SPARE ENGINE CHATTEL MORTGAGE
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(CF6-80C2 SPARE ENGINE POOL)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of April 25, 2000
(this "Mortgage"), and entered into by and between ATLAS FREIGHTER LEASING III,
INC., a Delaware corporation (the "Company" or "Lessor") and BANKERS TRUST
COMPANY, as administrative agent for and representative of (in such capacity,
the "Agent") the financial institutions (the "Lenders") party to the Credit
Agreement referred to below.
PRELIMINARY STATEMENTS
The Company has entered into a credit agreement dated as of April 25, 2000,
(said credit agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with the
Lenders and the Agent, pursuant to which the Lenders have agreed, on the terms
and conditions set forth in the Credit Agreement, to make term loans to the
Company in the principal amount of up to $300 million (the "Loans") to enable
the Company to refinance certain indebtedness currently encumbering the Spare
Engine Collateral (as defined below). The indebtedness with respect to the Loans
made by the Lenders is to be evidenced by certain promissory notes of the
Company to the order of the Lenders of even date herewith issued under and
pursuant to the Credit Agreement (such promissory notes, as they may be amended,
modified, supplemented, renewed, converted or extended from time to time, being
the "Notes"). It is a condition precedent to the making by the Lenders of the
Loans under the Credit Agreement that this Mortgage be executed, delivered and
filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make the Loans, the Company hereby agrees with the Agent as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by the Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
the Company under the Credit Agreement, this Mortgage and the other Loan
Documents (all such payment and performance obligations of the Com-
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pany, the "Secured Obligations"), the Company hereby mortgages to the Agent, for
the benefit of the Lenders, and their respective successors and assigns, and
hereby grants and assigns to the Agent, for the benefit of the Lenders, and
their respective successors and assigns, a first priority security interest in
each Spare Engine (the "Spare Engine Collateral") and a first priority security
interest in all estate, right, title and interest of the Company in, to and
under, the other below described property wherever the same may be located (the
"Spare Engine Related Collateral"):
(a) Spare Engine Collateral. All of the Company's right, title and
interest in and to:
(i) each of the engines that are listed in Schedule I hereto or
which are described in a Supplemental Chattel Mortgage (a
"Supplemental Chattel Mortgage") substantially in the form of Exhibit
A attached hereto, supplementing this Mortgage, and listed by
manufacturer's serial number in such Schedule or in such Supplemental
Chattel Mortgage, whether or not from time to time thereafter
installed on any Aircraft or on any other aircraft or airframe, and
any replacement engine that may be substituted for such engine in
accordance with the provisions of Section 4(f) hereof or Section 9.21A
of the Credit Agreement, together, in each case, with any and all
Parts incorporated or installed in or attached thereto and any and all
Parts removed therefrom, until such Parts are replaced in accordance
with Section 4(e) hereof (each such engine, and replacement engine,
together with any and all such Parts, hereinafter referred to as an
"Engine" and collectively, the "Engines");
(ii) all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other
than complete Engines or engines), that may from time to time be
incorporated or installed in or attached to any Engine, including all
such appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment purchased by the Company for
incorporation or installation in or attachment to any Engine pursuant
to the terms of any agreement whether or not identified in a
Supplemental Chattel Mortgage (collectively referred to herein as
"Parts"); and
(iii) all records, logs and other materials required by
applicable law or regulation to be maintained and all other records,
logs and materials maintained in the ordinary course of business with
respect to the properties described in paragraphs (i) and (ii) above
(together with such Engines, the "Spare Engines").
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(b) Spare Engine Related Collateral. All of the Company's right, title
and interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to the Company after termination of the Lease with
respect to the Spare Engines as the result of the sale, lease or other
disposition thereof, and all estate, right, title and interest of
every nature whatsoever of the Company in and to the same and every
part thereof;
(ii) all monies and securities deposited or required to be
deposited with the Agent pursuant to any term of this Mortgage and
held or required to be held by the Agent hereunder or paid to the
Agent in accordance with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of
the Company (including such indemnities, rights of assignment, rights
and remedies for breach of any warranty and/or claims for damages,
rights to receive title to parts and materials to the extent same
relates to any Engine including any agreement assigned therewith;
(iv) all amounts payable to the Company by any manufacturer,
supplier or vendor of any of the Spare Engine Collateral or any
component thereof pursuant to any warranty or indemnity covering any
such Spare Engine Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any loss, confiscation, condemnation,
requisition or other taking of any Spare Engine Collateral to the
extent payable to the Company under the Lease or to the Agent
hereunder;
(vi) the Lease, including without limitation all Basic Rent (as
defined in the Lease), Supplemental Rent (as defined in the Lease),
insurance proceeds, requisition, indemnity and other payments of any
kind thereunder, and including all rights of the Company, as lessor,
to execute any election or option or to give any notice, consent,
waiver or approval under or in respect of the Lease or to accept any
surrender of any Engine or any part thereof, as well as any rights,
powers or remedies on the part of the Lessor, whether arising under
the Lease
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or by statute or at law or in equity, or otherwise, arising out of any
Lease Event of Default (as defined in the Lease), including, without
limitation, all rights under Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any loss
or damage to any Engine.
The Company shall deliver to the Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Spare Engines.
All property referred to in this granting clause, whenever acquired by the
Lessor under the Lease, shall secure all Secured Obligations. The Company does
hereby warrant and represent that it has not assigned or pledged, and hereby
covenants that it will not assign or pledge, so long as the assignment hereunder
shall remain in effect, any of its right, title or interest hereby assigned to
anyone other than the Agent, and that it will not, except as provided herein or
in the Credit Agreement, enter into any agreement amending or supplementing any
purchase agreement, modification agreement to the extent such agreement relates
to the Spare Engines, or execute any waiver or modification of, or consent
under, any such agreement, or settle or compromise any claim arising under any
such agreement or submit or consent to the submission of any dispute, difference
or other matter arising under or in any respect of any such agreement to
arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Acceptable Alternate Engine" means a General Electric CF6-80C2 aircraft
engine or an engine of the same or another manufacturer of equivalent or greater
residual value, condition, utility, airworthiness, and remaining useful life and
suitable for installation and use on one of the Aircraft or one of the Boeing
747-400 aircraft operated by the Lessee; provided, that such engine shall be of
the same make, model and manufacturer as the other engines installed on the
Aircraft or Boeing 747-400 aircraft operated by the Lessee, shall be an engine
of a type then being utilized by the Lessee on other Boeing 747-200 or 747-400
operated by the Lessee, and shall have been maintained, serviced, repaired and
overhauled in substantially the same manner as required under the Lease without
in any way discriminating against such engine.
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"ACMI Contract" means (i) any contract entered into by the Lessee pursuant
to which the Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all in accordance with the Lessee's
historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and recodified in
▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, or any similar legislation of the United States
enacted to supersede, amend or supplement such Act and the rules and regulations
promulgated thereunder.
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" means any Aircraft as defined in the Credit Agreement.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary Statements.
"Domestic Air Carrier" means any United States "domestic air carrier," as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of April 25, 2000, by
and between Atlas Freighter Leasing III, Inc., as Lessor, and Atlas Air, Inc.,
as Lessee, for the lease of the Spare Engine Pool, together with any amendments,
modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc., a Delaware corporation.
"Lessor" has the meaning specified in the first paragraph of this Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
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"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engine Collateral" has the meaning specified in Section 1 hereof.
"Spare Engine Related Collateral" has the meaning specified in Section 1
hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
The Company hereby represents and warrants that, in the case of each Engine
initially or subsequently mortgaged hereunder on the date such Engine is
mortgaged hereunder as follows:
(a) The Company has good and marketable title to the Spare Engine
Collateral free and clear of all Liens except for the lien of this Mortgage
and Permitted Encumbrances and the Lease and has full power and authority
to mortgage and grant the lien and security interest in the Spare Engine
Collateral and Spare Engine Related Collateral intended by the terms hereof
and in the manner aforesaid and has not assigned or pledged any of its
right, title or interest hereby assigned to anyone other than the Agent.
(b) The Company is a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code.
(c) Ownership of each of the Engines is duly registered in the name of
the Company in accordance with the Act; and the Spare Engines are not
registered under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against such Engine.
(e) An airworthiness certificate has been duly issued under the Act
for each of the Engines (evidence of which has been supplied to the Agent),
and the airworthiness certificate for the Engines is in full force and
effect.
(f) Each of the Engines is in such condition so as to comply with the
requirements of Section 4(c) hereof; and the insurance required by Section
4(g) hereof is in full force and effect.
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(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
the Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first
priority mortgage on and security interest in the Spare Engine Collateral,
securing the payment and performance of the Secured Obligations.
(h) The Company has delivered to the Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the States of
Colorado and New York and such other states as may be required with respect
to that portion of the Spare Engine Collateral not covered by the filing
system established under the Act and with respect to the Spare Engine
Related Collateral; and except for the filings described in this paragraph
and in paragraph (d) above of this Section 3, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Spare Engine Collateral and Spare Engine Related
Collateral under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of the
Company is located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 4. Covenants.
The Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. The Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the Spare
Engine Collateral, or Spare Engine Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted
Encumbrances, including the Lease. The Company will promptly, at its own
expense, take such action as may be necessary to duly discharge any such
Lien not excepted above if the same shall arise at any time.
(b) Taxes. The Company will pay, and hereby indemnifies the Agent from
and against, any and all fees and taxes, levies, imposts, duties, charges
or withholdings, together with any penalties, fines or interest thereon
(any of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against the
Agent or any Lender or any Engine or any part thereof or interest therein
by any Federal, state or local government or other taxing authority in the
United States or by any foreign government or subdivision thereof or by any
foreign taxing authority in connection with, relating to or resulting from:
(i) any Engine or any part thereof of interest therein; (ii) the
manufacture, purchase,
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ownership, mortgaging, lease, sublease, use, storage, maintenance, sale or
other disposition of any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Mortgage; provided, however, that there shall
be excluded from any indemnification any Lessor Tax (as defined in the
Lease) and unless the payment of any such Tax shall be a condition to the
enforceability of this Mortgage or the perfection of the lien hereof or
unless proceedings shall have been commenced to foreclose any lien which
may have attached as security for such Tax, nothing in this Section shall
require the payment of any Tax so long as and to extent that validity
thereof shall be contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and the Company shall have set
aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. The Company, at its own
cost and expense, (i) will be a "citizen of the United States" as defined
in Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Engines to be duly registered and remain duly registered
in the United States of America in the name of the Company in accordance
with the Act; and (iii) will cause the Lessee to service, repair, inspect,
test, maintain, overhaul each Engine and install replacement equipment and
parts on each Engine (A) so as to keep each Engine in such operating
condition as may be required to permit each Engine to be utilized in
commercial operations, (B) so as to enable the airworthiness certification
of the Engines to be maintained in good standing at all times under the
Act, except when engines of the same type, model or series as the Engines
registered in the United States have been grounded by the FAA; provided,
however, that if following its issuance, the United States FAA
airworthiness certificate of any Engine shall be withdrawn, then subject to
the provisions of Section 4(f) hereof, so long as the Company is diligently
taking or causing to be taken all necessary action to promptly correct the
condition which caused such withdrawal, no Event of Default shall arise
from such withdrawal, (C) in accordance with the Lessee's FAA-approved
maintenance, inspection and maintenance control programs, and in the same
manner and with the same care used by the Lessee with respect to the same
or similar aircraft and engines owned or operated by the Lessee so as to
keep the same in as good operating condition as when originally mortgaged
hereunder, ordinary wear and tear excepted, which practices shall at all
times be at or above the standard of the industry in the United States for
prudent maintenance of similar equipment, and (D) in such manner as may be
necessary to maintain in full force all warranties of the manufacturers
thereof. The Company shall maintain, or shall cause Lessee to maintain, all
records, logs and other materials which may be required to permit each
Engine to be so utilized.
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The Company will comply in all material respects with all
airworthiness directives, mandatory notes or modifications or similar
requirements affecting the same (including those issued by the manufacturer
or supplier) in such condition so as to comply with the provisions of this
Mortgage and the rules and regulations of the FAA from time to time in
force and applicable to the Engines. No Engine will be maintained, used or
operated in violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign), or in violation of any airworthiness certificate, license or
registration relating to such Engine issued by any such authority, and in
the event that such laws, rules, regulations or orders require alteration
of any Engine, the Company, at its own cost and expense, will conform
thereto or obtain conformance therewith and will maintain the same in
proper operating condition under such laws, rules, regulations and orders;
provided, however, that the Company may, in good faith (after having
delivered to the Agent an Officer's Certificate stating the facts with
respect thereto), contest the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not, in the
Agent's opinion, adversely affect the interests under this Mortgage of the
Agent or any Lender.
The Company will not operate, use or locate any Engine, (I) in any
area in which any insurance required to be maintained pursuant to Section
4(g) shall not be at the time in full force and effect, or in any area
excluded from coverage by an insurance policy in effect with respect to any
such Engine, except in the case of a requisition for use by the United
States of America, and then only if Company obtains indemnity or "war risk"
insurance in lieu of such insurance from the United States of America
against the risks and in the amounts required by said Section covering such
area, or (II) in any recognized or threatened area of hostilities unless
fully covered to the Agent's satisfaction by war risk and political risk
and allied perils insurance or unless any such Engine is operated or used
under contract with the Government of the United States of America under
which contract that Government provides "war risk" insurance or assumes
liabilities for any damages, loss, destruction or failure to return
possession of any such Engine at the end of the term of such contract and
for injury to persons or damage to property of others.
The Company shall not use any Engine nor suffer it to be used in any
manner or for any purpose excepted from any of the insurance on or in
respect of any such Engine or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit to be done,
anything which, or admit to do anything the admission of which, may
invalidate any of such insurance.
(d) Possession. The Company will not, without the prior written
consent of the Agent, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish
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possession or control of, or transfer the right, title or interest of the
Company in, any Engine except that the Company may enter into and perform
all provisions and terms of the Lease and the Lessee or the Company, unless
a Potential Event of Default or Event of Default shall have occurred and be
continuing, without the prior written consent of the Agent, may take the
following actions so long as the actions to be taken shall not deprive the
Agent of the first priority Lien of this Mortgage on the assets subject
hereto and so long as the actions to be taken shall not deprive the Company
as Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to any of the Engines nor shall such actions deprive the Agent of
the protections of Section 1110 of the Bankruptcy Code with respect to any
of the Engines as assignee of the Company's rights under this Mortgage:
(i) transfer possession of any Engine other than by lease to the
United States of America or any instrumentality thereof pursuant to
the Civil Reserve Air Fleet Program (as administered pursuant to
Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of any Engine to the manufacturer
thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by the Company or the Lessee in the
ordinary course of business that do not contemplate or require the
transfer of title to, or use for the remainder of the useful life of,
any such Engine; provided, however, that if the Company's title to or
use for the remainder of its useful life of any Engine shall be
divested under any such agreement or arrangement, such divesture shall
be deemed to be an Event of Loss with respect to such Engine and the
Company shall comply with Section 4(f) in respect thereof;
(iv) install Engine on an airframe that is owned by the Lessee,
provided that such airframe is free and clear of all Liens on property
of the Lessee except (A) Liens permitted under the Lease, (B) Liens
that apply only to the engines (other than the Engines), appliances,
parts, instruments, appurtenances, accessories, furnishings and other
equipment (other than Parts) installed on such airframe (but not to
the airframe as an entirety), and (C) the rights of any Domestic Air
Carrier, under normal interchange agreements which are customary in
the airline industry and do not contemplate or require the transfer of
title to such airframe or the engines installed thereon;
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(v) install Engine on an airframe leased to the Lessee or owned
by the Lessee subject to a conditional sale or other security
agreement, provided that: (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease or conditional
sale or other security agreement covering such airframe and except
Liens of the type permitted by clause (iv) above and (B) the Agent
shall have received from the lessor, conditional vendor or secured
party and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party of such airframe a written
agreement (which may be the lease, conditional sale agreement or
mortgage covering such airframe), whereby such lessor, conditional
vendor or secured party and each of the purchasers, mortgagees and
encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors
and assigns will acquire or claim any right, title or interest in any
Engine by reason of such Engine being installed on such airframe at
any time when such Engine is subject to this Mortgage;
(vi) install Engine on an airframe owned or leased by the Lessee
subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided, that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and the Company shall comply with
Section 4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for any Engine with any third party pursuant to
which the Company has operational control of the Engines installed
thereon, such operation to be performed solely by individuals under
the operational control of the Company possessing all current
certificates and licenses that would be required under the applicable
laws of the United States for the performance by such employees of
similar functions within the United States; provided, that the
Company's obligations hereunder shall continue in full force and
effect notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives
possession of any Engine permitted by the terms hereof shall be made
subject and subordinate to, and the Leases shall be made expressly
subject and subordinate to, the lien and security interest of this
Mortgage and all of the Agent's rights hereunder and the Company shall
remain primarily liable hereunder for the performance of all the terms
of this Mortgage to the same extent as if such transfer had not
occurred, and any such instrument of transfer shall include
appropriate provisions for the maintenance and insurance of such
Engine, and any such in-
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strument of transfer (other than the Lease) shall expressly prohibit
any further transfer of such Engine or any assignment of the rights
thereunder; and provided further, that no such lease, pooling
arrangement or other transfer or relinquishment of the possession of
any Engine shall in any way discharge or diminish any of the Company's
obligations to the Agent hereunder or under the Credit Agreement. In
the event that the Agent shall have received from the lessor,
conditional vendor or secured party of any airframe leased to the
Lessee or purchased by the Lessee subject to a conditional sale or
other security agreement, a written agreement complying with clause
(B) of Section 4(d)(v), and the lease or conditional sale or other
security agreement covering such airframe also covers an engine,
engines or spare engines owned by the lessor under such lease,
conditionally owned by the conditional vendor under such conditional
sale agreement, or subject to such security agreement, the Agent
hereby agrees for the benefit of such lessor, conditional vendor or
secured party that the Agent will not acquire or claim, as against
such lessor, conditional vendor or secured party, any right, title or
interest in any such engine or spare engine as the result of such
engine or spare engine being installed on an airframe at any time
while such engine or spare engine is subject to such lease or
conditional sale or other security agreement and owned by such lessor,
conditionally owned by such conditional vendor or subject to such
security agreement.
(e) Replacement and Pooling of Parts; Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), the
Company, at its own cost and expense, will promptly replace all Parts,
that may from time to time be incorporated or installed in or attached
to any Engine and that may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In
addition, in the ordinary course of maintenance, service, repair or
testing, the Company at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use; provided,
that, except as otherwise provided in Section 4(e)(iv), the Company at
its own cost and expense shall replace such Parts as promptly as
practicable. All replacement Parts shall be owned by the Company free
and clear of all Liens (except Permitted Encumbrances and the Lease,
and for pooling arrangements to the extent permitted by Section
4(e)(ii)), and shall be in as good operating condition as, and shall
have a value and utility at least equal to, the Parts replaced
assuming such property were in the condition and repair required to be
maintained by the terms hereof.
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All Parts at any time removed from any Engine shall remain the
property of the Company and shall remain subject to the lien and
security interest of this Mortgage, no matter where located until such
time as such Parts shall be replaced by parts that have been
incorporated or installed in or attached to any Engine and which meet
the requirements for replacement parts specified above. Immediately
upon any replacement Part becoming incorporated or installed in or
attached to any Engine as above provided, without further act, (A)
title to such replacement Part shall vest in and such replacement part
shall become the property of the Company and shall become subject to
the lien and security interest of this Mortgage and shall be deemed
part of such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Engine, and (B)
title to the replaced part shall no longer be the property of the
Company and shall thereupon become free and clear of all rights of the
Agent hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from any Engine as provided in Section
4(e)(i) may be subjected by the Company or the Lessee to a normal
pooling arrangement of the type customary in the airline industry
entered into by the Lessee in the ordinary course of its business and
entered into with Domestic Air Carriers that are not the subject of
any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided that the Part replacing such removed Part shall
be incorporated or installed in or attached to such Engine in
accordance with Section 4(e)(i) as promptly as possible after the
removal of such removed part. In addition, any replacement Part when
incorporated or installed in or attached to any Engine in accordance
with Section 4(e)(i) may be owned subject to such a pooling
arrangement, provided that the Company, at its expense, as promptly
thereafter as possible, either (A) causes such replacement Part to
become subject to the lien and security interest of this Mortgage in
accordance with Section 4(e)(i) by the Company's acquiring title
thereto for the benefit of the Agent free and clear of all Liens
(except Permitted Encumbrances and the Lease) or (B) replaces such
replacement Part by incorporating or installing in or attaching to
such Engine a further replacement Part owned by the Company free and
clear of all Liens (except Permitted Encumbrances and the Lease).
(iii) The Company, at its own cost and expense, shall make or
cause to be made such alterations and modifications in and additions
to the Engines as may be required from time to time to meet the
standards of the FAA or other governmental authority having
jurisdiction; provided, that the Company may, in good faith, contest
the validity or application of any such standard in any reasonable
matter that shall not adversely affect the Lien of this Mortgage or
Lenders' interests therein. The Company also agrees, at its own cost
and expense, to make or cause to be made such alterations and
modifications in and additions to the Engines as may be required from
time to
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time to meet the standards or requirements of any directive issued by
a manufacturer relating to any Engine. In addition, so long as no
Potential Event of Default or Event of Default shall have occurred and
be continuing, the Company, at its own cost and expense, may from time
to time make such alterations and modifications in and additions to
any Engine as the Company may deem desirable in the proper conduct of
its business or to accommodate the business of the Lessee, provided
that no such alteration, modification or addition diminishes the value
or utility or impairs the condition or airworthiness of such Engine
below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition,
assuming that such Engine were then in the condition and airworthiness
required to be maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to any Engine as the result of such alteration, modification or
addition shall, without further act, become the property of, and title
to such parts shall vest in the Company and shall be subject to the
lien and security interest of this Mortgage; provided, that, so long
as no Potential Event of Default or Event of Default shall have
occurred and be continuing, the Company may remove and not replace any
such Part if it (A) is in addition to, and not in replacement of or in
substitution for, any Part incorporated or installed in or attached to
such Engine on the date hereof, on the date the Engine first becomes
subject to the lien of this Mortgage, or any Part in replacement of or
substitution for any such Part, (B) is not required to be incorporated
or installed in or attached or added to such Engine pursuant to the
terms of Section 4(c) hereof or any other provision of this Mortgage
and (C) can be removed from such Engine without diminishing or
impairing the value, utility or airworthiness that such Engine would
have had at such time had such alteration, modification or addition
not occurred, assuming that the Spare Engine was otherwise in the
condition required by this Mortgage. Upon the removal by the Company
of any such Part, as above provided, title thereto shall, without
further act, be free and clear of all rights of the Agent hereunder
and such Part shall no longer be deemed a Part hereunder.
(v) The Company will ensure that, pursuant to the terms of the
Lease, all obligations of the Company pursuant to this Section 4(e)
shall be performed by the Lessee, at the Lessee's own cost and
expense, and all Parts and alterations, improvements or modifications
in and additions to any of the Engines shall become subject to the
Lien of this Mortgage and shall be leased to the Lessee under the
applicable Lease.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to any Engine,
the Company will promptly notify the Agent thereof in writing (in any
event within five (5) days of
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such occurrence) and will, not later than 180 days after the receipt
of Proceeds in connection with such Event of Loss, mortgage hereunder,
by complying with all of the terms of subsection (ii) below and
otherwise taking all necessary actions to provide that the Company
(and the Agent upon foreclosure of the Company's interest in the
Lease) will continue to be entitled to the benefits of Section 1110 of
the Bankruptcy Code with respect to the replacement engine referred to
below, an Acceptable Alternate Engine free of all Liens (other than
Permitted Encumbrances and the Lease). Upon compliance with the
preceding sentence within such 180-day period, the Agent will execute
and deliver to the Company a partial release, in recordable form,
releasing the lien of this Mortgage to the extent that it covers such
Engine with respect to which such Event of Loss has occurred. Such
Acceptable Alternate Engine shall thereupon constitute an "Engine" for
all purposes hereof and shall be deemed to constitute part of the
Spare Engine Collateral.
(ii) Whenever the Company shall subject any Engine to the lien
and security interest of this Mortgage (as contemplated by paragraph
(i) above), the Company will on or prior thereto:
(A) deliver to the Agent and duly file for recording under
the Act, a Supplemental Chattel Mortgage substantially in the
form of Exhibit A hereto duly executed by the Company
appropriately describing such engine to be subjected to the lien
and security interest of this Mortgage;
(B) deliver to the Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required at
such time) covering the security interest created by this
Mortgage to perfect the security interest of the Agent in the
Engine to be subjected to the lien and security interest of this
Mortgage;
(C) deliver to the Agent an Officers' Certificate dated the
date of execution of said Supplemental Chattel Mortgage, stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Engine and the
Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
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(III) that all conditions precedent contemplated in
this Section 4(f)(ii) have been complied with;
(D) furnish the Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Engine as the Agent may reasonably request;
(E) furnish the Agent with a warranty (as to title) ▇▇▇▇ of
sale, in form and substance reasonably satisfactory to the Agent
with respect to such Engine;
(F) furnish the Agent with such evidence of title such as
the ▇▇▇▇ of sale as the Agent may reasonably request concerning
such Engine;
(G) cause to be delivered to the Agent an appraisal by the
Approved Appraisers relating to the Engine to be subjected to the
lien and the security interest of this Mortgage stating that it
has a value and utility at least equal to, and in as good
operating condition as the Engine subject to such Event of Loss
immediately prior to such Event of Loss, assuming compliance by
the Company with all the terms of this Mortgage with respect to
such Engine; and
(H) cause to be delivered to the Agent an opinion or
opinions of counsel dated the date of execution of such
Supplemental Chattel Mortgage, stating:
(I) that the Engine specifically described in said
Supplemental Chattel Mortgage, is free and clear of all
recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company, and
(2) creates a valid, perfected and first priority security
interest in and to the Engine described in said Supplemental
Chattel Mortgage, enforceable against all third parties and
securing the payment of all obligations purported to be
secured thereby and that all action required to perfect
fully such security interest has been taken and completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the provisions
of the Act to continue the perfection and priority of the
security interest intended to be created by the Mortgage,
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(IV) that the Company (and the Agent upon succeeding to
the Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Engine described in
said Supplemental Chattel Mortgage, and
(V) as to such other matters as the Agent may
reasonably request.
Promptly upon the recording of each Supplemental Chattel
Mortgage under the Act, the Company will cause to be delivered to the
Agent an opinion of counsel for the Company as to the due recording of
such Supplemental Chattel Mortgage in accordance with the Act.
(iii) With respect to any Engine as between the Agent and the
Company, any payments on account of an Event of Loss (other than
insurance proceeds or other payments the application of which is
provided for in Section 4(g) below and under the terms of the Credit
Agreement) received from any government authority or other person
shall be applied as follows:
(A) if such payments are received with respect to an Event
of Loss to an Engine that has been or is being replaced by the
Company pursuant to the terms hereof, so long as there shall
exist no Event of Default or Potential Event of Default, such
payment shall be paid over to or retained by the Company or the
Lessee upon satisfaction of the conditions for replacement
contained in paragraph (ii) above and until such time shall be
held by the Agent in accordance with the provisions hereof as
security for the Secured Obligations; and
(B) if such payments are received with respect to an Event
of Loss with respect to which no replacement is being effected,
such payments shall be applied to the prepayment of the Notes
required pursuant to the terms of the Credit Agreement and shall
be held pursuant to the terms of this Mortgage, and the balance,
if any, shall be paid over to or retained by the Company.
(iv) In the event of a requisition for use by the United States
Government of any Engine, the Company shall promptly notify the Agent
of such requisition and all of the Company's obligations under this
Mortgage shall continue to the same extent as if such requisition had
not occurred. Any payments received by the Agent or the Company from
the United States Government for the use of such Engine, shall be paid
over to, or retained by, the Company.
-18-
(v) Any amount referred to in paragraph (iii) or (iv) of this
Section 4(f) that is payable to or retained by the Company shall not
be paid to the Company or retained by the Company, if at the time of
such payment or retention any Event of Default or a Potential Event of
Default shall have occurred and be continuing, but shall be held by or
paid over to the Agent as security for the obligations of the Company
under this Mortgage and the other Loan Documents, and, if the Agent
shall declare the Credit Agreement to be in default, shall be applied
against the Company's obligations hereunder and thereunder as and when
due. At such time as there shall not be continuing any such Event of
Default or Potential Event of Default, such amount shall be paid to
the Company to the extent not previously applied in accordance with
the preceding sentence. In addition, and whether or not there shall
exist an Event of Default or Potential Event of Default, until such
time as the Company shall request to be paid any amount referred to in
paragraph (iii) or (iv) in order to effect the mortgaging hereunder of
a replacement Engine, any amounts referred to in paragraphs (iii) or
(iv) of this Section 4(f) shall be held by the Agent as security for
the obligations of the Company under this Mortgage and the other Loan
Documents.
(g) Insurance.
(i) The Company will cause the Lessee at all times to carry and
maintain on or with respect to the Engines, at the Lessee's own cost
and expense, public liability (including without limitation,
contractual liability, cargo liability, passenger legal liability,
bodily injury and product liability, but excluding manufacturer's
product liability) and property damage insurance with insurers of
recognized responsibility and reputation in amounts, of the type and
covering the risks customarily carried with respect to similar
equipment by corporations engaged in the same or similar business and
similarly situated with the Lessee but in no event in an amount less
than $500,000,000 per occurrence (which shall include war risk,
governmental confiscation and expropriation and allied perils
coverage). During any period when the Engines are on the ground and
not in operation, the Lessee may carry or cause to be carried, in lieu
of insurance required by this Section, insurance otherwise conforming
with the provisions of this Section except that the amounts of
coverage shall not be required to exceed the amounts of comprehensive
airline liability insurance, and the scope of risk covered and type of
insurance shall be the same, as are customarily carried with respect
to similar equipment on the ground by corporations engaged in the same
or similar business and similarly situated with the Lessee. Any
policies of insurance carried in accordance with this Section 4(g) and
any policies taken out in substitution or replacement of any such
policies (A) shall be amended to name the Agent and the Lenders as
additional named insureds, (B) shall be primary without right of
contribution from any other insurance which is carried by the Lessee,
(C) shall expressly pro-
-19-
vide that all provisions thereof, except the limits of the liability,
shall operate in the same manner as if there were a separate policy
covering each insured, and (D) shall provide that the insurer shall
waive any right of subrogation against the Agent or the Lenders.
(ii) The Company will cause the Lessee at all times to carry and
maintain with insurers of recognized responsibility and reputation on
or with respect to the Engines, at the Lessee's own cost and expense,
aircraft ground and flight all-risk hull insurance as well as fire and
extended coverage insurance on the Engines and other equipment while
removed from an airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States
Government) and allied perils including (A) strikes, riots, civil
commotions or labor disturbances, (B) any malicious act or act of
sabotage and (C) hijacking (air piracy) or any unlawful seizure or
wrongful exercise of control of the aircraft on which any Engine is
installed or crew of such aircraft in flight (including any attempt at
such seizure or control) made by any person or persons aboard such
aircraft acting without the consent of the insured, if and to the
extent the same shall be maintained by the Lessee with respect to
similar equipment owned or operated by the Lessee on the same routes
or if such aircraft is operated on routes where the custom is for
Domestic Carriers similarly situated with the Lessee flying comparable
routes with similar equipment to carry such insurance, of the type
usually carried by corporations engaged in the same or similar
business and similarly situated with the Lessee; provided, that such
insurance (including any self-insurance to the extent --------
permitted below) shall at all times be for an amount not less than the
greater of the amount required by the applicable Lease and $3,000,000
per Engine. During any period when an Engine is on the ground and not
in operation the Lessee may carry or cause to be carried, in lieu of
the insurance required by this Section, insurance otherwise conforming
hereto except that the scope of risk covered and type of insurance
shall be the same as are from time to time customarily carried with
respect to similar spare engines by corporations engaged in the same
or similar business and similarly situated with the Lessee for spare
engines on the ground in an amount at least equal to the applicable
amount provided above. All such insurance shall name the Agent and the
Lenders as additional insureds and loss payees to the extent their
interest may appear and shall provide that any loss to an Engine in
excess of $2,000,000 (and, if a Potential Event of Default or Event of
Default has occurred and is continuing, any such loss) shall be
payable to the Agent for the benefit of the Lenders; and shall be
primary without right of contribution from any other insurance that is
carried by the Agent with respect to its interest therein.
The Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section
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4(g)(ii) in such reasonable amounts as are then applicable to other
similar spare engines in the Lessee's fleet that are of a value
comparable to the Engines, and as are not substantially greater than
amounts self-insured by corporations engaged in the same or similar
business and similarly situated with the Lessee; provided, however,
that the Company shall not permit the Lessee to self-insure in an
amount in excess of $1,000,000 without the prior written consent of
the Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
the Agent and the Lenders as additional named insureds, but without
the Agent or the Lenders being thereby liable for premiums; (B)
provide that in respect of the interest of the Agent or the Lenders in
such policies the insurance shall not be invalidated by any action or
inaction of the Lessee and shall insure the interests of the Agent and
the Lenders regardless of any breach or violation by the Lessee or any
Person (other than the Agent) of any warranty, declaration or
condition contained in such policies; (C) provide that if such
insurance is cancelled, or if any material change is made in the
coverage that affects the interest of the Agent or any Lender, or if
such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to the Agent
for thirty (30) days (seven (7) days, or such shorter or longer period
as may from time to time be customarily available in the industry, in
the case of any war risk and allied perils coverage) after receipt by
the Agent of written notice from such insurers of such cancellation,
change or lapse; (D) be in full force and effect throughout any
geographical areas at any time traversed by any of the Engines and
shall be payable in U.S. dollars; (E) waive any right of the insurers
to any setoff or counterclaim or any other deduction, whether by
attachment or otherwise in respect of any liability of the Agent; and
(F) waive all rights of subrogation against the Agent.
(iv) In the case of a lease or contract with the United States or
any agency or instrumentality thereof in respect of any Engine, a
valid agreement by the United States or such agency or instrumentality
to indemnify the Lessee against the same risks against which the
Lessee is required hereunder to insure shall be considered adequate
insurance with respect to such Engine to the extent of the risks and
in the amounts that are the subject of any such agreement to
indemnify.
(v) On or prior to the date hereof, and annually thereafter on or
prior to January 31, the Company will cause the Lessee to furnish to
the Agent (A) a report signed by a firm of independent aircraft
insurance brokers, appointed by the Lessee and not objected to by the
Agent, describing in reasonable detail acceptable to the Agent the
insurance then carried and maintained on or with respect to the
Engines and stating that in the opinion of such firm such insurance
complies with the terms of this Section 4(g) and is adequate to
protect the interests of the Lessee, the Company and
-21-
the Agent, and (B) certificates of the insurer or insurers evidencing
the insurance covered by the report. The Company will cause the Lessee
to cause such brokers to advise the Agent in writing (x) promptly of
any default in the payment of any premium and of any other act or
omission on the part of the Lessee of which such firm has knowledge
and which might invalidate or render unenforceable, in whole or in
part, any insurance on any Engine and (y) at least thirty (30) days
prior to the expiration or termination date, or date of effectiveness
of any material change, of any insurance carried and maintained on the
Engines hereunder.
(vi) All insurance payments and other payments received by the
Agent or the Company from insurance referred to in paragraph (ii)
above shall be, if received by the Company, immediately paid to the
Agent and shall be held by the Agent as security for the Secured
Obligations and all other obligations required to be paid in
accordance with the terms of this Mortgage and the Credit Agreement
and such payments shall be paid to the Company upon compliance by the
Company with the terms of Subsection 4(f) with respect to the
replacement of an engine, provided that no Potential Event of Default
or Event of Default shall have occurred and be continuing.
All insurance payments and other payments received by the Agent
or the Company from insurance referred to in paragraph (ii) above and
paid other than as a result of an Event of Loss shall be paid by the
Agent to or be retained by the Company, and promptly applied by the
Company to the extent necessary to repair the damage to the Engine for
which such insurance was paid, provided that the Agent shall not be
required to make any such payment to the Company if a Potential Event
of Default or Event of Default has occurred and is continuing, but
shall be held or paid over to the Agent as security for the
obligations of the Company under this Mortgage and the other Loan
Documents, and, if the Agent shall declare the Credit Agreement to be
in default, shall be applied against the Company's obligations
hereunder and thereunder as and when due. Retention by the Agent of
any amounts pursuant to the preceding sentence shall not relieve the
Company of its obligations to make promptly all repairs and
replacements required by Sections 4(c) and (e) hereof and to pay for
the same with the Company's funds or cause payment of the same under
the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit the Agent or
any Lender from obtaining insurance with respect to any Engine for its
own account. The Company may, at its own expense, carry insurance with
respect to its interest in any Engine in amounts in excess of that
required to be maintained by this Section 4(g). No insurance
maintained by the Agent or any Lender shall prevent the Company from
causing the Lessee to carry the insurance required or permitted by
this Section or adversely affect such insurance or the cost thereof.
Proceeds of any such insurance carried by the
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Agent or any Lender shall be paid as provided in the insurance policy
relating thereto and the Agent shall have no duty to obtain any such
insurance.
(h) Inspection. The Company will permit, and cause the Lessee to
permit, any officers, employees or authorized representatives of the Agent
to inspect, at the Lessee's cost and expense under the Lease, the Spare
Engine Collateral and Spare Engine Related Collateral, or any part thereof,
and to examine, copy or make extracts from, any and all books, records and
documents in the possession of the Company relating to such Collateral or
any part thereof and performance of this Mortgage, all at such reasonable
times and as often as may be requested. The Agent shall have no duty to
make any such inspection or examination and shall not incur any liability
or obligation by reason of making or not making any such inspection or
examination.
(i) Insignia. The Company shall, at its own cost and expense, or
pursuant to the Lease, cause each Engine included in the Spare Engine
Collateral to be legibly marked (in a reasonably prominent location) with
such a plate, disk, or other marking of customary size, and bearing the
legend "Owned by Atlas Freighter Leasing III, Inc., and Mortgaged to
Bankers Trust Company, as Agent" or such other legend, as shall in the
opinion of the Agent be appropriate or desirable to evidence the fact that
it is subject to the lien and security interest created by this Mortgage.
The Company shall not remove or deface, or permit to be removed or defaced,
any such plate, disk, or other marking or the identifying manufacturer's
serial number, and, in the event of such removal or defacement, shall
promptly cause such plate, disk, or other marking or serial number to be
promptly replaced. Except as provided above, the Company shall not allow
the name of any person, association or corporation to be placed on any
Engine as a designation that might be interpreted as a claim of ownership
or of any security interest therein, except that any permitted lessee may
place its customary colors and insignia or the insignia of the manufacturer
on any Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then the Agent
may, without notice of any kind to the Company, exercise in respect of the Spare
Engine Collateral and Spare Engine Related Collateral, (i) all the rights and
remedies of a secured party on default under the Uniform Commercial Code as in
effect at the time in any applicable jurisdiction (whether or not the Uniform
Commercial Code applies to the affected Spare Engine Collateral), (ii) any and
all remedies under the Leases and all of the rights and remedies of the Lessor
under the Lease, (iii) all the rights and remedies provided for in this
Mortgage, the Credit Agreement and any other Loan Document, and in any other
agreement between the Company and the Agent, and (iv) such other rights and
remedies as may be provided by law or otherwise.
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(b) After an Event of Default has occurred and is continuing, the Agent
may, without notice, take possession of the Spare Engine Collateral or any part
thereof and may exclude the Company and the Lessee, and all persons claiming
under the Company or the Lessee, wholly or partly therefrom. At the request of
the Agent, the Company shall promptly deliver or cause the Lessee to deliver to
the Agent or to whomsoever the Agent shall designate, at such time or times and
place or places as the Agent may specify, and fly or cause to be flown to such
airport or airports in the United States as the Agent may specify, without risk
or expense to the Agent, the Spare Engine Collateral or any part thereof. In
addition, the Company will provide, or cause the Lessee to provide, without cost
or expense to the Agent, storage facilities for the Spare Engine Collateral. If
the Company or the Lessee shall for any reason fail to deliver the Spare Engine
Collateral or any part thereof after demand by the Agent, the Agent may, without
being responsible for loss or damage, (i) obtain a judgment conferring on the
Agent the right to immediate possession or requiring the Company and the Lessee
to deliver immediate possession of the Spare Engine Collateral or any part
thereof to the Agent, the entry of which judgment the Company hereby
specifically consents and the Lessor's consent to which will be obtained by the
Company under the Lease, or (ii) with or without such judgment, pursue the Spare
Engine Collateral or any part thereof wherever it may be found and may enter any
of the premises of the Company and the Lessee where the Spare Engine Collateral
may be and search for the Spare Engine Collateral and take possession of and
remove the same. The Company agrees to pay to the Agent, upon demand, all
expenses incurred in taking any such action; and all such expenses shall, until
paid, be secured by the lien of this Mortgage. Upon every such taking of
possession, the Agent may, from time to time, make all such reasonable
expenditures for maintenance, insurance, repairs, replacements, alterations,
additions and improvements to and of the Spare Engine Collateral, as it may deem
proper. In each such case, the Agent shall have the right to maintain, use,
operate, store, lease, control or manage the Spare Engine Collateral or any part
thereof and to carry on the business and exercise all rights and powers of
Company relating to the Spare Engine Collateral, as the Agent shall deem best,
including the right to enter into any and all such agreements with respect to
the maintenance, use, operation, storage, leasing, control, management or
disposition of the Spare Engine Collateral or any part thereof as the Agent may
determine. Further, after the occurrence and during the continuation of an Event
of Default, the Agent shall be entitled to collect and receive directly all
tolls, rents, revenues, issues, income, products and profits of the Spare Engine
Collateral or any part thereof, including without limitation, all payments under
any of the Leases. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of the use, operation, storage,
leasing, control, management or disposition of the Spare Engine Collateral, and
of all maintenance, insurance, repairs, replacements, alterations, additions and
improvements, and to make all payments that the Agent may be required or may
elect to make, if any, for taxes, assessments, or other proper charges upon the
Spare Engine Collateral and all other payments that the Agent may be required or
authorized to make under any provision of this Mortgage, as well as just and
reasonable com-
-24-
pensation for the services of the Agent and of all persons properly engaged and
employed for such purposes by the Agent.
(c) The Agent, with or without taking possession of the Spare Engine
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales, as an
entirety or in separate lots or parcels, the Spare Engine Collateral or any
part thereof, at public or private sale, at such place or places and at
such time or times and upon such terms, including terms of credit (which
may include the retention of title by the Agent to the property so sold),
as the Agent may determine, whether or not the Spare Engine Collateral
shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under this Mortgage by
suit, whether for specific performance of any covenant herein contained or
in aid of the exercise of any power herein granted or for the foreclosure
of this Mortgage and the sale of the Spare Engine Collateral under the
judgment or decree of a court of competent jurisdiction or for the
enforcement of any other right.
(d) After an Event of Default has occurred and is continuing, the Company
agrees to the fullest extent that it lawfully may, that it and the Lessee will
not (and hereby irrevocably waives its right to) at any time plead, or claim the
benefit or advantage of, any appraisement, valuation, stay, extension,
moratorium, or redemption law now or hereafter in force, in order to prevent or
hinder the enforcement of this Mortgage or the absolute sale of the Spare Engine
Collateral. The Company, for itself and all who may claim under it, waives, to
the extent that it lawfully may, all right to have all or any portion of the
Spare Engine Collateral marshalled upon any foreclosure hereof.
(e) Each and every remedy of the Agent shall be cumulative and shall not be
exclusive of any other remedies provided now or hereafter at law, in equity or
otherwise. The Company shall reimburse the Agent, upon demand, for all fees and
other expenses paid or incurred by the Agent in exercising any rights, powers or
remedies granted hereby. All such fees and expenses shall, until paid, be
secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this Mortgage or
the Lease, the Agent shall at all times have the right, to the exclusion of the
Company, to declare the Lease in default in accordance with its terms and to
exercise all remedies set forth in the Leases.
-25-
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by the Lessee of
any purchase option or Event of Loss) and the proceeds of any sale, lease or
other disposition of all or any of the Spare Engine Collateral or Spare Engine
Related Collateral under this Mortgage and all other sums realized by the Agent
pursuant to this Mortgage or any proceedings hereunder shall be applied in the
following order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to the
Agent's agents and counsel, and all expenses, liabilities and advances made
or incurred by the Agent in connection therewith, including, without
limitation, taxes upon or with respect to the sale, lease, disposition or
realization and the payment of taxes and Liens, if any, prior to the lien
and security interest of this Mortgage (except any taxes or Liens to which
the respective sale, lease, disposition or realization shall have been
subject) and to the payment of expenses and the reimbursement of payments
incurred or made by the Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which payment
shall be applied to the principal installments of the Notes in the manner
specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by the Company
under the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to the Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
The Company hereby irrevocably appoints the Agent the true and lawful
attorney of the Company (with full power of substitution) in the name, place and
stead of, and at the expense of, the Company at any time after the occurrence
and during the continuation of an Event of Default (i) to ask, demand, collect,
▇▇▇ for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Spare Engine Collateral
and Spare Engine Related Collateral, (ii) to make all necessary transfers of all
or any part of the Spare Engine Collateral and Spare Engine Related Collateral
in connection with any sale, lease or other disposition made pursuant hereto,
(iii) to execute and
-26-
deliver for value all necessary or appropriate bills of sale, assignments and
other instruments in connection with any such sale, lease or other disposition,
and (iv) generally to do, at the Agent's option and the Company's cost and
expense, at any time, or from time to time, all acts and things that the Agent
deems necessary to protect, preserve or realize upon the Spare Engine Collateral
and Spare Engine Related Collateral and the Agent's security interest therein,
in order to effect the intent of this Mortgage, all as fully and effectively as
the Company might do, the Company hereby ratifying and confirming all that its
said attorney (or any substitute) shall lawfully do hereunder and pursuant
hereto.
SECTION 8. Cash Collateral.
All monies received by the Agent to be held and applied under this Section,
and all monies if any, required to be paid to the Agent hereunder, which
disposition is not elsewhere herein otherwise specifically provided for, shall
be held by the Agent and applied from time to time as provided herein and in the
Credit Agreement and the other Loan Documents and shall be held in an account in
the name of the Agent and invested in Cash Equivalents for the benefit and at
the risk of the Company.
SECTION 9. Agent's Right to Perform.
If the Company fails to make any payment required to be made by it
hereunder or fails to perform or comply with any of its agreements contained
herein, the Agent may itself make such payment or perform or comply with such
agreement (including, without limitation, the agreement of the Company to
maintain insurance pursuant to Section 4(g) hereof), and the amount of such
payment and the amount of the reasonable expenses of the Agent incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the rate
specified in the Credit Agreement from time to time, shall be payable by the
Company to the Agent on demand and shall constitute additional indebtedness
secured by the lien and security interest of this Mortgage.
SECTION 10. Further Assurances.
The Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as the Agent may from time to time request, in order to correct any defect,
error or omission which may at any time hereafter be discovered in the contents
of this Mortgage or in the execution or delivery hereof, and/or in order to more
effectively carry out the intent and purpose of this Mortgage and to establish,
protect and perfect the rights, remedies and security interests created or
intended to be created in favor of the Agent hereunder, including, without
limitation, the execution, delivery and filing of any instruments with the FAA
and of any Uniform Com-
-27-
mercial Code financing and continuation statements with respect to the security
interests created hereby, in form and substance satisfactory to the Agent, in
such jurisdictions as the Agent may reasonably request. The Company hereby
authorizes the Agent to file any such statements without the signature of the
Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Spare
Engine Collateral and Spare Engine Related Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of the Secured
Obligations, (b) be binding upon the Company, its successors and assigns and (c)
inure, together with the rights and remedies of the Agent hereunder, to the
benefit of the Agent and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), the Agent or any Lender
may, subject to any restrictions contained in the Credit Agreement, assign or
otherwise transfer any of its interests in the Credit Agreement or in any Note
to any other person or entity, and such other benefits in respect thereof
granted to the Agent or any Lender herein or otherwise. Upon the indefeasible
payment in full of the Secured Obligations, the security interest granted hereby
shall terminate and all rights to the Spare Engine Collateral and Spare Engine
Related Collateral shall revert to Company. Upon any such termination, the Agent
will execute and deliver to the Company, at the Company's expense, such
instruments of release and termination as the Company may reasonably request to
evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the Company
hereby waives any provision of law which renders any provision hereof prohibited
or unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the Company and the Agent. The captions and headings in this
Mortgage are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against the Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Spare Engine
Collateral and Spare Engine Related Collateral,
-28-
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Mortgage. The Company hereby agrees that service of process
in any such proceeding in any such court may be made by registered or certified
mail return receipt requested to the Company at its address provided on the
signature pages of the Mortgage, such service being hereby acknowledged by the
Company to be effective and binding service in every respect. A copy of any such
process so served shall be mailed by registered mail to the Company, at its
address specified in Section 15 hereof, except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity of
service of process. If any agent appointed by the Company refuses to accept
service, the Company hereby agrees that service upon it by mail shall constitute
sufficient notice. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Company in the courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR AIRCRAFT COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to the Company or the Agent, as the case may be, addressed to it at
the address of such party specified on the signature page hereof, or as to
either party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section 15. All such notices and other communications shall, when mailed,
be effective when deposited in the mails, addressed as aforesaid.
-29-
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
-30-
IN WITNESS WHEREOF, the Company and the Agent have caused this Mortgage to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
ATLAS FREIGHTER LEASING III, INC.
By:
-------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing III, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President -
Strategic Planning and Treasurer
BANKERS TRUST COMPANY, as Agent
By:
-------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
SCHEDULE I
to Security Agreement
and Chattel Mortgage
ENGINES
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Manufacturer's
Manufacturer Model Serial Number
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General Electric CF6-80C2 704699
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General Electric CF6-80C2 704860
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General Electric CF6-80C2 704918
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Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated April 25, 2000, between Atlas
Freighter Leasing III, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as Administrative Agent for and representative of (in such
capacity, the "Agent") the financial institutions (the "Lenders") party to the
Credit Agreement dated as of April 25, 2000, among the Company, the Lenders and
the Agent.
The Company and the Agent have heretofore entered into a Security Agreement
and Chattel Mortgage dated April 25, 2000, (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine subjected to the lien of the Mortgage pursuant to Section
4(f) thereof, and shall specifically mortgage such Engine to the Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on April
__, 2000, and has been assigned Conveyance No. ____________.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, the Company hereby mortgages to the
Agent, its successors and assigns, and grants and assigns to the Agent, its
successors and assigns, a first priority purchase money security interest in all
estate, right, title and interest of the Company in and to the property
described in Schedule I annexed hereto (whether or not such Engine shall be
installed on or attached to an Aircraft), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.
A-1
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Remainder of page intentionally left blank]
A-2
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING III, INC.
By:
-------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing III, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President -
Strategic Planning and Treasurer
BANKERS TRUST COMPANY, as Agent
By:
-------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇-▇
▇▇▇▇▇▇▇ ▇-▇
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇'▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Manufacturer Model Number Registry No.
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================================================================================
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
