EXHIBIT 99.4
MORTGAGE AND SECURITY AGREEMENT
DATED AS OF DECEMBER 30, 2003
MADE BY
WORLD AIRWAYS, INC., AND
WORLD AIRWAYS PARTS COMPANY, LLC,
AS GRANTORS
IN FAVOR OF
CITIBANK, N.A.,
AS COLLATERAL AGENT
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS............................................................................................ 6
Section 1.01 Definitions................................................................................. 6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE GRANTORS......................................................... 16
Section 2.01 Certificated Air Carrier; Maintenance and Location of Spare Parts; Section 1110............. 16
Section 2.02 Title to Collateral; Financing Statements................................................... 16
Section 2.03 Location of Grantors; UCC Information....................................................... 17
Section 2.04 Perfected First Priority Liens.............................................................. 17
Section 2.05 Consents.................................................................................... 17
Section 2.06 Possession of Pledged Equipment............................................................. 18
Section 2.07 Pledged Equity and Pledged Debt............................................................. 18
Section 2.08 Intellectual Property....................................................................... 19
Section 2.09 Deposit and Securities Accounts............................................................. 19
ARTICLE 3 COVENANTS OF THE COMPANY............................................................................... 20
Section 3.01 Maintenance and Operation; Possession; Insignia............................................. 20
Section 3.02 Replacement and Pooling of Parts; Alterations, Modifications and Additions.................. 25
Section 3.03 Use, Possession and Designated Locations of Spare Parts and Pledged
Equipment; Collateral Access Agreement...................................................... 26
Section 3.04 Insurance................................................................................... 28
Section 3.05 Inspection.................................................................................. 32
Section 3.06 Changes in Locations, Name, etc............................................................. 33
Section 3.07 Pledged Receivables......................................................................... 33
Section 3.08 Pledged Equipment........................................................................... 34
Section 3.09 Delivery and Control of Pledged Equity and Pledged Debt..................................... 34
Section 3.10 Notices..................................................................................... 35
Section 3.11 Intellectual Property Collateral............................................................ 36
Section 3.12 Liens....................................................................................... 37
Section 3.13 Financing Statements........................................................................ 37
Section 3.14 Disposition of Collateral................................................................... 37
Section 3.15 Further Assurances.......................................................................... 38
Section 3.16 Performance................................................................................. 38
ARTICLE 4 EVENT OF LOSS.......................................................................................... 38
Section 4.01 Event of Loss; Application of Payments and Proceeds......................................... 38
ARTICLE 5 REMEDIES............................................................................................... 42
Section 5.01 Remedies Available to Collateral Agent...................................................... 42
Section 5.02 Expenses.................................................................................... 45
Section 5.03 Waiver of Claims............................................................................ 46
Section 5.04 Discontinuance of Proceedings............................................................... 46
ARTICLE 6 TERMINATION OF SECURITY AGREEMENT...................................................................... 47
Section 6.01 Termination of Security Agreement........................................................... 47
ARTICLE 7 MISCELLANEOUS.......................................................................................... 47
Section 7.01 Notices..................................................................................... 47
Section 7.02 Governing Law............................................................................... 47
Section 7.03 Execution in Counterparts................................................................... 48
Section 7.04 Amendments.................................................................................. 48
Section 7.05 Documentation............................................................................... 48
Section 7.06 Cash Collateral............................................................................. 48
SCHEDULES
Schedule 1.01 - Spare Engines
Schedule 2.01 - Designated Locations
Schedule 2.03 - UCC Information
Schedule 2.05 - Consents
Schedule 2.06 - Pledged Equipment Locations
Schedule 2.07(a) - Initial Pledged Equity
Schedule 2.07(b) - Initial Pledged Debt
Schedule 2.08 - Intellectual Property Collateral
Schedule 2.09 - Deposit and Securities Accounts
Schedule 3.01 - Countries Authorized for Domicile of
Permitted Lessees
EXHIBITS
Exhibit A1 - Form of Mortgage and Security Agreement
Supplement (Spare Engine)
Exhibit A2 - Form of Mortgage and Security Agreement
Supplement (Spare Parts)
Exhibit B - Form of Intellectual Property Security
Agreement
Exhibit C - Form of Intellectual Property Security
Agreement Supplement
MORTGAGE AND SECURITY AGREEMENT (as amended, modified,
restated or otherwise supplemented from time to time in accordance with the
terms hereof, the "Security Agreement" or "Agreement") dated as of December 30,
2003 made by WORLD AIRWAYS, INC., a Delaware corporation (the "Company"), and
WORLD AIRWAYS PARTS COMPANY, LLC, a Delaware limited liability company ("World
LLC," and together with the Company, the "Grantors") in favor of CITIBANK, N.A.,
acting solely in its capacity as Collateral Agent for the Board, the Lenders and
the Supplemental Guarantor (as such terms are defined in the Loan Agreement
referred to below) and as directed by the Board and the Lenders (the "Collateral
Agent").
WITNESSETH:
WHEREAS, all capitalized terms used and not otherwise defined
herein shall have the respective meanings set forth or referred to in Article 1
hereof;
WHEREAS, the Company is an air carrier certificated under
Sections 41102 and 44705 of Title 49 of the United States Code and holds air
carrier operating certificates;
WHEREAS, World LLC, a wholly owned subsidiary of the Company,
owns and maintains Spare Parts (as defined below) by and on behalf of the
Company at the Designated Locations set forth on Schedule 2.01 hereto;
WHEREAS, the Company, Govco Incorporated, as Primary Tranche A
Lender, Citibank, N.A., as Alternate Tranche A Lender and as Agent, Citicorp
USA, Inc., as Tranche B Lender, Citicorp North America, Inc., as Govco
Administrative Agent, Phoenix American Financial Services, Inc., as Loan
Administrator, the Collateral Agent and the Air Transportation Stabilization
Board are parties to a Loan Agreement dated as of December 30, 2003 (as amended,
modified, restated or otherwise supplemented from time to time in accordance
with its terms, the "Loan Agreement") providing, subject to the terms and
conditions thereof, for a single term loan (the "Loan") to be made by such
Lenders to the Company;
WHEREAS, pursuant to that certain Subsidiary Guarantee dated
as of the date hereof, World LLC has agreed to guarantee the payment in full of
the Guaranteed Obligations (as defined therein);
WHEREAS, it is a condition precedent to the making of the Loan
that the Grantors shall have executed and delivered to the Collateral Agent this
Security Agreement;
WHEREAS, the Grantors wish to execute this Security Agreement
to satisfy the condition described in the preceding paragraph and to grant
certain first priority security interests in the Collateral in favor of the
Collateral Agent for the ratable benefit and security of the Board and the
Lenders; and
WHEREAS, all things necessary to make this Security Agreement
the legal, valid and binding obligation of the Grantors and the Collateral
Agent, for the uses and purposes herein set forth, in accordance with its terms,
have been done and performed and have happened.
GRANTING CLAUSE
NOW, THEREFORE, THIS MORTGAGE AND SECURITY AGREEMENT
WITNESSETH, that, to secure the prompt payment of the principal of, interest on,
and all other amounts due with respect to, the Loan, and to secure the
performance and observance by each of the Grantors of all the agreements,
covenants and provisions contained herein, in the Loan Agreement and in the
other Loan Documents, and the prompt payment of any and all amounts from time to
time owing hereunder, under the Loan Agreement and the other Loan Documents, and
for the uses and purposes and subject to the terms and provisions hereof, and in
consideration of the premises and of the covenants herein contained, and of
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, each Grantor has granted, bargained, sold, assigned,
transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant,
bargain, sell, assign, transfer, convey, mortgage, pledge and confirm unto the
Collateral Agent, its successors and assigns, for the ratable security and
benefit of the Board, the Lenders and the Supplemental Guarantor, a security
interest in and mortgage Lien on all estate, right, title and interest of such
Grantor in, to and under the following described property, rights, interests and
privileges, ownership of which is now held or hereafter acquired by such
Grantor, and wherever located (which collectively, including all property
hereafter specifically subjected to the Lien of the Security Documents by any
instrument supplemental hereto, are herein called the "Collateral"):
(1) its Pledged Equipment;
(2) its Pledged Inventory;
(3) its Pledged Receivables and the Related Contracts;
(4) its Security Collateral;
(5) its Account Collateral;
(6) its Intellectual Property Collateral and all other
General Intangibles;
(7) its Pledged Real Property;
(8) each Spare Engine (each such Spare Engine having 750
or more rated take-off horsepower or the equivalent thereof) as the
same is now and will hereafter be constituted, whether now owned or
hereafter acquired, and whether or not any such Spare Engine shall be
installed in or attached to any airframe and all substitutions or
replacements therefor, as provided in this Security Agreement, together
with all Parts of whatever nature which are from time to time
incorporated or installed in or attached to the Spare Engines, whether
now owned or hereafter acquired, and all renewals, substitutions,
replacements, additions, improvements, accessories and accumulations
with respect to any of the foregoing;
(9) all Spare Parts, whether now owned or hereafter
acquired by such Grantor, including any replacements, substitutions or
renewals therefor, and accessions thereto,
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including but not limited to those spare parts located at the
Designated Locations described on Schedule 2.01 attached hereto and
incorporated herein by reference or any supplement or amendment thereto
supplied hereunder or in any Mortgage and Security Agreement Supplement
(Spare Parts) executed and delivered from time to time hereunder;
(10) without limiting the generality of the foregoing, all
requisition proceeds (including, without limitation, all payments and
proceeds or other revenues or income under the Civil Reserve Air Fleet
Program) with respect to any Collateral and all insurance proceeds with
respect to any loss of or damage to any Collateral;
(11) the Purchase Agreements and the Warranty Bills of
Sale;
(12) the rights of such Grantor under any warranty,
indemnity or agreement, express or implied, regarding title, materials,
workmanship, design or patent infringement or related matters in
respect of any Collateral (other than a warranty, indemnity or other
such agreement which, by its terms, cannot be transferred or encumbered
without resulting in its termination or causing a default or breach
thereunder);
(13) all repair, maintenance and inventory records, logs,
manuals and all other documents and materials similar thereto
(including, without limitation, any such records, logs, manuals,
documents and materials that are in electronic format or are computer
print-outs) at any time maintained, created or used by such Grantor
(including, without limitation, all records, logs, documents and other
materials required at any time to be maintained by such Grantor
pursuant to the FAA or under the Federal Aviation Act) ("Records");
(14) all moneys and securities now or hereafter paid or
deposited or required to be paid or deposited to or with the Collateral
Agent by or for the account of such Grantor pursuant to any term hereof
or of any other Loan Document and held or required to be held by the
Collateral Agent hereunder or thereunder;
(15) all right, title, interest, claims and demands of
such Grantor as lessor in, to and under any lease of any Spare Engines
or other Collateral;
(16) all other real and personal property of every kind
and nature of such Grantor; and
(17) all substitutions, replacements, accessions and
Proceeds of any of the foregoing; provided, however, that in no event
shall this Security Agreement create a leasehold mortgage or other
security or lien interest with respect to, and the term "Collateral"
shall at all times exclude, the Excluded Assets.
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HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Collateral Agent, its successors and assigns, and for the uses and
purposes and subject to the terms and provisions set forth in this Security
Agreement.
(1) It is expressly agreed that, anything herein
contained to the contrary notwithstanding, each Grantor shall remain liable
under each of the contracts and agreements included in the Collateral to which
such Grantor is a party to perform all of the obligations assumed by such
Grantor thereunder, all in accordance with and pursuant to the terms and
provisions thereof, and the Collateral Agent shall have no obligation or
liability under any of such contracts and agreements by reason of or arising out
of the collateral assignment hereunder, nor shall the Collateral Agent be
required or obligated in any manner to perform or fulfill any obligations of
such Grantor under any of such contracts and agreements to which such Grantor is
a party, or, except as herein expressly provided or as may be required by law,
to make any payment, or to make any inquiry as to the nature or sufficiency of
any payment received by it, or present or file any claim, or take any action to
collect or enforce the payment of any amounts which may have been assigned to it
or to which it may be entitled at any time or times.
(2) Each Grantor does hereby constitute the Collateral
Agent as its true and lawful attorney, irrevocably, for good and valuable
consideration and coupled with an interest and with full power of substitution
(in its name or otherwise) subject to the terms and conditions of this Security
Agreement, to ask, require, demand, receive, xxx for, compound and give
acquittance for any and all moneys and claims for moneys due and to become due
to it under or arising out of the Loan Documents, to endorse any checks or other
instruments or orders in connection therewith, to file any claims or take any
action or institute any proceedings which the Collateral Agent may deem to be
necessary or advisable in the premises as fully as such Grantor itself could do;
provided that the Collateral Agent shall not exercise any of such rights or take
any of such actions except upon the occurrence and during the continuance of an
Event of Default.
(3) Each Grantor hereby authorizes the Collateral Agent
to file one or more financing or continuation statements, including, without
limitation, a UCC-1 financing statement, and any amendments thereto and
continuations thereof, each of which may indicate that such financing statements
cover all assets or all personal property (or words of similar effect) of such
Grantor other than Excluded Assets, in each case without the signature of such
Grantor, and regardless of whether any particular asset described in such
financing statements falls within the scope of the UCC or the Granting Clause of
this Agreement. Each Grantor ratifies its authorization for the Collateral Agent
to have filed such financing statements, continuation statements or amendments
prior to the date hereof.
(4) Each Grantor agrees that at any time and from time to
time, at its sole cost and expense, upon the written request of the Collateral
Agent, it will promptly and duly execute, deliver, file and record (as
applicable) any and all such further agreements, certificates, instruments and
documents as may be necessary or which the Collateral Agent may reasonably
request in order to create, preserve, perfect (or better perfect), confirm or
validate the security
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interests in the Collateral or to enable the Collateral Agent to obtain the full
benefits of this Security Agreement and the other Security Documents or to
enable the Collateral Agent lawfully to enforce any of its rights, powers, and
remedies hereunder or thereunder with respect to any of the Collateral (provided
that the Collateral Agent shall not exercise any of such remedies except upon
the occurrence and during the continuance of an Event of Default), including,
without limitation, to enable the Collateral Agent to comply at any time with
the Assignment of Claims Act in respect of an assignment of the Pledged
Receivable owing to the Company under the Air Mobility Command Agreement, it
being acknowledged and agreed that the Collateral Agent is expressly authorized
to unilaterally exercise or cause to be exercised any and all rights of a
Secured Party hereunder or under applicable law, including the filing of UCC
financing statements (or any amendment thereto) in respect of any of the
Collateral. Without limiting the generality of the foregoing, except as
otherwise provided in clause (5) of this Habendum Clause, each Grantor will: (i)
at the written request of the Collateral Agent during the continuance of a
Specified Default or Event of Default, xxxx conspicuously each document included
in Pledged Inventory, each Chattel Paper included in Pledged Receivables, each
Related Contract, and each of its records pertaining to such Collateral with a
legend, in form and substance reasonably satisfactory to the Collateral Agent,
indicating that such document, Chattel Paper, Related Contract, or Collateral is
subject to the security interest granted hereby; (ii) execute or authenticate
(to the extent required) and file, or authorize the filing of (to the extent
authorization is required) such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as the Collateral
Agent may reasonably request, in order to perfect and preserve the security
interest granted or purported to be granted by such Grantor hereunder; (iii)
take all action reasonably necessary to ensure that the Collateral Agent has
control of Collateral consisting of Deposit Accounts, Securities Accounts,
Commodity Accounts, Investment Property, and at the written request of the
Collateral Agent during the continuance of a Specified Default or Event of
Default, Electronic Chattel Paper and Letter-of-Credit Rights, as provided in
Sections 9-104, 9-105, 9-106 and 9-107 of the UCC; (iv) take all action
reasonably necessary to ensure that the Collateral Agent's security interest is
noted on any Certificate of Title related to any Collateral evidenced by a
Certificate of Title; (v) at the written request of the Collateral Agent, cause
the Collateral Agent to be the beneficiary under all letters of credit that
constitute Collateral, with the exclusive right to make all draws under such
letters of credit, and with all rights of a transferee under Section 5-114(e) of
the UCC; and (vi) deliver to the Collateral Agent evidence that all other action
that the Collateral Agent may deem reasonably necessary in order to perfect and
protect the security interest created by such Grantor in the Collateral under
this Agreement has been taken.
(5) Anything herein to the contrary notwithstanding,
unless requested by the Collateral Agent upon the occurrence and during the
continuance of a Specified Default or Event of Default, the Grantors shall not
be obligated to perfect the security interest of the Collateral Agent in any of
the following Collateral: (i) any Deposit Account or Securities Account with
respect to which the Grantors are not required to enter into a Control Agreement
pursuant to Section 5.17 of the Loan Agreement; (ii) any Pledged Real Property
which has a net book value of less than $200,000; and (iii) any Motor Vehicles
other than a Motor Vehicle acquired after the date of this Agreement at a cost
in excess of $200,000.
(6) It is hereby further agreed that any and all property
described or referred to in the Granting Clause hereof which is hereafter
acquired by the Grantors shall ipso facto, and
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without any other conveyance, assignment or act on the part of the Grantors or
the Collateral Agent, become and be subject to the Lien herein granted as fully
and completely as though specifically described herein.
(7) Anything herein to the contrary notwithstanding, in
no event shall the security interest granted under this Security Agreement
attach to any (i) Excluded Assets or (ii) any right in any agreement (A) the
grant of a security interest in which would violate the agreement under which
such right arises if such Grantor has failed to obtain a waiver or other relief
from such provision (except to the extent such provision would be rendered
ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of the UCC), so long as
such Grantor has used commercially reasonable efforts to obtain such waiver or
other relief (without obligation to incur more than immaterial costs or expenses
in connection with such commercially reasonable efforts) or (B) to the extent
that the pledge or assignment of such agreement requires the consent of any
third party, unless such third party has consented thereto (except to the extent
such consent requirement would be rendered ineffective under Sections 9-406,
9-407, 9-408 or 9-409 of the UCC), so long as such Grantor has used commercially
reasonable efforts to obtain such consent (without obligation to incur more than
immaterial costs or expenses in connection with such commercially reasonable
efforts); provided, however, that such security interest shall attach
immediately at such time as the relevant provision or requirement is no longer
applicable and, to the extent such agreement is severable, shall attach
immediately to any portion of such agreement that does not result in any of the
consequences specified in (A) or (B) above.
IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the
parties hereto as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 DEFINITIONS.
(a) For all purposes of this Security Agreement, except
as otherwise expressly provided or unless the context otherwise requires:
(i) each of the "Company," "World LLC," and
"Collateral Agent," or any other Person includes, without prejudice to
the provisions of any Loan Documents, any successor in interest to it
and any permitted transferee, permitted purchaser or permitted assignee
of it;
(ii) the terms defined in this Article 1 have the
meanings assigned to them in this Article 1, and include the plural as
well as the singular;
(iii) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
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(iv) the words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Security Agreement as a
whole and not to any particular Article, Section or other subdivision;
(v) all references in this Security Agreement to
Articles, Sections, Schedules and Exhibits refer to Articles, Sections,
Schedules and Exhibits of this Security Agreement; and
(vi) all references in this Security Agreement to
Schedules and Exhibits refer to such Schedules and Exhibits as such
Schedules and Exhibits may be amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof.
(b) The terms "aircraft," "aircraft engine," "appliance"
and "cargo" shall have the respective meanings ascribed thereto in Section 40102
of Chapter 401 of Title 49 of the United States Code and the term "engine" shall
include an "aircraft engine" as defined therein.
(c) The term "UCC" means the Uniform Commercial Code as
in effect on the date hereof in the State of New York; provided, however, that
if by reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of any security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, then for purposes of the provisions hereof relating to such
perfection or the effect of perfection or non-perfection of any security
interest the term "UCC" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction. References herein to Article 9 of the UCC shall include
such Article however numbered in any relevant jurisdiction.
(d) Unless the context otherwise requires, the terms
"Account," "Certificate of Title," "Chattel Paper," "Commodity Account,"
"Commodity Contract," "Deposit Account," "Electronic Chattel Paper,"
"Equipment," "Fixtures," "General Intangibles," "Goods," "Health-Care Insurance
Receivables," "Instruments," "Inventory," "Investment Property,"
"Letter-of-Credit Right," "Payment Intangibles," "Promissory Note," "Registered
Organization," "Secured Party," "Securities Account," "Security Entitlement,"
"Software" and "Tangible Chattel Paper" shall have the respective meanings
ascribed thereto in Article 9 of the UCC.
(e) Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Loan Agreement.
(f) For all purposes of this Security Agreement, the
following capitalized terms have the following respective meanings:
"Acceptable Alternate Spare Engine" means an engine of at
least the same value, utility and remaining useful life (except for maintenance
cycle condition) as the Spare Engine it is replacing assuming such Spare Engine
was of the value, utility and remaining useful life (except for maintenance
cycle condition) required by the terms of this Security Agreement.
"Account Collateral" means the following property of the
Grantors:
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(i) the Cash Collateral Account and all Deposit
Accounts, Securities Accounts and Commodity Accounts and all funds and
financial assets from time to time credited thereto (including, without
limitation, all cash equivalents), all interest, dividends,
distributions, cash, Instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such funds and financial assets, and all
certificates and Instruments, if any, from time to time representing or
evidencing such Accounts;
(ii) all certificates of deposit and other
Instruments from time to time delivered to or otherwise possessed by
the Collateral Agent for or on behalf of any Grantor, including,
without limitation, those delivered or possessed in substitution for or
in addition to any or all of the then existing Account Collateral; and
(iii) all interest, distributions, cash,
Instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
the then existing Account Collateral.
"Account Debtor" means a Person obligated to pay a Grantor in
respect of a Pledged Receivable.
"Additional Insured" means each Lender, the Board, the
Collateral Agent, the Agent, the Supplemental Guarantor, the Loan Administrator
and each of their respective Affiliates, successors and permitted assigns, and
the respective directors, officers and employees of each of the foregoing.
"Air Mobility Command Agreement" has the meaning assigned to
such term in the Loan Agreement.
"Appliances" means an instrument, Equipment, apparatus, part,
appurtenance, or accessory used, capable of being used, or intended to be used
in operating or controlling aircraft in flight, including a parachute,
communication equipment, and any other mechanism installed in or attached to
aircraft during flight, and not part of an aircraft or engine.
"Bankruptcy Default" means any event or condition which is, or
upon notice, lapse of time or both would, unless cured or waived, become, an
Event of Default under clauses (f), (g), (p) or (q) of Section 7.1 of the Loan
Agreement.
"Certificated Air Carrier" means a Person holding an air
carrier operating certificate issued by the Secretary of Transportation of the
United States pursuant to Chapter 447 of Title 49 of the United States Code or
any analogous successor provision of the United States Code, for aircraft
capable of carrying ten or more individuals or 6,000 pounds or more of cargo.
"CFC" means a "controlled foreign corporation" under Section
957 of the Internal Revenue Code.
"Citigroup Paper" has the meaning assigned thereto in Section
7.06(i).
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"Civil Reserve Air Fleet Program" means the Civil Reserve Air
Fleet Program administered by the United States Government pursuant to Executive
Order No. 11490, as amended, or any substantially similar program.
"Collateral" has the meaning assigned thereto in the Granting
Clause hereof.
"Company" has the meaning assigned thereto in the preamble to
this Agreement.
"Designated Locations" means (i) the locations in the United
States designated from time to time by a Grantor at which it may keep Spare
Parts (other than Spare parts kept in the Fly Away Kits), which initially shall
be the locations set forth on part (a) of Schedule 2.01, and (ii) with respect
to Spare Parts which are stored in the Fly Away Kits, (A) the aircraft
identified on part (b) of Schedule 2.01 on which such Fly Away Kits may be kept
from time to time (it being acknowledged that no claim is being made against any
of such aircraft) and (B) the airports or other locations in the U.S. identified
on part (b) of Schedule 2.01 at which such aircraft are generally located while
not in actual flight; and in the case of each of (i) and (ii), the additional
locations designated by a Grantor pursuant to Section 3.03(c) hereof.
"Disposition" has the meaning assigned thereto in Section
3.14.
"Equity Interests" means, with respect to any Person, all
Capital Stock of such Person, all warrants, options or other rights for the
purchase or acquisition from such Person of its Capital Stock, all securities
convertible into or exchangeable for such Person's Capital Stock and all of the
other ownership or profit interests in such Person.
"Event of Loss" means, with respect to any Collateral, any of
the following events with respect to such property (as applicable): (i) the loss
of such property or of the use thereof due to the destruction of or damage to
such property which renders repair uneconomic or which renders such property
permanently unfit for normal use for any reason whatsoever; (ii) any damage to
such property which results in an insurance settlement with respect to such
property on the basis of a total loss or a constructive or compromised total
loss; (iii) the theft or disappearance of such property for the lesser of (A) a
period in excess of sixty (60) consecutive days, (B) the period to the date when
the Net Insurance Proceeds with respect to such property are paid to the
Collateral Agent, or (C) the period to the date when a Grantor has confirmed to
the Collateral Agent in writing that it cannot recover such property; (iv) the
confiscation, condemnation or seizure of, or requisition of, title to such
property by any Governmental Authority or purported Governmental Authority; (v)
the confiscation, condemnation or seizure of, or requisition of, use of such
property by any Governmental Authority or purported Governmental Authority,
which shall have resulted in the loss of possession of such property by a
Grantor for a period in excess of six months; and (vi) any other event which
constitutes an Event of Loss hereunder.
"Excluded Assets" means (i) any of Borrower's or any of its
Affiliate's interest in any Capital Lease or Operating Lease of Aircraft Related
Equipment or in any deposits, reserves or other payments or proceeds thereunder,
or in rights to payments, property or proceeds thereunder and (ii) the excluded
deposit accounts identified on Schedule 2.09.
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"Expendables" means those Spare Parts of a type normally used
only once and thereby consumed or otherwise discarded, including all Parts which
have a limited life and are not classified as fixed assets in accordance with
GAAP.
"FAA" means the United States Federal Aviation Administration
or any successor thereto administering the functions of the Federal Aviation
Administration under the Federal Aviation Act.
"Federal Aviation Act" means Subtitle VII of Title 49 of the
United States Code relating to aviation, as amended from time to time, or any
similar legislation of the United States enacted to supersede, amend or
supplement such subtitle.
"Fly Away Kits" has the meaning assigned to such term in the
Loan Agreement.
"Grantors" has the meaning assigned thereto in the preamble to
this Agreement.
"Initial Pledged Debt" means all indebtedness for borrowed
money owed to each Grantor and set forth opposite such Grantor's name on and as
otherwise described in Schedule 2.07(b).
"Initial Pledged Equity" means the Equity Interests set forth
opposite each Grantor's name on and as otherwise described in Schedule 2.07(a).
"Insurance Brokers" has the meaning assigned thereto in
Section 3.04(c).
"Insured Amount" for any Spare Engine or other item of
Collateral as of any date of determination means an amount equal to its
replacement value.
"Insurers" has the meaning assigned thereto in Section
3.04(a)(i).
"Intellectual Property Collateral" means the following
property of the Grantors:
(i) all patents, patent applications, utility
models and statutory invention registrations, all inventions claimed or
disclosed therein and all improvements thereto;
(ii) all trademarks, service marks, domain names,
trade dress, logos, designs, slogans, trade names, business names,
corporate names and other source identifiers, whether registered or
unregistered (provided that no security interest shall be granted in
United States intent-to-use trademark applications to the extent that,
and solely during the period in which, the grant of a security interest
therein would impair the validity or enforceability of such
intent-to-use trademark applications under applicable federal law),
together, in each case, with the goodwill symbolized thereby
("Trademarks");
(iii) all copyrights, whether registered or
unregistered, including, without limitation, copyrights in computer
software, internet websites and the content thereof, whether registered
or unregistered;
10
(iv) all computer software, programs and
databases (including, without limitation, source code, object code and
all related applications and data files), firmware and documentation
and materials relating thereto, together with any and all rights under
contracts for maintenance and service, additional programming, hosting
services, testing, improvements, error corrections, updates and new
versions of any of the foregoing;
(v) all confidential and proprietary
information, including, without limitation, trade secrets, confidential
and proprietary know-how, manufacturing and production processes and
techniques, inventions, research and development information, databases
and data, including, without limitation, technical data, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information, and
all other intellectual, industrial and intangible property of any type,
including, without limitation, industrial designs and mask works;
(vi) all registrations and applications for
registration for any of the foregoing, including, without limitation,
those registrations and applications for registration set forth on
Schedule 2.08 hereto or in any IP Security Agreement, together with all
reissues, divisions, continuations, continuations-in-part, extensions,
renewals and reexaminations thereof;
(vii) all rights in the foregoing provided by
international treaties or conventions, all rights corresponding thereto
throughout the world and all other rights of any kind whatsoever of
such Grantor accruing thereunder or pertaining thereto;
(viii) all agreements, permits, consents and
franchises relating to the license, development, use or disclosure of
any of the foregoing to which such Grantor, now or hereafter, is a
party or a beneficiary ("IP Agreements"); and
(ix) any and all claims for damages and
injunctive relief for past, present and future infringement, dilution,
misappropriation, violation, misuse or breach with respect to any of
the foregoing, with the right, but not the obligation, to xxx for and
collect, or otherwise recover, such damages.
"IP Agreement" has the meaning assigned thereto in clause
(viii) of the definition of Intellectual Property Collateral.
"IP Security Agreement" means an intellectual property
security agreement in the form of Exhibit B.
"IP Security Agreement Supplement" means a supplement to an IP
Security Agreement in the form of Exhibit C attached hereto.
"Loss Payment Date" has the meaning assigned thereto in clause
(B)(1) of Section 4.01(a)(i).
"Manufacturer" means with respect to each Spare Engine and
Spare Part, the manufacturer thereof, and its successors and assigns.
11
"Minimum Liability Insurance Amount" means $750,000,000.
"Mortgage and Security Agreement Supplement (Spare Engine)"
means a supplement to this Security Agreement in the form of Exhibit A1.
"Mortgage and Security Agreement Supplement (Spare Parts)"
means a supplement to this Security Agreement in the form of Exhibit A2.
"Motor Vehicle" means any vehicle whose ownership is governed
by a Certificate of Title statute.
"Parts" means, with respect to any Spare Engine or any Spare
Part, any and all parts, instruments, appurtenances, accessories and other
Equipment of whatever nature (other than complete Spare Engines or engines)
which may from time to time be incorporated or installed in or attached to such
Spare Engine or such Spare Part.
"Payment Default" means any event or condition which is, or
upon notice, lapse of time or both would, unless cured or waived, become, an
Event of Default under Section 7.1(a) of the Loan Agreement.
"Permitted Lease" means a lease permitted under the terms of
Section 3.01(b)(i)(H).
"Permitted Lessee" means the lessee under a Permitted Lease.
"Permitted Liens" means (i) the Liens permitted under the
definition of Permitted Encumbrances contained in the Loan Agreement, (ii) the
Liens permitted under Section 6.1 of the Loan Agreement, and (iii) the Lien of
this Agreement.
"Pledged Debt" has the meaning assigned thereto in clause (iv)
of the definition of Security Collateral.
"Pledged Equipment" means all Equipment in all of its forms,
including, without limitation, all machinery, tools, Motor Vehicles, vessels,
passenger loading bridges, Fixtures, furniture, and all parts thereof and all
accessions thereto and all Software related thereto (including, without
limitation, Software that is embedded in and is part of the Equipment).
"Pledged Equity" has the meaning assigned thereto in clause
(iii) of the definition of Security Collateral.
"Pledged Inventory" means all Inventory in all of its forms,
including, without limitation, (i) all raw materials, work in process, finished
goods and materials used or consumed in the manufacture, production, preparation
or shipping thereof, (ii) Goods in which such Grantor has an interest en mass or
a joint or other interest or right of any kind (including, without limitation,
Goods in which such Grantor has an interest or right as consignee) and (iii)
Goods that are returned to or repossessed or stopped in transit by such
Grantor), and all accessions thereto and products thereof and documents
therefor, and all Software related thereto (including, without limitation,
Software that is embedded in and is part of the Inventory).
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"Pledged Real Property" means all of any Grantor's right,
title and interest in real property other than leasehold interests in real
property.
"Pledged Receivables" means all Accounts (including, without
limitation, Health-Care Insurance Receivables), Chattel Paper (including,
without limitation, Tangible Chattel Paper and Electronic Chattel Paper),
Instruments (including, without limitation, Promissory Notes), Letter-of-Credit
Rights, General Intangibles (including, without limitation, Payment Intangibles)
and other obligations of any kind, whether or not arising out of or in
connection with the sale or lease of Goods or the rendering of services and
whether or not earned by performance, including, without limitation, all of the
Company's rights to payment under the Air Mobility Command Agreement, in each
case which is not Security Collateral, Account Collateral or Intellectual
Property Collateral.
"Proceeds" has the meaning assigned to such term under Article
9 of the UCC and, in any event, shall include, but not be limited to, any and
all (i) proceeds of any insurance, indemnity, warranty or guarantee, by reason
of loss or damage to or otherwise, payable to the Collateral Agent or to the
Grantors from time to time with respect to any of the Collateral, (ii) payments
(in any form whatsoever), made or due and payable to the Grantors from time to
time in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority), (iii) Instruments
delivered in respect of the Collateral, (iv) products of the Collateral, (v) any
and all rights of the Grantors to receive moneys due and to become due from any
Person under or pursuant to any contract or other agreement arising out of the
Collateral, including, all rents, revenues, royalties, license fees, for the
use, or otherwise arising out of the Collateral, (vi) all causes of action,
claims (including tort and commercial tort claims) and warranties now or
hereafter held by each Grantor arising out of any of the Collateral, and (vii)
other amounts from time to time paid or payable on account of any of the
Collateral.
"Purchase Agreements" means, collectively, with respect to
each Spare Engine, the agreement between a Grantor and the applicable
Manufacturer or other seller relating to the purchase by such Grantor of such
Spare Engine as originally executed or as modified, amended or supplemented in
accordance with the terms thereof, but only insofar as the foregoing relates to
such Spare Engine and to such Manufacturer's warranty obligations (if
applicable) with respect thereto.
"Records" has the meaning assigned thereto in paragraph (13)
of the Granting Clause hereof.
"Related Contracts" means, with respect to any Pledged
Receivable, all rights now or hereafter existing in and to all supporting
obligations and in and to all security agreements, mortgages, Liens, leases,
letters of credit and other contracts securing or otherwise relating to such
Pledged Receivable, in each case which is not Security Collateral, Account
Collateral or Intellectual Property Collateral.
"Replacement Engine" means any engine or engines substituted
for a Spare Engine in accordance with Section 3.01(d) and Section 4.01(a)
hereof.
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"Rotables" means those Spare Parts that can be repeatedly
overhauled and repaired.
"Security Agreement" or "Agreement" means this Mortgage and
Security Agreement.
"Security Collateral" means the following property to the
extent not Account Collateral:
(i) the Initial Pledged Equity and the
certificates, if any, representing the Initial Pledged Equity, and all
dividends, distributions, return of capital, cash, Instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Initial
Pledged Equity and all subscription warrants, rights or options issued
thereon or with respect thereto;
(ii) the Initial Pledged Debt and the
Instruments, if any, evidencing the Initial Pledged Debt, and all
interest, cash, Instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Initial Pledged Debt;
(iii) all additional shares of stock and other
Equity Interests from time to time acquired by such Grantor in any
manner (such shares and other Equity Interests, together with the
Initial Pledged Equity, being the "Pledged Equity"), and the
certificates, if any, representing such additional shares or other
Equity Interests, and all dividends, distributions, return of capital,
cash, Instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such shares or other Equity Interests and all
subscription warrants, rights or options issued thereon or with respect
thereto; provided, however, that anything to the contrary contained
herein notwithstanding, neither of the Grantors shall be required to
pledge any Equity Interest in any Subsidiary that is a CFC or an Equity
Interest in a U.S. corporation whose assets consist solely of the stock
of one or more CFCs owned or otherwise held by such Grantor which, when
aggregated with all of the other shares of stock in such Subsidiary
pledged by the other Grantor, would result in more than 66% of the
shares of stock in such Subsidiary entitled to vote (within the meaning
of Treasury Regulation Section 1.956-2(c)(2) promulgated under the
Internal Revenue Code) being pledged to the Collateral Agent, under
this Agreement (although all of the shares of stock in such Subsidiary
not entitled to vote (within the meaning of Treasury Regulation Section
1.956-2(c)(2) promulgated under the Internal Revenue Code) shall be
pledged by each of the Grantors that owns or otherwise holds any such
non-voting foreign stock therein; provided, further, that if as a
result of any change in U.S. tax laws after the date of this Agreement
the pledge by such Grantor of any additional shares of stock in any
such Subsidiary to the Collateral Agent would not result in income
inclusion under Section 951 or 956 of the Internal Revenue Code with
respect to the Company and its Subsidiaries, then, promptly after the
change in such laws, all such additional shares of stock shall be so
pledged under this Agreement;
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(iv) all additional indebtedness for borrowed
money from time to time owed to such Grantor (such indebtedness,
together with the Initial Pledged Debt, being the "Pledged Debt") and
the Instruments, if any, evidencing such indebtedness, and all
interest, cash, Instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such indebtedness; and
(v) all other Investment Property (including,
without limitation, all (A) securities, whether certificated or
uncertificated, (B) Security Entitlements and (C) Commodity Contracts)
in which such Grantor now has, or acquires from time to time hereafter,
any right, title or interest in any manner, and the certificates or
Instruments, if any, representing or evidencing such Investment
Property, and all dividends, distributions, return of capital,
interest, distributions, value, cash, Instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Investment Property
and all subscription warrants, rights or options issued thereon or with
respect thereto.
"Similar Carriers" has the meaning assigned thereto in Section
3.04(a)(i).
"Spare Engine" means (i) each of the engines listed by
Manufacturer's serial number on Schedule 1.01 hereto and on any Mortgage and
Security Agreement Supplement (Spare Engine) executed and delivered from time to
time hereunder, and whether or not either initially or from time to time
installed on any airframe; (ii) any Replacement Engine which may from time to
time be substituted for any of such Spare Engines pursuant to the terms hereof;
and (iii) in either case, any and all Parts which are from time to time
incorporated or installed in or attached to any such engine and any and all
Parts removed therefrom, unless the Lien of the Security Documents shall not
apply to such Parts in accordance with Section 3.02.
"Spare Part" means an accessory, appurtenance, Appliance,
instrument or part, of whatever nature (including, without limitation, passenger
convenience equipment), relating to an aircraft (except an engine), engine
(except a propeller), or Appliance that is to be installed at a later time on an
aircraft, engine or Appliance; provided, however, that the Lien of this Security
Agreement shall not attach to any Spare Parts so long as such Spare Parts are
incorporated in, installed on or attached or appurtenant to an aircraft or
engine. Spare Parts shall include Expendables and Rotables.
"Specified Default" means a Payment Default or a Bankruptcy
Default.
"Tracking System" means the Grantors' Ultramain system for
tracking the Grantors' inventory of Spare Parts, and any and all improvements,
upgrades, substitutes or replacement systems.
"Trademark" has the meaning assigned thereto in clause (ii) of
the definition of Intellectual Property Collateral.
"United States" or "U.S." means the United States of America.
"United States Government" means the federal government of the
United States or any instrumentality or agency thereof.
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"Warranty Bills of Sale" means, collectively, each full
warranty xxxx of sale delivered to a Grantor from the applicable Manufacturer
(or other seller) in respect of each Spare Engine.
"Wet Lease" means any arrangement whereby a Grantor (or any
Permitted Lessee) agrees to furnish an aircraft on which a Spare Engine is
installed to a third party pursuant to which such aircraft (i) remains in the
operational control of the Grantors (or such Permitted Lessee) and (ii) is
maintained, insured and otherwise used and operated in accordance with the
provisions hereof.
"World LLC" has the meaning assigned thereto in the preamble
to this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE GRANTORS
Each Grantor hereby represents and warrants as follows (as
applicable):
SECTION 2.01 CERTIFICATED AIR CARRIER; MAINTENANCE AND
LOCATION OF SPARE PARTS; SECTION 1110.
(a) The Company is a Certificated Air Carrier, and the
Spare Parts which are subject to this Security Agreement are maintained by it or
by World LLC on its behalf. The Designated Locations identified on part (a) of
Schedule 2.01 hereto or otherwise identified on a Mortgage and Security
Agreement Supplement (Spare Parts) are the only locations at which Spare Parts
are maintained by the Company or by World LLC on its behalf, other than Spare
Parts in the Fly Away Kits or in transit to or from Designated Locations. The
Designated Locations identified on part (b) of Schedule 2.01 hereto or otherwise
identified on a Mortgage and Security Agreement Supplement (Spare Parts) are (i)
the only aircraft on which Fly Away Kits are kept from time to time and (ii) the
only airports or other locations in the U.S. at which such aircraft are
generally located while not in actual flight.
(b) The Collateral Agent shall be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to a Grantor's
Spare Parts and Spare Engines pledged hereunder, in each case to the extent
first placed into service after October 22, 1994, in the event of a case under
Chapter 11 of the Bankruptcy Code in which such Grantor is a debtor.
SECTION 2.02 TITLE TO COLLATERAL; FINANCING STATEMENTS. Such
Grantor is the legal and beneficial owner of the Collateral of such Grantor free
and clear of any Liens, other than Permitted Liens. Such Grantor has full power,
authority and legal right to assign and pledge all of the Collateral pledged by
it hereunder. Except as set forth on Schedule 2.03, as of the date hereof, there
is no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction intended to provide notice of a Lien) covering
or purporting to cover any interest of any kind in the Collateral (other than
Pledged Real Property) of such Grantor which would be effective to perfect or
record a Lien on such Collateral, other than financing statements that relate to
(x) transactions for which all secured obligations have been paid in full or are
being paid in full on the Closing Date, and there is no commitment on the part
of any
16
Person to advance funds or perform any obligation that would be secured by the
collateral described in such financing statements or (y) Permitted Liens.
SECTION 2.03 LOCATION OF GRANTORS; UCC INFORMATION. Such
Grantor's name, (sufficient to provide the name of such Grantor as a debtor
under Section 9-503(a) of the UCC), federal employer identification number and
state organizational identification number are correctly set forth on Schedule
2.03 hereto. Such Grantor is located (within the meaning of Section 9-307 of the
UCC) in Delaware and has its chief executive office at the address and in the
state set forth on Schedule 2.03 hereto. Delaware is the only jurisdiction in
which such Grantor is a Registered Organization. As of the date hereof, the
information set forth on Schedule 2.03 hereto with respect to such Grantor is
true and accurate in all respects. Except as disclosed on Schedule 2.03, as of
the date hereof no Grantor has previously changed its name, location, chief
executive office, type of organization, jurisdiction of organization or
organizational identification number during the five (5) years preceding the
execution of this Agreement from those set forth in herein or on Schedule 2.03.
SECTION 2.04 PERFECTED FIRST PRIORITY LIENS. Other than with
respect to Pledged Real Property, upon (i) the filing of this Agreement with the
FAA in accordance with the Federal Aviation Act and the rules and regulations
thereunder in respect of the Spare Engines and Spare Parts, (ii) the filing of
the UCC-1 financing statement in the appropriate filing office naming such
Grantor as debtor and the Collateral Agent as secured party in respect of the
Collateral, (iii) the recording of the IP Security Agreement with the U.S.
Patent and Trademark Office, the U.S. Copyright Office and any other applicable
U.S. Governmental Authority with respect to the Intellectual Property Collateral
of such Grantor, and (iv) effecting other filings/recordings required to be made
and expressly contemplated hereunder (including, without limitation, in respect
of any Motor Vehicle, endorsing on the Certificate of Title therefor the Lien of
the Collateral Agent thereon), all filings, registrations and recordings
necessary to create, preserve, protect and perfect the security interest granted
by such Grantor to the Collateral Agent hereby in respect of the Collateral of
such Grantor will have been accomplished, and the security interest granted to
the Collateral Agent pursuant to this Agreement in and to the Collateral of such
Grantor will constitute a first priority perfected security interest therein
(and with respect to perfection, to the extent that (A) perfection of the
security interest in respect of such Collateral is required hereunder and (B) a
security interest in such Collateral may be perfected by filing, registration or
recording), prior to the rights of all other Persons therein and subject to no
other Liens other than Permitted Liens.
SECTION 2.05 CONSENTS. Except as set forth on Schedule 2.05
and except with respect to Pledged Real Property, no consent of any other party
(including, without limitation, stockholders or creditors of such Grantor) other
than consents that have been obtained, and no consent, authorization, approval,
or other action by, and (except in connection with the perfection of the Liens
created hereby) no notice to or filing with, any Governmental Authority or other
Person is required either (x) for the pledge by such Grantor of its Collateral
pursuant to this Agreement or for its execution, delivery or performance of this
Agreement or (y) for the exercise by the Collateral Agent of the rights and
remedies provided in this Agreement in respect of the Collateral.
17
SECTION 2.06 POSSESSION OF PLEDGED EQUIPMENT. Such Grantor has
exclusive possession and control of the Pledged Equipment of such Grantor, which
Pledged Equipment is located only at the locations identified on Schedule 2.06
hereto or in transit between such locations. In the case of Pledged Equipment
located on leased premises, leased aircraft or in warehouses, no lessor or
warehouseman of any premises or warehouse upon or in which such Pledged
Equipment is located has (i) to the best knowledge of any Responsible Officer,
issued any warehouse receipt or other receipt in the nature of a warehouse
receipt in respect of any Pledged Equipment, (ii) to the best knowledge of any
Responsible Officer, issued any document for any of such Grantor's Pledged
Equipment and (iii) to the best knowledge of any Responsible Officer, received
notification of any Secured Party's interest (other than the security interest
granted hereunder) in such Grantor's Pledged Equipment.
SECTION 2.07 PLEDGED EQUITY AND PLEDGED DEBT.
(a) The Pledged Equity of any Subsidiary of such Grantor
which is pledged by such Grantor hereunder, including, without limitation, the
Pledged Equity listed on Schedule 2.07(a), has been duly authorized and validly
issued and is fully paid and non-assessable. If any Grantor is an issuer of
Pledged Equity, such Grantor confirms that it has received notice of such
security interest. To the best knowledge of such Grantor, the Pledged Debt
pledged by such Grantor hereunder which has an outstanding principal amount on
the date hereof in excess of $50,000 has been duly authorized, authenticated or
issued and delivered, is the legal, valid and binding obligation of the issuers
thereof, is evidenced by one or more Promissory Notes and is not in default.
(b) The Initial Pledged Equity constitutes all of the
Equity Interests of any Person owned by such Grantor as of the Closing Date
(other than Equity Interests not required to be pledged hereunder on the Closing
Date pursuant to the terms hereof). The Initial Pledged Debt constitutes all of
the outstanding indebtedness for borrowed money owed to each Grantor by the
issuers thereof (other than indebtedness for borrowed money owed to a Grantor
and not required to be pledged hereunder on the Closing Date pursuant to the
terms hereof) and, as of the Closing Date, is outstanding in the principal
amount indicated on Schedule 2.07(b) hereto.
(c) With respect to the Initial Pledged Equity in which
such Grantor has any right, title or interest and which is represented by a
certificate or Instrument, such Grantor has delivered such Instruments or
certificates to the Collateral Agent in suitable form for transfer by delivery
or accompanied by duly executed Instruments of transfer or assignment in blank.
(d) With respect to the Initial Pledged Equity in which
such Grantor has any right, title or interest and which constitutes an
uncertificated security (other than an uncertificated security which (x) is not
an Equity Interest in a Subsidiary of such Grantor and (y) has a fair market
value, together with all uncertificated securities of such issuer held by such
Grantor, of less than $50,000), such Grantor has caused the issuer thereof
either (A) to register the Collateral Agent as the registered owner of such
security or (B) to agree in an authenticated record with such Grantor and the
Collateral Agent that such issuer will comply with instructions with respect to
such security originated by the Collateral Agent without further consent of such
Grantor.
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(e) With respect to any Initial Pledged Debt in which
such Grantor has any right, title or interest and which is represented by an
Instrument (other than an Instrument representing Pledged Debt (x) issued by a
Person other than a Subsidiary of such Grantor and (y) which has a value,
together with all other Instruments representing Pledged Debt issued by the same
issuer and held by such Grantor, of less than $50,000), such Grantor has
delivered such Instrument to the Collateral Agent accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Collateral Agent.
(f) (i) Upon the filing of the UCC-1 financing statement
in the appropriate filing office naming such Grantor as debtor and the
Collateral Agent as secured party in respect of the Collateral and (ii) the
taking of the actions described in subsections (c), (d) and (e) of this Section
2.07, as applicable, the security interest granted to the Collateral Agent
pursuant to this Agreement in and to the Initial Pledged Equity and the Initial
Pledged Debt will constitute a first priority perfected security interest
therein (to the extent perfection is required hereunder), prior to the rights of
all other Persons therein and subject to no other Liens other than Permitted
Liens.
SECTION 2.08 INTELLECTUAL PROPERTY. Schedule 2.08 sets forth
all material Intellectual Property Collateral of such Grantor which is the
subject of a registration or application for registration with the U.S. Patent
and Trademark Office, the U.S. Copyright Office and any other applicable U.S.
Governmental Authority. With respect to each material IP Agreement included in
the Collateral: (i) such IP Agreement is valid and binding and in full force and
effect with respect to such Grantor; (ii) to the extent that Section 9-408 of
the UCC is applicable thereto or such IP Agreement permits the assignment of
such Grantor's rights thereunder, such IP Agreement will not cease to be valid
and binding and in full force and effect with respect to such Grantor on terms
identical to those currently in effect as a result of the rights and interest
granted herein, nor will the grant of such rights and interest constitute a
breach or default under such IP Agreement or otherwise give any party thereto a
right to terminate such IP Agreement; (iii) neither Grantor has received any
notice of termination, cancellation or received any notice of a breach or
default under such IP Agreement; (iv) except as set forth on Schedule 2.08,
neither Grantor has granted to any other third party any rights under such IP
Agreement; and (v) neither such Grantor nor, to the best knowledge of such
Grantor, any other party to such IP Agreement, is in breach or default thereof
in any material respect, and, to the best knowledge of such Grantor, no event
has occurred that, with notice or lapse of time or both, would constitute such a
breach or default or permit termination, modification or acceleration under such
IP Agreement.
SECTION 2.09 DEPOSIT AND SECURITIES ACCOUNTS. Schedule 2.09
lists all of the Deposit Accounts and Securities Accounts maintained by such
Grantor on the date hereof. Other than the excluded deposit accounts identified
on Schedule 2.09, each such Deposit Account or Securities Account is maintained
with a financial institution which has entered into a Control Agreement with
such Grantor and the Collateral Agent relating to such Deposit Account or
Securities Account, as the case may be, other than a Deposit Account or
Securities Account not required to be subject to a Control Agreement pursuant to
Section 5.17 of the Loan Agreement.
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ARTICLE 3
COVENANTS OF THE COMPANY
Each Grantor covenants and agrees as follows:
SECTION 3.01 MAINTENANCE AND OPERATION; POSSESSION; INSIGNIA.
(a) Maintenance and Operation of Spare Engines.
(i) Such Grantor, at its own cost and expense,
shall: (A) maintain, service, repair, and overhaul (or cause to be
maintained, serviced, repaired, and overhauled) each Spare Engine and
each of the material Spare Parts (x) so as to keep the Spare Engines in
an airworthy condition and suitable for installation and operation on
the aircraft in the Company's fleet in accordance with any applicable
maintenance program and in compliance with all applicable airworthiness
directives; and (y) so as to maintain in or return the Spare Parts to
good working order and condition and shall perform all maintenance
thereon necessary for that purpose and in accordance with the
requirements of each of the Manufacturer's manuals and mandatory
service bulletins, excluding Spare Engines or Spare Parts that have
become worn out or obsolete or unfit for use and are not reasonably
repairable; and (B) maintain or cause to be maintained all Records,
logs and other materials required by the FAA or any other applicable
regulatory agency or body to be maintained in respect of each Spare
Engine and each of the Spare Parts.
(ii) Such Grantor will not (or permit any
Permitted Lessee to) maintain, use, store, service, repair, overhaul or
operate any Spare Engine in violation of any (A) law, rule, regulation,
treaty, order or certificate of any government or Governmental
Authority (domestic or foreign) having jurisdiction, (B) airworthiness
certificate or (C) license or registration relating to such Spare
Engine issued by any such authority. In the event that any such law,
rule, regulation, treaty, order, certificate, license or registration
requires alteration of any Spare Engine, such Grantor will, at its sole
cost and expense, conform thereto or obtain conformance therewith other
than to the extent that such Grantor has determined in good faith that
such Spare Engine is obsolete or not reasonably repairable.
Notwithstanding the foregoing, such Grantor or any Permitted Lessee may
contest in good faith the validity or application of any such law,
rule, regulation, treaty, order, certificate, license or registration
in any reasonable manner which does not materially adversely affect the
Collateral Agent, the Board or any Lender, or any of their respective
legal and economic interests in or to any of the Spare Engines,
including the Lien of the Security Documents. In every case, operation,
use, storage, maintenance, servicing, repair or overhaul of each Spare
Engine is subject to compliance by such Grantor with the provisions of
Section 3.04. If the indemnities or insurance from the United States
Government specified in Section 3.04(f), or some combination thereof in
amounts equal to amounts required by Section 3.04, have not been
obtained (unless indemnities or insurance in amounts so required are
available in the commercial aviation insurance market and are
obtained), such Grantor will not operate or locate any Spare Engine in
or to any area excluded from coverage by any insurance required to be
maintained by the terms of Section 3.04; provided, however, that the
failure of any
20
Grantor to comply with the provisions of this Section 3.01(a)(ii) shall
not give rise to an Event of Default where such failure is attributable
to a hijacking, medical emergency, equipment malfunction, weather
conditions, navigational error or act of terrorism and such Grantor is
taking all reasonable steps to remedy such failure as soon as
practicable.
(b) Possession of Spare Engines.
(i) Such Grantor will not, without the prior
written consent of the Collateral Agent, lease or otherwise in any
manner deliver, transfer or relinquish possession of any Spare Engine
or install or permit any Spare Engine to be installed on any airframe;
provided, however, that so long as (x) no Specified Default or Event of
Default shall have occurred and be continuing at the time of such
delivery, transfer or relinquishment of possession or installation and
(y) such action shall not deprive the Collateral Agent of the first
priority perfected Lien of the Security Documents on any Spare Engine,
such Grantor or any Permitted Lessee (except with respect to clause
(H)) may, without the prior written consent of Collateral Agent:
(A) subject any Spare Engine to normal
pooling or similar arrangements, in each case customary in the
airline industry and entered into by such Grantor in the
ordinary course of its business; provided, that (1) no such
arrangement contemplates or requires the transfer of title to
any Spare Engine and (2) if such Grantor's title to any Spare
Engine shall be divested under any such arrangement, such
divestiture shall be deemed to be an Event of Loss with
respect to such Spare Engine, and such Grantor shall comply
with Section 4.01 hereof in respect thereof;
(B) deliver possession of any Spare
Engine to the Manufacturer thereof or to any other Person for
testing, service, repair, maintenance or overhaul work on such
Spare Engine or any part thereof or for alterations or
modifications in or additions to such Spare Engine to the
extent required or permitted by the terms hereof;
(C) install a Spare Engine on an
airframe registered in the United States owned by a Grantor,
so long as such airframe is free and clear of all Liens other
than (1) Permitted Liens and those which apply only to the
engines (other than Spare Engines), Appliances, parts,
instruments, appurtenances, accessories, furnishings and other
Equipment (other than Parts) installed on such airframe (but
not to the airframe as an entirety), (2) the rights of third
parties under interchange agreements customary in the airline
industry and entered into by such Grantor in the ordinary
course of its business, provided that such Grantor's title to
such Spare Engine shall not be divested as a result thereof
and (3) mortgage Liens or other security interests, provided,
that (as regards this clause (3)), such mortgage Liens or
other security interests effectively provide that such Spare
Engine shall not become subject to the Lien of such mortgage
or security interest, notwithstanding the installation thereof
on such airframe;
21
(D) install a Spare Engine on an
airframe registered in the United States leased to a Grantor
(or a Permitted Lessee) or purchased by such Grantor (or a
Permitted Lessee) subject to a conditional sale or other
security agreement, so long as (1) such airframe is free and
clear of all Liens, other than (x) the rights of the parties
to the lease or conditional sale or other security agreement
covering such airframe, or their assignees, and (y) Liens of
the type permitted by clause (C) of this Section 3.01(b)(i)
and (2) such lease, conditional sale or other security
agreement effectively provides that such Spare Engine shall
not become subject to the Lien of such lease, conditional sale
or other security agreement, notwithstanding the installation
thereof on such airframe;
(E) install a Spare Engine on an
airframe registered in the United States owned by a Grantor
(or a Permitted Lessee), leased to such Grantor or purchased
by such Grantor subject to a conditional sale or other
security agreement under circumstances where neither clause
(C) nor clause (D) of this Section 3.01(b)(i) is applicable,
provided that any divestiture of title to such Spare Engine
resulting from such installation shall be deemed an Event of
Loss with respect to such Spare Engine, and such Grantor shall
comply with Section 4.01(a) hereof in respect thereof, the
Collateral Agent not intending hereby to waive any right or
interest it may have to or in such Spare Engine under
applicable law until compliance by such Grantor with such
Section 4.01(a);
(F) transfer (or permit any Permitted
Lessee to transfer) possession of any Spare Engine to the
United States Government or any instrumentality or agency
thereof pursuant to the Civil Reserve Air Fleet Program so
long as such Grantor shall notify the Collateral Agent (1)
prior to or contemporaneously with transferring possession of
any such Spare Engine to the United States Government or any
agency or instrumentality thereof pursuant to the Civil
Reserve Air Fleet Program and (2) of the name and the address
of the Contracting Office Representative for the Air Mobility
Command to whom notice must be given pursuant to Section
5.01(b) hereof;
(G) transfer possession of any Spare
Engine to the United States Government or any instrumentality
or agency thereof pursuant to a lease, contract or other
instrument, a copy of which shall be provided to the
Collateral Agent; or
(H) enter into a lease of any Spare
Engine with (1) a Certificated Air Carrier, (2) any airline
domiciled and principally located in a country listed on
Schedule 3.01 hereto, or (3) any other Person approved in
writing by the Collateral Agent; provided that (I) no such
lease shall be permitted to a lessee that is subject to a
proceeding or final order under applicable bankruptcy,
insolvency or reorganization laws on the date the lease is
entered into, (II) in the case of a lease under subclause (2)
or (3) above, on the date of such lease or any renewal or
extension thereof, the United States and the country in which
such lessee is domiciled and principally located maintain
normal diplomatic relations (which for purposes of this clause
(H) shall include Taiwan),
22
(III) in the case only of a lease to any Person under
subclause (3) above, the Collateral Agent receives at the time
of such lease an opinion of counsel (in form and from counsel
reasonably satisfactory to the Collateral Agent) to the effect
that (w) the terms of the proposed lease will be legal, valid,
binding and (subject to customary exceptions in foreign
opinions generally that are of a nature accepted by
financiers) enforceable in accordance with its terms against
the proposed lessee in the country in which the proposed
lessee is principally based, (x) there exist no possessory
rights in favor of the lessee under such lease under the laws
of such lessee's country of domicile that would, upon
bankruptcy or insolvency of or other default by such Grantor
and assuming at such time such lessee is not insolvent or
bankrupt, prevent the return or repossession of such Spare
Engine in accordance with the lease and when permitted by the
terms of Article 5 upon the exercise by the Collateral Agent
of its remedies pursuant to such Article, (y) the laws of such
lessee's country of domicile require fair compensation by the
government of such jurisdiction payable in currency freely
convertible into Dollars for the loss of use of such Spare
Engine in the event of the requisition by such government of
such use, and (z) the laws of such lessee's country of
domicile would give recognition to such Grantor's title to the
Spare Engine, to the registration of the Spare Engine (if such
country maintains a registry for engines) in the name of such
Grantor (or the proposed lessee, as "lessee", as appropriate),
and to the Lien of the Security Documents, (IV) if the lessee
under such lease is a governmental entity, such lessee has
waived all rights of sovereign immunity, and (V) if the lessee
is a Certificated Air Carrier, such Grantor will be entitled
as lessor to the benefits of Section 1110 of the Bankruptcy
Code with respect to such Spare Engine in connection with a
proceeding under Chapter 11 of the Bankruptcy Code in which
the lessee is the debtor.
(ii) The rights of any transferee (other than a
transferee where the transfer is of a Spare Engine which is to be an
Event of Loss) shall be (and the assignment or other transfer document
under which such transfer is governed shall explicitly provide that)
during the period of such possession, subject and subordinate to, all
the terms of the Security Documents, including, without limitation, the
covenants contained in this Article 3, including the inspection rights
contained in Section 3.05 and the Collateral Agent's right to repossess
such Spare Engine. No pooling agreement, Permitted Lease or other
relinquishment of possession of any Spare Engine shall in any way
discharge or diminish such Grantor's obligations to the Collateral
Agent under the Security Documents or constitute a waiver of the
Collateral Agent's rights or remedies hereunder or thereunder.
(iii) In connection with any Permitted Lease, all
necessary action shall be taken by such Grantor at its expense which is
required to continue the Collateral Agent's security interest in the
applicable Spare Engine, and such Permitted Lease and all other
necessary documents shall be duly filed, registered or recorded in such
public offices as may be required to fully preserve the priority of the
security interest of the Collateral Agent in such Spare Engine. Any Wet
Lease shall not constitute a delivery, transfer or relinquishment of
possession for purposes of this Section 3.01. The Collateral Agent
acknowledges that any consolidation or merger of such Grantor or
conveyance,
23
transfer or lease of all or substantially all of such Grantor's assets,
in each case as permitted by the Loan Documents, shall not be
prohibited by this Section 3.01. No Permitted Lease entered into
pursuant to this Section 3.01(b) shall permit any subleasing of the
Spare Engines without the prior written consent of the Grantor and the
Collateral Agent.
(iv) Any Permitted Lease having a term in excess
of one (1) year shall be assigned by such Grantor to the Collateral
Agent as additional Collateral hereunder; provided that, except upon
the occurrence and during the continuance of a Specified Default or
Event of Default, (A) such Grantor shall be entitled to retain the
rental payments made to such Grantor under such Permitted Lease, and
(B) the rights of such Grantor as lessor under any Permitted Lease
shall not vest (to the exclusion of such Grantor) in the Collateral
Agent. Upon the occurrence of a default under such Permitted Lease,
such Grantor and the Collateral Agent shall have the right, acting
separately or together, to enforce the terms of such Permitted Lease;
provided, however, that upon the occurrence and during the continuance
of a Specified Default or Event of Default, the Collateral Agent shall
have the exclusive right to enforce the terms of such Permitted Lease.
In the event of the expiration or termination of the Permitted Lease,
at such Grantor's request, the Collateral Agent shall release its
interest in such Permitted Lease.
(c) Insignia. Within ninety (90) days after (x) the
Closing Date (with respect to Spare Engines covered by the Lien of the Security
Documents as of the Closing Date), and (y) the date on which any Mortgage and
Security Agreement Supplement (Spare Engine) is delivered (with respect to such
additional Collateral), and so long as any Spare Engines are subject to the Lien
of the Security Documents, such Grantor agrees to affix and maintain (or cause
to be affixed and maintained) on each Spare Engine a nameplate bearing the
inscription:
THIS ENGINE IS MORTGAGED TO
CITIBANK, N.A.,
AS COLLATERAL AGENT
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor collateral agent, in each case as permitted under the Loan
Documents). Except as above provided, such Grantor will not allow the name of
any Person other than the Grantors to be placed on any Spare Engine as a
designation that might be interpreted as a claim of ownership or of any rights
therein.
(d) Substitution of Spare Engines. Such Grantor may at
any time, at its sole cost and expense, replace any Spare Engine subjected to
the Lien hereof by causing one or more Acceptable Alternate Spare Engines to be
substituted for such Spare Engine hereunder in accordance with the provisions of
Section 4.01(a) hereof to the same extent as if an Event of Loss had occurred
with respect to such Spare Engine.
24
SECTION 3.02 REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS.
(a) Replacement of Parts. Such Grantor, at its own cost
and expense, will promptly replace or cause to be replaced all Parts of each
Spare Engine that may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever, except as otherwise provided in Section
3.02(c). All replacement parts shall be owned by such Grantor free and clear of
all Liens (except Permitted Liens, pooling arrangements permitted by Section
3.02(b) hereof and replacement parts temporarily installed on an emergency
basis) and shall be in good operating condition, and shall have a value and
utility at least equal to, the Parts replaced, assuming such replaced Parts were
in the condition and repair required to be maintained by the terms hereof. All
Parts at any time removed from any Spare Engine shall remain the property of
such Grantor and subject to the Lien of the Security Documents, no matter where
located, until such time as such Parts shall be replaced by parts which meet the
requirements for replacement parts specified above. Immediately upon any
replacement part becoming incorporated or installed in or attached to any Spare
Engine, without further act (subject only to Permitted Liens and any pooling
arrangement permitted by Section 3.02(b) hereof and except any replacement part
temporarily installed on an emergency basis), (i) such replacement part shall
become the property of such Grantor and subject to the Lien of the Security
Documents and be deemed a Part for all purposes hereof to the same extent as the
Part originally incorporated or installed in or attached to such Spare Engine
and (ii) the replaced Part shall be free and clear of all rights of the
Collateral Agent and shall no longer be deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from any Spare
Engine as provided in Section 3.02(a) hereof may be subjected by such Grantor to
a pooling arrangement of the type which is permitted by clause (iii) of Section
3.03(b) hereof; provided, that the part replacing such removed Part shall be
incorporated or installed in or attached to such Spare Engine in accordance with
Section 3.02(a) as promptly as practicable after the removal of such removed
Part. In addition, any replacement part when incorporated or installed in or
attached to a Spare Engine in accordance with such Section may be owned by any
third party subject to a pooling arrangement, provided, that such Grantor (or
any Permitted Lessee), at its expense, as promptly thereafter as practicable,
either (i) causes such replacement part to become subject to the Lien of the
Security Documents, free and clear of all Liens other than Permitted Liens or
(ii) replaces such replacement part with a further replacement part owned by
such Grantor (or any Permitted Lessee) which shall become the property of such
Grantor and subject to the Lien of the Security Documents, free and clear of all
Liens other than Permitted Liens.
(c) Alterations, Modifications and Additions. Such
Grantor, at its own expense, will make (or cause to be made) such alterations
and modifications in and additions to the Spare Engines as may be required to be
made from time to time so as to comply with any law, rule, regulation or order
of any regulatory agency or body of any jurisdiction in which any aircraft may
then be registered; provided, however, that such Grantor (or any Permitted
Lessee) may, in good faith, and by appropriate proceedings contest the validity
or application of any such law, rule, regulation or order in any reasonable
manner which does not materially adversely affect the Collateral Agent, the
Board or any Lender or any of their respective legal and economic interests in
or to such Spare Engine, or subject any such Person to risk of any material
25
civil or any criminal penalties or involve any material risk of loss or
forfeiture of title to such Spare Engine. In addition, such Grantor (or any
Permitted Lessee), at its own expense, may from time to time make such
alterations and modifications in and additions to any Spare Engine as such
Grantor (or any Permitted Lessee) may deem desirable in the proper conduct of
its business, including removal of Parts which such Grantor (or any Permitted
Lessee) deem to be obsolete or no longer suitable or appropriate for use on such
Spare Engine (such parts, "Obsolete Parts"); provided that no such alteration,
modification, removal or addition, after giving effect to the installation of
Additional Parts (as defined below), impairs the condition or airworthiness of
such Spare Engine, or materially diminishes the value or utility of such Spare
Engine below the condition, airworthiness, value or utility thereof immediately
prior to such alteration, modification, removal or addition assuming such Spare
Engine was then in the condition required to be maintained by the terms of this
Security Agreement. In addition, the value (but not the utility, condition or
airworthiness) of any Spare Engine may be reduced by the value, if any, of
Obsolete Parts which shall have been removed so long as the aggregate fair
market value of all Obsolete Parts which shall have been removed and not
replaced shall not exceed 1.5% of the then Appraised Value of such Spare Engine
(as shown in the most recent Appraisal Report delivered on or prior to such
date) unless such Spare Engine has become worn out, obsolete or unfit for use
and not easily repairable as provided in Section 3.01(a)(i) above. All Parts
incorporated or installed in or attached or added to a Spare Engine as the
result of such alteration, modification or addition (except those parts which
are excluded from the definition of Parts or which may be removed by such
Grantor pursuant to the next sentence) (the "Additional Parts") shall, without
further act, become subject to the Lien of the Security Documents.
Notwithstanding the foregoing sentence, such Grantor may, at its own expense, so
long as no Event of Default shall have occurred and be continuing, remove or
suffer to be removed any Additional Part, provided that such Additional Part (i)
is in addition to, and not in replacement of or substitution for, any Part
originally incorporated or installed in or attached to any Spare Engine at the
time of delivery thereof hereunder or any part in replacement of or substitution
for any such Part, (ii) is not required to be incorporated or installed in or
attached or added to any Spare Engine pursuant to the first sentence of this
paragraph (c) and (iii) can be removed from such Spare Engine without
diminishing the condition, airworthiness, value or utility of such Spare Engine
which such Spare Engine would have had at such time had such alteration,
modification or addition not occurred. Upon the removal thereof as provided
above, such Additional Part shall no longer be deemed to be subject to the Lien
of the Security Documents or part of the Spare Engine from which it was removed.
SECTION 3.03 USE, POSSESSION AND DESIGNATED LOCATIONS OF SPARE
PARTS AND PLEDGED EQUIPMENT; COLLATERAL ACCESS AGREEMENT.
(a) Such Grantor shall have the right, at any time and
from time to time at its own cost and expense, without the necessity of
obtaining any release from or consent by the Collateral Agent, to deal with the
Spare Parts and the Pledged Equipment in any manner consistent with such
Grantor's ordinary course of business, including without limitation any of the
following:
(i) with respect to the Spare Parts, to
incorporate in, install on or attach or make appurtenant to any
aircraft, engine or Appliance leased to or owned by
26
such Grantor (whether or not subject to any Lien) any Spare Part, free
from the Lien of the Security Documents;
(ii) with respect to the Spare Parts or the
Pledged Equipment, to dismantle any Spare Part or Pledged Equipment
that has become worn out or obsolete or unfit for use, and to sell or
dispose of any such Spare Part or Pledged Equipment or any salvage
resulting from such dismantling, free from the Lien of the Security
Documents; and
(iii) with respect to the Spare Parts, (A) to
transfer any or all of the Spare Parts located at one or more
Designated Locations to one or more other Designated Locations and (B)
to refurbish, maintain and replace Spare Parts in the Fly Away Kits.
(b) Without the prior consent of the Collateral Agent,
such Grantor will not sell, lease, transfer or relinquish possession of any
Spare Part or any Pledged Equipment to any Person (other than the other
Grantor), except as permitted by the provisions of this Section 3.03 and except
that such Grantor shall have the right in the ordinary course of business, (i)
to transfer possession of any Spare Part or any Pledged Equipment to the
Manufacturer thereof or any service provider for testing, overhaul, repairs,
maintenance, alterations or modifications purposes, (ii) to sell any of the same
in the ordinary course of business or when determined to be obsolete or
unrepairable or (iii) to subject any Spare Part to an interchange or pooling,
exchange, borrowing or maintenance servicing arrangement customary in the
airline industry and entered into in the ordinary course of business. So long as
no Specified Default or Event of Default shall have occurred and be continuing,
and subject to such Grantor's obligations under Section 4.01 hereof and Section
2.6(c) of the Loan Agreement, such Grantor shall be entitled to retain all
payments received by it in respect of any warranty, indemnity or similar
agreement relating to Spare Parts, Pledged Equipment and Spare Engines and deal
with the counterparties to such agreements with respect to its rights thereunder
in such manner as the Grantors deem appropriate.
(c) Such Grantor shall maintain and keep the Spare Parts
at one or more of the Designated Locations, except as otherwise permitted under
this Section 3.03 (it being understood and agreed that Spare Parts maintained in
a Fly Away Kit shall be deemed to be located at a Designated Location so long as
(x) the aircraft upon which such Fly Away Kit is kept and (y) the airport or
other locations in the U.S. at which such aircraft when in the U.S. is generally
located while not in actual flight are identified as Designated Locations on
Schedule 2.01 hereto. If any material Spare Part (other than a Spare Part in a
Fly Away Kit aboard an aircraft outside the U.S.), at any time and for any
reason, is stored at any location other than a Designated Location, such Grantor
will promptly furnish to the Collateral Agent the following:
(i) a Mortgage and Security Agreement Supplement
(Spare Parts) duly executed by such Grantor identifying each location
(and aircraft, as applicable) that is to become a Designated Location
and specifically subjecting the Spare Parts at such location to the
Lien of the Security Documents;
(ii) other than with respect to Spare Parts
maintained in a Fly Away Kit, a legal opinion from counsel (which
opinion and counsel (which may be in-house
27
counsel to such Grantor) shall be reasonably satisfactory to the
Collateral Agent), dated the date of execution of said Mortgage and
Security Agreement Supplement (Spare Parts), stating that said Mortgage
and Security Agreement Supplement (Spare Parts) has been duly filed for
recording in accordance with the provisions of the Federal Aviation
Act, and either: (A) no other filing or recording is required in any
other place within the United States in order to perfect the Lien of
the Security Documents on the Spare Parts (or spare parts) held at the
Designated Locations specified in such Mortgage and Security Agreement
Supplement (Spare Parts) under the laws of the United States, or (B) if
any such filing or recording shall be required that said filing has
been accomplished in such other manner and places, which shall be
specified in such legal opinion, as are necessary to perfect the Lien
of the Security Documents; and
(iii) an Officer's Certificate stating that in the
opinion of the officer executing the Officers' Certificate, all
conditions precedent provided for in this Security Agreement relating
to the subjection of such property to the Lien of the Security
Documents have been complied with.
(d) Such Grantor shall, on an ongoing basis, effect any
filings or recordings (or amend or continue any existing filings or recordings)
which are necessary or desirable to perfect the security interest of the
Collateral Agent in the Spare Parts and the Pledged Equipment which are being
subjected to the Lien hereof in accordance with this Section 3.03 and shall
promptly deliver copies of any such filings or recordings to the Collateral
Agent.
(e) In the event that any Pledged Inventory, Pledged
Equipment or Spare Parts are located in a warehouse or on real property leased
by such Grantor and have an aggregate Appraised Value, together with all other
Pledged Inventory, Pledged Equipment or Spare Parts at such location, of more
than $1,000,000, such Grantor will, to the extent required under the Loan
Agreement, use its reasonable commercial efforts to ensure that such warehouse
or leased property is subject to a Collateral Access Agreement executed by the
lessor, warehouseman, or other third party, as the case may be, for the benefit
of the Collateral Agent, and that such Collateral is segregated or otherwise
separately identifiable from goods of others, if any, stored on the premises.
SECTION 3.04 INSURANCE.
(a) Public Liability and Property Damage Insurance.
(i) Except as provided in clause (ii) of this
Section 3.04(a), such Grantor will carry or cause to be carried with
respect to each Spare Engine at its expense (A) comprehensive airline
liability (including, without limitation, passenger, contractual,
bodily injury, and property damage liability and product liability)
insurance (exclusive of Manufacturer's product liability insurance) of
a type and in an amount comparable to the type and amounts of
comprehensive airline liability insurance from time to time carried by
similarly situated U.S. Air Carriers owning and operating similar
aircraft and engines ("Similar Carriers"), which is maintained in
effect with insurers of internationally recognized reputation and
reasonably believed to be financially sound ("Insurers") and (B) war
risk, hijacking and allied perils liability insurance of a scope and in
an amount
28
then being carried by Similar Carriers, which may be effected by
combining insurance available in commercial insurance markets with
coverage of the type described in Section 3.04(f) (it being agreed that
such Grantor's obligations under this clause (IV) shall be subject in
any event and at all times to whether such coverage is available on
commercially reasonable terms through a combination of commercial
insurance coverage and coverage of the type described in Section
3.04(f)).
(ii) During any period that a Spare Engine is on
the ground and not in operation, such Grantor may carry or cause to be
carried as to such non-operating property, in lieu of the insurance
required by clause (i) above, insurance by Insurers otherwise
conforming with the provisions of clause (i) except that (A) the
amounts of coverage shall not be required to exceed the amounts of
comprehensive airline liability insurance from time to time applicable
to property owned or leased by such Grantor of the same type as such
non-operating property and which is on the ground and not in operation;
and (B) the scope of the risks covered and the type of insurance shall
be the same as from time to time shall be applicable to property owned
or leased by Similar Carriers of the same type as such non-operating
property and which is on the ground and not in operation.
(iii) Such Grantor will carry or cause to be
carried at all times, (x) with respect to the Spare Parts,
comprehensive airline liability insurance, including, without
limitation, property damage liability insurance and (y) with respect to
the Pledged Equipment, comprehensive property damage liability
insurance, in each case, which is (A) of amount and scope as may be
customarily maintained by Similar Carriers for property similar to the
Spare Parts and Pledged Equipment and (B) maintained in effect with
Insurers.
(b) Insurance Against Loss or Damage to a Spare Engine,
etc. Such Grantor shall maintain or cause to be maintained in effect, at its (or
a Permitted Lessee's) expense, with insurers of nationally recognized reputation
and reasonably believed to be financially sound, "all-risk" insurance coverage
of Spare Engines (while such Spare Engines are either installed on any airframe
or not installed on an airframe) and "all-risk" insurance coverage of Spare
Parts and Pledged Equipment, in each case in such forms as are customarily
maintained with respect to similar property owned or operated by Similar
Carriers and in an amount of coverage not less than the Insured Amount therefor.
In addition, such Grantor shall maintain with Insurers in respect of the Spare
Engines war risk and allied perils insurance of a scope carried by Similar
Carriers in an amount equal to the amount of "all-risk" coverage therefor,
unless and to the extent that Section 3.04(a)(ii) shall apply (it being agreed
that such Grantor obligations under this sentence shall be subject in any event
and at all times to whether such coverage is available on commercially
reasonable terms through a combination of commercial insurance coverage with
Insurers and coverage of the type described in Section 3.04(f)). All losses will
be adjusted by such Grantor (giving due regard to the interest of the Collateral
Agent) with the insurers; provided, however, that during a period when any
Specified Default or Event of Default shall have occurred and be continuing,
such Grantor shall not agree to any such adjustment without the prior written
consent of the Collateral Agent. As between the Collateral Agent and such
Grantor, it is agreed that all proceeds of insurance maintained in compliance
with the preceding
29
paragraph and received as the result of the occurrence of an Event of Loss will
be applied in accordance with Section 4.01.
(c) Reports, Certificates, etc. Such Grantor will
furnish, or cause to be furnished, to the Collateral Agent on or before the
Closing Date, and each annual renewal of the applicable insurances, (i) a
report, signed by a recognized independent firm of insurance brokers reasonably
acceptable to the Collateral Agent which brokers may be regularly retained by
such Grantor (the "Insurance Brokers"), describing in reasonable detail the
property and liability insurance then carried and maintained with respect to the
Collateral and stating the opinion of such firm that (A) such insurance complies
with the terms hereof, (B) all premiums in connection with such insurance then
due have been paid and (C) such insurance together with any self-insurance
permitted hereby provides coverages against risks that are customarily insured
against by Similar Carriers and that such coverages are in substantially similar
forms, are of such types and have limits as are customarily carried by Similar
Carriers; and (ii) a certificate of insurance evidencing the due compliance with
the terms of this Section 3.04 relating to insurance with respect to the
Collateral. To the extent that the insurance obligations of this Section 3.04
are satisfied in part with the coverage described in Section 3.04(f), the
Insurance Broker's report and certificate need not certify such coverage but may
instead refer to the FAA Certificate of Insurance (which the Insurance Broker
shall attach to its report). Such Grantor will cause such Insurance Broker to
agree to advise the Collateral Agent in writing of any default in the payment of
any premium and of any act or omission on the part of such Grantor of which it
has knowledge and which might invalidate or render unenforceable, in whole or in
part, any insurance on the applicable Collateral and to advise the Collateral
Agent in writing at least thirty (30) days (twenty (20) days in the case of
lapse for nonpayment of premiums and seven (7) days in the case of war risk and
allied perils coverage) prior to the cancellation (but not expiration), lapse
for non-payment of premium or material adverse change of any insurance
maintained pursuant to this Section 3.04; provided that if the war risk notice
period specified above is not reasonably obtainable, such Grantor will cause the
Insurance Broker to provide for as long a period of prior notice as shall then
be reasonably obtainable. In the event that such Grantor shall fail to maintain
or cause to be maintained insurance as herein provided, the Collateral Agent
may, at its sole option, but shall be under no duty to, procure such insurance
on behalf of such Grantor (and shall give notice to such Grantor of such event)
and, in such event, such Grantor shall, upon demand, reimburse the Collateral
Agent for the cost thereof to the Collateral Agent, together with interest on
such cost at the interest rate determined in accordance with Section 2.7(e) of
the Loan Agreement from the date of such payment by the Collateral Agent to the
date of reimbursement without waiver of any other rights the Collateral Agent
may have; provided, however, that no exercise by the Collateral Agent of said
option shall affect the provisions of this Security Agreement or the other Loan
Documents, including the provisions that failure by such Grantor to maintain the
prescribed insurance shall constitute an Event of Default. Upon receipt of any
notices or reports, the Collateral Agent shall as promptly as practicable
forward copies of the same to the Agent, the Loan Administrator, the Board and
each of the Lenders. The Collateral Agent shall have no responsibility for
independently verifying the accuracy or completeness of any information
contained in any report or certificate provided by the Insurance Brokers.
(d) Self-Insurance. Such Grantor (but no Permitted
Lessee) may self-insure the risks required to be insured against pursuant to
this Section 3.04 under a program applicable
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to all aircraft and engines (whether owned or leased) in such Grantor's fleet,
but in no case shall the aggregate amount of such self-insurance in regard to
Section 3.04(a) and Section 3.04(b) hereof for any calendar year, with respect
to all of the aircraft and engines (whether owned or leased) in such Grantor's
fleet, exceed $500,000. In addition to the foregoing right to self-insure, such
Grantor may self-insure the risks required to be insured against pursuant to
this Section 3.04 in an amount equal to any applicable minimum per occurrence
(or, if applicable, annual (or other) period) deductible imposed by its property
or liability Insurer, which are commensurate with the standard deductibles in
the aircraft insurance industry.
(e) Additional Insurance by such Grantor. Such Grantor
may at its own expense carry insurance with respect to its interest in the Spare
Engines and Spare Parts in amounts in excess of that required to be maintained
by this Section 3.04; provided, however, that such insurance does not prevent
such Grantor from carrying the insurance required or permitted by this Section
3.04 or adversely affect such insurance or the cost thereof; and provided,
further, that the proceeds of such insurance shall be subject to Section 2.6(c)
of the Loan Agreement.
(f) Indemnification by Government in Lieu of Insurance.
Notwithstanding any provisions of this Section 3.04 requiring insurance, the
Collateral Agent agrees to accept, in lieu of insurance required by the terms of
this Section 3.04, indemnification from, or insurance provided by, the United
States Government, against such risk in an amount which, when added to the
amount of insurance against such risk maintained by such Grantor shall be at
least equal to the amount of insurance against such risk otherwise required by
this Section 3.04 (taking into account self-insurance permitted by Section
3.04(d) hereof). Any such indemnification or insurance provided by the United
States Government shall provide substantially similar protection as the
insurance required by this Section 3.04 (other than Section 3.04(g) to the
extent that any of the provisions of such section are generally unavailable from
the United States Government). Such Grantor shall furnish to the Collateral
Agent a copy of any FAA Certificate of Insurance (if such certificates are then
being furnished by the FAA), and at the request of the Collateral Agent, an
Officer's Certificate confirming in reasonable detail the amount and scope of
such indemnification or insurance and certifying that such indemnification or
insurance complies with the terms of this Section 3.04(f).
(g) Terms of Insurance Policies. Any insurance policies
covering Collateral (and any policies taken out in substitution or replacement
for any such policies) (i) shall name the Additional Insureds as additional
insureds, as their respective interests may appear (but without imposing on any
such party liability to pay premiums with respect to such insurance), (ii) shall
name the Collateral Agent as sole loss payee in respect of any casualty
insurance maintained with respect to Collateral; provided, so long as the
Insurers shall not have received notice of a Specified Default or an Event of
Default, in respect of any casualty occurrence the insurance proceeds of which
are less than $1,000,000, such insurance proceeds shall be paid directly to such
Grantor, (iii) may provide for self-insurance to the extent permitted in Section
3.04(d) hereof, (iv) shall provide that if the insurers cancel such insurance
for any reason whatever, or if the same is allowed to lapse for non-payment of
premium or if any material change is made in the insurance which adversely
affects the interest of any Additional Insured, such lapse, cancellation or
change shall not be effective as to any Additional Insured for thirty (30) days
(twenty (20) days in the case of lapse for non-payment of premiums and seven (7)
days in the case of war risk and allied perils coverage) after receipt by such
Additional Insured of
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written notice by such insurers of such lapse, cancellation or change; provided,
however, that if the war risk notice period specified above is not reasonably
obtainable, such policies shall provide for as long a period of prior notice as
shall then be reasonably obtainable, (v) shall provide that in respect of the
respective interests of each Additional Insured in such policies the insurance
shall not be invalidated by any action or inaction of such Grantor or any other
Person and shall insure the respective interests of the Additional Insureds, as
they appear, regardless of any breach or violation of any warranty, declaration
or condition contained in such policies by such Grantor or by any other Person,
(vi) shall be primary without any right of contribution from any other insurance
which is carried by any Additional Insured, (vii) shall expressly provide that
all of the provisions thereof, except the limits of liability, shall operate in
the same manner as if there were a separate policy covering each Additional
Insured, (viii) shall waive any right of the insurers to set-off, recoupment or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of any Additional Insured, (ix) shall waive any right
of the insurers to subrogation against any Additional Insured, and (x) shall
provide for a 50/50 claims settlement per AVS 103 or its equivalent, except that
if coverage required under this Section 3.04 is then being provided under
Section 3.04(f), such claims settlement shall be made pursuant to provisions
then generally in effect with respect to commercial aviation insurance.
(h) Application of Payments During Existence of a
Specified Default or an Event of Default. Any amount referred to in this Section
3.04 which is payable to or retainable by such Grantor (or any Permitted Lessee)
shall not be paid to or retained by such Grantor (or any Permitted Lessee) if at
the time of such payment or retention a Specified Default or an Event of Default
shall have occurred and be continuing, but shall, so long as such Specified
Default or an Event of Default is continuing, be held by or paid over to the
Collateral Agent and, at the direction of the Board (or if the Board Guarantee
is no longer in effect, the Requisite Lenders), subject to applicable law, be
applied against the obligations of such Grantor under the Loan Documents. At
such time as there shall not be continuing any such Specified Default or Event
of Default, such amount shall be paid to such Grantor to the extent not
previously applied in accordance with the preceding sentence. Prior to remitting
any such funds to such Grantor, the Collateral Agent shall be authorized to
request and receive an Officer's Certificate from the Company certifying that no
Specified Default or Event of Default has occurred and is continuing.
(i) Obligations under Loan Agreement. Nothing in this
Section 3.04 shall be construed as limiting the Company's obligations under
Section 5.4(b) of the Loan Agreement to maintain insurance coverages in
accordance with the terms thereof, including, without limitation, to maintain
insurance with respect to other Collateral not specifically identified in
subsections (a) and (b) of this Section 3.04.
SECTION 3.05 INSPECTION.
(a) Subject to subsection (b), at reasonable times but
not more often than twice in any twelve (12) month period, and upon at least ten
(10) days prior written notice to such Grantor (provided, however, that if an
Event of Default shall have occurred and be continuing, any such inspection
shall be at reasonable times without any limit on the number of times and upon
at least one (1) Business Day's prior written notice to and at the expense of
such Grantor), the Collateral Agent or the Board or their respective authorized
representatives may
32
inspect the Collateral, inspect and make copies of the books and records of such
Grantor relating to the Collateral, including books and records required to be
maintained by the FAA or other applicable regulatory agency or body, and access
the Tracking System (with assistance from such Grantor's personnel and at such
Grantor's risk and expense). Any inspection of Spare Engines or Spare Parts
shall be subject to such Grantor's safety and security rules applicable at the
location of such Collateral. So long as no Default or Event of Default shall
have occurred and be continuing, no exercise of such inspection right shall be
unduly disruptive to the business of such Grantor. Neither the Collateral Agent
nor the Board shall have any duty to make any such inspection and shall incur no
liability or obligation by reason of not making any such inspection.
(b) Such Grantor shall at all times properly maintain the
Tracking System and its perpetual inventory procedures for the Spare Engines and
Spare Parts that provide a continuous internal audit of the Spare Engines and
Spare Parts. Notwithstanding subsection (a), at any time during normal business
hours and upon reasonable notice to such Grantor but not more than quarterly
(provided, however, that if an Event of Default shall have occurred and be
continuing any such inspection shall be at reasonable times without any limit on
the number of times and upon at least one (1) Business Day's prior written
notice to and at the expense of such Grantor), the Collateral Agent shall be
entitled to inspect the Tracking System to ensure such Grantor's compliance with
the terms hereof. Such inspection right shall not be exercised in a manner which
is unduly disruptive to the normal operation or maintenance of the Tracking
System or the normal business operations of such Grantor.
SECTION 3.06 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor
will not, except upon thirty (30) days' prior written notice to the Collateral
Agent and delivery to the Collateral Agent of all additional financing
statements and other documents in recordable form (and with all required
signatures thereon) reasonably requested by the Administrative Agent to maintain
the validity, perfection and priority of the security interests provided for
herein, (i) change its jurisdiction of organization (or take any other action to
become a Registered Organization in any other jurisdiction) or the location of
its chief executive office; or (ii) change its name.
SECTION 3.07 PLEDGED RECEIVABLES.
(a) Except with respect to intercompany Pledged
Receivables among the Grantors, such Grantors will not, without the Collateral
Agent's prior written consent, grant any extension of the time of payment under
or in respect of any of the Pledged Receivables or Related Contracts of such
Grantor, compromise, compound or settle the same for less than the full amount
thereof, release, wholly or partly, any Person liable for the payment thereof,
or allow any credit or discount whatsoever thereon, other than any of the
foregoing with respect to Pledged Receivables consisting of Accounts which are
done in the ordinary course of business and trade or other customary discounts
granted in the ordinary course of business of such Grantor.
(b) Such Grantor shall keep full and accurate books and
records relating to the Pledged Receivables, including, without limitation, a
current and complete list of all Account Debtors, along with their respective
names, addresses, telephone numbers, account or other identification numbers and
the balance and aging of their respective Pledged Receivables, copies
33
of which list the such Grantor shall deliver to the Collateral Agent promptly
after the end of each fiscal quarter of such Grantor and as soon as practicable
following the Collateral Agent's request therefor, and (ii) stamp or otherwise
xxxx or code such books and records in such manner as may be required to perfect
the security interest in such Collateral or at the request of the Collateral
Agent in order to reflect the security interests granted by this Security
Agreement.
(c) Such Grantor shall use commercially reasonable
efforts to cause to be collected from its Account Debtors, as and when due, all
amounts owing under or on account of the Pledged Receivables (including, without
limitation, a Pledged Receivable which is delinquent, which shall be collected
in accordance with lawful collection procedures to the extent commercially
reasonable) and shall apply forthwith upon receipt thereof all such amounts as
are so collected to the outstanding balance of the Pledged Receivable.
(d) Upon the occurrence and during the continuance of an
Event of Default and upon the request of the Collateral Agent, such Grantor
shall promptly (i) notify the Account Debtors in respect of the Pledged
Receivables that the Pledged Receivables have been assigned to the Collateral
Agent hereunder, and that any payments due or to become due in respect thereof
are to be made directly to the Collateral Agent or its designee (it being
understood and agreed that the foregoing shall not limit the rights of the
Collateral Agent upon the occurrence and during the continuance of an Event of
Default to so notify the Account Debtors without giving prior notice to or
making a demand upon such Grantor including, without limitation, any notices
required to be given under the Assignment of Claims Act) and (ii) transfer to
the Collateral Agent or its designee all funds received by it from or on behalf
of the Account Debtors in respect of the Pledged Receivables (it being
acknowledged and agreed that such Grantor shall be deemed to be holding all such
funds as trustee for the Collateral Agent and, as such, shall not commingle such
funds with other funds of such Grantor).
SECTION 3.08 PLEDGED EQUIPMENT. Subject to Section 3.03, such
Grantor shall maintain and keep the Pledged Equipment in good working order and
repair, ordinary wear and tear and loss due to casualty excepted, and shall not
use such Collateral in violation of law or any policy of insurance thereon.
Except upon prior written notice to the Collateral Agent and delivery to the
Collateral Agent of a written supplement to Schedule 2.06 showing any additional
locations at which Pledged Equipment shall be kept, such Grantor shall not
transfer Pledged Equipment to any locations other than the locations listed on
Schedule 2.06. Upon the acquisition after the date hereof by such Grantor of any
additional or replacement Pledged Equipment covered by a Certificate of Title or
ownership, such Grantor shall cause the Collateral Agent to be listed as the
lienholder on such Certificate of Title and take such other steps as may be
required under the law applicable to perfection of a security interest in such
property to perfect such security interest, other than to the extent perfection
thereof is not required under clause (3) of the Habendum Clause, and within
thirty (30) days of the acquisition thereof deliver evidence of the same to the
Collateral Agent.
SECTION 3.09 DELIVERY AND CONTROL OF PLEDGED EQUITY AND
PLEDGED DEBT.
(a) Each Grantor shall promptly give written notice to
the Collateral Agent upon the Grantor's acquisition of any right, title or
interest in any Pledged Equity which is represented by a certificate or
Instrument, and, upon the written request of the Collateral Agent,
34
such Grantor shall promptly deliver such Instruments or certificates to the
Collateral Agent in suitable form for transfer by delivery or accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Collateral Agent.
(b) With respect to any Pledged Equity in which any
Grantor acquires any right, title or interest and which constitutes an
uncertificated security, such Grantor will use commercially reasonable efforts
promptly after the acquisition thereof to cause the issuer thereof either (A) to
register the Collateral Agent as the registered owner of such security or (B) to
agree in an authenticated record with such Grantor and the Collateral Agent that
such issuer will comply with instructions with respect to such security
originated by the Collateral Agent without further consent of such Grantor, such
authenticated record to be in form and substance reasonably satisfactory to the
Collateral Agent; provided, however, that such Grantor shall not be required to
comply with the terms of this subsection (b) so long as (x) such uncertificated
security is not an Equity Interest in a Subsidiary of such Grantor and (y) the
fair market value of such uncertificated security together with all
uncertificated securities of such issuer held by such Grantor, is less than
$50,000.
(c) Such Grantor shall be entitled to receive all cash
dividends paid in respect of the Pledged Equity of such Grantor, except upon the
occurrence and during the continuation of a Specified Default or an Event of
Default, in which event, all cash dividends paid in respect of the Pledged
Equity of such Grantor shall be held by or paid over to the Collateral Agent
and, at the direction of the Board (or if the Board Guarantee is no longer in
effect, the Requisite Lenders), subject to applicable law, be applied against
the obligations of such Grantor under the Loan Documents.
(d) Such Grantor will be entitled to exercise all voting,
consent and corporate rights with respect to the Pledged Equity of such Grantor,
except upon the occurrence and during the continuation of a Specified Default or
an Event of Default, in which event, the Collateral Agent shall have the sole
right to exercise all voting, consent and corporate rights with respect to the
Pledged Equity of such Grantor.
(e) Each Grantor shall promptly give written notice to
the Collateral Agent upon the Grantor's acquisition of any right, title or
interest in any Pledged Debt which is represented by an Instrument, and, upon
the written request of the Collateral Agent, such Grantor will promptly deliver
such Instruments to the Collateral Agent accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Collateral Agent; provided, however, that such
Grantor shall not be required to comply with the terms of this subsection (e)
with respect to an Instrument representing Pledged Debt (x) issued by a Person
other than a Subsidiary of such Grantor and (y) which has a value, together with
all other Instruments representing Pledged Debt issued by the same issuer and
held by such Grantor, of less than $50,000.
SECTION 3.10 NOTICES. Such Grantor will advise the Collateral
Agent in reasonable detail promptly after it obtains knowledge of any Lien
asserted against any material portion of the Collateral pledged by such Grantor
(other than Permitted Liens).
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SECTION 3.11 INTELLECTUAL PROPERTY COLLATERAL.
(a) With respect to each item of such Grantor's
Intellectual Property Collateral that is material to its business, such Grantor
agrees to take, at its expense, all necessary action in the U.S. Patent and
Trademark Office, the U.S. Copyright Office and any other applicable U.S.
Governmental Authority, and such other actions reasonably requested in writing
by the Collateral Agent, to (i) maintain the validity and enforceability of such
Intellectual Property Collateral and maintain such Intellectual Property
Collateral in full force and effect, and (ii) pursue the registration and
maintenance of each patent, trademark, or copyright registration or application,
now or hereafter included in such Intellectual Property Collateral of such
Grantor, including, without limitation, the payment of required fees and taxes,
the filing of responses to office actions issued by the U.S. Patent and
Trademark Office, the U.S. Copyright Office or other applicable U.S.
Governmental Authorities, the filing of applications for renewal or extension,
the filing of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the
filing of divisional, continuation, continuation-in-part, reissue and renewal
applications or extensions, the payment of maintenance fees and, to the extent
that there is, in the Grantor's reasonable judgment, a reasonable probability of
success, the participation in interference, reexamination, opposition,
cancellation, infringement and misappropriation proceedings. Such Grantor shall
not, without the written consent of the Collateral Agent, discontinue use of or
otherwise abandon any Intellectual Property Collateral that is material to such
Grantor's business, or abandon any right to file an application for patent,
trademark, or copyright in any Intellectual Property Collateral that is material
to the Grantor's business, unless such Grantor shall have determined prior to
such cessation of use or abandonment that such use or the pursuit or maintenance
of such Intellectual Property Collateral is no longer desirable in the conduct
of such Grantor's business and that the loss thereof would not be reasonably
likely to have a Material Adverse Effect.
(b) Such Grantor agrees promptly to notify the Collateral
Agent if such Grantor becomes aware (i) that any material item of the
Intellectual Property Collateral has become abandoned, placed in the public
domain, invalid or, unenforceable, or of any adverse determination or
development regarding such Grantor's ownership of any of the material
Intellectual Property Collateral or its right to register the same or to keep
and maintain and enforce the same, or (ii) of any adverse determination or the
institution of any proceeding (including, without limitation, the institution of
any proceeding in the U.S. Patent and Trademark Office or any court) regarding
any material item of the Intellectual Property Collateral.
(c) In the event that any Grantor becomes aware that any
item of the Intellectual Property Collateral that is material to such Grantor's
business is being infringed or misappropriated by a third party, such Grantor
shall promptly notify the Collateral Agent and shall take such actions, at its
expense, as such Grantor or the Collateral Agent deems reasonable and
appropriate under the circumstances to protect or enforce such Intellectual
Property Collateral, including, without limitation, suing for infringement or
misappropriation and seeking an injunction against such infringement or
misappropriation, unless such Grantor shall have determined that such
Intellectual Property Collateral is no longer desirable in the conduct of such
Grantor's business and that the infringement or misappropriation thereof would
not be reasonably likely to have a Material Adverse Effect.
36
(d) Each Grantor shall use proper statutory notice (where
necessary) in connection with its use of each material item of its Intellectual
Property Collateral. No Grantor shall do or permit any act or knowingly omit to
do any act whereby any of its material Intellectual Property Collateral may
lapse or become invalid or unenforceable or placed in the public domain except
to the extent that it is commercially reasonable to do so.
(e) Each Grantor shall take all reasonable steps which it
or the Collateral Agent deems appropriate under the circumstances to preserve
and protect each material item of its Intellectual Property Collateral,
including, without limitation, maintaining a level of quality with respect to
any and all products or services offered or sold in connection with any of the
material Trademarks, consistent with the level of quality existing on the date
hereof, and take all steps necessary to ensure that all licensed users of any of
the material Trademarks use such consistent standards of quality.
(f) Each Grantor agrees that should it obtain an
ownership interest (or in the case of trademarks, begin use of a trademark)
after the date hereof in any intellectual property (which it does not own or use
on the date hereof) of the type which is similar to the Intellectual Property
Collateral (for purposes of this subsection, "After-Acquired Intellectual
Property") the provisions of this Agreement shall automatically apply to such
After-Acquired Intellectual Property and such After-Acquired Intellectual
Property shall automatically become part of the Intellectual Property Collateral
subject to the terms and conditions of this Agreement with respect thereto. At
the end of each calendar quarter, each Grantor shall give prompt written notice
to the Collateral Agent identifying the After-Acquired Intellectual Property
acquired during such quarter (if any) that is material to its business and the
subject of an application or registration in the U.S. Patent and Trademark
Office or the U.S. Copyright Office, and such Grantor shall, at the request of
the Collateral Agent, execute and deliver to the Collateral Agent, or otherwise
authenticate, an IP Security Agreement Supplement covering such After-Acquired
Intellectual Property which shall be recorded with the U.S. Patent and Trademark
Office, the U.S. Copyright Office and any other applicable Governmental
Authorities in the United States (if any) necessary to perfect the security
interest hereunder in such After-Acquired Intellectual Property.
SECTION 3.12 LIENS. Such Grantor will not directly or
indirectly create, incur, assume or suffer to exist any Lien on or with respect
to any Collateral, except Permitted Liens. Such Grantor shall promptly, at its
own expense, take such action as may be necessary to duly discharge any Lien
(other than a Permitted Liens) arising at any time.
SECTION 3.13 FINANCING STATEMENTS. Such Grantor shall not
execute, file or authorize to be filed in any public office any financing
statement (or similar statement or instrument of registration under the law of
any jurisdiction intended to provide notice of a Lien) relating to the
Collateral of such Grantor, except financing statements filed or to be filed in
respect of and covering Permitted Liens and termination statements in respect of
Liens of third parties or as provided by law upon termination of this Agreement.
SECTION 3.14 DISPOSITION OF COLLATERAL. Such Grantor shall not
sell, lease, transfer, assign, convey or otherwise dispose of its Collateral
(for purposes of this subsection, a "Disposition"), except: (i) Dispositions
permitted by Section 3.01, Section 3.02 and Section 3.03
37
hereof; (ii) abandonment of Intellectual Property Collateral pursuant to Section
3.11(a) hereof; (iii) licensing and sublicensing of Intellectual Property
Collateral consistent with such Grantor's past practices in the ordinary course
of business; (iv) Dispositions of unused, obsolete or worn out property in the
ordinary course of business of such Grantor, (v) Dispositions or consumption of
Inventory in the ordinary course of business of such Grantor; (vi) other
Dispositions effected under and pursuant to Section 6.10 of the Loan Agreement
and with respect to which the Grantor complies with Section 2.6(b) thereof, as
applicable; (vii) Dispositions of property by such Grantor to any other Grantor
(so long as such Disposition shall not deprive the Collateral Agent of its
security interest in such Collateral); and (viii) Dispositions permitted by
Sections 6.6 or 6.9 of the Loan Agreement.
SECTION 3.15 FURTHER ASSURANCES. Such Grantor agrees that it
will notify the Collateral Agent in writing of, and upon the written request of
the Collateral Agent promptly correct, any defect or error that may be
discovered in any document delivered in connection with the Security Documents
to which it is a party or in the execution, acknowledgment or recordation
thereof.
SECTION 3.16 PERFORMANCE. The Company shall perform and
observe all of its agreements, covenants and obligations in the Loan Agreement
and the Notes (subject to the notice and cure provisions set forth therein), all
of which are hereby incorporated by reference herein.
ARTICLE 4
EVENT OF LOSS
SECTION 4.01 EVENT OF LOSS; APPLICATION OF PAYMENTS AND
PROCEEDS.
(a) Event of Loss with Respect to a Spare Engine.
(i) Upon the occurrence of an Event of Loss with
respect to any Spare Engine of a Grantor, such Grantor shall:
(A) forthwith (and in any event, within
five (5) Business Days after such occurrence) give the
Collateral Agent written notice of such Event of Loss; and
(B) not later than the earlier of (x)
60 days after the occurrence of such Event of Loss or (y) the
fifth (5th) Business Day following notification to such
Grantor of receipt by the loss payee of the insurance proceeds
with respect to such Event of Loss, give the Collateral Agent
written notice of its election to perform one of the following
options (it being understood that the failure to give such
notice shall be deemed to be an election of the option set
forth in subclause (1) below):
(1) Not later than the earlier
of (x) the Business Day next succeeding the ninetieth
(90th) day following the occurrence of such Event of
Loss or (y) the first Interest Payment Date that is
at least three (3)
38
Business Days after receipt by the loss payee of the
insurance proceeds with respect to such Event of Loss
(but not earlier than the first Business Day next
succeeding the thirtieth (30th) day following the
occurrence of such Event of Loss) (the applicable day
being the "Loss Payment Date"), such Grantor shall,
to the extent not paid to the Collateral Agent as
insurance proceeds, pay or cause to be paid to the
Collateral Agent the proceeds of insurance in respect
of such Event of Loss. Upon receipt of such insurance
proceeds from such Grantor or the relevant insurance
provider, the Collateral Agent shall apply such
insurance proceeds on behalf of such Grantor as a
prepayment of the Loan in accordance with Section
2.6(c) of the Loan Agreement (without regard to
whether the aggregate amount of all Net Insurance
Proceeds and Net Condemnation Proceeds received by
the Company or any of its Subsidiaries in such Fiscal
Year, including the insurance proceeds received in
respect of such Event of Loss, exceeds the threshold
amount set forth in the first sentence of such
Section 2.6(c)). If such insurance proceeds are less
than the Insured Amount, such Grantor shall pay or
cause to be paid to the Collateral Agent the
difference between the Insured Amount and the amount
of such proceeds (which payment shall also be applied
on behalf of such Grantor as a prepayment of the Loan
in accordance with Section 2.6(c) of the Loan
Agreement); or
(2) Not later than the
Business Day next succeeding the ninetieth (90th) day
following the occurrence of such Event of Loss, such
Grantor shall substitute one or more Acceptable
Alternate Spare Engines, free and clear of all Liens
(other than Permitted Liens) and cause such
Acceptable Alternate Spare Engines to be subjected to
the Lien of the Security Documents, provided that if
(x) a Specified Default or Event of Default shall
have occurred and be continuing as of such election
date or (y) such Grantor shall have elected to make a
substitution under this clause (2) and shall fail for
any reason to make such substitution in accordance
with the terms hereof, then such Grantor shall make
the payments required by clause (1) above on (I) the
date of such election or the date such substitution
was required to have been made in accordance with the
terms hereof, as applicable, so long as the Grantor
has received Insurance Proceeds or Condemnation
Proceeds in respect of such Event of Loss prior to
such day, or (II) if the Grantor has not yet received
Insurance Proceeds or Condemnation Proceeds with
respect to such Event of Loss prior to such day, the
second (2nd) Business Day after receipt of such
Insurance Proceeds or Condemnation Proceeds.
(ii) At such time as such Grantor shall have
complied fully with the provisions of clause (1) above, the Collateral
Agent shall release from the Lien of the Security Documents such Spare
Engine by executing and delivering to such Grantor all documents and
instruments, prepared at such Grantor's sole cost and expense, as such
Grantor may reasonably request to evidence such release.
39
(iii) A Grantor's right to substitute any
Replacement Engine as provided in clause (B)(2) of Section 4.01(a)(i)
shall be subject to the fulfillment (which may be simultaneous with
such replacement), at such Grantor's sole cost and expense, of the
following conditions precedent:
(A) on the date when any Replacement
Engine is subjected to the Lien of the Security Documents
(such date being referred to in this Section 4.01 as the
"Replacement Closing Date"), the following documents shall
have been duly authorized, executed and delivered by the
respective party or parties thereto and shall be in full force
and effect, and an executed counterpart of each thereof shall
have been delivered by such Grantor to the Collateral Agent:
` (I) a Mortgage and Security
Agreement Supplement (Spare Engine) covering such
Replacement Engine, which shall have been duly filed
for recordation pursuant to the Federal Aviation Act;
and
(II) UCC financing statements
covering such Replacement Engine, which are then
being or shall have been duly filed for recordation
in such places as shall be required;
(B) each Replacement Engine shall be an
Acceptable Alternate Spare Engine, and the Collateral Agent
shall have received an Appraisal Report from an Appraiser of
such Replacement Engine (together with any other Replacement
Engines that are replacing a Spare Engine), dated within ten
(10) Business Days of the Replacement Closing Date, evidencing
that such Replacement Engine is of at least the same value as
the replaced Spare Engine at the time of replacement (assuming
the replaced Spare Engine was in the condition and state of
repair required by this Security Agreement);
(C) the Collateral Agent shall have
received satisfactory evidence as to the compliance with
Section 3.04 with respect to such Replacement Engine;
(D) the Collateral Agent, at the
expense of such Grantor, shall have received (acting directly
or by authorization to its special counsel) (I) an opinion of
counsel to such Grantor (which opinion and counsel (which may
be in- house counsel of such Grantor) shall be reasonably
satisfactory to the Collateral Agent), addressed to the
Collateral Agent, to the effect that each Replacement Engine
has been made subject to the Lien of the Security Documents,
that all required action has been taken in order to maintain,
and such action shall maintain, the effectiveness and
perfection (other than to the extent perfection is addressed
in the opinion of FAA counsel and to the extent the same
existed immediately prior to the occurrence of such Event of
Loss, assuming such Grantor was in compliance with all
relevant terms hereof) of the security interests in such Spare
Engine and title thereto created by this Security Agreement
and that, except as may have been effected by a change in law,
the protections afforded to the Collateral Agent by Section
1110 of the Bankruptcy Code will not
40
be less than such protections immediately prior to the
occurrence of such Event of Loss (assuming such Grantor was in
compliance with all relevant terms hereof) and (II) an opinion
of qualified FAA counsel or counsel in any jurisdiction
outside the United States where the Replacement Engine and/or
the aircraft of which such Replacement Engine is a part is
required to be registered in accordance with applicable law
(which opinion and counsel shall be reasonably satisfactory to
the Collateral Agent), addressed to the Collateral Agent,
stating, in the case of FAA counsel, that the Mortgage and
Security Agreement Supplement (Spare Engine), and all other
documents or instruments, the recordation of which is
necessary to perfect and protect the rights of the Collateral
Agent in each such Replacement Engine have been duly recorded
and that each such Replacement Engine is free and clear of any
liens, security interests and encumbrances of record with the
FAA, in the case of counsel in a jurisdiction outside the
U.S., that all action necessary has been taken in such
jurisdiction for such purposes;
(E) the representations contained in
Section 2.02 and Section 2.04 hereof with respect to such
Replacement Engine shall be true and correct; and
(F) the Collateral Agent shall have
received an Officer's Certificate of such Grantor stating that
all conditions precedent provided for in this Section 4.01(a)
relating to such replacement have been complied with and
representing that any such Replacement Engine is an Acceptable
Alternate Spare Engine and authorizing the Collateral Agent to
rely on such Officer's Certificate.
(iv) Upon satisfaction of all conditions to such
substitution, (x) the Collateral Agent shall execute and deliver to
such Grantor such documents and instruments, prepared by such Grantor
at such Grantor's sole cost and expense, as such Grantor shall
reasonably request to evidence the release of each such replaced Spare
Engine from the Lien of the Security Documents, (y) the Collateral
Agent shall assign to such Grantor all claims it may have against any
other Person relating to any Event of Loss giving rise to such
substitution and (z) subject to Section 2.6(c) of the Loan Agreement
(to the extent that less than 100% of the insurance proceeds received
in respect of the Event of Loss giving rise to such replacement were
used to acquire such Replacement Engine), such Grantor shall receive
all insurance proceeds and other proceeds in respect of any Event of
Loss giving rise to such replacement. For all purposes hereof, each
such Replacement Engine so substituted shall be deemed to be subjected
to the Lien of the Security Documents and shall be deemed a Spare
Engine as defined herein.
(b) Event of Loss with Respect to Other Collateral. As
between the Grantors and the Collateral Agent, all insurance proceeds received
in respect of any Collateral other than Spare Engines, whether as a result of
the occurrence of an Event of Loss, or property damage or loss not constituting
an Event of Loss, will be applied in accordance with the provisions of Section
2.6(c) of the Loan Agreement.
41
(c) Application of Payments from Governmental Authorities
for Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for elsewhere in this Section 4.01) received at
any time by the Collateral Agent or by the Grantors from any Governmental
Authority or other Person with respect to an Event of Loss, other than a
requisition for use by the United States Government or other government of
registry of an aircraft or any instrumentality or agency of any thereof not
constituting an Event of Loss, will be applied in accordance with Section 2.6(c)
of the Loan Agreement.
(d) Requisition for Use of a Spare Engine by the United
States Government or the Government of Registry of an Aircraft. In the event of
the requisition for use of a Spare Engine by the United States Government or any
other government of registry of the applicable aircraft or any agency or
instrumentality of any thereof (other than in the circumstances contemplated by
subsection (e)), any payments received by Collateral Agent or the Grantors from
such government with respect to such requisition shall be paid over to, or
retained by the Grantors.
(e) Application of Payments During Existence of Specified
Defaults and Events of Default. Any amount referred to in this Section 4.01
which is payable to or retainable by the Grantors (or any Permitted Lessee)
shall not be paid to or retained by the Grantors (or any Permitted Lessee) if at
the time of such payment or retention a Specified Default or any Event of
Default shall have occurred and be continuing, but shall be held by or paid over
to Collateral Agent and, at the direction of the Board (or if the Board
Guarantee is no longer in effect, the Requisite Lenders), subject to applicable
law, be applied against the obligations of the Grantors under the Loan
Documents. At such time as there shall not be continuing any such Specified
Default or Event of Default, such amount shall be paid to the Grantors to the
extent not previously applied in accordance with the preceding sentence. Prior
to remitting any such funds to the Grantors, the Collateral Agent shall be
authorized to request and receive an Officer's Certificate from the Company
certifying that no Specified Default or Event of Default has occurred and is
continuing.
ARTICLE 5
REMEDIES
SECTION 5.01 REMEDIES AVAILABLE TO COLLATERAL AGENT.
(a) After an Event of Default shall have occurred and so
long as such Event of Default shall be continuing, then and in every such case
the Collateral Agent, as holder of a security interest in the Collateral may, as
and when required pursuant to the provisions of Section 7.2 of the Loan
Agreement, exercise, any or all of the rights and powers and pursue any and all
of the remedies accorded to a Secured Party under the UCC and under any other
applicable law, may recover judgment in its own name as Collateral Agent against
the Collateral and may take possession of all or any part of the Collateral and
may exclude the Grantors and all Persons claiming under any of them wholly or
partly therefrom. Any proceeds received or realized by the Collateral Agent at
any time pursuant to the exercise of remedies hereunder shall be promptly
transferred by the Collateral Agent to the account of the Agent specified in
Section 2.9(a) of the
42
Loan Agreement for application in accordance with the priority of payments set
forth in Section 2.9(e) of the Loan Agreement.
(b) For the purpose of enforcing any and all rights and
remedies under this Security Agreement, after an Event of Default shall have
occurred and so long as such Event of Default shall be continuing, each Grantor
agrees that: (i) upon the written demand of the Collateral Agent and at such
Grantor's expense, such Grantor shall give the Collateral Agent immediate access
to the Tracking System (together with personnel necessary to operate the
Tracking System) and promptly deliver to the Collateral Agent or its designee
possession of any Collateral as the Collateral Agent may so demand in the manner
and condition required by, and otherwise in accordance with all the provisions
of, this Security Agreement, or the Collateral Agent at its option may enter
upon the premises where all or any part of the Collateral is located and take
immediate possession of and remove the same by summary proceedings or otherwise
(and at the Collateral Agent's option, store the same at such Grantor's premises
until disposal thereof by the Collateral Agent), all without liability accruing
to the Collateral Agent (other than that caused by the Collateral Agent's
willful misconduct or gross negligence as actually and finally determined by a
final, non-appealable judgment of a court of competent jurisdiction) for or by
reason of such entry or taking of possession or removing whether for the
restoration of damage to property caused by such action or otherwise; and (ii)
such Grantor shall, at the request of the Collateral Agent, promptly execute and
deliver to the Collateral Agent such instruments or other documents as may be
necessary or advisable to enable the Collateral Agent or an agent or
representative designated by the Collateral Agent, at such time or times and
place or places as the Collateral Agent may specify, to obtain possession of all
or any part of the Collateral the possession of which the Collateral Agent shall
at the time be entitled to hereunder; provided, that during any period any
aircraft on which a Spare Engine is installed is activated under the Civil
Reserve Air Fleet Program in accordance with the provisions of Section
3.01(b)(i)(F) hereof and in the possession of the United States Government or an
instrumentality or agency thereof, the Collateral Agent shall not, on account of
any Event of Default, be entitled to exercise any of its rights under this
Section 5.01 against the Collateral in such manner as to limit such Grantor's
control of the associated aircraft, unless at least sixty (60) days' (or such
greater or lesser period as may then be applicable under the Air Mobility
Command program) prior written notice of Default hereunder shall have been given
by the Collateral Agent to the Company with a copy addressed to the Contracting
Office Representative for the Air Mobility Command under the contract with the
Company relating to such aircraft.
(c) So long as an Event of Default shall have occurred
and be continuing, the Collateral Agent may, if at the time such action may be
lawful and always subject to compliance with any mandatory legal requirements,
either with or without taking possession, and either before or after taking
possession and without instituting any legal proceedings whatsoever, and having
first given notice of such sale by registered mail to the Grantors at least 20
days prior to the date of such sale, and any other notice which may be required
by law, sell and dispose of the Collateral, or any part thereof, or interest
therein, at public auction or private sale, in one lot as an entirety or in
separate lots, and either for cash or on credit and on such terms as the
Collateral Agent may determine, and at any place (whether or not it be the
location of the Collateral or any part thereof) and time designated in the
notice above referred to.
43
(d) Any such sale may be adjourned from time to time by
announcement at the time and place appointed for such sale, or for any such
adjourned sale, without further notice, and the Collateral Agent or any Lender
may bid and become the purchaser at any such sale and each Lender shall be
entitled at any public auction sale to credit against any purchase price bid at
such public auction sale by such Lender all or any part of any unpaid
obligations owing to such Lender secured by the Lien of the Security Documents.
(e) If an Event of Default has occurred and is
continuing, the Collateral Agent shall also be entitled to pursue all or any
part of the Collateral wherever it may be found and may enter any of the
premises of the Grantors or any other Person wherever the Collateral may be or
be supposed to be and search for the Collateral and take possession of any item
of the Collateral pursuant to this Section 5.01(e). The Collateral Agent may,
from time to time, at the expense of the Grantors, make all such expenditures
for the collection, maintenance, insurance, repairs, replacements, alterations,
additions and improvements to and of the Collateral, as it may deem proper. In
each such case, the Collateral Agent shall have the right to collect, maintain,
use, insure, operate, store, lease, control or manage the Collateral, and to
carry on business and exercise all rights and powers of the Grantors relating to
the Collateral as the Collateral Agent shall deem appropriate, including the
right to enter into any and all such agreements with respect to the collection,
maintenance, use, insurance, operation, storage, leasing, control or management
of the Collateral or any part thereof. The Collateral Agent shall be entitled to
collect, xxx for and receive directly all monies due or to become due, tolls,
rents, issues, profits, products, revenues or other income pursuant to this
Section 5.01(e). In accordance with the terms of this Section 5.01(e), such
monies due or to become due, tolls, rents, issues, profits, products, revenues
and other income shall be applied to pay the expenses of collecting, using,
operating, storing, leasing, controlling or managing the Collateral, and of all
maintenance, insurance, repairs, replacements, alterations, additions and
improvements, and to make all payments which the Collateral Agent may be
required or may elect to make, if any, for taxes, assessments, insurance or
other proper charges upon the Collateral or any part thereof (including the
employment of engineers and accountants to examine, inspect and make reports
upon the properties and books and records of the Grantors), and all other
payments which the Collateral Agent may be required or authorized to make under
any provision of this Security Agreement, including this Section 5.01(e), as
well as just and reasonable compensation for the services of the Collateral
Agent, and of all persons properly engaged and employed by the Collateral Agent.
(f) Subject to Section 5.01(c), the Collateral Agent may
proceed to protect and enforce this Security Agreement by suit or suits or
proceedings in equity, at law or in bankruptcy, and whether for the specific
performance of any covenant or agreement herein contained or in execution or aid
of any power herein granted; or for foreclosure hereunder, or for the
appointment of a receiver or receivers for the Collateral or any part thereof,
or for the recovery of judgment for the indebtedness secured by the Lien created
under this Security Agreement or for the enforcement of any other proper, legal
or equitable remedy available under applicable law.
(g) Each and every right, power and remedy herein given
to the Collateral Agent specifically or otherwise in this Security Agreement
shall be cumulative and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in equity
or by statute, and each and every right, power and remedy whether
44
specifically herein given or otherwise existing may be exercised from time to
time and as often in such order as may be deemed expedient by the Collateral
Agent, and the exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any other right, power or remedy. No delay or omission by the
Collateral Agent in the exercise of any right, remedy or power or in pursuing
any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of the Grantors or to be an acquiescence
therein.
(h) Upon and during the continuance of an Event of
Default, the Collateral Agent shall be entitled to undertake an acceptance of
all or a part of the Collateral in satisfaction of all or a specified part of
the Obligations pursuant to and in accordance with the provisions of Sections
9-620 and 9-621 of the UCC and the Grantors' rights thereunder, none of which
are waived herein notwithstanding the terms of Section 5.03, and, if pursuant to
such sections and after such Event of Default any of the Grantors consent to
such acceptance, then such Grantor shall execute and deliver such deeds of
conveyance, assignments and other documents or instruments (including any
notices or applications to the FAA or any other Governmental Authority having
jurisdiction over the Collateral subject to such conveyance) as shall be
reasonably required to effectuate the transfer of such Collateral, together with
the certificates, if any, representing the same and any other rights of such
Grantor with respect thereto, to the Collateral Agent or any designee or
designees selected by the Collateral Agent.
SECTION 5.02 EXPENSES. The Grantors agree that they will
promptly pay (but in no event later than five (5) Business Days after request
therefor) to the Collateral Agent:
(a) the amount of any taxes (other than income taxes or
other taxes measured by net income or net profits) payable by reason of the
Collateral Agent's security interests in respect of the Collateral or to free
any of the Collateral from any Lien thereon; and
(b) the amount of any and all reasonable out-of-pocket
expenses, including, but not limited to, any excise, property, transfer, sales
and use taxes imposed by any state, federal or other local authority on any of
the Collateral, and reasonable fees and disbursements of counsel and of any
other experts payable in connection with the enforcement of this Security
Agreement after and during the continuance of any Event of Default, including
such expenses as are actually incurred in connection with:
(i) the collection, sale or other disposition of
the Collateral;
(ii) any action taken by the Collateral Agent to
effect compliance on behalf of the Grantors in respect of a failure by
either of the Grantors to comply with the provisions of this Security
Agreement which results (or is likely to result) in the diminution of
the value of the Collateral or the validity, perfection, rank or value
of the Collateral Agent's security interest in the Collateral;
(iii) protecting, storing, warehousing,
appraising, insuring, handling, maintaining, shipping, overhauling and
repairing the Collateral; or
(iv) the exercise by the Collateral Agent of any
of the rights or powers conferred upon it hereunder.
45
Any such amount not paid to the Collateral Agent on demand shall bear
interest for each day until paid at a rate per annum equal to the rate specified
in Section 2.7(e) of the Loan Agreement.
SECTION 5.03 WAIVER OF CLAIMS.
(a) Except as otherwise provided in this Security
Agreement, each Grantor hereby waives, to the maximum extent permitted by
applicable law, notice and judicial hearing in connection with the Collateral
Agent's taking possession, retention, disposition or sale of any Collateral,
including any and all prior notice and hearing for any prejudgment remedy or
remedies and any such right which such Grantor would otherwise have under any
applicable law, and such Grantor hereby further waives, to the maximum extent
permitted by law:
(i) provided that the actions taken comply in
all respects with applicable law, including but not limited to all
applicable provisions of the UCC, all claims, damages and demands
against the Collateral Agent, the Board and the Lenders arising out of
such taking of possession, retention, disposition or sale of the
Collateral except such claims, damages and demands as may arise out of
such Person's own gross negligence or willful misconduct as actually
and finally determined by a final non-appealable judgment of a court of
competent jurisdiction and only to the extent of direct (as opposed to
special, indirect, consequential or punitive) damages;
(ii) all other requirements as to the time, place
and terms of sale or other requirements with respect to the enforcement
of the Collateral Agent's rights hereunder; and
(iii) all rights of appraisal, valuation, stay,
extension or moratorium (but not redemption) now or hereafter in force
under any applicable law in order to prevent or delay the enforcement
of this Security Agreement or the absolute sale or other disposition of
any part of the Collateral, and such Grantor, for itself and all who
may claim under it, insofar as it or they now or hereafter lawfully
may, hereby waives the benefit of all such laws; provided, however,
that the actions taken by the Collateral Agent as described in this
Section 5.03 herein comply, in all material respects, with applicable
law, including but not limited to all applicable provisions of the UCC.
(b) Each Grantor, for itself and all who claim through
it, hereby waives all right to have the Collateral marshaled upon any
foreclosure hereof and agrees that any court having jurisdiction to foreclose
this Security Agreement may order the sale of the Collateral as an entity.
SECTION 5.04 DISCONTINUANCE OF PROCEEDINGS. In case the
Collateral Agent shall have instituted any proceeding to enforce any right,
power or remedy under this Security Agreement by foreclosure, sale, entry or
otherwise, and such proceeding shall have been discontinued or abandoned for any
reason or shall have been determined adversely to the Collateral Agent, then and
in every such case, the Grantors, the Collateral Agent and each Lender shall be
restored to their former positions and rights hereunder with respect to the
Collateral subject to the security interest and Lien created under the Security
Documents and all
46
rights, remedies and powers of the Collateral Agent shall continue as if no such
proceeding had been instituted.
ARTICLE 6
TERMINATION OF SECURITY AGREEMENT
SECTION 6.01 TERMINATION OF SECURITY AGREEMENT. This Security
Agreement shall terminate (i) upon payment and performance in full of all of the
Obligations and (ii) as to any item of Collateral, upon the Disposition of such
Collateral as permitted in Section 3.14 hereof. Upon termination, at the request
and sole cost and expense of a Grantor, and upon receipt by the Collateral Agent
of confirmation from the Agent that all of the Obligations have been paid and
performed in full, the Collateral Agent shall execute and deliver such documents
and instruments reasonably requested by such Grantor to evidence the release of
the Collateral (or such item of Collateral, as the case may be) from the Lien of
the Security Documents; provided, however, that this Security Agreement shall
earlier terminate and this Security Agreement shall be of no further force or
effect upon any sale or other final disposition by the Collateral Agent of all
property constituting part of the Collateral and the final distribution by the
Collateral Agent of all monies or other property or proceeds constituting part
of the Collateral in accordance with the terms hereof. Except as otherwise
provided above, this Security Agreement shall continue in full force and effect
in accordance with the terms hereof.
ARTICLE 7
MISCELLANEOUS
SECTION 7.01 NOTICES. All notices and other communication
provided for herein shall be in writing and given in accordance with Section
10.7 of the Loan Agreement and (i) if to the Company and the Collateral Agent,
at their respective addresses set forth in Annex A to the Loan Agreement and
(ii) if to World LLC, in care of the Company. Each party hereto may change its
address or telecopy number for notices and other communications hereunder by
notice to the other parties hereto. All notices and other communications given
to the parties hereto in accordance with the provisions of this Security
Agreement shall be deemed to have been given on the date of receipt.
SECTION 7.02 GOVERNING LAW. THIS SECURITY AGREEMENT IS BEING
DELIVERED IN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK; PROVIDED,
THAT IN THE EVENT THE BOARD BECOMES A LENDER PURSUANT TO THE BOARD GUARANTEE,
THE RIGHTS AND OBLIGATIONS OF THE BOARD HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE FEDERAL LAW OF THE UNITED STATES OF AMERICA,
IF AND TO THE EXTENT SUCH FEDERAL LAW IS APPLICABLE, AND OTHERWISE IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. THE PROVISIONS OF SECTION 10.11 OF THE
LOAN AGREEMENT ARE INCORPORATED HEREIN MUTATIS MUTANDIS, AS IF FULLY SET FORTH
HEREIN.
47
SECTION 7.03 EXECUTION IN COUNTERPARTS. This Security
Agreement may be executed in any number of counterparts, each of which shall be
an original but such counterparts shall together constitute but one instrument.
SECTION 7.04 AMENDMENTS. This Security Agreement may be
amended in accordance with the provisions set forth in Section 10.1 of the Loan
Agreement.
SECTION 7.05 DOCUMENTATION. The Grantors shall provide the
Collateral Agent with copies of all documents executed in connection with the
Security Documents.
SECTION 7.06 CASH COLLATERAL.
(a) Any amounts held by the Collateral Agent pursuant to
the provisions of this Agreement shall be invested by the Collateral Agent from
time to time in Cash Equivalents as directed in an Officer's Certificate from
the Company so long as the Collateral Agent may invest in the same using
commercially reasonable efforts. The parties hereto agree that the Collateral
Agent and/or an Affiliate of the Collateral Agent may charge and/or collect
customary fees and expenses in connection with the purchase of Cash Equivalents
or for other services rendered to the parties hereto (provided that such
charges, fees and expenses are on terms consistent with terms negotiated at
arm's length). Neither the Collateral Agent nor any of its Affiliates shall be
required to account for any profits or benefits described in the preceding
sentence. All Cash Equivalents held by the Collateral Agent pursuant to this
Section 7.06 shall be registered in the name of, payable to the order of, or
specially endorsed to, the Collateral Agent. Any income realized as a result of
any such investment, net of the Collateral Agent's reasonable fees and expenses
in making such investment, shall be held and applied by the Collateral Agent in
the same manner as the principal amount of such investment is to be applied and
any losses, net of earnings and such reasonable fees and expenses, shall be
charged against the principal amount invested. All taxes on any income so
realized shall be charged to the applicable Grantor. The Collateral Agent shall
not be liable for any loss resulting from any investment to be made by it under
this Agreement other than by reason of its willful misconduct or gross
negligence as actually and finally determined in a final, non-appealable
judgment of a court of competent jurisdiction.
(b) Neither the Collateral Agent nor any of its
Affiliates assume any duty or liability for monitoring the rating of the
selected investment. In the event an investment selection is not made, the
amounts held by the Collateral Agent pursuant to the provisions of this Security
Agreement shall not be invested and the Collateral Agent shall not incur any
liability for interest or income thereon.
(c) The Collateral Agent shall have no obligation to
invest or reinvest amounts to be held by the Collateral Agent if all or a
portion of such amounts are deposited with the Collateral Agent after 11:00 a.m.
(New York time) on the day of the deposit. Instructions to invest or reinvest
that are received after 11:00 a.m. (New York time) will be treated as if
received on the following Business Day in New York.
(d) The Collateral Agent shall have the power to sell or
liquidate the foregoing investments whenever the Collateral Agent shall be
required to distribute the amounts
48
held pursuant to the terms of this Security Agreement or as otherwise
contemplated in this Security Agreement. Requests or instructions received after
11:00 a.m. (New York time) by the Collateral Agent to liquidate such amounts
will be treated as if received on the following Business Day in New York.
(e) The Collateral Agent shall have no responsibility for
any investment losses resulting from the investment, reinvestment or liquidation
of the amounts held by the Collateral Agent pursuant to the terms of this
Security Agreement, provided that the Collateral Agent has made such investment,
reinvestment or liquidation of the trust assets in accordance with the terms,
and subject to the conditions, of this Security Agreement.
(f) Each of the parties to this Security Agreement
acknowledge that non-deposit investment products are not obligations of, or
guaranteed by, Citibank, N.A. or Citigroup North America, Inc., nor any of their
affiliates; are not FDIC insured; and are subject to investment risks, including
the possible loss of principal amount invested in one of the money market funds
made available by the Collateral Agent and selected by the Grantors.
(g) Any investment direction contained herein may be
executed through an affiliated broker or dealer of the Collateral Agent and any
such affiliated broker or dealer shall be entitled to such broker's or dealer's
usual and customary fees for such execution.
(h) The Cash Equivalents may be held by the Collateral
Agent directly or through any clearing agency or depository (collectively, the
"Clearing Agency") including, without limitation, the Federal Reserve/Treasury
Book-Entry System for United States and federal agency securities, and The
Depository Trust Company. The Collateral Agent shall not have any responsibility
or liability for the actions or omissions to act on the part of any Clearing
Agency.
(i) Notwithstanding anything contained herein to the
contrary, the parties hereto hereby agree and acknowledge that due to the
potential conflict of interest, the Collateral Agent will not purchase the
commercial paper of Citigroup North America, Inc., or any Affiliate
(collectively, "Citigroup Paper") unless the Collateral Agent is specifically
instructed to purchase Citigroup Paper in an Officer's Certificate from the
Company. Any instruction for the purchase of Citigroup Paper must be given by
the Company on a transaction by transaction basis in the manner set forth in the
preceding sentence.
* * *
49
IN WITNESS WHEREOF, the parties to hereto have caused this
Mortgage and Security Agreement to be duly executed by their respective officers
thereunto duly authorized.
WORLD AIRWAYS, INC.,
as Grantor
By: /s/ Xxxxxxxx X. Xxxxxx, Xx.
-------------------------------
Xxxxxxxx X. Xxxxxx, Xx.
Chief Financial Officer
WORLD AIRWAYS PARTS COMPANY, LLC,
as Grantor
By: /s/ Xxxxxxxx X. Xxxxxx, Xx.
-------------------------------
Xxxxxxxx X. Xxxxxx, Xx.
Manager
CITIBANK, N.A.,
as Collateral Agent
By: /s/ Xxxxxxxx Xxxxxxx
-------------------------------
Xxxxxxxx Xxxxxxx
Assistant Vice President
EXHIBIT A1
to Mortgage and
Security Agreement
MORTGAGE AND SECURITY AGREEMENT
SUPPLEMENT (SPARE ENGINE) NO. ( )
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (SPARE ENGINE) NO. (__)
dated ______________ (herein called this "Mortgage and Security Agreement
Supplement") made by [World Airways, Inc., a Delaware corporation/World Airways
Parts Company, LLC, a Delaware limited liability company] (herein called the
"Company"), in favor of Citibank, N.A., as Collateral Agent for, and directed
by, the Board, the Lenders and the Supplemental Guarantor (each as defined in
the Loan Agreement (as defined in the Security Agreement (as defined below)))
(the "Collateral Agent").
WITNESSETH:
WHEREAS, the Company and [World Airways, Inc./World Airways Parts
Company, LLC] have heretofore executed and delivered to the Collateral Agent a
Mortgage and Security Agreement dated as of December 30, 2003 (as amended,
modified, restated or otherwise supplemented from time to time in accordance
with its terms, the "Security Agreement"), covering, inter alia, Spare Engines
of the Company;
WHEREAS, terms that are defined in the Security Agreement or the Loan
Agreement (as such term is defined in the Security Agreement) and which are not
otherwise defined herein shall have the meanings assigned to such terms in the
Security Agreement or the Loan Agreement;
WHEREAS, the Security Agreement and Mortgage and Security Agreement
Supplement (Spare Engine) No. __ dated _______________ __, ____ have been duly
recorded pursuant to Subtitle VII of Title 49 of the United States Code on
_______________ __, ____, as one document and have been assigned Conveyance No.
_________; and
WHEREAS, the Security Agreement provides for the execution and delivery
from time to time of Mortgage and Security Agreement Supplements, each
substantially in the form hereof, for the purpose of subjecting engines to the
Lien of the Security Agreement.
NOW, THEREFORE, this Mortgage and Security Agreement Supplement
Witnesseth, that to secure the prompt payment of the principal of, interest on
and all other amounts due with respect to the Loan and to secure the performance
and observance by the Company of all the agreements, covenants and provisions
contained in the Security Agreement, in the Loan Agreement and in the other Loan
Documents and the prompt payment of any and all amounts from time to time owing
hereunder, under the Loan Agreement and the other Loan Documents and for the
uses and purposes and subject to the terms and provisions of the Security
Agreement, and in consideration of the premises and of the covenants contained
in the Security Agreement, and of other good and valuable consideration the
receipt and adequacy whereof are hereby
acknowledged, the Company has granted, bargained, sold, assigned, transferred,
conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain,
sell, assign, transfer, convey, mortgage, pledge and confirm, unto the
Collateral Agent, its successors and assigns, for the security and benefit of
the Board and the Lenders, a first priority security interest in and first
priority mortgage Lien on the following described property:
AIRCRAFT ENGINES
[____] aircraft engines, each such engine having 750 or more rated
take-off horsepower or the equivalent thereof, whether or not such engines shall
be installed in or attached to any aircraft or airframe, identified as follows:
Manufacturer's
Manufacturer Model Serial Number
------------ ----- --------------
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, unless the Lien of the
Security Agreement shall not be applicable to such Part pursuant to the
provisions of the Security Agreement.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.
This Mortgage and Security Agreement Supplement shall be construed as a
supplemental Security Agreement and shall form a part thereof, and the Security
Agreement is hereby incorporated by reference herein and is hereby ratified,
approved and confirmed.
* * *
A1-2
IN WITNESS WHEREOF, the Company has caused this Mortgage and
Security Agreement Supplement (Spare Engine) No. (__) to be duly executed by one
of its officers, thereunto duly authorized, on the day and year first above
written.
[NAME]
By: ________________________________
Name:
Title:
A1-3
EXHIBIT A2
to Mortgage and
Security Agreement
MORTGAGE AND SECURITY AGREEMENT
SUPPLEMENT (SPARE PARTS) NO. ( )
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT (SPARE PARTS) NO. (__) dated
______________ (herein called this "Mortgage and Security Agreement Supplement")
made by [World Airways, Inc., a Delaware corporation/World Airways Parts
Company, LLC, a Delaware limited liability company] (herein called the
"Company"), in favor of Citibank, N.A., as Collateral Agent for, and directed
by, the Board, the Lenders and the Supplemental Guarantor (as defined in the
Loan Agreement (as defined in the Security Agreement (as defined below))) (the
"Collateral Agent").
WITNESSETH:
WHEREAS, the Company and [World Airways, Inc./World Airways Parts
Company, LLC] have heretofore executed and delivered to the Collateral Agent a
Mortgage and Security Agreement dated as of December 30, 2003 (as amended,
modified, restated or otherwise supplemented from time to time in accordance
with its terms, the "Security Agreement"), covering, inter alia, Spare Parts of
the Company;
WHEREAS, terms that are defined in the Security Agreement or the Loan
Agreement (as such term is defined in the Security Agreement) and which are not
otherwise defined herein shall have the meanings assigned to such terms in the
Security Agreement or the Loan Agreement;
WHEREAS, the Security Agreement and Mortgage and Security Agreement
Supplement (Spare Parts) No. __ dated _______________ __, ____ have been duly
recorded pursuant to Subtitle VII of Title 49 of the United States Code on
_______________ __, ____, as one document and have been assigned Conveyance No.
_________; and
WHEREAS, the Security Agreement provides for the execution and delivery
from time to time of Mortgage and Security Agreement Supplements, each
substantially in the form hereof, for the purpose of subjecting spare parts,
appliances and expendables to the Lien of the Security Agreement.
NOW, THEREFORE, this Mortgage and Security Agreement Supplement
Witnesseth, that to secure the prompt payment of the principal of, interest on
and all other amounts due with respect to the Loan and to secure the performance
and observance by the Company of all the agreements, covenants and provisions
contained in the Security Agreement, in the Loan Agreement and in the other Loan
Documents and the prompt payment of any and all amounts from time to time owing
hereunder, under the Loan Agreement and the other Loan Documents and for the
uses and purposes and subject to the terms and provisions of the Security
Agreement, and in consideration of the premises and of the covenants contained
in the Security Agreement,
and of other good and valuable consideration the receipt and adequacy whereof
are hereby acknowledged, the Company has granted, bargained, sold, assigned,
transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant,
bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the
Collateral Agent, its successors and assigns, for the security and benefit of
the Board and the Lenders, a first priority security interest in and first
priority mortgage Lien on the following described property:
SPARE PARTS
[Describe]
The Spare Parts described above are located, as of the date hereof, at
[specify locations] (each such location to be included as a Designated Location)
and are maintained by or on behalf of World Airways, Inc.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.
The Company hereby represents and warrants that it holds an air carrier
operating certificate issued by the Secretary of Transportation of the United
States pursuant to Chapter 447 of Title 49 of the United States Code and 49
U.S.C. Section 44705 or any analogous successor provision of the United States
Code, for aircraft capable of carrying ten or more individuals or 6,000 pounds
or more of cargo.
This Mortgage and Security Agreement Supplement shall be construed as a
supplemental Security Agreement and shall form a part thereof, and the Security
Agreement is hereby incorporated by reference herein and is hereby ratified,
approved and confirmed.
* * *
A2-2
IN WITNESS WHEREOF, the Company has caused this Mortgage and Security
Agreement Supplement (Spare Parts) No. (__) to be duly executed by one of its
officers, thereunto duly authorized, on the day and year first above written.
[NAME]
By: ________________________________
Name:
Title:
A2-3
EXHIBIT B
to Mortgage and
Security Agreement
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended,
restated, supplemented or otherwise modified from time to time, the "IP Security
Agreement"), dated as of December 30, 2003, is made by the grantors listed on
the signature page hereof (collectively, the "Grantors") in favor of Citibank,
N.A. as collateral agent (the "Collateral Agent") for the Lenders (as defined
below), the Board (as defined below) and the Supplemental Guarantor (as defined
in the Loan Agreement referred to below) (the Lenders, the Board and
Supplemental Guarantor are hereinafter collectively referred to as the "Secured
Parties"). Terms defined in the Security Agreement (as defined below) and not
otherwise defined herein have the meaning as set forth in the Security
Agreement.
WHEREAS, pursuant to that certain Loan Agreement dated as of
the date hereof (as amended, restated, extended, supplemented or otherwise
modified in writing from time to time, the "Loan Agreement") among World
Airways, Inc. (the "Borrower"), Govco Incorporated, as Primary Tranche A Lender,
Citibank, N.A. as Alternate Tranche A Lender, Citicorp USA, Inc. as Tranche B
Lender (together with Govco Incorporated, the "Lenders"), Citicorp North
America, Inc. as Govco Administrative Agent, Phoenix American Financial
Services, Inc., as Loan Administrator, Citibank, N.A. as the Collateral Agent
and Agent, and Air Transportation Stabilization Board (the "Board"), the Lenders
have agreed to make, upon the terms and conditions set forth therein, a single
term loan (the "Loan") to the Borrower; and
WHEREAS, as a condition precedent to the making of the Loan by
the Lenders under the Loan Agreement, the Grantors have entered into a Security
Agreement dated as of the date hereof (the "Security Agreement"), pursuant to
which such Grantors have granted to the Collateral Agent, for the ratable
security and benefit of the Secured Parties, a security interest in the property
described therein, including certain intellectual property of the Grantors, and
have agreed as a condition thereof, to execute this IP Security Agreement for
recording with the U.S. Patent and Trademark Office, the United States Copyright
Office and other governmental authorities.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Grantor agrees as
follows:
Section 1. Grant of Security. Each Grantor hereby grants to
the Collateral Agent, for itself and for the ratable security and benefit of the
Secured Parties, a security interest in all of such Grantor's right, title and
interest in and to the following (the "Collateral"):
(a) the patents and patent applications set forth in
Schedule A hereto;
(b) the trademark and service xxxx registrations and
applications set forth in Schedule B hereto (provided that no security interest
shall be granted in United States intent-to-use trademark applications to the
extent that, and solely during the period in which, the grant of a security
interest therein would impair the validity or enforceability of such
intent-to-use
trademark applications under applicable federal law), together with the goodwill
symbolized thereby;
(c) the copyright registrations and applications and
exclusive copyright licenses set forth in Schedule C hereto;
(d) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any of the
foregoing, all rights in the foregoing provided by international treaties or
conventions;
(e) all rights corresponding to the foregoing throughout
the world, and all other rights of any kind whatsoever of such Grantor accruing
thereunder or pertaining thereto;
(f) any and all claims for damages and injunctive relief
for past, present and future infringement, dilution, misappropriation,
violation, misuse or breach with respect to any of the foregoing, with the
right, but not the obligation, to xxx for and collect, or otherwise recover,
such damages; and
(g) any and all Proceeds of any and all of the foregoing
Collateral or arising from any of the foregoing.
Anything herein to the contrary notwithstanding, in no event
shall the security interest granted under this Section 1 attach to any (i)
Excluded Assets or (ii) lease, license, contract, property rights or agreement
to which any Grantor is a party or any of the rights or interests of any Grantor
thereunder if and for so long as the grant of such security interest shall
constitute or result in (x) the abandonment, invalidation, or unenforceability
of any material right, title or interest of any Grantor therein or (y) in a
breach or termination pursuant to the terms of, or a default under, any such
lease, license, contract, property rights or agreement (other than to the extent
that any such term would be rendered ineffective pursuant to Section 9-406,
9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of
any relevant jurisdiction or any other applicable law (including the Bankruptcy
Code) or principles of equity); provided, however, that such security interest
shall attach immediately at such time as the condition causing such abandonment,
invalidation or unenforceability shall be remedied and, to the extent severable,
shall attach immediately to any portion of such lease, license, contract,
property rights or agreement that does not result in any of the consequences
specified in (x) or (y) above.
Section 2. Security for Secured Obligations. The grant of a
security interest in the Collateral by each Grantor under this IP Security
Agreement secures the payment and performance of all Obligations of such Grantor
under the Loan Documents including, without limitation, payment of the principal
of, interest on, and all other amounts due with respect to, the Loan, and the
performance and observance by each of the Grantors of all the agreements,
covenants and provisions contained in the Security Agreement, in the Loan
Agreement and in the other Loan Documents, and the payment of any and all
amounts from time to time owing under the Security Agreement, the Loan Agreement
and the other Loan Documents.
B-2
Section 3. Recordation. Each Grantor authorizes and requests
that the Register of Copyrights, the Commissioner for Patents and the
Commissioner for Trademarks and any other applicable government officer record
this IP Security Agreement.
Section 4. Execution in Counterparts. This IP Security
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
Section 5. Grants Rights and Remedies. This IP Security
Agreement has been entered into in conjunction with the provisions of the Loan
Agreement and the Security Agreement. Each Grantor does hereby acknowledge and
confirm that the grant of the security interest hereunder to, and the rights and
remedies of, the Collateral Agent with respect to the Collateral are more fully
set forth in the Loan Agreement and the Security Agreement, the terms and
provisions of which are incorporated herein by reference as if fully set forth
herein.
Section 6. Governing Law. This IP Security Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.
[Remainder of this page intentionally left blank.]
B-3
IN WITNESS WHEREOF, each Grantor has caused this IP Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
WORLD AIRWAYS, INC., as Grantor
By: _______________________________
Name:
Title:
WORLD AIRWAYS PARTS COMPANY, LLC,
as Grantor
By: _______________________________
Name:
Title:
CITIBANK, N.A., as Collateral Agent under
the Loan Agreement
By: _______________________________
Name:
Title:
EXHIBIT C
to Mortgage and
Security Agreement
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT (as
amended, restated, supplemented or otherwise modified from time to time, the "IP
Security Agreement Supplement"), dated as of __________, 2003, is made by the
grantor listed on the signature page hereof (the "Grantor") in favor of
Citibank, N.A. as collateral agent (the "Collateral Agent") for the Secured
Parties (as defined in the IP Security Agreement referred to below). Terms
defined in the Security Agreement (as defined below) and not otherwise defined
herein have the meaning as set forth in the Security Agreement.
WHEREAS, the Grantor and certain other persons have heretofore
entered into a Security Agreement dated as of _________, 2003 (the "Security
Agreement"), pursuant to which the grantors described therein (including the
Grantor) granted to the Collateral Agent, for the ratable security and benefit
of the Secured Parties, a security interest in the Collateral described therein,
including the Additional Collateral (as defined below) and other intellectual
property of such grantors;
WHEREAS, pursuant to the Security Agreement, such grantors
executed and delivered that certain Intellectual Property Security Agreement
dated as of _________, 2003 (as amended, restated, supplemented or otherwise
modified from time to time, the "IP Security Agreement"); and
WHEREAS, the Security Agreement provides for the execution and
delivery from time to time of IP Security Agreement Supplements in the form
hereof for the purpose of recording with the U.S. Patent and Trademark Office,
the United States Copyright Office and other governmental authorities the grant
of the security interest in the Additional Collateral (as defined below).
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Grantor agrees as
follows:
Section 1. Grant of Security. The Grantor hereby grants to the
Collateral Agent, for itself and for the ratable security and benefit of the
Secured Parties, a security interest in all of such Grantor's right, title and
interest in and to the following (the "Additional Collateral"):
(a) the patents and patent applications set forth in
Schedule A hereto;
(b) the trademark and service xxxx registrations and
applications set forth in Schedule B hereto (provided that no security interest
shall be granted in United States intent-to-use trademark applications to the
extent that, and solely during the period in which, the grant of a security
interest therein would impair the validity or enforceability of such
intent-to-use trademark applications under applicable federal law), together
with the goodwill symbolized thereby;
(c) the copyright registrations and applications and
exclusive copyright licenses set forth in Schedule C hereto;
(d) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any of the
foregoing, all rights in the foregoing provided by international treaties or
conventions;
(e) all rights corresponding to the foregoing throughout
the world, all rights of priority associated with the foregoing and all other
rights of any kind whatsoever of such Grantor accruing thereunder or pertaining
thereto;
(f) any and all claims for damages and injunctive relief
for past, present and future infringement, dilution, misappropriation,
violation, misuse or breach with respect to any of the foregoing, with the
right, but not the obligation, to xxx for and collect, or otherwise recover,
such damages; and
(g) any and all Proceeds of any and all of the foregoing
Collateral or arising from any of the foregoing.
Anything herein to the contrary notwithstanding, in no event
shall the security interest granted under this Section 1 attach to any [(i)
Excluded Assets or (ii)] lease, license, contract, property rights or agreement
to which any Grantor is a party or any of the rights or interests of any Grantor
thereunder if and for so long as the grant of such security interest shall
constitute or result in (x) the abandonment, invalidation, or unenforceability
of any material right, title or interest of any Grantor therein or (y) in a
breach or termination pursuant to the terms of, or a default under, any such
lease, license, contract, property rights or agreement (other than to the extent
that any such term would be rendered ineffective pursuant to Section 9-406,
9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of
any relevant jurisdiction or any other applicable law (including the Bankruptcy
Code) or principles of equity); provided, however, that such security interest
shall attach immediately at such time as the condition causing such abandonment,
invalidation or unenforceability shall be remedied and, to the extent severable,
shall attach immediately to any portion of such lease, license, contract,
property rights or agreement that does not result in any of the consequences
specified in (x) or (y) above.
Section 2. Supplement to IP Security Agreement. Each of
Schedules A, B and C to the IP Security Agreement is, effective as of the date
hereof, hereby supplemented to add to such Schedule the Additional Collateral.
Section 3. Security for Secured Obligations. The grant of a
security interest in the Collateral by Grantor under this IP Security Agreement
Supplement secures the payment and performance of all Obligations of such
Grantor under the Loan Documents including, without limitation, payment of the
principal of, interest on, and all other amounts due with respect to, the Loan,
and the performance and observance by the Grantor of all the agreements,
covenants and provisions contained in the Security Agreement, in the Loan
Agreement and in the other Loan Documents, and the payment of any and all
amounts from time to time owing under the Security Agreement, the Loan Agreement
and the other Loan Documents.
C-2
Section 4. Recordation. Each Grantor authorizes and requests
that the Register of Copyrights, the Commissioner for Patents and the
Commissioner for Trademarks and any other applicable government officer record
this IP Security Agreement Supplement.
Section 5. Execution in Counterparts. This IP Security
Agreement Supplement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
Section 6. Grants Rights and Remedies. This IP Security
Agreement Supplement has been entered into in conjunction with the provisions of
the Loan Agreement, the Security Agreement and the IP Security Agreement. The
Grantor does hereby acknowledge and confirm that the grant of the security
interest hereunder to, and the rights and remedies of, the Collateral Agent with
respect to the Additional Collateral are more fully set forth in the Loan
Agreement and the Security Agreement, the terms and provisions of which are
incorporated herein by reference as if fully set forth herein.
Section 7. Governing Law. This IP Security Agreement
Supplement shall be governed by, and construed in accordance with, the laws of
the State of New York.
[Remainder of this page intentionally left blank.]
C-3
IN WITNESS WHEREOF, the Grantor has caused this IP Security
Agreement Supplement to be duly executed and delivered by its officer thereunto
duly authorized as of the date first above written.
[________________________], as Grantor
By: _______________________________
Name:
Title:
