1
EXHIBIT 10.82
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO.N526MC)
(SPARE ENGINE NOS. 517544 and 517547)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of September
5, 1997, (this "Mortgage"), and entered into by and between ATLAS AIR, INC., a
Delaware corporation (the "Lessee"), ATLAS FREIGHTER LEASING II, INC., a
Delaware corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as
administrative agent for and representative of (in such capacity, the "Agent")
the financial institutions ("Lenders") party to the Credit Agreement referred
to below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of September 5,
1997 (said credit agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with
Lenders, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners L.P., as Syndication Agent, and Agent,
pursuant to which Lenders have agreed, on the terms and conditions set forth in
the Credit Agreement, to make term loans to Company in the principal amount of
up to $185 million (the "Loans") to enable Company to refinance certain
indebtedness currently encumbering the Aircraft Collateral (as defined below).
The indebtedness with respect to Loans made by Lenders is to be evidenced by
certain promissory notes of Company to the order of Lenders of even date
herewith issued under and pursuant to the Credit Agreement (such promissory
notes, as they may be amended, modified, supplemented, renewed, converted or
extended from time to time, being the "Notes"). It is a condition precedent to
the making by Lenders of the Loans under the Credit Agreement that this
Mortgage be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make the Loans, Company hereby agrees with Agent as follows:
-1-
2
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with
accrued interest thereon, and all other amounts from time to time payable by
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(as defined below) (including payment of amounts that would become due but for
the operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the benefit of Lenders, and their respective successors and assigns,
a first priority security interest in the Aircraft and the Spare Engines (the
"Aircraft Collateral") and a first priority security interest in all estate,
right, title and interest of Company in, to and under, the other below
described property wherever the same may be located (the "Aircraft Related
Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest
in and to:
(i) the airframe (the Aircraft except for the Engines or engines
from time to time installed thereon), which is described on Schedule
I hereto and any replacement airframe which may be substituted for
such airframe in accordance with the provisions of Section 4(f)
hereof together with any and all Parts (as hereinafter defined)
incorporated or installed in or attached to such airframe and all
Parts removed from such airframe until such Parts are replaced in
accordance with Section 4(e) hereof (such airframe, together with any
replacement airframe and all such Parts, hereinafter referred to as
the "Airframe");
(ii) each of the engines and spare engines (the "Spare
Engines"), which are listed in Schedule II hereto or which are
described in a Supplemental Chattel Mortgage (a "Supplemental Chattel
Mortgage") substantially in the form of Exhibit A attached hereto,
supplementing this Mortgage, and listed by manufacturer's serial
numbers in such Schedule or in such Supplemental Chattel Mortgage,
whether or not from time to time thereafter installed on the airframe
or on any other airframe or aircraft, and any replacement engine
which may be substituted for such engine or spare engine in
accordance with the provisions of Section 4(f) hereof, together, in
each case, with any and all Parts incorporated or installed in or
attached thereto and any and all Parts removed therefrom, until such
Parts are replaced in accordance with Section 4(e) hereof (each such
engine, and replacement engine, together with any and all such Parts,
hereinafter referred to as an "Engine" and collectively, the
"Engines");
-2-
3
(iii) all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature
(other than complete Engines, Spare Engines or engines), which may
from time to time be incorporated or installed in or attached to the
Airframe or any Engine or Spare Engine, including all such
appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment purchased by Company for
incorporation or installation in or attachment to the Airframe or any
Engine or Spare Engine pursuant to the terms of any agreement whether
or not identified in a Supplemental Chattel Mortgage (collectively
referred to herein as "Parts"); and
(iv) all records, logs and other materials required by
applicable law or regulation to be maintained and all other records,
logs and materials maintained in the ordinary course of business with
respect to the properties described in paragraphs (i), (ii) and (iii)
above (together with such Airframe and Engines (other than the Spare
Engines), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to Company after termination of the Lease with
respect to the Aircraft and Spare Engines as the result of the sale,
lease or other disposition thereof, and all estate, right, title
interest of every nature whatsoever of Company in and to the same and
every part thereof;
(ii) all monies and securities deposited or required to be
deposited with Agent pursuant to any term of this Mortgage and held
or required to be held by Agent hereunder or paid to Agent in
accordance with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase
or modification agreement or manufacturer's warranty, together with
all rights, powers, privileges, options, licenses and other benefits
of Company (including such indemnities, rights of assignment, rights
and remedies for breach of any warranty and/or claims for damages,
rights to receive title to parts and materials to the extent same
relates to the Aircraft or Spare Engines including any agreement
assigned therewith;
-3-
4
(iv) all amounts payable to Company by any manufacturer,
supplier or vendor of any of the Aircraft Collateral or any component
thereof pursuant to any warranty or indemnity covering any such
Aircraft Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to Company under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and
other payments of any kind thereunder, and including all rights of
Company, as lessor, to execute any election or option or to give any
notice, consent, waiver or approval under or in respect of the Lease
or to accept any surrender of any of the Aircraft or Spare Engines or
any part thereof, as well as any rights, powers or remedies on the
part of the Lessor, whether arising under the Lease or by statute or
at law or in equity, or otherwise, arising out of any Lease Event of
Default (as defined in the Lease), including, without limitation, all
rights under Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any
loss or damage to the Aircraft, any Engine or any Spare Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft and
Spare Engines. All property referred to in this granting clause, whenever
acquired by the Lessor under the Lease, shall secure all Secured Obligations.
Company does hereby warrant and represent that it has not assigned or pledged,
and hereby covenants that it will not assign or pledge, so long as the
assignment hereunder shall remain in effect, any of its right, title or
interest hereby assigned to anyone other than Agent, and that it will not,
except as provided herein or in the Credit Agreement, enter into any agreement
amending or supplementing any purchase agreement, modification agreement to the
extent such agreement relates to the Aircraft or Spare Engines, or execute any
waiver or modification of, or consent under, any such agreement, or settle or
compromise any claim arising under any such agreement or submit or consent to
the submission of any dispute, difference or other matter arising under or in
any respect of any such agreement to arbitration thereunder.
-4-
5
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is
in cargo configuration capable of immediate operation in the business
of Lessee and has a maximum gross takeoff weight of at least 800,000
pounds and is of the equivalent or greater residual value, condition,
utility, airworthiness, and remaining useful life and which shall
have been maintained, serviced, repaired and overhauled in
substantially the same manner as Lessee maintains, services, repairs
and overhauls similar airframes utilized by Lessee and without in any
way discriminating against such airframe.
"Acceptable Alternate Engine" means a General Electric CF6-50E2
aircraft engine for the aircraft bearing U.S. registration numbers
N523MC, N524MC, N526MC and N527MC or an engine of the same or another
manufacturer of equivalent or greater residual value, condition,
utility, airworthiness, and remaining useful life and suitable for
installation and use on the Airframe; provided that such engine shall
be of the same make, model and manufacturer as the other engines
installed on the Airframe, shall be an engine of a type then being
utilized by Lessee on other Boeing 747-200 aircraft operated by
Lessee, and shall have been maintained, serviced, repaired and
overhauled in substantially the same manner as Lessee maintains,
services, repairs and overhauls similar engines utilized by Lessee
and without in any way discriminating against such engine.
"ACMI Contract" means (i) any contract entered into by Lessee
pursuant to which Lessee furnishes the aircraft, crew, maintenance
and insurance and customers bear all other operating expenses and
(ii) any similar contract in which the customer provides the flight
crew, all in accordance with Lessee's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, or any similar
legislation of the United States enacted to supersede, amend or
supplement such Act and the rules and regulations promulgated
thereunder.
-5-
6
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1
hereof.
"Aircraft Related Collateral" has the meaning specified in
Section 1 hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of
this instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air
carrier," as defined in Part 121 of the Federal Aviation Regulations,
that is operating in accordance with the operating certificate and
appropriate operations specifications issued under Part 121 or any
successor regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the
Credit Agreement.
"Lease" means that certain Lease Agreement, dated as of
September __, 1997, by and between Atlas Freighter Leasing II, Inc.,
as Lessor, and Atlas Air, Inc., as Lessee, for the lease of the
Aircraft and Spare Engines, together with any amendments,
modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of
this Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
-6-
7
"Mortgage" has the meaning specified in the first paragraph of
this instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1
hereof.
"Spare Engines" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in
Section 1 hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the
Airframe or each Engine or each Spare Engine initially or subsequently
mortgaged hereunder on the date the Airframe, such Engine or Spare Engine is
mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft
Collateral free and clear of all Liens except for the lien of this
Mortgage and Permitted Encumbrances and the Lease and has full power
and authority to mortgage and grant the lien and security interest in
the Aircraft Collateral and Aircraft Related Collateral intended by
the terms hereof and in the manner aforesaid and has not assigned or
pledged any of its right, title or interest hereby assigned to anyone
other than Agent.
(b) Company is a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not
registered under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the
case may be, is in due form for recording in accordance with the Act
and has been duly filed for recording in accordance with the Act
against the Aircraft or such Engine(s) or Spare Engine as the case
may be.
-7-
8
(e) An airworthiness certificate has been duly issued under the
Act for the Aircraft (evidence of which has been supplied to Agent),
and the airworthiness certificate for the Aircraft is in full force
and effect.
(f) The Aircraft, Engines and Spare Engines are in such
condition so as to comply with the requirements of Section 4(c)
hereof; and the insurance required by Section 4(g) hereof is in full
force and effect.
(g) This Mortgage or this Mortgage as supplemented by a
Supplemental Chattel Mortgage constitutes the legally valid and
binding obligation of Company enforceable against it in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws or equitable
principles relating to or limiting creditors' rights generally, and
creates a valid, perfected and first priority mortgage on and
security interest in the Aircraft Collateral, securing the payment
and performance of the Secured Obligations.
(h) Company has delivered to Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the
States of Colorado and New York and such other states as may be
required with respect to that portion of the Aircraft Collateral not
covered by the filing system established under the Act and with
respect to the Aircraft Related Collateral; and except for the
filings described in this paragraph and in paragraph (d) above of
this Section 3, no filing or recording of any instrument shall be
required to establish and perfect a first priority security interest
in the Aircraft Collateral and Aircraft Related Collateral under the
laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office
of Company is located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create,
incur, assume or suffer to exist any Lien, on or with respect to any
of the Aircraft Collateral, or Aircraft Related Collateral, title
thereto or any interest therein, except the lien of this Mortgage and
Permitted Encumbrances, including the Lease. Company will promptly,
at its own expense, take such action as may be
-8-
9
necessary to duly discharge any such Lien not excepted above if
the same shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from
and against, any and all fees and taxes, levies, imposts, duties,
charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this
Section 4(b) being called a "Tax"), which may from time to time be
imposed on or asserted against Agent or any Lender or the Airframe or
any Engine or any Spare Engine or any part thereof or interest
therein by any Federal, state or local government or other taxing
authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection
with, relating to or resulting from: (i) the Airframe or any Engine
or any Spare Engine or any part thereof of interest therein; (ii) the
manufacture, purchase, ownership, mortgaging, lease, sublease, use,
storage, maintenance, sale or other disposition of the Airframe or
any Engine or any Spare Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds
received with respect thereto; or (iv) this Mortgage; provided,
however, that there shall be excluded from any indemnification any
Lessor Tax (as defined in the Lease) and unless the payment of any
such Tax shall be a condition to the enforceability of this Mortgage
or the perfection of the lien hereof or unless proceedings shall have
been commenced to foreclose any lien which may have attached as
security for such Tax, nothing in this Section shall require the
payment of any Tax so long as and to extent that validity thereof
shall be contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and Company shall have
set aside on its books adequate reserves with respect thereto in
accordance with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own
cost and expense, (i) will be a "citizen of the United States" as
defined in Section 40102(15) of Title 49 of the United States Code;
(ii) will cause ownership of the Aircraft and Spare Engines to be
duly registered and remain duly registered in the name of Company in
accordance with the Act; and (iii) will cause Lessee to service,
repair, inspect, test, maintain, overhaul the Airframe and each
Engine and each Spare Engine and install replacement equipment and
parts on the Aircraft, each Engine and each Spare Engine (A) so as to
keep the Airframe and each Engine and each Spare Engine in such
operating condition as may be required to permit the Airframe and
each Engine to be utilized in commercial operations, (B) so as to
enable the airworthiness certification of the Airframe to be
maintained in good standing at all times under
-9-
10
the Act, except when aircraft of the same type, model or series
as the Airframe (powered by engines of the same type as those with
which the Airframe shall be equipped at the time of grounding)
registered in the United States have been grounded by the FAA;
provided, however, that if following its issuance, the United States
FAA airworthiness certificate of the Aircraft shall be withdrawn,
then subject to the provisions of Section 4(f) hereof, so long as
Company is diligently taking or causing to be taken all necessary
action to promptly correct the condition which caused such
withdrawal, no Event of Default shall arise from such withdrawal, (C)
in accordance with Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the
same care used by Lessee with respect to the same or similar aircraft
and engines owned or operated by Lessee so as to keep the same in as
good operating condition as when originally mortgaged hereunder,
ordinary wear and tear excepted, which practices shall at all times
be at or above the standard of the industry in the United States for
prudent maintenance of similar equipment, and (D) in such manner as
may be necessary to maintain in full force all warranties of the
manufacturers thereof. Company shall maintain, or shall cause Lessee
to maintain, all records, logs and other materials which may be
required to permit the Airframe, each Engine and each Spare Engine to
be so utilized.
Company will comply in all material respects with all
airworthiness directives, mandatory notes or modifications or similar
requirements affecting the same (including those issued by the
manufacturer or supplier) in such condition so as to comply with the
provisions of this Mortgage and the rules and regulations of the FAA
from time to time in force and applicable to the Aircraft, Engines
and Spare Engines. Neither the Airframe nor any Engine nor any Spare
Engine will be maintained, used or operated in violation of any law
or any rule, regulation or order of any government or governmental
authority having jurisdiction (domestic or foreign), or in violation
of any airworthiness certificate, license or registration relating to
the Airframe or such Engine or such Spare Engine issued by any such
authority, and in the event that such laws, rules, regulations or
orders require alteration of the Airframe or any Engine or any Spare
Engine, Company, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper
operating condition under such laws, rules, regulations and orders;
provided, however, that Company may, in good faith (after having
delivered to Agent an Officer's Certificate stating the facts with
respect thereto), contest the validity or application of any such
law, rule, regulation or order in any reasonable manner which does
not, in Agent's opinion, adversely affect the interests under this
Mortgage of Agent or any Lender.
-10-
11
Company will not operate, use or locate the Airframe or any
Engine or any Spare Engine, (I) in any area in which any insurance
required to be maintained pursuant to Section 4(g) shall not be at
the time in full force and effect, or in any area excluded from
coverage by an insurance policy in effect with respect to the
Airframe or such Engine or such Spare Engine, except in the case of a
requisition for use by the United States of America, and then only if
Company obtains indemnity or "war risk" insurance in lieu of such
insurance from the United States of America against the risks and in
the amounts required by said Section covering such area, or (II) in
any recognized or threatened area of hostilities unless fully covered
to Agent's satisfaction by war risk and political risk and allied
perils insurance or unless the Airframe or such Engine or such Spare
Engine is operated or used under contract with the Government of the
United States of America under which contract that Government
provides "war risk" insurance or assumes liabilities for any damages,
loss, destruction or failure to return possession of the Airframe or
such Engine or such Spare Engine at the end of the term of such
contract and for injury to persons or damage to property of others.
Company shall not use the Aircraft or any Spare Engines nor
suffer it to be used in any manner or for any purpose excepted from
any of the insurance on or in respect of the Aircraft or any Spare
Engines or for the purpose of carriage of goods of any description
excepted from such insurance nor do, or permit to be done, anything
which, or admit to do anything the admission of which, may invalidate
any of such insurance.
(d) Possession. Company will not, without the prior written
consent of Agent, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish possession or control of, or transfer
the right, title or interest of Company in, the Airframe or any
Engine or any Spare Engine except that Company may enter into and
perform all provisions and terms of the Lease and Lessee or the
Company, unless a Potential Event of Default or Event of Default
shall have occurred and be continuing, without the prior written
consent of Agent, may take the following actions so long as the
actions to be taken shall not deprive the Agent of the first priority
Lien of this Mortgage on the assets subject hereto and so long as the
actions to be taken shall not deprive Company as Lessor of the
protections of Section 1110 of the Bankruptcy Code with respect to
the Aircraft or Spare Engines nor shall such actions deprive the
Agent of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft or Spare Engines as assignee of Company's
rights under this Mortgage:
-11-
12
(i) transfer possession of the Airframe or any Engine or
Spare Engine other than by lease to the United States of America
or any instrumentality thereof pursuant to the Civil Reserve Air
Fleet Program (as administered pursuant to Executive Order
12656, or any substitute order) or any similar or substitute
programs;
(ii) transfer possession of the Airframe or any Engine or
Spare Engine to the manufacturer thereof for testing or other
similar purposes or any other organization for service, repairs,
maintenance or overhaul or, to the extent permitted by Section
4(e) hereof, for alterations or modifications;
(iii) subject any Engine or Spare Engine to normal
interchange or pooling agreements or arrangements of the type
customary in the United States airline industry and entered into
by Company or Lessee in the ordinary course of business which do
not contemplate or require the transfer of title to, use for the
remainder of its useful life, or registration of the Airframe or
title to, or use for the remainder of its useful life of such
Engine or Spare Engine; provided, however if Company's title to
or use for the remainder of its useful life, of the Airframe or
any Engines or Spare Engines shall be divested under any such
agreement or arrangement, such divesture shall be deemed to be
an Event of Loss with respect to the Airframe or such Engine or
Spare Engine and Company shall comply with Section 4(f) in
respect thereof;
(iv) install an Engine or Spare Engine on an airframe which
is owned by Lessee; provided that such airframe is free and
clear of all Liens on property of Lessee except (A) Liens
permitted under the Lease, (B) Liens that apply only to the
engines (other than the Engines or 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), and (C) the rights of
any Domestic Air Carrier, under normal interchange agreements
which are customary in the airline industry and do not
contemplate or require the transfer of title to such airframe or
the engines installed thereon;
(v) install an Engine or Spare Engine on an airframe leased
to Lessee or owned by Lessee subject to a conditional sale or
other security agreement, provided: (A) such airframe is free
and clear of all Liens, except the rights of the parties to the
lease or conditional sale or other security agreement covering
such airframe and except Liens of the
-12-
13
type permitted by clause (iv) above; and (B) Agent shall
have received from the lessor, conditional vendor or secured
party and each of the purchasers, mortgagees and encumbrancers
of such lessor, conditional vendor or secured party of such
airframe a written agreement (which may be the lease,
conditional sale agreement or mortgage covering such airframe),
whereby such lessor, conditional vendor or secured party and
each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party expressly and
effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in
any Engine or Spare Engine by reason of such Engine or Spare
Engine being installed on such airframe at any time when such
Engine or Spare Engine is subject to this Mortgage;
(vi) install an Engine or Spare Engine on an airframe owned
or leased by Lessee subject to a conditional sale or other
security agreement under circumstances where neither clause (iv)
nor clause (v) above is applicable; provided that any divesture
of title to such Engine or Spare Engine resulting from such
installation shall be deemed to be an Event of Loss with respect
to such Engine or Spare Engine and Company shall comply with
Section 4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines and Spare
Engines or engines installed thereon with any third party
pursuant to which Company has operational control of the
Airframe and any Engines and Spare Engines installed thereon
such operation to be performed solely by individuals under the
operational control of Company possessing all current
certificates and licenses that would be required under the
applicable laws of the United States for the performance by such
employees of similar functions within the United States;
provided that Company's obligations hereunder shall continue in
full force and effect notwithstanding any such ACMI Contract or
wet lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine or Spare Engine permitted by
the terms hereof shall be made subject and subordinate to, and the
Leases shall be made expressly subject and subordinate to, the lien
and security interest of this Mortgage and all of Agent's rights
hereunder and Company shall remain primarily liable hereunder for the
performance of all the terms of this Mortgage to the same extent as
if such transfer had not occurred, and any such instrument of
transfer shall include appropriate provisions for the maintenance and
insurance of the
-13-
14
Airframe or such Engine or Spare Engine, and any such instrument of
transfer (other than the Lease) shall expressly prohibit any further
transfer of the Airframe or such Engine or Spare Engine or any
assignment of the rights thereunder; and provided, further, that no
such lease, pooling arrangement or other transfer or relinquishment
of the possession of the Airframe or any Engine or Spare Engine shall
in any way discharge or diminish any of Company's obligations to
Agent hereunder or under the Credit Agreement. In the event Agent
shall have received from the lessor, conditional vendor or secured
party of any airframe leased to Lessee or purchased by Lessee subject
to a conditional sale or other security agreement, a written
agreement complying with clause (B) of Section 4(d)(v), and the lease
or conditional sale or other security agreement covering such
airframe also covers an engine, engines or spare engines owned by the
lessor under such lease, conditionally owned by the conditional
vendor under such conditional sale agreement, or subject to such
security agreement, Agent hereby agrees for the benefit of such
lessor, conditional vendor or secured party that Agent will not
acquire or claim, as against such lessor, conditional vendor or
secured party, any right, title or interest in any such engine or
spare engine as the result of such engine or spare engine being
installed on the Airframe at any time while such engine or spare
engine is subject to such lease or conditional sale or other security
agreement and owned by such lessor, conditionally owned by such
conditional vendor or subject to such security agreement.
(e) Replacement and Pooling of Parts: Alterations,
Modifications and Additions.
(i) Except as otherwise provided in Section 4(e)(iv),
Company, at its own cost and expense, will promptly replace all
Parts, which may from time to time be incorporated or installed
in or attached to the Airframe or any Engine or Spare Engine and
which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In
addition, in the ordinary course of maintenance, service, repair
or testing, Company at its own cost and expense may remove any
Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit
for use, provided that, except as otherwise provided in Section
4(e)(iv), Company at its own cost and expense shall replace such
Parts as promptly as practicable. All replacement Parts shall be
owned by Company free and clear of all Liens (except Permitted
Encumbrances and the Lease, and for pooling arrangements to the
extent permitted by
-14-
15
Section 4(e)(ii)), and shall be in as good operating
condition as, and shall have a value and utility at least equal
to, the Parts replaced assuming such property were in the
condition and repair required to be maintained by the terms
hereof.
All Parts at any time removed from the Airframe or any
Engine or any Spare Engine shall remain the property of Company
and shall remain subject to the lien and security interest of
this Mortgage, no matter where located until such time as such
Parts shall be replaced by parts which have been incorporated or
installed in or attached to the Airframe or any Engine or Spare
Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Airframe or any
Engine or Spare Engine as above provided, without further act,
(A) title to such replacement Part shall vest in and such
replacement part shall become the property of Company and shall
become subject to the lien and security interest of this
Mortgage and shall be deemed part of the Airframe or such Engine
or Spare Engine for all purposes hereof to the same extent as
the property originally comprising, or installed on, such
Airframe or such Engine or Spare Engine, and (B) title to the
replaced part shall no longer be the property of Company and
shall thereupon become free and clear of all rights of Agent
hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine or
Spare Engine as provided in Section 4(e)(i) may be subjected by
Company or Lessee to a normal pooling arrangement of the type
customary in the airline industry entered into by Lessee in the
ordinary course of its business and entered into with Domestic
Air Carriers that are not the subject of any bankruptcy,
insolvency, or similar proceeding, voluntary or involuntary,
provided the Part replacing such removed Part shall be
incorporated or installed in or attached to the Airframe or such
Engine or Spare Engine in accordance with Section 4(e)(i) as
promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in
or attached to the Airframe or any Engine or Spare Engine in
accordance with Section 4(e)(i) may be owned subject to such a
pooling arrangement, provided Company, at its expense, as
promptly thereafter as possible, either (A) causes such
replacement Part to become subject to the lien and security
interest of this Mortgage in accordance with Section 4(e)(i) by
Company's acquiring title thereto for the benefit of Agent free
and clear
-15-
16
of all Liens (except Permitted Encumbrances and the Lease)
or (B) replaces such replacement Part by incorporating or
installing in or attaching to the Airframe or such Engine or
Spare Engine a further replacement Part owned by Company free
and clear of all Liens (except Permitted Encumbrances and the
Lease).
(iii) Company, at its own cost and expense, shall make or
cause to be made such alterations and modifications in and
additions to the Airframe and the Engines and Spare Engines as
may be required from time to time to meet the standards of the
FAA or other governmental authority having jurisdiction;
provided that Company may, in good faith, contest the validity
or application of any such standard in any reasonable matter
that shall not adversely affect the Lien of this Mortgage or
Lenders' interests therein. Company also agrees, at its own cost
and expense, to make or cause to be made such alterations and
modifications in and additions to the Airframe and the Engines
and Spare Engines as may be required from time to time to meet
the standards or requirements of any directive issued by a
manufacturer relating to the Airframe or any Engine or Spare
Engine. In addition so long as no Potential Event of Default or
Event of Default shall have occurred and be continuing, Company,
at its own cost and expense, may from time to time make such
alterations and modifications in and additions to the Airframe
and any Engine or Spare Engine as Company may deem desirable in
the proper conduct of its business or to accommodate the
business of Lessee, provided no such alteration, modification or
addition diminishes the value or utility or impairs the
condition or airworthiness of the Airframe or such Engine or
Spare Engine below the value, utility, condition or
airworthiness thereof immediately prior to such alteration,
modification or addition assuming the Airframe or such Engine or
Spare Engine were then in the condition and airworthiness
required to be maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to
or added to the Airframe or any Engine or Spare Engine as the
result of such alteration, modification or addition shall,
without further act, become the property of, and title to such
parts shall vest in Company and shall be subject to the lien and
security interest of this Mortgage; provided, that, so long as
no Potential Event of Default or Event of Default shall have
occurred and be continuing, Company may remove and not replace
any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the
-16-
17
Airframe or such Engine or Spare Engine on the date hereof,
on the date the Engine or Spare Engine first becomes subject to
the lien of this Mortgage, or any Part in replacement of or
substitution for any such Part, (B) is not required to be
incorporated or installed in or attached or added to the
Airframe or such Engine or Spare Engine pursuant to the terms of
Section 4(c) hereof or any other provision of this Mortgage and
(C) can be removed from the Airframe, such Engine or Spare
Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare Engine
would have had at such time had such alteration, modification or
addition not occurred, assuming the Aircraft Collateral was
otherwise in the condition required by this Mortgage. Upon the
removal by Company of any such Part, as above provided, title
thereto shall, without further act, be free and clear of all
rights of the Agent hereunder and such Part shall no longer be
deemed a Part hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to
the Aircraft shall become subject to the Lien of this Mortgage
and shall be leased to the Lessee under the applicable Lease. In
no event shall the Lessor bear any liability or cost whatsoever
for (i) any alteration or modification of, or addition to, the
Airframe or any Engine or Spare Engine, (ii) any grounding of
the Aircraft, (iii) suspension of certification of the Aircraft,
or (iv) loss of revenue suffered by the Company for any reason
whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an
Airframe or an Engine or Spare Engine, Company will promptly
notify Agent thereof in writing (in any event within five (5)
days of such occurrence) and will, not later than 180 days after
the receipt of Proceeds in connection with such Event of Loss,
mortgage hereunder, by complying with all of the terms of
subsection (ii) below and otherwise taking all necessary actions
to provide that Company (and the Agent upon foreclosure of
Company's interest in the Lease) will continue to be entitled to
the benefits of Section 1110 of the Bankruptcy Code with respect
to the replacement airframe or engine referred to below, an
-17-
18
Acceptable Alternate Airframe or Acceptable Alternate
Engine free of all Liens (other than Permitted Encumbrances and
the Lease). Upon compliance with the preceding sentence within
such 180-day period, Agent will execute and deliver to Company a
partial release, in recordable form, releasing the lien of this
Mortgage to the extent that it covers such Airframe or Engine or
Spare Engine with respect to which such Event of Loss has
occurred. Such Acceptable Alternate Airframe or Acceptable
Alternate Engine shall thereupon constitute an "Airframe" or an
"Engine" or "Spare Engine", as the case may be, for all purposes
hereof and shall be deemed to constitute part of the Aircraft.
(ii) Whenever Company shall subject any Airframe or Engine
to the lien and security interest of this Mortgage (as
contemplated by paragraph (i) above), Company will on or prior
thereto:
(A) deliver to Agent and duly file for recording under
the Act, a Supplemental Chattel Mortgage substantially in
the form of Exhibit A hereto duly executed by Company
appropriately describing such engine to be subjected to the
lien and security interest of this Mortgage;
(B) deliver to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the
States of Colorado and New York (or such other States as
may be required at such time) covering the security
interest created by this Mortgage to perfect the security
interest of Agent in the Airframe or Engine or Spare Engine
to be subjected to the lien and security interest of this
Mortgage;
(C) deliver to Agent an Officers' Certificate dated
the date of execution of said Supplemental Chattel
Mortgage, stating:
(I) that the representations and warranties
contained in Section 3 hereof are true and correct on
and as of such date of execution with respect to such
Airframe or Engine or Spare Engine and Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event
of Default will exist; and
-18-
19
(III) that all conditions precedent contemplated
in this Section 4(f)(ii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to
such Airframe or Engine or Spare Engine as Agent may
reasonably request;
(E) furnish Agent with a warranty (as to title) ▇▇▇▇
of sale, in form and substance reasonably satisfactory to
Agent with respect to such Airframe or Engine or Spare
Engine;
(F) furnish Agent with such evidence of title such as
the ▇▇▇▇ of sale as Agent may reasonably request concerning
such Airframe or Engine or Spare Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine or
Spare Engine to be subjected to the lien and the security
interest of this Mortgage stating that it has a value and
utility at least equal to, and in as good operating
condition as the Airframe or Engine or Spare Engine subject
to such Event of Loss immediately prior to such Event of
Loss, assuming compliance by Company with all the terms of
this Mortgage with respect to such Airframe or Engine or
Spare Engine; and
(H) cause to be delivered to Agent an opinion or
opinions of counsel dated the date of execution of such
Supplemental Chattel Mortgage, stating:
(I) that the Airframe or Engine or Spare Engine
specifically described in said Supplemental Chattel
Mortgage, is free and clear of all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1)
has been duly authorized, executed and delivered by
Company, and (2) creates a valid, perfected and first
priority security interest in and to the Airframe or
Engine or Spare Engine described in said Supplemental
Chattel Mortgage, enforceable against all third
parties and securing the payment of all obligations
purported to be
-19-
20
secured thereby and that all action required to
perfect fully such security interest has been taken
and completed,
(III) that said Supplemental Chattel Mortgage has
been duly filed for recordation in accordance with the
provisions of the Act to continue the perfection and
priority of the security interest intended to be
created by the Mortgage, and
(IV) that Company (and the Agent upon succeeding
to Company's interest in the Lease) will continue to
be entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the lease of the
Airframe or Engine or Spare Engine described in said
Supplemental Chattel Mortgage.
(V) as to such other matters as Agent may
reasonably request.
Promptly upon the recording of each Supplemental Chattel Mortgage
under the Act, Company will cause to be delivered to Agent an opinion of
counsel for Company as to the due recording of such Supplemental Chattel
Mortgage in accordance with the Act.
(iii) With respect to the Airframe or any Engine or Spare Engine
as between the Agent and Company, any payments on account of an Event
of Loss (other than insurance proceeds or other payments the
application of which is provided for in Section 4(g) below and under
the terms of the Credit Agreement) received from any government
authority or other person shall be applied as follows:
(A) if such payments are received with respect to an
Event of Loss to an Airframe or Engine or Spare Engine that
has been or is being replaced by Company pursuant to the
terms hereof, so long as there shall exist no Event of
Default or Potential Event of Default, such payment shall
be paid over to or retained by Company or Lessee upon
satisfaction of the conditions for replacement contained in
paragraph (ii) above and until such time shall be held by
Agent in accordance with the provisions hereof as security
for the Secured Obligations; and
-20-
21
(B) if such payments are received with respect to an
Event of Loss with respect to which no replacement is being
effected, such payments shall be applied to the prepayment
of the Notes required pursuant to the terms of the Credit
Agreement and shall be held pursuant to the terms of this
Mortgage, and the balance, if any, shall be paid over to or
retained by Company.
(iv) In the event of a requisition for use by the United
States Government of the Airframe or any Engine or Spare Engine,
Company shall promptly notify Agent of such requisition and all
of Company's obligations under this Mortgage shall continue to
the same extent as if such requisition had not occurred. Any
payments received by Agent or Company from the United States
Government for the use of the Airframe or such Engine or Spare
Engine, shall be paid over to, or retained by, Company.
(v) Any amount referred to in paragraph (iii) or (iv) of
this Section 4(f) which is payable to or retained by Company
shall not be paid to Company or retained by Company, if at the
time of such payment or retention any Event of Default or a
Potential Event of Default shall have occurred and be
continuing, but shall be held by or paid over to Agent as
security for the obligations of Company under this Mortgage and
the other Loan Documents, and, if Agent shall declare the Credit
Agreement to be in default, shall be applied against Company's
obligations hereunder and thereunder as and when due. At such
time as there shall not be continuing any such Event of Default
or Potential Event of Default, such amount shall be paid to
Company to the extent not previously applied in accordance with
the preceding sentence. In addition, and whether or not there
shall exist an Event of Default or Potential Event of Default,
until such time as Company shall request to be paid any amount
referred to in paragraph (iii) or (iv) in order to effect the
mortgaging hereunder of a replacement Airframe or Engine or
Spare Engine, any amounts referred to in paragraphs (iii) or
(iv) of this Section 4(f) shall be held by the Agent as security
for the obligations of Company under this Mortgage and the other
Loan Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and maintain
on or with respect to the Aircraft and Spare Engines, at Lessee's own
cost and expense, public liability (including without limitation,
contractual liability, cargo
-21-
22
liability, passenger legal liability, bodily injury and product
liability, but excluding manufacturer's product liability) and
property damage insurance with insurers of recognized responsibility
and reputation in amounts, of the type and covering the risks
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee but in no event in an amount less than $500,000,000 per
occurrence (which shall include war risk, governmental confiscation
and expropriation and allied perils coverage). During any period when
the Aircraft and Spare Engines are on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of
insurance required by this Section, insurance otherwise conforming
with the provisions of this Section except that the amounts of
coverage shall not be required to exceed the amounts of comprehensive
airline liability insurance, and the scope of risk covered and type
of insurance shall be the same, as are customarily carried with
respect to similar aircraft on the ground by corporations engaged in
the same or similar business and similarly situated with Lessee. Any
policies of insurance carried in accordance with this Section 4(g)
and any policies taken out in substitution or replacement of any such
policies (A) shall be amended to name Agent and Lenders as additional
named insureds, (B) shall be primary without right of contribution
from any other insurance which is carried by Lessee, (C) shall
expressly provide that all provisions thereof, except the limits of
the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the
insurer shall waive any right of subrogation against Agent or
Lenders.
(ii) Company will cause Lessee at all times to carry and
maintain with insurers of recognized responsibility and reputation on
or with respect to the Aircraft and Spare Engines, at Lessee's own
cost and expense, aircraft ground and flight all-risk hull insurance
as well as fire and extended coverage insurance on Engines and other
equipment while removed from the Airframe or airframe (which shall
include war risk, governmental confiscation and expropriation (other
than by the United States Government) and allied perils including (A)
strikes, riots, civil commotions or labor disturbances, (B) any
malicious act or act of sabotage and (C) hijacking (air piracy) or
any unlawful seizure or wrongful exercise of control of the Aircraft
or Spare Engines or crew in flight (including any attempt at such
seizure or control) made by any person or persons aboard the Aircraft
or another aircraft acting without the consent of the insured, if and
to the extent the same shall be maintained by Lessee with respect to
similar aircraft owned or operated by Lessee on the same routes or if
the Aircraft or another aircraft is operated on routes where the
custom is for Domestic Carriers similarly situated with Lessee flying
comparable routes with similar aircraft to carry such insurance, of
the type usually carried by
-22-
23
corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be
for an amount not less than the greater of the amount required by the
applicable Lease and $50,000,000. During any period when the Aircraft
or Spare Engines, as the case may be, are on the ground and not in
operation Lessee may carry or cause to be carried, in lieu of the
insurance required by this Section, insurance otherwise conforming
hereto except that the scope of risk covered and type of insurance
shall be the same as are from time to time customarily carried with
respect to similar aircraft or spare engines by corporations engaged
in the same or similar business and similarly situated with Lessee
for aircraft and spare engines on the ground in an amount at least
equal to the applicable amount provided above. All such insurance
shall name Agent and Lenders as additional insureds and loss payees
to the extent their interest may appear and shall provide that any
loss to the Airframe or an Engine or Spare Engine in excess of
$2,000,000 (and, if a Potential Event of Default or Event of Default
has occurred and is continuing, any such loss) shall be payable to
Agent for the benefit of Lenders; and shall be primary without right
of contribution from any other insurance which is carried by Agent
with respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts
as are then applicable to other similar aircraft or spare engines in
Lessee's fleet which are of a value comparable to the Aircraft or
Spare Engines, as the case may be, and as are not substantially
greater than amounts self-insured by corporations engaged in the same
or similar business and similarly situated with Lessee; provided,
however, that Company shall not permit Lessee to self-insure in an
amount in excess of $1,000,000 without the prior written consent of
Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
Agent and Lenders as additional named insureds, but without Agent or
Lenders being thereby liable for premiums; (B) provide that in
respect of the interest of Agent or Lenders in such policies the
insurance shall not be invalidated by any action or inaction of
Lessee and shall insure the interests of Agent and Lenders regardless
of any breach or violation by Lessee or any Person (other than Agent)
of any warranty, declaration, condition or exclusion from coverage
contained in such policies; (C) provide that if such insurance is
cancelled, or if any material change is made in the coverage which
affects the interest of Agent or any Lender, or if such insurance is
allowed to lapse for nonpayment of premium, such cancellation,
-23-
24
change or lapse shall not be effective as to Agent for thirty
(30) days (seven (7) days, or such shorter or longer period as may
from time to time be customarily available in the industry, in the
case of any war risk and allied perils coverage) after receipt by
Agent of written notice from such insurers of such cancellation,
change or lapse; (D) be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft or Spare
Engines and shall be payable in U.S. dollars; (E) waive any right of
the insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise in respect of any liability of
Agent; and (F) waive all rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United States
or any agency or instrumentality thereof in respect of the Airframe
or any Engine or Spare Engine, a valid agreement by the United States
or such agency or instrumentality to indemnify Lessee against the
same risks against which Lessee is required hereunder to insure shall
be considered adequate insurance with respect to the Airframe or such
Engine or Spare Engine to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on
or prior to January 31, Company will cause the Lessee to furnish to
Agent (A) a report signed by a firm of independent aircraft insurance
brokers, appointed by Lessee and not objected to by Agent, describing
in reasonable detail acceptable to Agent the insurance then carried
and maintained on or with respect to the Aircraft and the Engines and
Spare Engines and stating that in the opinion of such firm such
insurance complies with the terms of this Section 4(g) and is
adequate to protect the interests of Lessee, Company and Agent, and
(B) certificates of the insurer or insurers evidencing the insurance
covered by the report. Lessee will cause such brokers to advise Agent
in writing (x) promptly of any default in the payment of any premium
and of any other act or omission on the part of Lessee of which such
firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft or
any Engine or Spare Engine and (y) at least thirty (30) days prior to
the expiration or termination date, or date of effectiveness of any
material change, of any insurance carried and maintained on the
Aircraft or Spare Engines hereunder.
(vi) All insurance payments and other payments received by Agent
or Company from insurance referred to in paragraph (ii) above shall
be, if received by Company, immediately paid to Agent and shall be
held by Agent as security
-24-
25
for the Secured Obligations and all other obligations required to be
paid in accordance with the terms of this Mortgage and the Credit
Agreement and such payments shall be paid to Company upon compliance
by Company with the terms of Subsection 4(f) with respect to the
replacement of an airframe or an engine, as the case may be, provided
that no Potential Event of Default or Event of Default shall have
occurred and be continuing.
All insurance payments and other payments received by Agent or
Company from insurance referred to in paragraph (ii) above and paid
other than as a result of an Event of Loss shall be paid by Agent to
or be retained by Company, and promptly applied by Company to the
extent necessary to repair the damage to the Airframe or the Engine
or Spare Engine for which such insurance was paid, provided that
Agent shall not be required to make any such payment to Company if a
Potential Event of Default or Event of Default has occurred and is
continuing, but shall be held or paid over to Agent as security for
the obligations of Company under this Mortgage and the other Loan
Documents, and, if Agent shall declare the Credit Agreement to be in
default, shall be applied against Company's obligations hereunder and
thereunder as and when due. Retention by Agent of any amounts
pursuant to the preceding sentence shall not relieve Company of its
obligations to make promptly all repairs and replacements required by
Sections 4(c) and (e) hereof and to pay for the same with Company's
funds or cause payment of the same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or any
Lender from obtaining insurance with respect to the Aircraft or Spare
Engines for its own account. Company may, at its own expense, carry
insurance with respect to its interest in the Aircraft or Spare
Engines in amounts in excess of that required to be maintained by
this Section 4(g). No insurance maintained by Agent or any Lender
shall prevent Company from causing Lessee to carry the insurance
required or permitted by this Section or adversely affect such
insurance or the cost thereof. Proceeds of any such insurance carried
by Agent or Lender shall be paid as provided in the insurance policy
relating thereto and Agent shall have no duty to obtain any such
insurance.
(h) Inspection. Company will permit, and cause Lessee to permit, any
officers, employees or authorized representatives of Agent to inspect, at
Lessee's cost and expense under the Lease, the Aircraft Collateral and
Aircraft Related Collateral. or any part thereof, and to examine, copy or
make extracts from, any and all books, records and documents in the
possession of Company relating to such Collateral or any part thereof and
performance of this Mortgage, all at such reasonable times and as often
-25-
26
as may be requested. Agent shall have no duty to make any such
inspection or examination and shall not incur any liability or obligation
by reason of making or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or pursuant
to the Lease, cause the Airframe and each Engine and Spare Engine included
in the Aircraft Collateral to be legibly marked (in a reasonably prominent
location, which in the case of the Airframe shall be adjacent to the
airworthiness certificate) with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing,
II Inc. and Mortgaged to Bankers Trust Company, as Agent" or such other
legend, as shall in the opinion of Agent be appropriate or desirable to
evidence the fact that it is subject to the lien and security interest
created by this Mortgage. Company shall not remove or deface, or permit to
be removed or defaced, any such plate, disk, or other marking or the
identifying manufacturer's serial number, and, in the event of such
removal or defacement, shall promptly cause such plate, disk, or other
marking or serial number to be promptly replaced. Except as provided
above, Company shall not allow the name of any person, association or
corporation to be placed on the Airframe or any Engine or Spare Engine as
a designation that might be interpreted as a claim of ownership or of any
security interest therein, except that any permitted lessee may place its
customary colors and insignia or the insignia of the manufacturer on the
Airframe or any Engine or Spare Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then
Agent may, without notice of any kind to Company, exercise in respect
of the Aircraft Collateral and Aircraft Related Collateral, (i) all
the rights and remedies of a secured party on default under the
Uniform Commercial Code as in effect at the time in any applicable
jurisdiction (whether or not the Uniform Commercial Code applies to
the affected Aircraft Collateral), (ii) any and all remedies under
the Leases and all of the rights and remedies of the Lessor under the
Lease, (iii) all the rights and remedies provided for in this
Mortgage, the Credit Agreement and any other Loan Document, and in
any other agreement between Company and Agent, and (iv) such other
rights and remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing,
Agent may, without notice, take possession of the Aircraft Collateral
or any part thereof and may exclude Company and Lessee, and all
persons claiming under Company or Lessee, wholly or partly therefrom.
At the request of Agent,
-26-
27
Company shall promptly deliver or cause Lessee to deliver to
Agent or to whomsoever Agent shall designate, at such time or times
and place or places as Agent may specify, and fly or cause to be
flown to such airport or airports in the United States as Agent may
specify, without risk or expense to Agent, the Aircraft Collateral or
any part thereof. In addition, Company will provide, or cause Lessee
to provide, without cost or expense to Agent, storage facilities for
the Aircraft Collateral. If Company or Lessee shall for any reason
fail to deliver the Aircraft Collateral or any part thereof after
demand by Agent, Agent may, without being responsible for loss or
damage, (i) obtain a judgment conferring on Agent the right to
immediate possession or requiring Company and Lessee to deliver
immediate possession of the Aircraft Collateral or any part thereof
to Agent, the entry of which judgment Company hereby specifically
consents and the Lessor's consent to which will be obtained by
Company under the Lease, or (ii) with or without such judgment,
pursue the Aircraft Collateral or any part thereof wherever it may be
found and may enter any of the premises of Company and Lessee where
the Aircraft Collateral may be and search for the Aircraft Collateral
and take possession of and remove the same. Company agrees to pay to
Agent, upon demand, all expenses incurred in taking any such action;
and all such expenses shall, until paid, be secured by the lien of
this Mortgage. Upon every such taking of possession, Agent may, from
time to time, make all such reasonable expenditures for maintenance,
insurance, repairs, replacements, alterations, additions and
improvements to and of the Aircraft Collateral, as it may deem
proper. In each such case, Agent shall have the right to maintain,
use, operate, store, lease, control or manage the Aircraft Collateral
or any part thereof and to carry on the business and exercise all
rights and powers of Company relating to the Aircraft Collateral, as
Agent shall deem best, including the right to enter into any and all
such agreements with respect to the maintenance, use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral or any part thereof as Agent may determine. Further, after
the occurrence and during the continuation of an Event of Default,
Agent shall be entitled to collect and receive directly all tolls,
rents, revenues, issues, income, products and profits of the Aircraft
Collateral or any part thereof, including without limitation, all
payments under any of the Leases. Such tolls, rents, revenues,
issues, income, products and profits shall be applied to pay the
expenses of the use, operation, storage, leasing, control, management
or disposition of the Aircraft Collateral, and of all maintenance,
insurance, repairs, replacements, alterations, additions and
improvements, and to make all payments which Agent may be required or
may elect to make, if any, for taxes, assessments, or other proper
charges upon the Aircraft Collateral and all other payments which
Agent may be required or authorized to make under any provision of
this Mortgage, as well as just and reasonable compensation for the
-27-
28
services of Agent and of all persons properly engaged and
employed for such purposes by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more
sales, as an entirety or in separate lots or parcels, the
Aircraft Collateral or any part thereof, at public or private
sale, at such place or places and at such time or times and upon
such terms, including terms of credit (which may include the
retention of title by Agent to the property so sold), as Agent
may determine, whether or not the Aircraft Collateral shall be
at the place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any
covenant herein contained or in aid of the exercise of any power
herein granted or for the foreclosure of this Mortgage and the
sale of the Aircraft Collateral under the judgment or decree of
a court of competent jurisdiction or for the enforcement of any
other right.
(d) After an Event of Default has occurred and is continuing,
Company agrees to the fullest extent that it lawfully may, that it
and Lessee will not (and hereby irrevocably waives its right to) at
any time plead, or claim the benefit or advantage of, any
appraisement, valuation, stay, extension, moratorium, or redemption
law now or hereafter in force, in order to prevent or hinder the
enforcement of this Mortgage or the absolute sale of the Aircraft
Collateral. Company, for itself and all who may claim under it,
waives, to the extent that it lawfully may, all right to have all or
any portion of the Aircraft Collateral marshalled upon any
foreclosure hereof.
(e) Each and every remedy of Agent shall be cumulative and shall
not be exclusive of any other remedies provided now or hereafter at
law, in equity or otherwise. Company shall reimburse Agent, upon
demand, for all fees and other expenses paid or incurred by Agent in
exercising any rights, powers or remedies granted hereby. All such
fees and expenses shall, until paid, be secured by the lien of this
Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right,
to the
-28-
29
exclusion of Company, to declare the Lease in default in
accordance with its terms and to exercise all remedies set forth in
the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Agent's agents and counsel, and all expenses, liabilities and advances
made or incurred by Agent in connection therewith, including, without
limitation, taxes upon or with respect to the sale, lease, disposition or
realization and the payment of taxes and Liens, if any, prior to the lien
and security interest of this Mortgage (except any taxes or Liens to which
the respective sale, lease, disposition or realization shall have been
subject) and to the payment of expenses and the reimbursement of payments
incurred or made by Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which
payment shall be applied to the principal installments of the Notes in the
manner specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of Default (i) to ask, demand, collect, ▇▇▇ for,
recover, compound, receive
-29-
30
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Aircraft Collateral and Aircraft Related Collateral, (ii)
to make all necessary transfers of all or any part of the Aircraft Collateral
and Aircraft Related Collateral in connection with any sale, lease or other
disposition made pursuant hereto, (iii) to execute and deliver for value all
necessary or appropriate bills of sale, assignments and other instruments in
connection with any such sale, lease or other disposition, and (iv) generally
to do, at Agent's option and Company's cost and expense, at any time, or from
time to time, all acts and things that Agent deems necessary to protect,
preserve or realize upon the Aircraft Collateral and Aircraft Related
Collateral and Agent's security interest therein, in order to effect the intent
of this Mortgage, all as fully and effectively as Company might do, Company
hereby ratifying and confirming all that its said attorney (or any substitute)
shall lawfully do hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section,
and all monies if any, required to be paid to Agent hereunder, which
disposition is not elsewhere herein otherwise specifically provided for, shall
be held by Agent and applied from time to time as provided herein and in the
Credit Agreement and the other Loan Documents and shall be held in an account
in the name of Agent and invested in Cash Equivalents for the benefit and at
the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company fails to make any payment required to be made by it hereunder
or fails to perform or comply with any of its agreements contained herein,
Agent may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent incurred in connection with such payment or
the performance of or compliance with such agreement, as the case may be,
together with interest thereon at the rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
-30-
31
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect,
error or omission which may at any time hereafter be discovered in the contents
of this Mortgage or in the execution or delivery hereof, and/or in order to
more effectively carry out the intent and purpose of this Mortgage and to
establish, protect and perfect the rights, remedies and security interests
created or intended to be created in favor of Agent hereunder, including,
without limitation, the execution, delivery and filing of any instruments with
the FAA and of any Uniform Commercial Code financing and continuation
statements with respect to the security interests created hereby, in form and
substance satisfactory to Agent, in such jurisdictions as Agent may reasonably
request. Company hereby authorizes Agent to file any such statements without
the signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and
its successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions
contained in the Credit Agreement, assign or otherwise transfer any of its
interests in the Credit Agreement or in any Note to any other person or entity,
and such other benefits in respect thereof granted to Agent or any Lender
herein or otherwise. Upon the indefeasible payment in full of the Secured
Obligations, the security interest granted hereby shall terminate and all
rights to the Aircraft Collateral and Aircraft Related Collateral shall revert
to Company. Upon any such termination. Agent will execute and deliver to
Company, at Company's expense, such instruments of release and termination as
Company may reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by
-31-
32
applicable law, Company hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect. No term or
provision of this Mortgage may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Company and Agent. The
captions and headings in this Mortgage are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage.
Company hereby agrees that service of process in any such proceeding in any
such court may be made by registered or certified mail return receipt requested
to Company at its address provided on the signature pages of the Mortgage, such
service being hereby acknowledged by Company to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of Agent to bring proceedings against Company in the
courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit
Agreement, terms used in Article 9 of the Uniform Commercial Code in the State
of New York are used herein as therein defined.
-32-
33
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
-33-
34
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:
--------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Treasury and
Secretary
BANKERS TRUST COMPANY,
as Agent
By:
--------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
35
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
------------ ----- -------------- -------------
Boeing 747-2D7B 22337 N526MC
36
SCHEDULE II-A
to Security Agreement
and Chattel Mortgage
ENGINES
Manufacturer's
Manufacturer Model Serial Number
------------ ----- -------------
General Electric CF6-50E2 530169
General Electric CF6-50E2 517718
General Electric CF6-50E2 517506
General Electric CF6-50E2 517569
Each such engine having 750 or more rated takeoff horsepower or the
equivalent thereof.
37
SCHEDULE II-B
to Security Agreement
and Chattel Mortgage
SPARE ENGINES
Manufacturer's
Manufacturer Model Serial Number
------------ ----- -------------
General Electric CF6-50E2 517544
General Electric CF6-50E2 517547
Each such engine having 750 or more rated takeoff horsepower or the
equivalent thereof.
38
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated , 199[ ] between Atlas
Freighter Leasing II, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as Administrative Agent for and representative of (in such
capacity, "Agent") the financial institutions ("Lenders") party to the Credit
Agreement dated as of September __, 1997 among Company, the Lenders, ▇▇▇▇▇▇▇
▇▇▇▇▇ Credit Partners L.P., as Syndication Agent, and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement
and Chattel Mortgage dated _______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine and Spare Engine subjected to the lien of the Mortgage
pursuant to Section 4(f) thereof, and shall specifically mortgage such Engine
and Spare Engine to Agent.
The Mortgage relates to the Engine(s) and Spare Engine(s) described below
and a counterpart of the Mortgage has been recorded by the Federal Aviation
Administration on __________, 1997, and has been assigned Conveyance No.
______.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate,
right, title and interest of Company in and to the property described in
Schedule I annexed hereto (whether or not such Engine or Spare Engine shall be
installed on or attached to the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and
confirmed.
39
EXHIBIT A
Page 2
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
40
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:
--------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Treasurer and Secretary
BANKERS TRUST COMPANY,
as Agent
By:
--------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
41
SCHEDULE I-A
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
------------ ----- -------------- -------------
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
42
SCHEDULE I-B
to Supplemental
Chattel Mortgage
SCHEDULE OF SPARE ENGINES
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
------------ ----- ------------- -------------
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof