Exhibit 10.59
AIRCRAFT SECURITY AGREEMENT (N375SK)
Dated as of
February 20, 2002
between
EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A.,
as Lender
and
CHAUTAUQUA AIRLINES, INC.,
as Borrower
relating to
One Embraer EMB-145 model XXX-000 XX Xxxxxxxx
Xxxxxx Xxxxxx Registration Number N375SK
Manufacturer's Serial No. 145569
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AIRCRAFT SECURITY AGREEMENT (N375SK)
This AIRCRAFT SECURITY AGREEMENT (N375SK), dated as of February 20,
2002, is between CHAUTAUQUA AIRLINES, INC., a New York corporation (together
with its successors and permitted assigns, the "Borrower"), and EMBRAER-EMPRESA
BRASILEIRA DE AERONAUTICA S.A., as Lender hereunder (herein called, together
with its permitted successors and assigns, the "Lender").
W I T N E S S E T H:
WHEREAS, the Lender (such term and other capitalized terms used
herein without definition being defined as hereinafter provided) has agreed,
pursuant and subject to the terms and conditions of the Loan Agreement, to make
a loan to the Borrower, the proceeds of which will be used to enable the
Borrower to purchase the Aircraft on the date of delivery thereof under the
Purchase Agreement, such loan to be evidenced by a Note to be issued by the
Borrower; and
WHEREAS, the Borrower desires by this Security Agreement, among
other things, to grant to the Lender a Lien on the Collateral in accordance with
the terms hereof as security for the Obligations; and
WHEREAS, all things have been done to make the Note, when executed,
issued and delivered by the Borrower, the legal, valid and binding obligation of
the Borrower; and
WHEREAS, all things necessary to make this Security Agreement a
legal, valid and binding obligation of the Borrower and the Lender, for the uses
and purposes herein set forth, in accordance with its terms, have been done and
performed and have occurred;
NOW, THEREFORE, it is hereby covenanted and agreed by and between
the parties hereto as follows:
ARTICLE 1 DEFINITIONS
SECTION 1.1 CERTAIN DEFINITIONS. For all purposes of this Security
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) capitalized terms used herein have the meanings set forth in
ANNEX A hereto unless otherwise defined herein;
(b) the definitions stated herein and those stated in ANNEX A apply
equally to both the singular and the plural forms of the terms defined;
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(c) 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;
(d) all references herein to articles, sections, appendices and
exhibits pertain to articles, sections, appendices and exhibits in or to this
Security Agreement; and
(e) references to any agreement shall be to such agreement, as
amended, modified or supplemented.
ARTICLE 2 SECURITY
SECTION 2.1 GRANT OF SECURITY. To secure the prompt and complete
payment (whether at the stated maturity, by acceleration or otherwise) of all
principal of, interest on and all other amounts payable by the Borrower under
the Borrower Loan Documents now in existence or hereafter incurred, and the
performance and observance by the Borrower of all the agreements and covenants
to be performed or observed by it for the benefit of the Lender contained in the
Borrower Loan Documents (collectively, the "OBLIGATIONS"), and in consideration
of the Note, the premises and of the covenants contained herein and in the other
Borrower Loan Documents and of other good and valuable consideration given to
the Borrower by the Lender at or before the Borrowing Date, the receipt of which
is hereby acknowledged, the Borrower does hereby grant, bargain, sell, convey,
transfer, mortgage, assign, pledge, and confirm unto the Lender and its
permitted successors and assigns, for the security and benefit of the Lender, a
security interest in, and mortgage lien on, all estate, right, title and
interest of the Borrower in, to and under, all and singular, the following
described properties, rights, interests and privileges whether now or hereafter
acquired (hereinafter sometimes referred to as the "COLLATERAL"):
(a) the Aircraft, including the Airframe and the Engines, whether or
not any such Engine may from time to time be installed on the Airframe or
any other airframe or any other aircraft, any and all Parts, and, to the
extent provided herein, all substitutions and replacements of and
additions, improvements, accessions and accumulations to the Aircraft, the
Airframe, the Engines and any and all Parts (such Airframe and Engines as
more particularly described in the Security Agreement Supplement executed
and delivered with respect to the Aircraft on the Borrowing Date or with
respect to any substitutions or replacements therefor), and together with
all flight records, logs, manuals, maintenance data and inspection,
modification and overhaul records and other documents at any time required
to be maintained in accordance with the rules and regulations of the FAA
with respect to the Airframe, Engine and Parts;
(b) to the extent in each case of the interest of the Lender
pursuant to the terms hereof, all requisition proceeds with respect to the
Aircraft or any Part thereof, and all proceeds of hull insurance with
respect to the Aircraft or any Part thereof but
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excluding all proceeds of, and rights under, any insurance maintained by
the Borrower pursuant to Section 3.4(f);
(c) all moneys and securities now or hereafter paid or deposited or
required to be paid or deposited to or with the Lender by or for the
account of the Borrower pursuant to any term of this Security Agreement or
any other Borrower Loan Document and held or required to be held by the
Lender hereunder or thereunder;
(d) all property that may, from time to time, hereafter in
accordance with the provision of this Agreement, be expressly subjected to
the Lien of this Agreement;
(e) all Proceeds of the foregoing. "PROCEEDS" shall have the
broadest meaning permissible under the New York Uniform Commercial Code;
PROVIDED, HOWEVER, that notwithstanding any of the foregoing provisions of this
ARTICLE II, so long as no Event of Default shall have occurred and be
continuing, the Borrower shall have the right, to the exclusion of the Lender or
any Person claiming by, through or under the Lender, to quiet enjoyment of the
Aircraft, the Airframe and Engines and the other Collateral and to possess, use,
retain and control the Aircraft, the Airframe and Engines and the other
Collateral and all revenues, income and profits derived therefrom.
TO HAVE AND TO HOLD all and singular the Collateral unto the Lender,
its permitted successors and assigns, forever, in trust, upon the terms and
trusts herein set forth, for the benefit, security and protection of the Lender
from time to time, and for the uses and purposes and subject to the terms and
provisions set forth in this Security Agreement.
It is hereby further agreed that any and all property described or
referred to in the granting clauses hereof which is hereafter acquired by the
Borrower shall IPSO FACTO, and without any further conveyance, assignment or act
on the part of the Borrower or Lender, become and be subject to the Lien and
security interest herein granted as fully and completely as though specifically
described herein, but nothing contained in this paragraph shall be deemed to
modify or change the obligations of the Borrower contained in the foregoing
paragraphs.
The Borrower does hereby agree that it will not violate any covenant
or agreement made by it under the Loan Agreement, herein or in any other
Borrower Loan Document and will not take any action from which it is prohibited
by this Security Agreement, or omit to take any action required by this Security
Agreement to be taken by it, the taking or omission of which would reasonably be
expected to result in an alteration or impairment of any Borrower Loan Document
or any of the rights created by any such document or the assignment hereunder.
The Borrower agrees that at any time and from time to time, upon the
written request of Lender, the Borrower will promptly and duly execute and
deliver or cause to be duly executed and delivered any and all such further
instruments and documents as Lender may reasonably request which are necessary
to perfect, preserve or protect the mortgage, security
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interests and assignments created or intended to be created hereby or to obtain
for Lender the full benefits of the assignment hereunder and of the rights and
powers herein granted.
It is expressly agreed that notwithstanding anything herein to the
contrary, the Borrower shall remain liable under the Borrower Loan Documents to
perform all of its obligations thereunder, and, except to the extent expressly
provided herein or in any other Borrower Loan Document, the Lender shall not be
required or obligated in any manner to perform or fulfill any obligations of the
Borrower under or pursuant to any thereof, 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 amount which
may have been assigned to it or to which it may be entitled at any time or
times.
The Borrower does hereby constitute and appoint the Lender the true
and lawful attorney of the Borrower (which appointment is coupled with an
interest) with full power (in the name of the Borrower or otherwise) to ask for,
require, demand and receive any and all moneys and claims for moneys due and to
become due under or arising out of all property (in each case including
insurance and requisition proceeds) which now or hereafter constitutes part of
the Collateral, to endorse any checks or other instruments or orders in
connection therewith and to file any claims or to take any action or to
institute any proceeding which the Lender may deem to be necessary or advisable
in the premises; PROVIDED that the Lender shall not exercise any such rights
except during the continuance of an Event of Default. Without limiting the
provisions of the foregoing, during the continuance of any Event of Default but
subject to the terms hereof and any mandatory requirements of applicable law,
the Lender shall have the right under such power of attorney in its discretion
to file any claim or to take any other action or proceedings, either in its own
name or in the name of the Borrower or otherwise, which the Lender may
reasonably deem necessary or appropriate to protect and preserve the right,
title and interest of the Lender in and to the security intended to be afforded
hereby.
ARTICLE 3 COVENANTS OF THE BORROWER
SECTION 3.1 LIENS. The Borrower will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to any of
the Collateral or its title thereto or any of its interest therein except:
(a) the respective rights of the Lender and the Borrower as provided
herein and in the other Borrower Loan Documents, and the Lien of this
Security Agreement, and the rights of the Lender under this Security
Agreement, the Loan Agreement and the other Borrower Loan Documents;
(b) the rights of others under agreements or arrangements to the
extent expressly permitted by Section 3.2;
(c) Liens for fees, Taxes, levies, duties or other governmental
charges of any kind, Liens of mechanics, materialmen, laborers, employees
or suppliers and similar
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Liens arising by operation of law, in each case incurred by Borrower in
the ordinary course of business for sums that are not yet delinquent or
are being contested in good faith by appropriate proceedings (and for
which adequate reserves have been provided in accordance with GAAP) which
suspend the collection thereof (provided that such proceedings do not
involve any material danger of the sale, forfeiture or loss of the
Airframe or an Engine, or any interest therein);
(d) Liens arising out of any judgments or awards against Borrower so
long as within 30 days after the entry thereof it has been discharged,
vacated or stayed pending an appeal or proceeding for review (provided
that such proceedings do not involve any material danger of the sale,
forfeiture or loss of the Airframe or an Engine, or any interest therein);
and
(e) Lender Liens.
Liens described in clauses (a) through (e) above are referred to herein as
"PERMITTED LIENS". The Borrower shall promptly, at its own expense, take such
action as may be necessary duly to discharge (by bonding or otherwise) any Lien
other than a Permitted Lien arising at any time with respect to any Collateral.
The Lender shall promptly, at its own expense, take such action as may be
necessary duly to discharge (by bonding or otherwise) Lender Lien.
SECTION 3.2 REGISTRATION AND MAINTENANCE; OPERATION; POSSESSION AND
LEASES.
(a) REGISTRATION AND MAINTENANCE. The Borrower shall, at its own
cost and expense:
(i) (A) upon delivery of the Aircraft, cause the Aircraft to be duly
registered in the name of the Borrower, and at all times thereafter to remain
duly registered in the United States of America in the name of the Borrower
under the Transportation Code, PROVIDED, that Lender shall execute and deliver
all such documents as the Borrower may reasonably request for the purpose of
effecting and continuing such registration and (B) upon delivery of the
Aircraft, cause the Security Agreement to be duly filed for recording with the
FAA, and at all times thereafter so long as the Loan shall be outstanding or any
amount shall be owing to the Lender, cause the Security Agreement to be
maintained of record as a first priority mortgage on the Aircraft (subject to
Permitted Liens);
(ii) inspect, maintain, service, repair, and overhaul (or cause to
be inspected, maintained, serviced, repaired, and overhauled) the Aircraft (and
any engine which is not an Engine but which is installed on the Aircraft), so as
to keep the Aircraft in as good condition as when originally delivered to the
Borrower on the Delivery Date, ordinary wear and tear excepted, in compliance at
all times with the Borrower's FAA-approved maintenance program and in accordance
with all applicable FAA regulations for the Aircraft (including all FAA
airworthiness directives applicable to the Aircraft) and to keep the Aircraft in
such condition as may be
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necessary to enable all certificates, licenses, permits and authorizations
required for the use and operation of the Aircraft and each Engine including the
airworthiness certification for the Aircraft to be maintained in good standing
at all times under the Transportation Code except when (w) the Aircraft is being
temporarily stored, (x) the Aircraft is being serviced, repaired, maintained,
overhauled, tested or modified as permitted or required by the terms of this
Agreement, (y) all Embraer EMB-145 aircraft of the same year of manufacture have
been grounded by the FAA (in which case the Aircraft shall be maintained in
accordance with Borrower's FAA-approved maintenance program for aircraft stored
and not in operation), or (z) laws or regulations affecting airworthiness are
being contested in good faith and by appropriate proceedings so long as such
proceedings would not reasonably be expected to materially adversely affect the
Lender or its legal or financial interest in the Aircraft, PROVIDED, that in the
case of (w) and (x) above such storage, service, repair, maintenance, overhaul,
test or modification is in accordance with applicable FAA regulations at such
time and in accordance with the Borrower's FAA-approved maintenance program and
in substantially the same manner and with the same care as the Borrower
inspects, maintains, services, repairs or overhauls similar aircraft operated by
the Borrower in similar circumstances; and
(iii) maintain or cause to be maintained in English all records,
logs and other materials required to be maintained in respect of the Aircraft by
the FAA.
Subject in all cases to the provisions of this Agreement and the other Borrower
Loan Documents, determination of the appropriate course of action in
maintenance, including the means of compliance with airworthiness directives,
and all other matters pertaining to the Aircraft will be within the reasonable
discretion of the Borrower.
(b) PARTS. If any Parts shall from time to time become worn out,
lost, destroyed, damaged beyond repair or otherwise permanently rendered unfit
for use, or are removed pursuant to the terms of the Security Agreement, the
Borrower, at its own expense, will within a reasonable time replace such Parts,
or cause the same to be replaced, by replacement parts or accessories which are
free and clear of all Liens except Permitted Liens and are in a condition and
have a value and utility equal to the greater of the value, condition and
utility (i) of the Parts replaced or (ii) that such replaced Parts would have
had if maintained in the condition and repair required by the terms hereof. All
replacement Parts, and all equipment, accessories and parts that are added to or
become attached to the Aircraft and which are essential to the operation of the
Aircraft (including those essential because of U.S. legal requirements) or which
cannot be detached from the Aircraft without materially interfering with the
operation of the Aircraft or adversely affecting the value, condition or utility
which the Aircraft would have had without the addition thereof or which are in
substitution of any Parts, shall, in each case, be deemed incorporated in the
Aircraft and subject to the terms of this Agreement and to the Lender's security
interest created hereunder. The Borrower agrees to prepare, execute and file, at
its own expense, such documents as may be reasonably requested by the Lender to
create, protect and/or perfect the Lender's interest in any such replacement
Part. Except as otherwise provided herein, all Parts at any time removed from
the Aircraft, Airframe or any Engine shall remain subject to the Lien of this
Agreement no matter where located, until such time as such Parts shall
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be replaced by parts which have been incorporated or installed in or attached to
the Aircraft, Aircraft or such Engine and which meet the requirements for
replacement Parts specified above. Immediately upon any replacement part
becoming incorporated or installed in or attached to the Aircraft, Airframe or
such Engine as above provided, without further act, (i) such replacement part
shall become subject to the Lien of this Agreement and be deemed part of the
Aircraft, originally incorporated or installed in or attached to such Aircraft,
Airframe or such Engine for all purposes hereof and thereof to the same extent
as the Parts originally incorporated or installed in or attached to such
Aircraft, Airframe or Engine and (ii) the replaced Part shall thereupon be free
and clear of all rights of the Lender and shall no longer be deemed a Part under
this Agreement. Any Part removed from the Aircraft, Airframe or any Engine may
be subjected by Borrower to a normal pooling arrangement customary in the
airline industry and entered into in the ordinary course of business of
Borrower, so long as a Part replacing such removed Part shall be incorporated or
installed in or attached to the Aircraft, Airframe or such Engine in accordance
with this Section 3.2(b) as promptly as practicable after the removal of such
removed part. In addition, any replacement part when incorporated or installed
in or attached to the Aircraft, Airframe or any Engine may be owned by any third
party subject to such a normal pooling arrangement, so long as Borrower, at its
own cost and expense, as promptly thereafter as reasonably possible either (x)
causes such replacement part to become subject to the Lien of this Security
Agreement, free and clear of all Liens (except Permitted Liens) at which time
such replacement part shall become a Part or (y) replaces (or causes to be
replaced) such replacement part by incorporating or installing in or attaching
to the Aircraft, Airframe or such Engine a further replacement Part owned by
Borrower free and clear of all Liens (except Permitted Liens).
(c) OPERATION. The Borrower will not maintain, use, service, repair,
overhaul or operate the Aircraft in violation of any law, rule, regulation,
treaty, or order of any government or Governmental Authority having
jurisdiction, or in violation of any airworthiness certificate, license or
registration relating to the Aircraft issued by any such authority except (1)
unanticipated minor violations not involving any material risk of the sale,
forfeiture or loss of the Aircraft, the Airframe, any Engine or the Lender's
interest therein or any imposition of criminal penalties or material civil
penalties against the Lender if such violation ceases promptly after discovery
thereof by the Borrower, or only requires the Borrower's payment of a fine
levied only against the Borrower, and (2) the Borrower may contest in good faith
the validity or application of any such law, rule, regulation, treaty, order,
certificate, license or registration, so long as there is no material risk of
the sale, forfeiture or loss of the Aircraft, the Airframe, any Engine or the
Lender's interest therein or any imposition of criminal penalties or material
civil penalties against the Lender; PROVIDED, HOWEVER, that actions taken under
(1) and (2) above will not result in the violation of any requirements of
insurance pursuant to Section 3.4 hereof. The Borrower will not operate, use or
locate the Aircraft in any area excluded from coverage by any insurance required
to be maintained by the terms of Section 3.4, or if war risk insurance specified
in Section 3.4 hereof has not been obtained, in or to any war zone or any area
of threatened or recognized hostility or in either case unless the Aircraft, the
Airframe or any Engine is only temporarily operated, used or located in such
area as a result of an emergency, equipment malfunction, navigational error,
hijacking, weather condition or other similar unforeseen circumstance, so long
as the Borrower diligently and in good faith proceeds to remove the Aircraft
from such area, and
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such temporary operation, use or location does not result in the violation of
any requirements of insurance pursuant to Section 3.4 hereof. The Borrower shall
not intentionally do or permit to be done anything which will expose the
Aircraft to penalty, forfeiture, impounding or detention, appropriation, damage
or destruction (other than any damage or destruction arising in the ordinary
course of operation of the Aircraft) or (insofar as the same relates to the
operation or use of the Aircraft) the Lender to criminal liability (and in the
event of any forfeiture, impounding, detention or appropriation of the Aircraft
the Borrower shall take all such steps reasonably open to it with a view to
obtaining the immediate release of the Aircraft). The Borrower shall not
represent or hold out the Lender as carrying goods or passengers on the Aircraft
or as being connected or associated with any operation of carriage which may be
undertaken by the Borrower or pledge the credit of the Lender. The Borrower
shall not on any occasion on which the ownership of the Aircraft is relevant
represent to third parties that title to the Aircraft is held by the Borrower
free of the Lien of the Security Agreement so long as the Lien of the Security
Agreement has not been discharged.
(d) POSSESSION. The Borrower shall not in any manner deliver,
relinquish or transfer possession of the Airframe or any Engine to any Person or
install any Engine, or permit any Engine to be installed, on any airframe other
than the Airframe, during the Term, without the prior consent of the Lender,
which consent may be withheld in its sole discretion, PROVIDED, HOWEVER, that so
long as (A) no Event of Default shall have occurred and be continuing, and (B)
all approvals, consents or authorizations required from the FAA in connection
with any such transfer or relinquishment of possession have been obtained and
remain in full force and effect, the Borrower may, without the prior consent of
the Lender:
(i) [intentionally left blank];
(ii) deliver possession of the Airframe or any Engine or any
Part to the manufacturer thereof or to any organization for testing,
service, repair, maintenance, overhaul work or other similar
purposes or for alterations or modifications or additions required
or permitted by the terms of this Security Agreement;
(iii) [intentionally left blank];
(iv) install an Engine on an airframe owned by the Borrower
free and clear of all Liens except (A) Permitted Liens, (B) those
which do not apply to the Engines, and (C) those created by the
rights of other air carriers under interchange or pooling agreements
or other arrangements customary in the airline industry which do not
contemplate, permit or require the transfer of title to such
airframe or engines installed thereon;
(v) install an Engine on an airframe, leased to the Borrower
or purchased by the Borrower subject to a conditional sale or other
security agreement, but only if (A) such airframe is free and clear
of all Liens, except (i)
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the rights of the parties to such lease, or any such secured
financing arrangement, covering such airframe and (ii) Liens of the
type permitted by Section 3.2(d)(iv) and (B) Borrower shall have
received from the lessor, mortgagee, secured party or conditional
seller, in respect of such airframe, a written agreement (which may
be a copy of the lease, mortgage, security agreement, conditional
sale or other agreement covering such airframe), whereby such Person
agrees that it will not acquire or claim any right, title or
interest in, or Lien on, such Engine by reason of such Engine being
installed on such airframe at any time while such Engine is subject
to the Lien of this Security Agreement;
(vi) [intentionally left blank];
(vii) transfer possession of the Airframe or Engine to the
United States of America or any instrumentality thereof pursuant to
the Civil Reserve Air Fleet Program (as established and administered
pursuant to Executive Order 11490, as amended, as superseded by
United States Executive Order No. 12656) or any similar or
substitute program ("CRAF Program"), in which event Borrower (or
such Permitted Sublessee) shall promptly notify Lender in writing of
any such transfer of possession and, in the case of any transfer
pursuant to the CRAF Program, in such notification shall identify by
name, address and telephone numbers the Contracting Office
Representatives of the Military Airlift Command of the United States
Air Force to whom notices must be given and to whom requests or
claims must be made to the extent applicable under the CRAF Program;
(viii) transfer possession of the Airframe or any Engine to
the United States of America, or to a foreign government, when
required by Applicable Law (it being understood that nothing in this
clause (viii) shall relieve the Borrower from its obligations under
Section 3.3 if such transfer becomes an Event of Loss), in which
event Borrower shall promptly notify Lender in writing of any such
transfer of possession;
(ix) [intentionally left blank];
(x) [intentionally left blank];
PROVIDED that (1) the rights of any transferee who receives possession by reason
of a transfer permitted by this Section 3.2(d) shall be subject and subordinate
to all the terms of this Security Agreement; (2) the Borrower shall remain
primarily liable hereunder for the performance of all the terms and conditions
of this Security Agreement and the other Borrower Loan Documents shall remain in
effect; and (3) no transfer of possession otherwise in compliance with this
Section 3.2(d) shall (A) result in any registration or re-registration of the
Aircraft or the maintenance, operation or use thereof except in compliance with
Sections 3.2(a), (b) and (c), or (B) permit any action not permitted to the
Borrower hereunder.
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The Lender hereby agrees for the benefit of the lessor, conditional
seller, mortgagee or secured party of any engine or of any airframe (other than
the Airframe) leased to the Borrower or owned by the Borrower subject to a
conditional sale or other security agreement, which lease or conditional sale or
other security agreement (in the case of any such airframe) also covers an
engine or engines owned by the lessor under such lease or subject to a security
interest in favor of the secured party under such conditional sale or other
security agreement, that the Lender will not acquire or claim, as against such
lessor or secured party, any right, title or interest in any such engine as the
result of such engine being installed on the Airframe at any time while such
engine is owned by such lessor or is subject to such conditional sale or other
security agreement or security interest in favor of such secured party.
(e) INSPECTION. The Lender shall have the right (at its own expense,
unless an Event of Default has occurred and is continuing) to inspect the
Aircraft and all logs, flight manuals and maintenance records and any other
books and records related to the Aircraft and identified by the Lender with
respect thereto at reasonable times and on reasonable notice during the Term.
The Lender shall not have any duty to inspect and shall not incur any liability
or obligation by reason of not making any such inspection. So long as no Event
of Default has occurred and is continuing, any such inspection shall be limited
to a visual, walk-around inspection which may include going on board the
Aircraft, but may not include any opening of any panels, bays, or disassembly of
any components, ETC. (unless such inspection is during an overhaul of the
Aircraft and such panels or bays are then opened or components then disassembled
in the course of such maintenance), and any such inspection shall be conducted
so as not to unreasonably interfere in any manner with the Borrower's business
or the operation and maintenance of the Aircraft.
(f) MODIFICATIONS, ALTERATIONS, IMPROVEMENTS, OBSOLETE PARTS.
Borrower shall have the right, at its sole cost and expense, to make any
modifications, alterations or improvements to the Aircraft (i) which comply with
the terms of this Agreement and do not decrease in more than a non-deminimis
amount the fair market value, utility or remaining useful life of the Aircraft
and (ii) as may be required to be made during the Term to comply with all
applicable laws and to meet the applicable standards of the FAA; PROVIDED,
HOWEVER, that Borrower may, in good faith contest the validity or application of
any such law, rule, regulation or order in any reasonable manner which does not
adversely affect in any material respect Lender or any of its legal or economic
interests in or to such Aircraft or any Borrower Loan Document and such contest
or failure to comply will not result in any material risk of loss, sale,
forfeiture or damage to the Aircraft or subject any Person to any material risk
of criminal or material civil penalties. Any such modification, alteration or
improvement may involve the removal of Parts that the Borrower deems obsolete or
no longer suitable or appropriate for use in the Aircraft, Airframe or an Engine
(provided that the aggregate value of such Parts shall not exceed $200,000 in
aggregate original cost) or of Parts that were installed in addition to, and not
in substitution for, any Part originally installed in the Aircraft, Airframe or
an Engine on the Delivery Date, in each case without replacement of such Parts.
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(g) IMPROVEMENTS OWNED BY OTHERS. The Borrower may install in the
Aircraft audio-visual, entertainment, telephonic, or other similar equipment
owned by third parties and leased or otherwise furnished to the Borrower in the
ordinary course of business, provided that (i) such equipment meets all
requirements for removal of Parts as specified in this Agreement, and (ii) the
Borrower shall procure that upon the occurrence of any default under the lease
or other arrangement relating to such equipment, the owner of such equipment
shall not be entitled to repossess such equipment unless it or the Borrower
shall, in connection with such repossession undertake to restore the Aircraft in
a workmanlike manner to a condition acceptable by commercial airline standards
and in compliance with applicable FAA rules and regulations, and the Lender
shall not acquire a Lien thereon and the rights of the owners therein shall not
constitute a default under this Agreement. Notwithstanding the foregoing, in no
event shall the installation or removal of such equipment impair or otherwise
adversely affect the Lender's rights and remedies hereunder.
SECTION 3.3 LOSS, DESTRUCTION OR REQUISITION. (a) TOTAL LOSS WITH RESPECT
TO THE AIRFRAME. Upon the occurrence of a Total Loss with respect to the
Airframe, the Borrower shall promptly (and, in any event, within 7 days after
such occurrence) give the Lender written notice of such Total Loss. Within 90
days following the occurrence of such Total Loss, the Borrower shall prepay (or,
if applicable, pay) the Note in full in accordance with the Loan Agreement.
(b) TOTAL LOSS WITH RESPECT TO AN ENGINE. Upon the occurrence of a
Total Loss with respect to an Engine under circumstances in which there has not
occurred a Total Loss with respect to the Airframe, the Borrower shall promptly
(and in any event within 15 days after such occurrence) give the Lender written
notice of such Total Loss and shall, within 120 days after the occurrence of
such Total Loss (or, if (x) the Lender has received all insurance proceeds with
respect to the Total Loss of such Engine, (y) Borrower does not have an engine
that satisfies the requirements for a Replacement Engine and (z) a new engine is
not available within such time from the engine manufacturer, as soon as a new
engine is available from the engine manufacturer), cause to be subjected to the
Lien of this Security Agreement, as replacement for the Engine with respect to
which such Total Loss occurred, a Replacement Engine free and clear of all Liens
(other than Permitted Liens).
Prior to or at the time of any replacement under this Section
3.3(b), the Borrower will (i) cause a Security Agreement Supplement
substantially in the form of Exhibit A covering such Replacement Engine to be
delivered to the Lender for execution and, upon such execution, to be filed for
recordation pursuant to the Transportation Code, (ii) cause a financing
statement or statements with respect to such Replacement Engine or other
requisite documents or instruments to be filed in such place or places as
necessary in order to perfect the security interest therein created by or
pursuant to this Security Agreement, (iii) furnish the Lender with an opinion of
the Borrower's counsel (which may be the Borrower's or an Affiliate of the
Borrower's General Counsel) addressed to the Lender to the effect that, upon
such replacement, the Replacement Engine will be subject to the Lien of this
Security Agreement, (iv) furnish the Lender with a certificate of an aircraft
engineer or appraiser (who may be an employee of the Borrower or an Affiliate of
the Borrower) certifying that such Replacement Engine has a value and utility at
least
11
equal to, and is in as good operating condition as, the Engine so replaced
assuming such Engine was in the condition and repair required by the terms
hereof immediately prior to the occurrence of such Total Loss, (v) furnish the
Lender with a report in the form provided by Section 3.4(b) evidencing
compliance with the insurance provisions of Section 3.4 hereof with respect to
such Replacement Engine and (vi) furnish to the Lender a copy of the xxxx of
sale respecting such Replacement Engine or other evidence of the Borrower's
ownership of such Replacement Engine, reasonably satisfactory to the Lender. In
the case of each Replacement Engine subjected to the Lien of this Security
Agreement under this Section 3.3, promptly upon the recordation of the Security
Agreement Supplement covering such Replacement Engine pursuant to the
Transportation Code, the Borrower will cause to be delivered to the Lender an
opinion of counsel to the Borrower addressed to the Lender as to the due
recordation of such Security Agreement Supplement or such other requisite
documents or instruments and the validity and perfection of the security
interest in the Replacement Engine granted to the Lender under this Security
Agreement. For all purposes hereof, upon the attachment of the Lien of this
Security Agreement thereto, the Replacement Engine shall become part of the
Collateral and shall be deemed an "Engine" as defined herein (and the replaced
Engine shall cease to be an "Engine" as defined herein). Upon such attachment of
the Lien of this Security Agreement, the Lender shall execute and deliver to the
Borrower an appropriate instrument, in the form provided by the Borrower and
approved by the Lender, releasing, without recourse or warranty, from the Lien
of this Security Agreement such replaced Engine (and shall cause any Lender Lien
with respect thereto to be released), any proceeds (including, without
limitation, insurance proceeds) and all rights relating to any thereof, and
assigning, without recourse or warranty, to the Borrower all claims against
third Persons for damage (if any) to such Engine arising from the Total Loss.
(c) APPLICATION OF PAYMENTS FOR TOTAL LOSS FROM REQUISITION OF TITLE
OR USE. Any payments (other than insurance proceeds the application of which is
provided for in Section 3.4) received at any time by the Borrower or by the
Lender from any Governmental Authority or other Person with respect to a Total
Loss to the Airframe or any Engine, will be applied as follows:
(i) if such payments are received with respect to the Engines
or engines installed on the Airframe that have been or are being
replaced by the Borrower pursuant to Section 3.3, such payments
shall be paid over to, or retained by, the Lender and upon
completion of such replacement (or if such payments are to be used
by the Borrower to acquire Replacement Engines, simultaneously with
the satisfaction of the requirements set forth herein with respect
to such Replacement Engine) shall be paid over to the Borrower;
(ii) if such payments are received with respect to the
Airframe or the Airframe, or with respect to Engines or engines
installed on the Airframe that have not been and will not be
replaced pursuant to Section 3.3, after reimbursement of the Lender
for costs and expenses, so much of such payments remaining as shall
not exceed the amounts required to be paid to the Lender pursuant to
the Loan Agreement shall be applied in reduction of the Borrower's
obligation to pay such amount, if not already paid by the Borrower,
or, if already paid
12
by the Borrower, shall be applied to reimburse the Borrower for its
payment of such amount, and the balance, if any, of such payment
remaining thereafter will be paid over to, or retained by, the
Borrower; and
(iii) if such payments are received with respect to an Engine
under circumstances contemplated by Section 3.3 after reimbursement
of the Lender for costs and expenses, so much of such payments shall
be paid over to, or retained by, the Borrower; PROVIDED that the
Borrower shall have fully performed (or concurrently performs) the
terms of Section 3.3 with respect to the Total Loss for which such
payments are made.
(d) APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF DEFAULT.
Any amount referred to in Section 3.3 that is payable to the Borrower shall not
be paid to the Borrower or, if it has been previously paid directly to the
Borrower, shall not be retained by the Borrower, if at the time of such payment
an Event of Default shall have occurred and be continuing, but shall be paid to
and held by the Lender as security for the obligations of the Borrower under
this Security Agreement, applied against the Borrower's payment obligations
hereunder when and as they become due and payable and at such time as there
shall not be continuing any such Event of Default, such amount, to the extent
not previously so applied against the Borrower's payment obligations, shall be
paid to the Borrower; PROVIDED that if any such amount has been so held by the
Lender as security for more than 90 days after any such Event of Default shall
have occurred, during which period (i) the Lender shall not have been limited by
operation of law or otherwise from exercising remedies hereunder and (ii) the
Note (with accrued interest thereon) shall not have become due and payable and
the Lender shall not have exercised any remedy available to it under Article V
then such amount, to the extent not previously so applied against the Borrower's
payment obligations, shall be paid to the Borrower.
SECTION 3.4 INSURANCE.
(a) PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE
Subject to the rights of the Borrower under Section 3.4(f), the
Borrower shall, without expense to the Lender, maintain or cause to be
maintained in effect at all times during the Term with independent insurers of
internationally recognized reputation and responsibility public liability
insurance (including, without limitation, aircraft third party, passenger legal
liability, property damage, general third party legal liability and product
liability coverage but excluding manufacturer's product liability coverage) with
respect to the Aircraft in an amount not less than the greater of (i) the amount
which The Borrower may carry from time to time on other similar aircraft in its
fleet (whether owned or leased) and (ii) the 105% of the outstanding principal
amount of the Note; PROVIDED that an agreement of the Government for the benefit
of the Lender to insure against or indemnify for substantially the same risks to
at least the same amount shall satisfy the requirements of this Section 3.4(a),
PROVIDED that on or prior to the date of such agreement, the Borrower shall
provide an Officer's Certificate of the Borrower certifying that any such
insurance or indemnity provides protection no less favorable than insurance
13
coverage that would comply with this Section 3.4. Such insurance shall be of the
type usually carried by the Borrower with respect to similar aircraft and
engines, and covering risks of the kind customarily insured against by the
Borrower. In addition, without limitation of the requirements of the preceding
sentence (and notwithstanding anything to the contrary contained in the
preceding sentence), the Borrower shall in all events maintain in effect, at all
times during the Term, war risk and allied perils liability insurance in
accordance with the London form AVN52C (as in effect on September 1, 2001) or
its equivalent form reasonably acceptable to Lender (or an agreement of the
Government to insure against or indemnify for substantially the same risks),
from time to time, with respect to the Aircraft , (I) in an amount not less than
the greater of (x) the amount of war risk and allied perils liability insurance
from time to time applicable to similar aircraft owned or operated by the
Borrower and (y) $350,000,000 per occurrence, and (II) maintained with
independent insurers of internationally recognized reputation and
responsibility.
During any period that the Aircraft is grounded and not in
operation, the Borrower may modify the insurance required by this Section 3.4(a)
to modify the amounts of public liability and property damage insurance, the
scope of the risks covered and the type of insurance, in all circumstances to
conform to such insurance customary in the United States airlines industry for
regional air carriers similarly situated with the Borrower in respect of similar
aircraft which are grounded, not in operation, and stored or hangared, except
that in all instances, the amounts of coverage and scope of risk covered and the
type of insurance shall be at a minimum no less favorable than the insurance as
from time to time applicable to aircraft owned or leased by the Borrower on the
ground, not in operation, and stored or hangared.
(b) INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT AND ENGINES
Subject to the rights of the Borrower under Section 3.4(f), the
Borrower shall, without expense to the Lender, maintain or cause to be
maintained in effect at all times during the Term with insurers of nationally
recognized responsibility all risk, agreed value, ground and flight hull
insurance covering the Aircraft for an amount at all times (even when the
Aircraft is grounded or in storage) of not less than 105% of the outstanding
principal of the Note; PROVIDED THAT, the Borrower shall not be required to
maintain all-risk flight aircraft hull insurance with respect to any period in
which the Aircraft is grounded and properly stored or hangared. Such insurance
shall not provide insurers with a right to replace the Airframe or any Engine
with another airframe or Engine. Such hull insurance or other personal property
insurance of the Borrower shall cover Engines or engines and Parts temporarily
removed from the Airframe, pending replacement by installation of the same or
similar Engines, engines or Parts on the Airframe. Such insurance shall be of
the type usually carried by the Borrower with respect to similar aircraft and
engines, and covering risks of the kind customarily insured against by the
Borrower. The Borrower shall in any event maintain or cause to be maintained in
effect at all times during the Term, with independent insurers of
internationally recognized reputation and responsibility hull war risks and
allied perils insurance (in accordance with the London form LSW555B or its
equivalent form reasonably acceptable to the Lender) with respect to the
Aircraft in the amount at least equal to 105% of the outstanding principal
amount of the Note
14
from time to time. An agreement by the Government to insure against or indemnify
for substantially the same risks to at least the same amount will satisfy any of
the requirements of this Section 3.4(b).
(c) ADDITIONAL INSUREDS; LOSS PAYMENT.
The Borrower shall cause all policies of insurance carried in
accordance with this Section 3.4 to name the Lender as an additional insured
("Additional Insureds"). Such policies shall provide with respect to such
Additional Insureds that (i) none of their respective interests in such policies
shall be invalidated by any act or omission or breach of warranty or condition
contained in such policies by the Borrower or, in the case of any particular
Additional Insured, any other Additional Insured; (ii) no cancellation or lapse
of coverage for nonpayment of premium or otherwise, and no substantial change of
coverage which adversely affects the interests of any such Additional Insured,
shall be effective as to such Additional Insured until 30 days (or such lesser
period as may be applicable in the case of any war risk coverage) after receipt
by such Additional Insured of written notice from the insurers of such
cancellation, lapse or change; (iii) they shall have no liability for premiums,
commissions, calls, assessments or advances with respect to such policies; (iv)
such policies will be primary without any right of contribution from any other
insurance carried by such Additional Insureds; (v) the insurers waive any rights
of set-off, counterclaim, deduction or subrogation against such Additional
Insureds; (vi) shall apply worldwide and have no territorial restrictions or
limitations (except, in the case of war, hijacking or related perils insurance,
as may be reasonably acceptable to the Lender); and (vii) shall contain a 50/50%
Clause per Lloyd's Aviation Underwriter's Association Standard Policy Form AVS
103. Each liability policy shall provide that all the provisions thereof, except
the limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured and provide that the exercise by the
insurer of rights of subrogation derived from rights retained by the Borrower
will not delay payment of any claim that would otherwise be payable but for such
rights of subrogation. Each hull policy shall name the Lender as loss payee;
PROVIDED THAT, so long as the insurers shall not have received written notice
that a Specified Default or Event of Default has occurred and is continuing, if
insurance proceeds in the aggregate equal $1,250,000 or less become payable,
then such proceeds shall be payable to the Borrower and, notwithstanding the
foregoing, any amounts up to Termination Value (i) of any proceeds which in the
aggregate exceed $1,250,000, (ii) of any proceeds in respect of an Event of Loss
or (iii) if the insurers shall have received written notice that an Event of
Default has occurred and is continuing, any proceeds with respect to any single
loss, shall be payable to such loss payee.
(d) DEDUCTIBLES AND SELF-INSURANCE
The Borrower may not self-insure, by way of deductible or premium
adjustment provisions in insurance policies or otherwise, except for a
deductible per occurrence that is not in excess of prevailing standard market
deductibles for similar aircraft.
(e) APPLICATION OF HULL INSURANCE PROCEEDS.
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Subject to Section 3.3(d), as between the Lender and the Borrower,
any payments received under policies of hull or other property insurance
required to be maintained by the Borrower pursuant to Section 3.4(b), shall be
applied as follows:
(i) if such payments are received with respect to loss or
damage (including an Event of Loss with respect to an Engine) not
constituting an Event of Loss with respect to the Airframe, payments
in the aggregate of $1,250,000 or less shall be paid over to or
retained by the Borrower and, subject to Section 3.4(c), any
payments which in the aggregate are greater than $1,250,000 shall be
paid over to or retained by the Lender for payment to the Borrower
only upon performance of its repair or replacement obligation; and
(ii) if such payments are received with respect to an Event of
Loss with respect to the Airframe, so much of such payments as shall
not exceed the outstanding principal and interest on the Note and
other amounts required to be paid by the Borrower pursuant to the
Borrower Loan Documents shall be applied in reduction of the
Borrower's obligation to pay such amounts if not already paid by the
Borrower, and to reimburse the Borrower if such amounts shall have
been paid, and the balance, if any, of such payments shall be
promptly paid over to or retained by the Borrower.
(f) INSURANCE FOR OWN ACCOUNT
Nothing in this Section 3.4 shall prohibit the Lender, the Borrower
or any Additional Insured from obtaining insurance with respect to the Aircraft
for its own account (including, without limitation, in the case of the Borrower,
hull insurance under the same policies maintained pursuant to this Section 3.4
in amounts in excess of those required to be maintained pursuant to this Section
3.4) and any proceeds payable thereunder shall be payable as provided in the
insurance policy relating thereto, PROVIDED that no such insurance may be
obtained which would limit or otherwise adversely affect the availability of
coverage or payment of any insurance required to be obtained or maintained
pursuant to this Section 3.4, it being understood that all salvage rights to the
Airframe or the Engines shall remain with the Borrower's insurers at all times.
(g) REPORTS, ETC.
The Borrower will furnish to the Lender (A) on or prior to the
Delivery Date, insurance certificates describing in reasonable detail the
insurance maintained by the Borrower as required pursuant to this Section 3.4,
(B) prior to the cancellation, lapse or expiration of the insurance policies
required pursuant to this Section 3.4, evidence of renewal of such insurance
policies, and (C) on or prior to the Delivery Date and on or before the renewal
dates of the insurance policies carried by the Borrower pursuant to this Section
3.4, a report signed by a firm of aircraft insurance brokers, not affiliated
with the Borrower, appointed by the Borrower and reasonably satisfactory to the
Lender, stating the opinion of such firm that all premiums in
16
connection with the insurance then due have been paid and the insurance then
carried and maintained on the Aircraft complies with the terms hereof and, in
the case of renewal insurance, that such renewal insurance will on and after the
effective date thereof so comply with the terms hereof, PROVIDED that all
information contained in such report shall be held confidential by the Lender,
and shall not be furnished or disclosed by them to anyone except their legal
counsel, insurance brokers or advisors, bona fide prospective transferees of the
Lender and their respective agents (PROVIDED that they shall agree for the
benefit of the Borrower to hold all such information similarly confidential) or
as may be required by Applicable Law. The Borrower will instruct such firm to
give prompt written advice to the Lender of any default in the payment of any
premium and of any other act or omission on the part of the Borrower of which it
has knowledge and which would in such firm's opinion invalidate or render
unenforceable, in whole or in any material part, any insurance on the Aircraft.
The Borrower will also instruct such firm to advise the Lender in writing at
least 30 days prior to the termination or cancellation of, or material adverse
change in, such insurance carried and maintained on the Aircraft pursuant to
this Section 3.4 (or such lesser period as may be applicable in the case of war
risk coverage).
(h) RIGHT TO PAY PREMIUMS.
The Additional Insureds shall have the rights but not the
obligations of an additional named insured. None of the Additional Insureds
shall have any obligation to pay any premium, commission, assessment or call due
on any such insurance (including reinsurance). Notwithstanding the foregoing, in
the event of cancellation of any insurance due to the nonpayment of premiums,
each of the Lender shall have the option, in its sole discretion, to pay any
such premium in respect of the Aircraft that is due in respect of the coverage
pursuant to this Security Agreement and to maintain such coverage, as the Lender
or any other Additional Insureds may require, until the scheduled expiry date of
such insurance and, in such event, the Borrower shall, upon demand, reimburse
the Lender and any other Additional Insureds for amounts so paid by them.
SECTION 3.5 ADDITIONAL AGREEMENTS.
(a) NOTATION OF SECURITY INTEREST. The Borrower shall place on the
Airframe and each Engine a notation or legend stating that the Lender holds a
first priority security interest therein pursuant to this Security Agreement, in
a form reasonably acceptable to the Lender.
(b) PAYMENT OF CHARGES, ETC. At any time after an Event of Default
shall have occurred and be continuing, the Lender may (without any obligation to
do so) at any time, in accordance with the terms hereof, effect insurance
coverage and necessary repairs to the Collateral and pay the premiums therefor
and the costs thereof, pay and discharge any fees, assessments, charges, Taxes
and Permitted Liens on the Collateral and, upon the occurrence of an Event of
Default, perform any of the Borrower's obligations, or exercise any of the
Borrower's rights, under any Collateral Document, in each case as reasonably
necessary to protect the Collateral. All sums so advanced or paid by the Lender
shall be payable by the Borrower to
17
Lender on demand with interest at the Default Rate, and any amounts remaining
unpaid, together with such interest thereon, shall be a part of the Secured
Obligations.
(c) FURTHER INFORMATION. The Borrower will furnish Lender such
additional information concerning the Collateral as Lender may from time to time
reasonably request.
(d) INVESTMENT OF SECURITY FUNDS. Any monies paid to or retained by
the Lender that are required to be paid to the Borrower or applied for the
benefit or at the direction of the Borrower, but which the Lender is entitled to
hold under the terms hereof pending the occurrence of some event or the
performance of some act (including, without limitation, the remedying of an
Event of Default), shall until paid to the Borrower or applied as provided
herein, be invested by the Lender at the written authorization and direction of
the Borrower from time to time at the sole expense and risk of the Borrower in
Permitted Investments. Such authorization and direction of the Borrower shall
specify the particular investment to be made and shall certify that such
investment constitutes a Permitted Investment. All Permitted Investments held by
the Lender pursuant to this Section shall either be (a) registered in the name
of, payable to the order of, or specially endorsed to, the Lender, or (b) held
in an Eligible Account. There shall be promptly remitted to the Borrower any
income or gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred in
connection with such investment) unless a Specified Default or Event of Default
shall have occurred and be continuing. If a Specified Default or Event of
Default shall have occurred and be continuing, the Lender shall hold any such
income or gain as security for the obligations of the Borrower hereunder and
apply it against such obligations as and when due, and at such time as there
shall not be continuing any such Specified Default or Event of Default, such
amount, to the extent not previously so applied against the Borrower's
obligations, shall be paid to the Borrower; provided that if any such amount has
been so held as security for more than 90 days, during which period (i) the
Lender shall not have been limited by operation of law or otherwise from
exercising remedies and (ii) the Lender shall not have exercised any remedy
available to it, then such amount, to the extent not previously so applied
against such obligations of the Borrower, shall be paid to the Borrower.
(e) LIABILITY FOR LOSSES. The Lender shall not be liable for any
loss relating to a Permitted Investment made in accordance with instructions
received by it pursuant to Section 3.5(d). The Borrower will promptly pay to the
Lender, on demand, the amount of any loss for which the Lender is not liable
realized as the result of any such investment (together with any fees,
commissions and other expenses, if any, incurred in connection with such
investment.)
ARTICLE 4 RECEIPT, DISTRIBUTION AND APPLICATION
OF CERTAIN FUNDS
SECTION 4.1 APPLICATION OF INCOME FROM THE COLLATERAL. After an
Event of Default shall have occurred and be continuing, and the unpaid principal
of the Note then outstanding and accrued interest thereon shall have become due
and payable, the Lender shall
18
apply any payments received, any amounts then held and any amounts realized by
the Lender with respect to the Collateral in the following order of priority:
FIRST, so much of such payments or amounts as shall be required to pay to the
Lender all amounts payable by the Borrower pursuant to the Loan Agreement or
pursuant to any other provision of any other Borrower Loan Document (other than
amounts payable pursuant to clause "second" of this Section 4.1) to the Lender
and remaining unpaid shall be distributed to the Lender; SECOND so much of such
payments or amounts as shall be required to pay in full the accrued but unpaid
interest on the Note to the date of distribution shall be distributed to the
Lender followed by the aggregate unpaid principal amount of the Note then due;
and THIRD, the balance, if any, of such payments or amounts remaining thereafter
shall be distributed to, or as directed by, the Borrower.
ARTICLE 5 REMEDIES OF THE LENDER
UPON AN EVENT OF DEFAULT
SECTION 5.1 EVENT OF DEFAULT. The occurrence of an Event of Default
(as defined in the Loan Agreement) shall constitute an "EVENT OF DEFAULT"
hereunder.
SECTION 5.2 REMEDIES WITH RESPECT TO COLLATERAL. (a) REMEDIES
AVAILABLE. Upon the occurrence of any Event of Default and at any time
thereafter so long as the same shall be continuing, following acceleration of
the Loan pursuant to Section 8.1 of the Loan Agreement, the Lender may do one or
more of the following to the extent permitted by, and subject to compliance with
the mandatory requirements of, applicable law then in effect:
(A) cause the Borrower, upon the written demand of the Lender, at
the Borrower's expense, to deliver promptly, and the Borrower shall
deliver promptly, the Airframe or any Engine as the Lender may so demand
to the Lender or its order, or, if the Borrower shall have failed to so
return the Aircraft after such demand, the Lender, at its option may enter
upon the premises where all or any part of the Airframe or any Engine are
located and take immediate possession of and remove the same together with
any engine which is not an Engine but which is installed on the Airframe,
subject to all of the rights of the owner, lessor, lienholder or secured
party of such engine; PROVIDED that the Airframe with an engine (which is
not an Engine) installed thereon may be flown or returned to a location
within the continental United States, and such engine shall be held for
the account of any such owner, lessor, lienholder or secured party or, if
owned by the Borrower, may at the option of the Lender, be exchanged with
the Borrower for an Engine in accordance with the provisions of Section
3.3(b); or (B) sell all or any part of the Airframe and any Engine at
public or private sale, whether or not the Lender shall at the time have
possession thereof, as the Lender, may determine, or otherwise dispose of,
hold, use, operate, lease to others or keep idle all or any part of the
Airframe or such Engine as the Lender, in its sole discretion may
determine, all free and clear of any rights or claims of the Borrower, and
the proceeds of such sale or disposition shall be applied in the order of
priorities set forth in Section 4.1; or (C) exercise any other remedy of a
secured party under the Uniform Commercial Code of the State of New York
(whether or not in effect in the jurisdiction in which enforcement is
sought).
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Upon every taking of possession of Collateral under this Section
5.2, the Lender shall, from time to time, at the expense of the Collateral, make
all such expenditures for maintenance, insurance, repairs, replacements,
alterations, additions and improvements to and of the Collateral, as it may
reasonably deem proper. In each such case, the Lender shall have the right to
maintain, use, operate, store, lease, control or manage the Collateral and to
exercise all rights and powers of the Borrower relating to the Collateral in
connection therewith, as the Lender shall deem best, including the right to
enter into any and all such agreements with respect to the maintenance,
insurance, use, operation, storage, leasing, control, management or disposition
of the Collateral or any part thereof as the Lender may reasonably determine;
and the Lendershall be entitled to collect and receive directly all tolls,
rents, revenues, issues, income, products and profits of the Collateral and
every part thereof. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of use, operation, storage,
leasing, control, management or disposition of the Collateral, and of all
maintenance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Lender may be required or may elect to make, if
any, for Taxes, insurance or other proper charges assessed against or otherwise
imposed upon the Collateral or any part thereof, and all other payments which
the Lender may be required or expressly authorized to make under any provision
of this Security Agreement, and shall otherwise be applied in accordance with
the provisions of Article 4.
If an Event of Default shall have occurred and be continuing and the
Note shall have been accelerated pursuant to Section 8.1 of the Loan Agreement,
and the Lender shall be entitled to exercise remedies hereunder, at the request
of the Lender, the Borrower shall promptly execute and deliver to the Lender
such instruments of title and other documents as the Lender may deem necessary
or advisable to enable the Lender or an agent or representative designated by
the Lender, at such time or times and place or places as the Lender may specify,
to obtain possession of all or any part of the Collateral to which the Lender
shall at the time be entitled hereunder. If the Borrower shall for any reason
fail to execute and deliver such instruments and documents after such request by
the Lender, the Lender, may obtain a judgment conferring on the Lender the right
to immediate possession and requiring the Borrower to execute and deliver such
instruments and documents to the Lender, to the entry of which judgment the
Borrower hereby specifically consents to the fullest extent it may lawfully do
so.
Nothing in the foregoing shall affect the right of the Lender to
receive all amounts owing to it as and when the same may be due.
(b) NOTICE OF SALE. The Lender shall give the Borrower at least 30
days' prior notice of any public sale or of the date on or after which any
private sale will be held, which notice the Borrower hereby agrees to the extent
permitted by applicable law is reasonable notice. The Lender shall be entitled
to bid for and become the purchaser of any Collateral offered for sale pursuant
to this Section 5.2 and to credit against the purchase price bid at such sale by
the Lender all or any part of the due and unpaid amounts of the Obligations
secured by the Lien of this Security Agreement.
20
SECTION 5.3 REMEDIES CUMULATIVE. To the extent permitted by
applicable law, each and every right, power and remedy herein specifically given
to the Lender 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, by statute or by the
Borrower Loan Documents, 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 and in such order as may be deemed expedient by the Lender 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 Lender
in the exercise of any right, remedy or power or in the pursuit of any remedy
shall, to the extent permitted by applicable law, impair any such right, power
or remedy or be construed to be a waiver of any default on the part of the
Borrower or to be an acquiescence therein.
SECTION 5.4 DISCONTINUANCE OF PROCEEDING. In case the Lender shall
have instituted any proceeding to enforce any right, power or remedy under this
Security Agreement by foreclosure, entry or otherwise, and such proceedings
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Lender, then and in every such case the Borrower and
the Lender shall, subject to any determination in such proceedings, be restored
to their former positions and rights hereunder with respect to the Collateral,
and all rights, remedies and powers of the Lender shall continue, as if no such
proceedings had been undertaken (but otherwise without prejudice).
ARTICLE 6 SUPPLEMENTS AND AMENDMENTS
TO THIS SECURITY AGREEMENT AND OTHER DOCUMENTS
SECTION 6.4 SUPPLEMENTAL SECURITY AGREEMENTS. The Borrower and the
Lender may, at any time and from time to time, enter into an amendment or
amendments hereto for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Security Agreement or of
modifying in any manner the rights and obligations of the Lender and of the
Borrower under this Security Agreement.
ARTICLE 7 MISCELLANEOUS
SECTION 7.1 TERMINATION OF SECURITY AGREEMENT. Upon payment to the
Lender in full of the principal of, and interest on, the Note and all other
amounts then due and owing under any Borrower Loan Document, the Lender shall
cause to be removed any Lender Lien attributable to the Lender and shall, upon
the written request of the Borrower execute and deliver to, or as directed in
writing by, and at the expense of, the Borrower an appropriate instrument or
instruments (in due form for recording and in the form provided by the Borrower
and approved by the Lender) releasing, without recourse or warranty, the
Aircraft and the balance of the Collateral from the Lien of this Security
Agreement and, in such event, this Security Agreement and the trusts created
hereby shall terminate and this Security Agreement shall be of no further
21
force or effect. Except as otherwise provided above, this Security Agreement and
the trusts created hereby shall continue in full force and effect in accordance
with the terms hereof.
SECTION 7.2 NO LEGAL TITLE TO COLLATERAL IN LENDER. The Lender shall
have no legal title to any part of the Collateral. No transfer, by operation of
law or otherwise, of any right, title and interest of the Lender in and to the
Collateral or this Security Agreement shall operate to terminate this Security
Agreement or the trusts hereunder or entitle any successor or transferee of the
Lender to an accounting or to the transfer to it of legal title to any part of
the Collateral.
SECTION 7.3 SALE OF THE AIRCRAFT BY LENDER IS BINDING. Any sale or
other conveyance of the Aircraft, the Airframe, any Engine or any interest
therein by the Lender made pursuant to the terms of this Security Agreement
shall bind the Borrower, and shall be effective to transfer or convey all right,
title and interest of the Borrower in and to such Aircraft, Airframe, Engine or
interest therein. No purchaser or other grantee shall be required to inquire as
to the authorization, necessity, expediency or regularity of such sale or
conveyance or as to the application of any sale or other proceeds with respect
thereto by the Lender.
SECTION 7.4 BENEFIT OF SECURITY AGREEMENT. Nothing in this Security
Agreement, whether express or implied, shall be construed to give to any Person
other than the Borrower and the Lender any legal or equitable right, remedy or
claim under or in respect of this Security Agreement.
SECTION 7.5 SECTION 1110. It is the intention of the parties hereto
that the secured interest created hereby, to the fullest extent available under
applicable law, entitles the Lender to all of the benefits of Section 1110 with
respect to the Aircraft.
SECTION 7.6 THE BORROWER'S PERFORMANCE AND RIGHTS. Any obligation
imposed on the Borrower herein shall require only that the Borrower perform or
cause to be performed such obligation, even if stated as a direct obligation,
and the performance of any such obligation by any permitted assignee, Borrower
or transferee under an assignment, lease or transfer agreement then in effect
and in accordance with the provisions of the Borrower Loan Documents shall
constitute performance by the Borrower and to the extent of such performance,
discharge such obligation by the Borrower. Except as otherwise expressly
provided herein, any right granted to the Borrower in this Agreement shall grant
the Borrower the right to permit such right to be exercised by any such
assignee, Borrower or transferee. The inclusion of specific references to
obligations or rights of any such assignee, Borrower or transferee in certain
provisions of this Agreement shall not in any way prevent or diminish the
application of the provisions of the two sentences immediately preceding with
respect to obligations or rights in respect of which specific reference to any
such assignee, Borrower or transferee has not been made in this Agreement.
SECTION 7.7 NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all notices required or permitted under the terms
and provisions hereof shall be in English and in writing, and any such notice
may be given by U.S. mail, courier service, telegram, cable or facsimile
(confirmed by telephone or in writing in the case of notice by telegram, cable
22
or facsimile) or any other customary means of communication, and any such notice
shall be effective when delivered to a party at its address or number set forth
in Section 9.2 of the Loan Agreement.
SECTION 7.8 SEVERABILITY. Should any one or more provisions of this
Security Agreement be determined to be illegal or unenforceable by a court of
any jurisdiction, such provision shall be ineffective to the extent of such
illegality or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 7.9 SEPARATE COUNTERPARTS. This Security Agreement may be
executed in any number of counterparts (and each of the parties hereto shall not
be required to execute the same counterpart). Each counterpart of this Security
Agreement including a signature page executed by each of the parties hereto
shall be an original counterpart of this Security Agreement, but all of such
counterparts together shall constitute one instrument.
SECTION 7.10 SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein and in the other Borrower Loan Documents shall be binding upon,
and inure to the benefit of, the Borrower and its successors and permitted
assigns and the Lender and its successors and permitted assigns, all as provided
herein or in the other Borrower Loan Documents.
SECTION 7.11 HEADINGS. The headings of the various Articles and
Sections herein and in the table of contents hereto are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
SECTION 7.12 GOVERNING LAW; JURISDICTION. THIS SECURITY AGREEMENT IS
BEING DELIVERED IN THE STATE OF NEW YORK AND THIS SECURITY AGREEMENT AND ANY
SECURITY AGREEMENT SUPPLEMENT SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK. Each of the parties irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State Court sitting in the
City of New York for any legal proceeding arising out of or relating to this
Security Agreement or any transactions contemplated hereby. Each party, to the
fullest extent it may do so under applicable law, irrevocably waives and agrees
not to assert by way of motion, as a defense or otherwise, any claim that it is
not subject to the jurisdiction of any such court, any objection that it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that such suit, action or
proceeding has been brought in an inconvenient forum.
SECTION 7.13 CONFIDENTIAL INFORMATION. Each of the Borrower and the
Lender hereby assumes the obligation to maintain in total and absolute
confidentiality the terms and conditions of the Borrower
23
Loan Documents not required by the terms of any of the Borrower Loan Documents
to be filed or recorded in the public record and shall not disclose or reproduce
the same by any means or for any purpose, except as follows: (1) as otherwise
required or contemplated by the Borrower Loan Documents, (2) to its accountants,
lawyers and financial and other professional advisors, (3) to its employees, its
Affiliates and their employees, and to each other party to the Borrower Loan
Documents, (4) as required by force of law, (5) as required by judicial or
administrative decision of a Governmental Authority, or (6) for the purpose of
effecting any transfer or participation permitted pursuant to Section 9.4 of the
Loan Agreement, PROVIDED, that in case of a disclosure referred to in Clauses
(4) and (5) above, the party requiring disclosure shall use its reasonable best
efforts to limit the extent of such disclosure to the extent permitted by law.
[The remainder of this page has been left blank.]
24
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective officers, as the case may be,
thereunto duly authorized, as of the day and year first above written.
CHAUTAUQUA AIRLINES, INC.
By: ______________________________________
Name:
Title:
EMBRAER-EMPRESA BRASILEIRA DE
AERONAUTICA S.A.
By: ______________________________________
Name:
Title:
1
Exhibit A to SECURITY AGREEMENT
SECURITY AGREEMENT SUPPLEMENT NO._
SECURITY AGREEMENT SUPPLEMENT NO. __, dated ____________, ___
("Security Agreement Supplement"), between [____________] (the "Borrower") and [
], as the Lender under the Security Agreement (each as hereinafter defined).
W I T N E S S E T H:
WHEREAS, the Aircraft Security Agreement (N375SK), dated as of
__________ __, 2001 (the "Security Agreement"; capitalized terms used herein
without definition shall have the meanings specified therefor in Annex A to the
Security Agreement), between the Borrower and _________________________ (the
"Lender"), provides for the execution and delivery of supplements thereto
substantially in the form hereof which shall particularly describe the Aircraft,
and shall specifically grant a security interest in the Aircraft to the Lender;
and
[WHEREAS, the Security Agreement relates to the Airframe and Engines
described in Annex A attached hereto and made a part hereof, and a counterpart
of the Security Agreement is attached to and made a part of this Security
Agreement Supplement;](1)
[WHEREAS, the Borrower has, as provided in the Security Agreement,
heretofore executed and delivered to the Lender Security Agreement Supplement(s)
for the purpose of specifically subjecting to the Lien of the Security Agreement
certain airframes and/or engines therein described, which Security Agreement
Supplement(s) is/are dated and has/have been duly recorded with the FAA as set
forth below, to wit:
DATE RECORDATION DATE FAA DOCUMENT NUMBER](2)
NOW, THEREFORE, to secure the prompt and complete payment
(whether at the stated maturity, by acceleration or otherwise) of all principal
of, interest on and all other amounts payable by the Borrower under the Note,
the Security Agreement, the Loan Agreement and the other Borrower Loan Documents
now in existence or hereafter incurred, and the performance and observance by
the Borrower of all the agreements and covenants to be performed or observed by
----------
1 Use for Security Agreement Supplement No. 1 only.
2 Use for all Security Agreement Supplements other than Security Agreement
Supplement No. 1.
1
it for the benefit of the Lender contained in the Borrower Loan Documents, and
in consideration of the Note and the premises and of the covenants contained in
the Security Agreement and the other Borrower Loan Documents, and of other good
and valuable consideration given to the Borrower by the Lender at or before the
delivery hereof, the receipt of which is hereby acknowledged, the Borrower has,
on the terms specified in and subject to the limitations provided in the
Security Agreement, granted, bargained, sold, conveyed, transferred, mortgaged,
assigned, pledged and confirmed, and does hereby grant, bargain, sell, convey,
transfer, mortgage, assign, pledge and confirm, unto the Lender and its
permitted successors and assigns, for the security and benefit of the Lender, a
security interest in, and mortgage lien on, all estate, right, title and
interest of the Borrower in, to and under, all and singular, the Airframe and
Engines described in Annex A attached hereto, whether or not any such Engine
shall be installed on the Airframe or any other airframe of any other aircraft,
and any and all Parts which are from time to time installed on the Airframe or
any such Engine, and, to the extent provided in the Security Agreement, all
substitutions and replacements of and additions, improvements, accessions and
accumulations to the Aircraft, the Airframe, the Engines and any and all Parts
relating thereto;
To have and to hold all and singular the aforesaid property unto the
Lender, its permitted successors and assigns, forever, in trust, upon the terms
and trusts set forth in the Security Agreement, for the benefit, security and
protection of the Lender from time to time, and for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.
This Security Agreement Supplement shall be construed as
supplemental to the 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.
THIS SECURITY AGREEMENT SUPPLEMENT IS BEING DELIVERED IN THE STATE
OF NEW YORK AND SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK.
2
IN WITNESS WHEREOF, the undersigned have caused this Supplement No._
to be duly executed by their respective duly authorized officers, on the day and
year first above written.
[BORROWER]
By:____________________________
Name:
Title:
[LENDER]
By:____________________________
Name:
Title:
Annex A to
Security Agreement
SUPPLEMENT NO.
DESCRIPTION OF AIRFRAME AND ENGINES
AIRFRAME
Manufacturer Model FAA Registration Manufacturer's
------------ ----- Number Serial No.
--------- ------------
Embraer EMB-145 model EMB-
135 KL
ENGINES
Manufacturer Model Manufacturer's
------------ ----- Serial No.
1
Rolls-Royce Corporation AE3007A1/3
Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of
such horsepower.
ANNEX A
TO LOAN AGREEMENT
AND TO SECURITY AGREEMENT
FINANCING OF ONE
EMBRAER EMB-145 MODEL EMB-135 KL AIRCRAFT
DEFINITIONS RELATING TO LOAN AGREEMENT
AND SECURITY AGREEMENT
"AFFILIATE" means with respect to a specified Person, any other
Person directly or indirectly Controlling or Controlled by or under direct or
indirect common Control with such Person.
"AIRCRAFT" means the Airframe, the Engines and the Parts.
"AIRFRAME" means (i) the Embraer model EMB-145 model EMB-135 KL
aircraft having United States registration number N375SK and Manufacturer's
serial number 145569 (except Engines and engines installed thereon) and (ii) and
any and all Parts so long as the same shall be incorporated or installed in or
attached to the Airframe, or so long as Lender's security interest shall remain
vested in Lender in accordance with the terms of the Security Agreement after
removal from the Aircraft.
"AFTER-TAX BASIS" means, with respect to any payment to be received
or accrued by any Person, the amount of such payment supplemented, if necessary,
by a further payment or payments so that the sum of all such payments, after
deduction of all Taxes actually payable to any taxing authority as a result of
the receipt or accrual of such payments shall be equal to the payment to be
received or accrued, after taking into account any Tax savings realized as a
result of the indemnified liability.
2
"APPLICABLE LAW" means all applicable laws, treaties, judgments,
decrees, injunctions, writs and orders of any Governmental Authority having
jurisdiction over the applicable party hereto and rules, regulations, orders,
directives, licenses and permits of any Governmental Authority having
jurisdiction over the applicable party hereto and all interpretations,
implementation and enforcement of any of the foregoing by any Governmental
Authority, in each case having the force of law.
"BILLS OF SALE" means the FAA Xxxx of Sale and the Warranty Xxxx of
Sale.
"BORROWER" has the meaning set forth in the recitals hereto.
"BORROWER LOAN DOCUMENTS" means the Loan Agreement, the Note, the
Security Agreement, each Security Agreement Supplement, and any other agreement
or instrument specifically agreed by the Parties hereto to be identified as a
"Borrower Loan Document" for purposes hereof.
"BORROWING DATE" means the Delivery Date.
"BRAZIL" means the Federative Republic of Brazil.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which commercial banks are authorized or required by law, regulation or
executive order to be closed in New York, New York, or Rio de Janeiro, Brazil.
"CERTIFICATED AIR CARRIER" means a Citizen of the United States
holding an air carrier operating certificate issued under Chapter 447 of the
Transportation Code for aircraft capable of carrying ten or more individuals or
6,000 pounds or more of cargo, or if such certification shall cease to be
available, an air carrier eligible for certification as to the matters
contemplated by such certification.
"CHANGE IN U.S. TAX LAW" means (a) any change after the Borrowing
Date to the Code, the Regulations or administrative guidance or (b) any formal
or informal change in any Internal Revenue Service position with respect to, or
interpretation of, U.S. Tax Law, regardless of how and when such change is
advanced, announced or articulated.
"CITIZEN OF THE UNITED STATES" has the meaning set forth in Section
40102(a)(15) of the Transportation Code.
"CLOSING" has the meaning set forth in Section 2.1 of the Loan
Agreement.
"CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time.
3
"COLLATERAL" has the meaning specified in Section 2.1 of the
Security Agreement.
"COLLATERAL DOCUMENTS" means all items of Collateral that are
agreements, instruments or other documents.
"COMMITMENT" has the meaning set forth in Schedule 2 to the Loan
Agreement.
"DEBT RATE" has the meaning set forth on Schedule 2 to the Loan
Agreement
"DEFAULT" means an event that, with the giving of notice or the
lapse of time or both, would become an Event of Default.
"DEFAULT RATE" has the meaning set forth in Schedule 2 to the Loan
Agreement.
"DELIVERY DATE" or "DATE OF ACTUAL DELIVERY" means the date on which
the Aircraft shall be delivered by the Manufacturer to the Borrower, which date
shall be the date of the Warranty Xxxx of Sale.
"DOLLARS" and "$" mean the lawful currency of the United States.
"ELIGIBLE ACCOUNT" means an account established by and with an
Eligible Institution at the request of the Lender, which institution agrees, for
all purposes of the UCC including Article 8 thereof, that (a) such account shall
be a "securities account" (as defined in Section 8-501 of the UCC), (b) all
property (other than cash) credited to such account shall be treated as a
"financial asset") (as defined in Section 8-102(9) of the UCC), (c) the Lender
shall be the "entitlement holder" (as defined in Section 8-102(7) of the UCC) in
respect of such account, (d) it will comply with all entitlement orders issued
by the Lender to the exclusion of the Borrower, and (e) the "securities
intermediary jurisdiction" (under Section 8-110(e) of the UCC) shall be the
State of New York.
"ELIGIBLE INSTITUTION" means the corporate trust department of a
depository institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any U.S. Branch
of a foreign bank), which has a long-term unsecured debt rating from Xxxxx'x and
Standard & Poor's of at least A-3 or its equivalent.
"ENGINE" means (i) unless and until replaced by a Replacement Engine
pursuant to the Security Agreement each of the two Rolls-Royce AE3007A1/3
engines, having the manufacturer's serial numbers set forth in the initial
Security Agreement Supplement, whether or not from time to time installed on the
Airframe or installed on any other airframe or any other aircraft, or (ii) any
Replacement Engine substituted for an Engine under the Security Agreement,
together in each case with any and all Parts incorporated or installed in or
attached thereto and
4
any and all Parts removed therefrom so long Lender's Security interest therein
shall remain vested in Lessor in accordance with the terms of the Security
Agreement after removal from such Engine.
"EQUIPMENT" means the Aircraft, the Airframe, any Engine and/or any
Part
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"EXCLUDED TAXES" means (i) Taxes imposed by a jurisdiction within
which Lender is incorporated or maintains its principal place of business and
(ii) Taxes that would not have been imposed but for a connection between the
Lender and the taxing jurisdiction other than the transactions contemplated
hereby, and (iii) Taxes that would not have been imposed but for Lender's, Loan
Transferee's or Loan Participant's failure to provide Borrower with any
certification in accordance with Section 2.6 of the Loan Agreement.
"EVENT OF DEFAULT" means any of the events set forth in Section 8.1
of the Loan Agreement.
"EXPENSES" means any and all liabilities, obligations, losses,
damages, settlements, penalties, claims (including, but not limited to,
negligence, strict or absolute liability, liability in tort and liabilities
arising out of violation of laws or regulatory requirements of any kind),
actions, suits, out-of-pocket costs, expenses and disbursements (including
reasonable legal fees, costs of investigation of whatsoever kind and nature and
expenses, and out-of-pocket costs and expenses relating to enforcement of, and
reasonable out-of-pocket costs and expenses relating to amendments, supplements,
waivers and consents to and under the Borrower Loan Documents.
"FAA" means the U.S. Federal Aviation Administration and any agency
or instrumentality of the U.S. Government succeeding to its functions.
"FAA APPLICATION FOR AIRCRAFT REGISTRATION" means an application for
registration of the Aircraft in the name of the Borrower on AC Form 8050-1 or
such other form approved by the FAA.
"FAA XXXX OF SALE" means the xxxx of sale for the Aircraft on AC
Form 8050-2 or such other form approved by the FAA, dated the Delivery Date,
executed by the Manufacturer in favor of the Borrower.
"FAA COUNSEL" means Daugherty, Fowler, Peregrin & Xxxxxx, or other
FAA counsel in Oklahoma City, Oklahoma, acceptable to all Parties.
5
"GAAP" means generally accepted accounting principles in the United
States.
"GOVERNMENT" means the government of the United States and any
instrumentality or agency thereof.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof and entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"IMMEDIATELY AVAILABLE FUNDS" means funds with good value on the day
and in the city in which payment is received.
"INDEMNIFIED TAXES" means any Taxes other than Excluded Taxes.
"Indemnitee" means Lender and its officers, directors, employees,
agents, servants, successors and permitted assigns of any of the foregoing
Persons.
"IRS" means the United States Internal Revenue Service or any agency
or instrumentality of the U.S. Government succeeding to its functions.
"LENDER" has the meaning set forth in the introductory paragraph of
the Loan Agreement.
"LENDER LIEN" means any Lien attributable to the Lender on or
against the Aircraft, any interest therein, or any other portion of the
Collateral, arising out of any claim against the Lender that is not related to
the Borrower Loan Documents or out of any act or omission of the Lender that is
not related to the transactions contemplated by the Borrower Loan Documents or
that constitutes a breach by it of its obligations under the Borrower Loan
Documents; PROVIDED, HOWEVER, that any Lien which is attributable solely to
Lender and would otherwise constitute a Lender Lien hereunder shall not, for the
purpose of any warranty or representation of Lender against the existence of the
same or for any covenant or obligation not to allow the same or to immediately
cause the removal of the same, constitute, for such purposes only, a Lender Lien
hereunder so long as (a) the existence of such Lien poses no material risk of
the sale, forfeiture or loss of the airframe or any Engine or any interest
therein, (b) the existence of such Lien does not interfere in any way with the
use or operation of the Aircraft by Borrower, (c) Lender is in good faith
diligently contesting such Lien by appropriate proceeding and (d), in the case
of any Lender Lien on any Engine, Borrower shall not have replaced such Engine
with a Replacement Engine pursuant to the applicable provisions of the Security
Agreement.
6
"LIEN" means any mortgage, lease, security interest, lien, title
retention arrangement or other claim or encumbrance.
"LOAN" means the loan in the amount of the Commitment, made by the
Lender pursuant to the proceeds of which are to be used for the purchase of the
Aircraft by the Borrower, such Loan to be evidenced by the Loan Agreement and
the Note.
"LOAN AGREEMENT" means the Loan Agreement (N375SK), dated as of
February 20, 2002 between the Borrower and the Lender.
"MANUFACTURER" means Embraer - Empresa Brasileira de Aeronautica
S.A., and its successors and permitted assigns.
"MATERIAL ADVERSE CHANGE" means a material adverse change since the
date of the last audited financial statements of the Borrower in the business,
operations or financial condition of the Borrower, which change has a material
adverse impact on the Borrower's ability to perform any of its obligations under
the Borrower Loan Documents to which it is a party. Without limiting the
generality of the foregoing, a material adverse change shall have occurred
within the meaning of the immediately preceding sentence if any of the following
shall occur: (i) a material financial or material non-financial default of the
Borrower in any obligation owed to Lender, (ii) any event described in Section
8.1(e) or (f) of the Loan Agreement, (iii) the termination of any of the
Borrower's existing code-sharing agreements with US Airways, Inc., and America
West Airlines, Inc., or American Airlines, Inc. (or, as applicable, with any
affiliate of such companies) and the non-replacement of such agreements by
code-sharing or other revenue generating arrangements of substantially
equivalent value within a period of one (1) month after such termination, or
(iv) the material and adverse grounding of all or a substantial portion of
Borrower's fleet of aircraft or the imposition of operating restrictions on
Borrower by any order or administrative action by the FAA or any other aviation
authority, and such order or administrative action is not applicable to regional
air carriers generally; and notwithstanding the specificity of the foregoing
clauses (i) to (iv), the first sentence of this paragraph shall be interpreted
non-exclusively in accordance with normal commercial practices.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or
a material adverse effect upon, the operations, business, properties or
financial condition of the Borrower or the Borrower and its Affiliates taken as
a whole; (b) a material impairment of the ability of the Borrower to perform its
obligations under any Borrower Loan Document; or (c) a material adverse effect
upon (i) the legality, validity, binding effect or enforceability against the
Borrower of any Borrower Loan Document to which it is a party or (ii) the
protections afforded Lender under Section 1110 of the United States Bankruptcy
Code (other than a change in United States law which would make such benefits
unavailable to aircraft leases or secured loans generally under United States
law).
7
"MATURITY DATE" has the meaning provided in Schedule 2 to the Loan
Agreement.
"MOODY'S" means Xxxxx'x Investor Service, Inc.
"NOTE" means the Note, dated the Borrowing Date, in the amount of
the Commitment and executed by the Borrower in favor of the Lender pursuant to
Section 2.2 of the Loan Agreement.
"PARTS" means all parts, appliances, components, instruments,
accessories and furnishings (other than complete engines) which are from time to
time be installed in or attached to the Airframe or to any Engine.
"PARTY" means each party to the Loan Agreement.
"PAYMENT DATE" has the meaning provided in Section 2.2(a) of the
Loan Agreement.
"PERMITTED INVESTMENTS" means the following securities (which shall
mature within 90 days of the date of purchase thereof): (a) direct obligations
of the U.S. Government; (b) obligations fully guaranteed by the U.S. Government;
(c) certificates of deposit issued by, or bankers' acceptances of, or time
deposits or a deposit account with any bank, trust company or national banking
association incorporated or doing business under the laws of the United States
or any state thereof having a combined capital and surplus and retained earnings
of at least $500,000,000 and having a rate of "C" or better from the Thomson
BankWatch Service; (d) commercial paper of any issuer doing business under the
Laws of the United States or one of the states thereof and in each case having a
rating assigned to such commercial paper by Standard & Poor's Rating Services or
Xxxxx'x Investors Service, Inc. equal to A1 or higher or (e) shares in money
market mutual or similar funds which invest substantially in assets satisfying
the requirements of clauses (a) through (d) of this definition.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
trustee(s) of a trust, unincorporated organization or Governmental Authority.
"PURCHASE AGREEMENT" means that Purchase Agreement No. GCT-025/98
dated June 17, 1998 (together with all amendments and supplements thereto),
between Solitair Corporation and Manufacturer relating to certain Embraer
EMB-145 aircraft, including the Aircraft.
"REPLACEMENT ENGINE" means a Rolls-Royce AE3007A1/3 engine or an
improved model having a value, utility, condition and remaining useful life at
least equal to the replaced Engine (assuming that such Engine was in the
condition required by the Security Agreement),
8
and being suitable for installation and use on the Airframe that is substituted
for an Engine pursuant to Section 3.3 of the Security Agreement.
"RESPONSIBLE OFFICER" means, with respect to any corporation, its
Chairman of the Board, its President, any Senior Vice President, the Chief
Financial Officer, any Vice President or the Treasurer, or any other management
employee (a) whose power to take the action in question has been authorized,
directly or indirectly, by the Board of Directors of such corporation, (B)
working under the supervision of such Chairman of the Board, President, Senior
Vice President, Chief Financial Officer, Vice President or Treasurer and (C)
whose responsibilities include the administration of the transactions and
agreements contemplated by the Loan Agreement and the Security Agreement.
"SECTION 1110" means Section 1110 of the United States Bankruptcy
Code, or any successor or replacement provision of the United States Bankruptcy
Code.
"SECURITY AGREEMENT" means the Security Agreement, dated as of the
date of the Loan Agreement, between the Borrower and the Lender, including all
annexes, schedules, exhibits, appendices and supplements thereto.
"SECURITY AGREEMENT SUPPLEMENT" means (A) the Security Agreement
Supplement No. 1, substantially in the form of Exhibit A to the Security
Agreement, dated the Borrowing Date, which shall describe with particularity the
Airframe and the Engines and which creates a security interest in the Airframe
and Engines and (B) any other supplement to the Security Agreement from time to
time executed and delivered by the Borrower pursuant to the Security Agreement.
"SPECIFIED DEFAULT" means (a) an event or condition described in
Section 3.3.1(a), (e) or (f) that, after the giving of notice or lapse of time,
or both, would become an Event of Default, or (b) any Event of Default.
"SUBSIDIARY" means, as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.
"TAX" and "TAXES" mean any and all fees and taxes imposed or
asserted by any Governmental Authority, including income, gross receipts, sales,
rents, use, turnover, value added, property, excise and stamp taxes, license,
levies, imposts, duties, recording charges or fees, charges, assessments or
withholding of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax and interest thereon.
9
"TERM" means the period between the Borrowing Date and the Maturity
Date.
"TOTAL INVOICE COST" has the meaning provided on Schedule 2 to the
Loan Agreement.
"TOTAL LOSS" of an Item means the occurrence of any of the
following:
(i) any theft, hijacking or disappearance of such property for a
period of 60 consecutive days or more or, if earlier for a period that
extends until the end of the Term;
(ii) destruction, damage beyond economic repair or rendition of such
property permanently unfit for normal use for any reason whatsoever;
(iii) any event which results in an insurance settlement with
respect to such property on the basis of an actual, constructive or
compromised total loss;
(iv) condemnation, confiscation or seizure of, or requisition of
title to or use of such property by any foreign government or purported
government (or in the case of any such requisition of title, by the
Government) or any agency or instrumentality thereof, for a period in
excess of (A) in the case of any requisition of use, 30 consecutive days
or (B) in the case of any condemnation, confiscation or seizure of, or
requisition of title, 10 consecutive days, or, in any of the cases in this
clause (iv), such shorter period ending on the expiration of the Term;
(v) condemnation, confiscation or seizure of, or requisition of use
of such property by the Government for a period extending beyond the Term;
(vi) as a result of any law, rule, regulation, order or other action
by the FAA, the use of the Aircraft or Airframe in the normal course of
air transportation shall have been prohibited by virtue of a condition
affecting all Embraer model EMB-145 model EMB-135 KL aircraft equipped
with engines of the same make and model as the Engines for a period of 120
consecutive days (or beyond the end of the Term), unless the Borrower,
prior to the expiration of such 120-day period, shall be diligently
carrying forward all necessary and desirable steps to permit normal use of
the Aircraft and shall within 3 months have conformed at least one Embraer
model EMB-145 model EMB-135 KL aircraft (but not necessarily the Aircraft)
to the requirements of any such law, rule, regulation, order or action,
and shall be diligently pursuing conformance of the Aircraft in a
non-discriminatory manner provided that, notwithstanding the foregoing, if
such normal use of such property subject to the Lease shall be prohibited
at the end of the Term, or if such normal use of such property shall be
prohibited for a period of six (6) consecutive months, a Total Loss shall
be deemed to have occurred; and
10
(vii) with respect to an Engine only, the requisition or taking of
use thereof by any government, and any divestiture of title or ownership
deemed to be a Total Loss with respect to an Engine under Section 3.3(b)
of the Security Agreement.
The date of such Total Loss shall be (aa) the 31st day following
loss of such property or its use due to theft or disappearance or the 91st day
following such loss if such period shall have been extended (or the end of the
Term if earlier); (bb) the date of any destruction, damage beyond economic
repair or rendition of such property permanently unfit for normal use; (cc) the
date of any insurance settlement on the basis of an actual, constructive or
compromised total loss; (dd) the 31st day following condemnation, confiscation,
seizure or requisition of title to such property by a foreign government
referred to in clause (iv) above (or the 11th day in the case of appropriation
of title), or the end of the Term if earlier than such 31st or 11th day; (ee)
the last day of the Term in the case of requisition of title to or use of such
property by the Government; and (ff) the last day of the applicable period
referred to in clause (vi) above (or if earlier, the end of the Term without the
Borrower's having conformed at least one Embraer model EMB-145 model EMB-135 KL
aircraft to the applicable requirements). A Total Loss with respect to the
Aircraft shall be deemed to have occurred if any Total Loss occurs with respect
to the Airframe.
"TRANSPORTATION CODE" means 49 U.S.C. subtitle VII, as amended, and
any successor statute thereto.
"UNITED STATES" and "U.S." each means the United States of America.
"UNITED STATES PERSON" shall have the meaning given such term in
Section 7701(a)(30) of the Code.
"U.S. TAX LAW" includes the Code, any regulations promulgated or
proposed thereunder (the "Regulations") and any private letter rulings as of
November 30, 2001 (as though such rulings have the force of law), in each case.
"WARRANTY XXXX OF SALE" means the full warranty xxxx of sale
covering the Aircraft (together with the FAA Xxxx of Sale collectively called
"Bills of Sale"), executed by the Manufacturer in favor of the Borrower, dated
the Delivery Date, and specifically referring to each Engine, as well as to the
Airframe, constituting a part of the Aircraft.
11
SECURITY AGREEMENT SUPPLEMENT XX. 0
XXXXXXXX XXXXXXXXX XXXXXXXXXX XX. 0, dated February 20, 2002,
("Security Agreement Supplement"), between Chautauqua Airlines, Inc. (the
"Borrower") and Embraer-Empresa Brasileira de Aeronautica S.A., as the Lender
under the Security Agreement (each as hereinafter defined).
W I T N E S S E T H:
WHEREAS, the Aircraft Security Agreement (N375SK), dated as of
February 20, 2002 (the "Security Agreement"; capitalized terms used herein
without definition shall have the meanings specified therefor in Annex A to the
Security Agreement), between the Borrower and Embraer-Empresa Brasileira de
Aeronautica S.A. (the "Lender"), provides for the execution and delivery of
supplements thereto substantially in the form hereof which shall particularly
describe the Aircraft, and shall specifically grant a security interest in the
Aircraft to the Lender; and
WHEREAS, the Security Agreement relates to the Airframe and Engines
described in Annex A attached hereto and made a part hereof, and a counterpart
of the Security Agreement is attached to and made a part of this Security
Agreement Supplement;
NOW, THEREFORE, to secure the prompt and complete payment (whether
at the stated maturity, by acceleration or otherwise) of all principal of,
interest on and all other amounts payable by the Borrower under the Note, the
Security Agreement, the Loan Agreement and the other Borrower Loan Documents now
in existence or hereafter incurred, and the performance and observance by the
Borrower of all the agreements and covenants to be performed or observed by it
for the benefit of the Lender contained in the Borrower Loan Documents, and in
consideration of the Note and the premises and of the covenants contained in the
Security Agreement and the other Borrower Loan Documents, and of other good and
valuable consideration given to the Borrower by the Lender at or before the
delivery hereof, the receipt of which is hereby acknowledged, the Borrower has,
on the terms specified in and subject to the limitations provided in the
Security Agreement, granted, bargained, sold, conveyed, transferred, mortgaged,
assigned, pledged and confirmed, and does hereby grant, bargain, sell, convey,
transfer, mortgage, assign, pledge and confirm, unto the Lender and its
permitted successors and assigns, for the security and benefit of the Lender, a
security interest in, and mortgage lien on, all estate, right, title and
interest of the Borrower in, to and under, all and singular, the Airframe and
Engines described in Annex A attached hereto, whether or not any such Engine
shall be installed on the Airframe or any other airframe of any other aircraft,
and any and all Parts which are from time to time installed on the Airframe or
any such Engine, and, to the extent provided in the Security Agreement, all
substitutions and replacements of and additions, improvements, accessions and
accumulations to the Aircraft, the Airframe, the Engines and any and all Parts
relating thereto;
To have and to hold all and singular the aforesaid property unto the
Lender, its permitted successors and assigns, forever, in trust, upon the terms
and trusts set forth in the Security Agreement, for the benefit, security and
protection of the Lender from time to time, and for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.
This Security Agreement Supplement shall be construed as
supplemental to the Security Agreement and shall form a part thereof, and the
Security Agreement is hereby incorporated by reference
1
herein and is hereby ratified, approved and confirmed.
THIS SECURITY AGREEMENT SUPPLEMENT IS BEING DELIVERED IN THE STATE
OF NEW YORK AND SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned have caused this Supplement No.
1 to be duly executed by their respective duly authorized officers, on the day
and year first above written.
Chautauqua Airlines, Inc.
By:____________________________
Name:
Title:
Embraer-Empresa Brasileira de Aeronautica S.A.
By:____________________________
Name:
Title:
2
Annex A
to
SECURITY AGREEMENT SUPPLEMENT NO. 1
DESCRIPTION OF AIRFRAME AND ENGINES
AIRFRAME
Manufacturer Model FAA Registration Manufacturer's
------------ ----- Number Serial No.
--------- ------------
Embraer EMB-EMB-145 model N375SK 145569
EMB-135 KL
ENGINES
Manufacturer Model Manufacturer's
------------ ----- Serial No.
------------
Rolls-Royce AE3007A1/3 CAE312062 and
Corporation CAE312065
Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of
such horsepower.
3
NOTE TO EXHIBIT 10.59
The three additional Aircraft Security Agreements are substantially identical
in all material respects to the filed Aircraft Security Agreement except as
follows:
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TAIL NUMBER CLOSING DATE OWNER-PARTICIPANT
------------------------------------- ----------------------------------- -----------------------------------
N372SK December, 2001 Embraer
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N373SK December, 2001 Embraer
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N374SK December, 2001 Embraer
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