, in one lot as an entirety or in separate lots,
and either for cash or on credit and on such terms as the Collateral Agent may
determine, and at any place (whether or not it be the location of the Collateral
or any part thereof) and time designated in the notice above referred to.
(d) Any such sale may be adjourned from time to time by announcement
at the time and place appointed for such sale, or for any such adjourned sale,
without further notice, and the Collateral Agent or any Lender may bid and
become the purchaser at any such sale and each Lender shall be entitled at any
public auction sale to credit against any purchase price bid at such public
auction sale by such Lender all or any part of any unpaid obligations owing to
such Lender secured by the Lien of the Security Documents.
(e) If an Event of Default has occurred and is continuing, the
Collateral Agent shall also be entitled to pursue all or any part of the
Collateral wherever it may be found and may enter any of the premises of the
Grantors or any other Person wherever the Collateral may be or be supposed to be
and search for the Collateral and take possession of any item of the Collateral
pursuant to this Section 5.01(e). The Collateral Agent may, from time to time,
at the expense of the Grantors, make all such expenditures for the collection,
maintenance, insurance, repairs, replacements, alterations, additions and
improvements to and of the Collateral, as it may deem proper. In each such case,
the Collateral Agent shall have the right to collect, maintain, use, insure,
operate, store, lease, control or manage the Collateral, and to carry on
business and exercise all rights and powers of the Grantors relating to the
Collateral as the Collateral Agent shall deem appropriate, including the right
to enter into any and all such agreements with respect to the collection,
maintenance, use, insurance, operation, storage, leasing, control or management
of the Collateral or any part thereof. The Collateral Agent shall be entitled to
collect, xxx for and receive directly all monies due or to become due, tolls,
rents, issues, profits, products, revenues or other income pursuant to this
Section 5.01(e). In accordance with the terms of this Section 5.01(e), such
monies due or to become due, tolls, rents, issues, profits, products, revenues
and other income shall be applied to pay the expenses of collecting, using,
operating, storing, leasing, controlling or managing the Collateral, and of all
maintenance, insurance, repairs, replacements,
45
alterations, additions and improvements, and to make all payments which the
Collateral Agent may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon the Collateral or any part
thereof (including the employment of engineers and accountants to examine,
inspect and make reports upon the properties and books and records of the
Grantors), and all other payments which the Collateral Agent may be required or
authorized to make under any provision of this Security Agreement, including
this Section 5.01(e), as well as just and reasonable compensation for the
services of the Collateral Agent, and of all persons properly engaged and
employed by the Collateral Agent.
(f) Subject to Section 5.01(c), the Collateral Agent may proceed to
protect and enforce this Security Agreement by suit or suits or proceedings in
equity, at law or in bankruptcy, and whether for the specific performance of
any covenant or agreement herein contained or in execution or aid of any power
herein granted; or for foreclosure hereunder, or for the appointment of a
receiver or receivers for the Collateral or any part thereof, or for the
recovery of judgment for the indebtedness secured by the Lien created under this
Security Agreement or for the enforcement of any other proper, legal or
equitable remedy available under applicable law.
(g) Each and every right, power and remedy herein given to the
Collateral Agent specifically or otherwise in this Security Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Collateral Agent, and the exercise
or the beginning of the exercise of any power or remedy shall not be construed
to be a waiver of the right to exercise at the same time or thereafter any other
right, power or remedy. No delay or omission by the Collateral Agent in the
exercise of any right, remedy or power or in pursuing any remedy shall impair
any such right, power or remedy or be construed to be a waiver of any default on
the part of the Grantors or to be an acquiescence therein.
(h) Upon and during the continuance of an Event of Default, the
Collateral Agent shall be entitled to undertake an acceptance of all or a part
of the Collateral in satisfaction of all or a specified part of the Obligations
pursuant to and in accordance with the provisions of Sections 9-620 and 9-621 of
the UCC and the Grantors' rights thereunder, none of which are; waived herein
notwithstanding the terms of Section 5.03, and, if pursuant to such sections and
after such Event of Default any of the Grantors consent to such acceptance, then
such Grantor shall execute and deliver such deeds of conveyance, assignments and
other documents or instruments (including any notices or applications to the FAA
or any other Governmental Authority having jurisdiction over the Collateral
subject to such conveyance) as shall be reasonably required to effectuate the
transfer of such Collateral, together with the certificates, if any,
representing the same and any other rights of such Grantor with respect thereto,
to the Collateral Agent or any designee or designees selected by the Collateral
Agent.
SECTION 5.02 EXPENSES. The Grantors agree that they will promptly
pay (but in no event later than five (5) Business Days after request therefor)
to the Collateral Agent:
46
(a) the amount of any taxes (other than income taxes or other
taxes measured by net income or net profits) payable by reason of the Collateral
Agent's security interests in respect of the Collateral or to free any of the
Collateral from any Lien thereon; and
(b) the amount of any and all reasonable out-of-pocket expenses,
including, but not limited to, any excise, property, transfer, sales and use
taxes imposed by any state, federal or other local authority on any of the
Collateral, and reasonable fees and disbursements of counsel and of any other
experts payable in connection with the enforcement of this Security Agreement
after and during the continuance of any Event of Default, including such
expenses as are actually incurred in connection with:
(i) the collection, sale or other disposition of the
Collateral;
(ii) any action taken by the Collateral Agent to effect
compliance on behalf of the Grantors in respect of a failure by any
Grantor to comply with the provisions of this Security Agreement which
results (or is likely to result) in the; diminution of the value of the
Collateral or the validity, perfection, rank or value of the Collateral
Agent's security interest in the Collateral;
(iii) protecting, storing, warehousing, appraising, insuring,
handling, maintaining, shipping, overhauling and repairing the Collateral;
or
(iv) the exercise by the Collateral Agent of any of the
rights or powers conferred upon it hereunder.
Any such amount not paid to the Collateral Agent on demand shall bear
interest for each day until paid at a rate per annum equal to the rate specified
in Section 2.7(e) of the Loan Agreement.
SECTION 5.03 WAIVER OF CLAIMS.
(a) Except as otherwise provided in this Security Agreement, each
Grantor hereby waives, to the maximum extent permitted by applicable law, notice
and judicial hearing in connection with the Collateral Agent's taking
possession, retention, disposition or sale of any Collateral, including any and
all prior notice and hearing for any prejudgment remedy or remedies and any such
right which such Grantor would otherwise have under any applicable law, and such
Grantor hereby further waives, to the maximum extent permitted by law:
(i) provided that the actions taken comply in all respects
with applicable law, including but not limited to all applicable
provisions of the UCC, all claims, damages and demands against the
Collateral Agent, the Board and the Lenders arising out of such taking of
possession, retention, disposition or sale of the Collateral except such
claims, damages and demands as may arise out of such Person's own gross
negligence or willful misconduct as actually and finally determined by a
final non-appealable judgment of a court of competent jurisdiction and
only to the extent of direct (as opposed to special, indirect,
consequential or punitive) damages;
47
(ii) all other requirements as to the time, place and terms
of sale or other requirements with respect to the enforcement of the
Collateral Agent's rights hereunder; and
(iii) all rights of appraisal, valuation, stay, extension or
moratorium (but not redemption) now or hereafter in force under any
applicable law in order to prevent or delay the enforcement of this
Security Agreement or the absolute sale or other disposition of any part
of the Collateral, and such Grantor, for itself and all who may claim
under it, insofar as it or they now or hereafter lawfully may, hereby
waives the benefit of all such laws; provided, however, that the actions
taken by the Collateral Agent as described in this Section 5.03 herein
comply, in all material respects, with applicable law, including but not
limited to all applicable provisions of the UCC.
(b) Each Grantor, for itself and all who claim through it, hereby
waives all right to have the Collateral marshaled upon any foreclosure hereof
and agrees that any court having jurisdiction to foreclose this Security
Agreement may order the sale of the Collateral as an entity.
SECTION 5.04 DISCONTINUANCE OF PROCEEDINGS. In case the Collateral
Agent shall have instituted any proceeding to enforce any right, power or remedy
under this Security Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Collateral Agent, then and in every such
case, the Grantors, the Collateral Agent and each Lender shall be restored to
their former positions and rights hereunder with respect to the Collateral
subject to the security interest and Lien created under the Security Documents
and all rights, remedies and powers of the Collateral Agent shall continue as if
no such proceeding had been instituted.
ARTICLE 6
TERMINATION OF SECURITY AGREEMENT
SECTION 6.01 TERMINATION OF SECURITY AGREEMENT. This Security
Agreement shall terminate (i) upon payment and performance in full of all of the
Obligations and (ii) as to any item of Collateral, upon the Disposition of such
Collateral as permitted in Section 3.14 hereof. Upon termination, at the request
and sole cost and expense of a Grantor, and upon receipt by the Collateral Agent
of confirmation from the Agent that all of the Obligations have been paid and
performed in full, the Collateral Agent shall execute and deliver such documents
and instruments reasonably requested by such Grantor to evidence the release of
the Collateral (or such item of Collateral, as the case may be) from the Lien of
the Security Documents; provided, however, that this Security Agreement shall
earlier terminate and this Security Agreement shall be of no further force or
effect upon any sale or other final disposition by the Collateral Agent of all
property constituting part of the Collateral and the final distribution by the
Collateral Agent of all monies or other property or proceeds constituting part
of the Collateral in accordance with the terms hereof. Except as otherwise
provided above, this Security Agreement shall continue in full force and effect
in accordance with the terms hereof.
48
ARTICLE 7
MISCELLANEOUS
SECTION 7.01 NOTICES. All notices and other communication provided
for herein shall be in writing and given in accordance with Section 10.7 of the
Loan Agreement and (i) if to the Company, Parent, North American and the
Collateral Agent, at their respective addresses as set forth in the Loan
Agreement and (ii) if to World LLC, in care of the Company. Each party hereto
may change its address or telecopy number for notices and other communications
hereunder by notice to the other parties hereto. All notices and other
communications given to the parties hereto in accordance with the provisions of
this Security Agreement shall be deemed to have been given on the date of
receipt.
SECTION 7.02 GOVERNING LAW. THIS SECURITY AGREEMENT IS BEING
DELIVERED IN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK; PROVIDED,
THAT IN THE EVENT THE BOARD BECOMES A LENDER PURSUANT TO THE BOARD GUARANTEE,
THE RIGHTS AND OBLIGATIONS OF THE BOARD HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE FEDERAL LAW OF THE UNITED STATES OF AMERICA,
IF AND TO THE EXTENT SUCH FEDERAL LAW IS APPLICABLE, AND OTHERWISE IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. THE PROVISIONS OF SECTION 10.11 OF THE
LOAN AGREEMENT ARE INCORPORATED HEREIN MUTATIS MUTANDIS, AS IF FULLY SET FORTH
HEREIN.
SECTION 7.03 EXECUTION IN COUNTERPARTS. This Security Agreement may
be executed in any number of counterparts, each of which shall be an original
but such counterparts shall together constitute but one instrument.
SECTION 7.04 AMENDMENTS. This Security Agreement may be amended in
accordance with the provisions set forth in Section 10.1 of the Loan Agreement.
SECTION 7.05 DOCUMENTATION. The Grantors shall provide the
Collateral Agent with copies of all documents executed in connection with the
Security Documents.
SECTION 7.06 CASH COLLATERAL.
(a) Any amounts held by the Collateral Agent pursuant to the
provisions of this Agreement shall be invested by the Collateral Agent from time
to time in Cash Equivalents as directed in an Officer's Certificate from the
Company so long as the Collateral Agent may invest in the same using
commercially reasonable efforts. The parties hereto agree that the Collateral
Agent and/or an Affiliate of the Collateral Agent may charge and/or collect
customary fees and expenses in connection with the purchase of Cash Equivalents
or for other services rendered to the parties hereto (provided that such
charges, fees and expenses are on terms consistent with terms negotiated at
arm's length). Neither the Collateral Agent nor any of its Affiliates shall be
required to account for any profits or benefits described in the preceding
sentence. All Cash Equivalents held by the Collateral Agent pursuant to this
Section 7.06 shall
49
be registered in the name of, payable to the order of, or specially endorsed to,
the Collateral Agent. Any income realized as a result of any such investment,
net of the Collateral Agent's reasonable fees and expenses in making such
investment, shall be held and applied by the Collateral Agent in the same manner
as the principal amount of such investment is to be applied and any losses, net
of earnings and such reasonable fees and expenses, shall be charged against the
principal amount invested. All taxes on any income so realized shall be charged
to the applicable Grantor. The Collateral Agent shall not be liable for any loss
resulting from any investment to be made by it under this Agreement other than
by reason of its willful misconduct or gross negligence as actually and finally
determined in a final, non-appealable judgment of a court of competent
jurisdiction.
(b) Neither the Collateral Agent nor any of its Affiliates assume
any duty or liability for monitoring the rating of the selected investment. In
the event an investment selection is not made, the amounts held by the
Collateral Agent pursuant to the provisions of this Security Agreement shall not
be invested and the Collateral Agent shall not incur any liability for interest
or income thereon.
(c) The Collateral Agent shall have no obligation to invest or
reinvest amounts to be held by the Collateral Agent if all or a portion of such
amounts are deposited with the Collateral Agent after 11:00 a.m. (New York time)
on the day of the deposit. Instructions to invest or reinvest that are received
after 11:00 a.m. (New York time) will be treated as if received on the following
Business Day in New York.
(d) The Collateral Agent shall have the power to sell or liquidate
the foregoing investments whenever the Collateral Agent shall be required to
distribute the amounts held pursuant to the terms of this Security Agreement or
as otherwise contemplated in this Security Agreement. Requests or instructions
received after 11:00 a.m. (New York time) by the Collateral Agent to liquidate
such amounts will be treated as if received on the following Business Day in New
York.
(e) The Collateral Agent shall have no responsibility for any
investment losses resulting from the investment, reinvestment or liquidation of
the amounts held by the Collateral Agent pursuant to the terms of this Security
Agreement, provided that the Collateral Agent has made such investment,
reinvestment or liquidation of the trust assets in accordance with the terms,
and subject to the conditions, of this Security Agreement.
(f) Each of the parties to this Security Agreement acknowledge that
non-deposit investment products are not obligations of, or guaranteed by,
Citibank, N.A. or Citigroup North America, Inc., nor any of their affiliates;
are not FDIC insured; and are subject to investment risks, including the
possible loss of principal amount invested in one of the money market funds made
available by the Collateral Agent and selected by the Grantors.
(g) Any investment direction contained herein may be executed
through an affiliated broker or dealer of the Collateral Agent and any such
affiliated broker or dealer shall be entitled to such broker's or dealer's usual
and customary fees for such execution.
50
(h) The Cash Equivalents may be held by the Collateral Agent
directly or through any clearing agency or depository (collectively, the
"Clearing Agency") including, without limitation, the Federal Reserve/Treasury
Book-Entry System for United States and federal agency securities, and The
Depository Trust Company. The Collateral Agent shall not have any responsibility
or liability for the actions or omissions to act on the part of any Clearing
Agency.
(i) Notwithstanding anything contained herein to the contrary, the
parties hereto hereby agree and acknowledge that due to the potential conflict
of interest, the Collateral Agent will not purchase the commercial paper of
Citigroup North America, Inc., or any Affiliate (collectively, "Citigroup
Paper") unless the Collateral Agent is specifically instructed to purchase
Citigroup Paper in an Officer's Certificate from the Company. Any instruction
for the purchase of Citigroup Paper must be given by the Company on a
transaction by transaction basis in the manner set forth in the preceding
sentence.
* * *
51
IN WITNESS WHEREOF, the parties to hereto have caused this Mortgage
and Security Agreement to be duly executed by their respective officers
thereunto duly authorized.
WORLD AIR HOLDINGS, INC.,
as Grantor
By: /s/____________________________
Name:
Title:
WORLD AIRWAYS, INC.,
as Grantor
By: /s/____________________________
Name:
Title:
WORLD AIRWAYS PARTS COMPANY, LLC,
as Grantor
By: /s/____________________________
Name:
Title:
NORTH AMERICAN AIRLINES, INC.,
as Grantor
By: /s/____________________________
Name:
Title:
CITIBANK, N.A.,
as Collateral Agent
By: /s/____________________________
Name:
Title:
SCHEDULE 1.01
SPARE ENGINES
SCHEDULE 2.01
DESIGNATED LOCATIONS
(a) Designated Locations
(b) Aircraft and Aircraft Locations (this should not be construed as a claim
against any of the below-listed aircraft).
SCHEDULE 2.03
UCC INFORMATION
SCHEDULE 2.05
CONSENTS
SCHEDULE 2.06
PLEDGED EQUIPMENT LOCATIONS
SCHEDULE 2.07(a)
INITIAL PLEDGED EQUITY
SCHEDULE 2.07(b)
INITIAL PLEDGED DEBT
SCHEDULE 2.08
INTELLECTUAL PROPERTY COLLATERAL
SCHEDULE 2.09
DEPOSIT AND SECURITIES ACCOUNTS
SCHEDULE 3.01
COUNTRIES AUTHORIZED FOR DOMICILE OF PERMITTED LESSEES
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Iceland
Ireland
Italy
Japan
Netherlands
Norway
Sweden
Switzerland
United Kingdom
Taiwan
EXHIBIT A1
to Mortgage and
Security Agreement
MORTGAGE AND SECURITY AGREEMENT
SUPPLEMENT (SPARE ENGINE) NO. ( )
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (SPARE ENGINE) NO.
(___________) dated _______________________ (herein called this "Mortgage and
Security Agreement Supplement") made by [World Air Holdings, Inc., a Delaware
corporation/World Airways, Inc., a Delaware corporation/World Airways Parts
Company, LLC, a Delaware limited liability company/North American Airlines,
Inc., a Delaware corporation] (herein called the "Company"), in favor of
Citibank, N.A., as Collateral Agent for, and directed by, the Board, the Lenders
and the Supplemental Guarantor (each as defined in the Loan Agreement (as
defined in the Security Agreement (as defined below))) (the "Collateral Agent").
WITNESSETH:
WHEREAS, the Company and [World Air Holdings, Inc., a Delaware
corporation/World Airways, Inc., a Delaware corporation/World Airways Parts
Company, LLC, a Delaware limited liability company] and the Collateral Agent are
parties to a Mortgage and Security Agreement dated as of December 30, 2003 (the
"Original Security Agreement"), and as amended and restated by that certain
Amended and Restated Security Agreement dated as of April 27, 2005, to which
North American Airlines, Inc., a Delaware corporation, is also a party (as
amended, modified, restated or otherwise supplemented from time to time in
accordance with its terms, the "Security Agreement"), covering, inter alia,
Spare Engines of the Company;
WHEREAS, terms that are defined in the Security Agreement or the Loan
Agreement (as such term is defined in the Security Agreement) and which are not
otherwise defined herein shall have the meanings assigned to such terms in the
Security Agreement or the Loan Agreement;
WHEREAS, the Original Security Agreement has been duly recorded pursuant
to Subtitle VII of Title 49 of the United States Code on January 12, 2004, and
has been assigned Conveyance No. E003336;
WHEREAS, the Security Agreement and Mortgage and Security Agreement
Supplement (Spare Engine) No._________dated______________ ___,______have been
duly recorded pursuant to Subtitle VII of Title 49 of the United States Code
on___________________ ___, ______, as one document and have been assigned
Conveyance No.______________; and
WHEREAS, the Security Agreement provides for the execution and delivery
from time to time of Mortgage and Security Agreement Supplements, each
substantially in the form hereof, for the purpose of subjecting engines to the
Lien of the Security Agreement.
NOW, THEREFORE, this Mortgage and Security Agreement Supplement
Witnesseth, that to secure the prompt payment of the principal of, interest on
and all other amounts due with respect to the Loan and to secure the performance
and observance by the Company of all the agreements, covenants and provisions
contained in the Security Agreement, in the Loan Agreement and in the other Loan
Documents and the prompt payment of any and all amounts from time to time owing
hereunder, under the Loan Agreement and the other Loan Documents and for the
uses and purposes and subject to the terms and provisions of the Security
Agreement, and in consideration of the premises and of the covenants contained
in the Security Agreement, and of other good and valuable consideration the
receipt and adequacy whereof are hereby acknowledged, the Company has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Collateral Agent, its successors and
assigns, for the security and benefit of the Board and the Lenders, a first
priority security interest in and first priority mortgage Lien on the following
described property:
AIRCRAFT ENGINES
[_____] aircraft engines, each such engine having 750 or more rated
take-off horsepower or the equivalent thereof, whether or not such engines shall
be installed in or attached to any aircraft or airframe, identified as follows:
Manufacturer's
Manufacturer Model Serial Number
------------ ----- --------------
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, unless the Lien of the
Security Agreement shall not be applicable to such Part pursuant to the
provisions of the Security Agreement.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.
This Mortgage and Security Agreement Supplement shall be construed as a
supplemental Security Agreement and shall form a part thereof, and the Security
Agreement is hereby incorporated by reference herein and is hereby ratified,
approved and confirmed.
* * *
A1-2
IN WITNESS WHEREOF, the Company has caused this Mortgage and
Security Agreement Supplement (Spare Engine) No. (___) to be duly executed by
one of its officers, thereunto duly authorized, on the day and year first above
written.
[NAME]
By:_______________________________
Name:
Title:
A1-3
EXHIBIT A2
to Mortgage and
Security Agreement
MORTGAGE AND SECURITY AGREEMENT
SUPPLEMENT (SPARE PARTS) NO. ( )
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (SPARE PARTS) NO. (______)
dated ______________ (herein called this "Mortgage and Security Agreement
Supplement") made by [World Air Holdings, Inc., a Delaware corporation, World
Airways, Inc., a Delaware corporation/World Airways Parts Company, LLC, a
Delaware limited liability company/North American Airlines, Inc., a Delaware
corporation] (herein called the "Company"), in favor of Citibank, N.A., as
Collateral Agent for, and directed by, the Board, the Lenders and the
Supplemental Guarantor (as defined in the Loan Agreement (as defined in the
Security Agreement (as defined below))) (the "Collateral Agent").
WITNESSETH:
WHEREAS, the Company and [World Air Holdings, Inc., a Delaware
corporation, World Airways, Inc., a Delaware corporation/World Airways Parts
Company, LLC, a Delaware limited liability company/] and the Collateral Agent
are parties to a Mortgage and Security Agreement dated as of December 30, 2003
(the "Original Security Agreement"), and as amended and restated by that certain
Amended and Restated Security Agreement dated as of April 27, 2005, to which
North American Airlines, Inc., a Delaware corporation, is also a party (as
amended, modified, restated or otherwise supplemented from time to time in
accordance with its terms, the "Security Agreement"), covering, inter alia,
Spare Parts of the Company;
WHEREAS, terms that are defined in the Security Agreement or the Loan
Agreement (as such term is defined in the Security Agreement) and which are not
otherwise defined herein shall have the meanings assigned to such terms in the
Security Agreement or the Loan Agreement;
WHEREAS, the Original Security Agreement has been duly recorded pursuant
to Subtitle VII of Title 49 of the United States Code on January 12, 2004, and
has been assigned Conveyance No. E003336;
WHEREAS, the Security Agreement and Mortgage and Security Agreement
Supplement (Spare Parts) No.________dated___________ ___,____have been duly
recorded pursuant to Subtitle VII of Title 49 of the United States Code
on___________ ____, ______, as one document and have been assigned Conveyance
No.______________; and
WHEREAS, the Security Agreement provides for the execution and delivery
from time to time of Mortgage and Security Agreement Supplements, each
substantially in the form hereof, for the purpose of subjecting spare parts,
appliances and expendables to the Lien of the Security Agreement.
NOW, THEREFORE, this Mortgage and Security Agreement Supplement
Witnesseth, that to secure the prompt payment of the principal of, interest on
and all other amounts due with respect to the Loan and to secure the performance
and observance by the Company of all the agreements, covenants and provisions
contained in the Security Agreement, in the Loan Agreement and in the other Loan
Documents and the prompt payment of any and all amounts from time to time owing
hereunder, under the Loan Agreement and the other Loan Documents and for the
uses and purposes and subject to the terms and provisions of the Security
Agreement, and in consideration of the premises and of the covenants contained
in the Security Agreement, and of other good and valuable consideration the
receipt and adequacy whereof are hereby acknowledged, the Company has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Collateral Agent, its successors and
assigns, for the security and benefit of the Board and the Lenders, a first
priority security interest in and first priority mortgage Lien on the following
described property:
SPARE PARTS
[Describe]
The Spare Parts described above are located, as of the date hereof, at
[specify locations] (each such location to be included as a Designated Location)
and are maintained by or on behalf of World Airways, Inc.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.
The Company hereby represents and warrants that it holds an air carrier
operating certificate issued by the Secretary of Transportation of the United
States pursuant to Chapter 447 of Title 49 of the United States Code and 49
U.S.C. Section 44705 or any analogous successor provision of the United States
Code, for aircraft capable of carrying ten or more individuals or 6,000 pounds
or more of cargo.
This Mortgage and Security Agreement Supplement shall be construed as a
supplemental Security Agreement and shall form a part thereof, and the Security
Agreement is hereby incorporated by reference herein and is hereby ratified,
approved and confirmed.
* * *
A2-2
IN WITNESS WHEREOF, the Company has caused this Mortgage and Security
Agreement Supplement (Spare Parts) No. (_____) to be duly executed by one of its
officers, thereunto duly authorized, on the day and year first above written.
[NAME]
By:________________________________
Name:
Title:
A2-3
EXHIBIT B
to Mortgage and
Security Agreement
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
EXHIBIT C
to Mortgage and
Security Agreement
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT