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EXHIBIT 10.25
ESCROW AND SECURITY AGREEMENT
This ESCROW AND SECURITY AGREEMENT (this "Escrow Agreement")
is made and entered into as of November 19, 1997 between KITTY HAWK, INC., a
Delaware corporation (the "Issuer") and BANK ONE, N.A., as Trustee and
Collateral Trustee (the "Trustee") for the holders (the "Holders") of the Notes
(as defined herein) issued by the Issuer under the Indenture referred to below.
All capitalized terms used herein which are not specifically defined shall have
the meanings assigned thereto in the Indenture.
W I T N E S S E T H
WHEREAS, pursuant to the Indenture (the "Indenture") dated as
of November 15, 1997, among the Issuer, each Subsidiary of the Issuer (other
than AIC), as a Guarantor (each, a "Guarantor") and the Trustee, the Issuer is
issuing $340,000,000 aggregate principal amount of 9.95% Senior Secured Notes
due November 15, 2004 (the "Notes");
WHEREAS, pursuant to the Indenture, the Issuer is required to
(i) purchase or cause the purchase of Pledged Securities (as defined herein) as
detailed on Schedule I hereto to provide for (a) the purchase of the two
Optioned Boeing 747s or other Eligible Aircraft and (b) the conversion of such
aircraft to freighter configuration and (ii) place such Pledged Securities (or
cause them to be placed) in an account held by the Trustee for the benefit of
Holders of the Notes; and
WHEREAS, to secure the obligations of the Issuer and the
Guarantors under the Notes (the "Obligations") and fund its commitment to
purchase the two Optioned Boeing 747s or other Eligible Aircraft and convert
such aircraft to freighter configuration, the Issuer has agreed to (i) pledge
to the Trustee for its benefit and the ratable benefit of the Holders of the
Notes, a security interest in the Pledged Securities, the Escrow Account and
certain related items, as specified herein and (ii) execute and deliver this
Escrow and Security Agreement (the "Escrow Agreement") in order to specify the
terms of such pledge which secures the payment and performance by the Issuer of
the Obligations and provide for the escrow of such Pledged Securities in
accordance with the terms hereof. Unless otherwise defined herein or in the
Indenture, terms used in Articles 8 or 9 of the Uniform Commercial Code ("UCC")
as in effect in the State of New York are used herein as therein defined.
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AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein
contained and contained in the Indenture, and in order to induce the Holders of
the Notes to purchase the Notes, the Issuer hereby agrees with the Trustee, for
the benefit of the Trustee and for the ratable benefit of the Holders of the
Notes, as follows:
SECTION 1. Pledge and Grant of Security Interest. The
Issuer hereby pledges to the Trustee for its benefit and for the ratable
benefit of the Holders of the Notes, and grants to the Trustee for its benefit
and for the ratable benefit of the Holders of the Notes, a continuing first
priority security interest in and to all of the Issuer's right, title and
interest in, to and under the following (hereinafter collectively referred to
as the "Collateral"), whether characterized as investment property, general
intangibles or otherwise: (a) the United States Treasury securities identified
in Annex 1 to Exhibit A to this Escrow Agreement (the "Pledged Securities"),
(b) any and all applicable security entitlements with respect to the Pledged
Securities, (c) the Bank One, N.A. account in the name of "Bank One, N.A., as
Trustee for the benefit of the holders of the 9.95% Senior Secured Notes due
2004 of Kitty Hawk, Inc. Escrow Account", Administrative Account No. 6802026999
(the "Escrow Account") established and maintained by the Trustee pursuant to
this Escrow Agreement, (d) any and all related securities accounts in which
security entitlements with respect to the Pledged Securities are held, and (e)
all proceeds of any and all of the foregoing Collateral (including, without
limitation, proceeds that constitute property of the types described in clauses
(a) - (d) of this Section 1) and, to the extent not otherwise included, all
cash. The Issuer in its discretion may from time to time in writing delivered
to the Trustee direct the Trustee to sell any Pledged Securities. Upon receipt
of net proceeds with respect to any sale of the Pledged Securities, the Issuer
shall be entitled to re-invest such net proceeds in any other U.S. Government
Obligations subject to the provisions hereof; provided that the Trustee and
Holders shall receive a continuing perfected first priority security interest
therein until the release of any of such Collateral or any portion thereof from
time to time pursuant to Section 4 hereof.
SECTION 2. Security for Obligation. This Escrow
Agreement and the pledge of Collateral hereunder secures, in conjunction with
the Collateral specified in the Indenture, the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of the Obligations.
SECTION 3. Delivery of Collateral; Escrow Account;
Interest. (a) The Pledged Securities shall be pledged and transferred to or
acquired by the Company or the Trustee in the name of the Trustee and the
Trustee shall become the holder of a security entitlement to the Pledged
Securities, through action by the Federal Reserve Bank of New York ("FRBNY") or
another securities intermediary, as confirmed (in writing or electronically or
otherwise in accordance with standard industry practice) to the Trustee by
FRBNY or such other securities intermediary (i) indicating by book- entry that
the Pledged Securities or a security entitlement
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thereto has been credited to the Trustee's account, or (ii) acquiring the
Pledged Securities or a security entitlement thereto for the Trustee and
accepting the same for credit to a securities account of the Trustee.
(b) Prior to or concurrently with the execution and delivery
hereof and prior to the transfer to or acquisition by the Company or the
Trustee of the Pledged Securities on behalf of the Holders (or acquisition by
the Trustee of any security entitlement thereto), as provided in subsection (a)
of this Section 3, the Trustee shall establish the Escrow Account on its books
as an account segregated from all other custodial or collateral accounts at its
office at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇. Upon transfer
to or the acquisition of the Pledged Securities by the Company or the Trustee
(or the Trustee's acquisition of a security entitlement thereto), as confirmed
by FRBNY or another securities intermediary, the Trustee shall make appropriate
book entries indicating that the Pledged Securities and/or such security
entitlement have been credited to and are held in the Escrow Account. Subject
to the other terms and conditions of this Escrow Agreement, all funds or other
property held by the Trustee pursuant to this Escrow Agreement shall be held in
the Escrow Account subject (except as expressly provided in Sections 4 hereof)
to the exclusive dominion and control of the Trustee and exclusively for the
benefit of the Trustee and for the ratable benefit of the Holders of the Notes
and segregated from all other funds or other property otherwise held by the
Trustee.
(c) All Collateral shall be retained in the Escrow Account pending
disbursement pursuant to the terms hereof.
(d) Concurrently with the execution and delivery of this Escrow
Agreement, the Trustee is delivering to the Issuer a duly executed certificate,
in the form of Exhibit A hereto, of an officer of the Trustee, confirming the
Trustee's establishment and maintenance of the Escrow Account and its receipt
and holding of the Pledged Securities or a security entitlement thereto and the
crediting of the Pledged Securities or such security entitlement to the Escrow
Account, all in accordance with this Escrow Agreement.
(e) Concurrently with the execution and delivery of this Escrow
Agreement, the Issuer is delivering to the Trustee copies of financing
statements, which have been submitted for filing on the Closing Date (as
defined in the Indenture) under the UCC of the States of Texas and New York,
covering the Collateral described in this Escrow Agreement.
SECTION 4. Disbursements. (a) Concurrent with or
immediately prior to the closing of the purchase of one or more Optioned Boeing
747s or other Eligible Aircraft, the Issuer may, pursuant to written
instructions given by the Issuer to the Trustee in the form attached hereto as
Exhibit B (an "Issuer Order") given from time to time, direct the Trustee to
release an amount from the Escrow Account for the purchase of such aircraft,
not to exceed the purchase price therefor or to be paid by and/or on behalf of
the Issuer or a subsidiary of Issuer. Upon receipt of an Issuer Order, the
Trustee shall sell Pledged Securities in an amount necessary
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to deliver funds to the Issuer in such amount and release to the Issuer or
Issuer's Designee such amount from the Escrow Account in accordance with the
Issuer Order.
(b) Subsequent to the closing of the purchase of one or more
Optioned Boeing 747s or other Eligible Aircraft or immediately prior thereto,
the Issuer may, from time to time, direct the Trustee in writing in the form
attached hereto as Exhibit C (an "Issuer Reconfiguration Order") to release an
amount from the Escrow Account sufficient to pay for any portion of the
conversion of such aircraft to freighter configuration. Upon receipt of the
Issuer Reconfiguration Order, the Trustee shall sell Pledged Securities in an
amount necessary to deliver funds to the Issuer in such amount and release to
the Issuer or Issuer's Designee the amount from the Escrow Account specified
therein as provided for therein.
(c) If the Issuer makes any payment or portion of a payment (other
than interest payments with respect to the Notes) for which the Collateral is
security from a source of funds other than the Escrow Account ("Issuer Funds"),
the Issuer may, after payment in full of such payment, direct the Trustee in
writing in the form attached hereto as Exhibit D (an "Other Release Order") to
release to the Issuer or to another party at the direction of the Issuer (the
"Issuer's Designee") from the Escrow Account in an amount less than or equal to
the amount of Issuer Funds applied to such payment. Upon receipt by the
Trustee of such Other Release Order, the Trustee shall sell Pledged Securities
in an amount necessary to deliver funds to the Issuer in such amount and pay
over to the Issuer or the Issuer's Designee, as the case may be, the requested
amount from the Escrow Account as soon as practicable.
(d) To the extent Pledged Securities are sold to distribute funds
or cash is otherwise distributed to the Company in accordance with the terms
hereof, the security interest in the Collateral evidenced by this Escrow
Agreement and held in the Escrow Account will automatically terminate and be of
no further force and effect and the Collateral shall promptly be paid over and
transferred to the Issuer, except to the extent of a sale of Pledged Securities
provided for in Section I hereof. Furthermore, upon the release of any
Collateral from the Escrow Account in accordance with the terms of this Escrow
Agreement, whether upon release of Collateral to Holders as payment of the
Obligations or otherwise, the security interest evidenced by this Escrow
Agreement in such released Collateral will automatically terminate and be of no
further force and effect and the Trustee shall execute and deliver to the
Issuer or file any and all documentation necessary or required to evidence
same.
(e) On the date that is 18 months after the Closing Date (the
"Valuation Date"), the chief financial officer of the Issuer shall in good
faith determine the value of the assets remaining in the Escrow Account, which
shall be evidenced by delivery of an Officers' Certificate to the Trustee. If
the value of such assets (as so determined) exceeds $5,000,000 the Issuer shall
make an Offer to Purchase Notes having a principal amount equal to such value
(as so determined). On the Business Day immediately prior to the expiration
date of such Offer to Purchase, the Trustee shall release all assets then held
in the Escrow Account to the Issuer, which assets, to the
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extent necessary, will be used to consummate such Offer to Purchase or, if not
needed for such purpose, may be used by the Issuer for general corporate
purposes. If the value of the assets in the Escrow Account on the Valuation
Date (as so determined) is equal to or less than $5,000,000, the Trustee will
promptly release all assets then held in the Escrow Account (whether cash,
proceeds from the sale of Pledged Securities or Pledged Securities) to the
Issuer and release and discharge any security interest in the Collateral. The
Issuer will be entitled to liquidate such assets and use such assets for
general corporate purposes. Any Offer to Purchase hereunder shall be
consummated in accordance with the terms of the Indenture and for all purposes
of the Indenture shall be treated identically to an Offer to Purchase for an
Asset Sale or upon the occurrence of a Change of Control Triggering Event.
(f) Nothing contained in this Escrow Agreement shall (i) afford
the Issuer any right to issue entitlement orders with respect to any security
entitlement to the Pledged Securities or any securities account in which any
such security entitlement may be carried, or otherwise afford the Issuer
control of any such security entitlement or (ii) otherwise give rise to any
rights of the Issuer with respect to the Pledged Securities, any security
entitlement thereto or any securities account in which any such security
entitlement may be carried, other than the Issuer's rights under this Escrow
Agreement as the beneficial owner of Collateral pledged to and subject to the
exclusive dominion and control (except as expressly provided in this Sections
4) of the Trustee in its capacity as such (and not as a securities
intermediary). The Issuer acknowledges, confirms and agrees that the Trustee
is an entitlement holder of the security entitlements to the Pledged Securities
solely as Trustee for the Holders of the Notes and not as a securities
intermediary.
SECTION 5. Representations and Warranties. The Issuer
hereby represents and warrants that:
(a) The execution and delivery by the Issuer of, and the
performance by the Issuer of its obligations under, this Escrow
Agreement will not contravene any provision of applicable law or the
Certificate of Incorporation of the Issuer or any material agreement
or other material instrument binding upon the Issuer or any of its
subsidiaries or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Issuer or any of
its subsidiaries, or result in the creation or imposition of any lien
on any assets of the Issuer, except for the security interests granted
under this Escrow Agreement; no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required (i) for the performance by the Issuer of its obligations
under this Escrow Agreement, (ii) for the pledge by the Issuer of the
Collateral pursuant to this Escrow Agreement or (iii) except for any
such consents, approvals, authorizations or orders required to be
obtained by the Trustee (or the Holders) for reasons other than the
consummation of this transaction, for the exercise by the Trustee of
the rights provided for in this Escrow Agreement or the remedies in
respect of the Collateral pursuant to this Escrow Agreement.
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(b) The Issuer is the beneficial owner of the Collateral,
free and clear of any Lien or claims of any person or entity (except
for the security interests granted under this Escrow Agreement). No
financing statement covering the Issuer's interest in the Pledged
Securities is on file in any public office, other than the financing
statements filed pursuant to this Escrow Agreement.
(c) This Escrow Agreement has been duly authorized,
validly executed and delivered by the Issuer and constitutes a valid
and binding agreement of the Issuer, enforceable against the Issuer in
accordance with its terms, except as (i) the enforceability hereof may
be limited by bankruptcy, insolvency, fraudulent conveyance,
preference, reorganization, moratorium or similar laws now or
hereafter in effect relating to or affecting creditors' rights or
remedies generally, (ii) the availability of equitable remedies may be
limited by equitable principles of general applicability, (iii) the
exculpation provisions and rights to indemnification hereunder may be
limited by U.S. federal and state securities laws and public policy
considerations and (iv) the waiver of rights and defenses contained in
Section 11(b), Section 14.11 and Section 14.15 hereof may be limited
by applicable law.
(d) Upon the transfer to or acquisition by the Trustee of
the Pledged Securities and the acquisition by the Trustee of any
security entitlement relating thereto, in accordance with Section 3,
the pledge of and grant of a security interest in the Collateral
securing the payment of the Obligations for the benefit of the Trustee
and the Holders of the Notes will constitute a perfected security
interest in such Collateral with first priority against all creditors
of the Issuer (and any persons purporting to purchase any of the
Collateral from the Issuer).
(e) There are no legal or governmental proceedings
pending or, to the best of the Issuer's knowledge, threatened to which
the Issuer or any of its subsidiaries is a party or to which any of
the properties of the Issuer or any such subsidiary is subject that
would materially adversely affect the power or ability of the Issuer
to perform its obligations under this Escrow Agreement or to
consummate the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Escrow
Agreement is not prohibited by law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System) applicable to the Issuer.
(g) No Event of Default exists.
SECTION 6. Further Assurances. The Issuer will,
promptly upon request by the Trustee, execute and deliver or cause to be
executed and delivered, or use its reasonable best
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efforts to procure, all assignments, instruments and other documents, all in
form and substance reasonably satisfactory to the Trustee, deliver any
instruments to the Trustee and take any other actions that are necessary or, in
the reasonable opinion of the Trustee, desirable to perfect, continue the
perfection of, or protect the first priority of the Trustee's security interest
in and to the Collateral, to protect the Collateral against the rights, claims,
or interests of third persons (other than any such rights, claims or interests
created by or arising through the Trustee) or to effect the purposes of this
Escrow Agreement including those contemplated by the Final Offering Memorandum
dated November 14, 1997 relating to the Notes. The Issuer also hereby
authorizes the Trustee to file any financing or continuation statements in the
United States with respect to the Collateral without the signature of the
Issuer (to the extent permitted by applicable law). The Issuer will promptly
pay all reasonable costs incurred in connection with any of the foregoing
within 45 days of receipt of an invoice therefor. The Issuer also agrees,
whether or not requested by the Trustee, to take all actions that are necessary
to perfect or continue the perfection of, or to protect the first priority of,
the Trustee's security interest in and to the Collateral, including the filing
of all necessary financing and continuation statements, and to protect the
Collateral against the rights, claims or interests of third persons (other than
any such rights, claims or interests created by or arising through the
Trustee).
SECTION 7. Covenants. The Issuer covenants and agrees with
the Trustee and the Holders of the Notes that from and after the date of this
Escrow Agreement until the earlier of payment in full in cash of the
Obligations:
(a) that (i) it will not (and will not purport to) sell
or otherwise dispose of, or grant any option or warrant with respect
to, any of the Collateral or its beneficial interest therein, and (ii)
it will not create or permit to exist any Lien or other adverse
interest in or with respect to its beneficial interest in any of the
Collateral (except for the security interests granted under this
Escrow Agreement); and
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or
inhibit the Trustee's rights or remedies hereunder, including, without
limitation, the trustee's right to sell or otherwise dispose of the
Collateral or (ii) fail to pay or discharge any tax, assessment or
levy of any nature with respect to its beneficial interest in the
Collateral not later than five days prior to the date of any proposed
sale under any judgment, writ or warrant of attachment with respect to
such beneficial interest.
SECTION 8. Power of Attorney. In addition to all of the
powers granted to the Trustee pursuant to the Indenture, the Issuer hereby
appoints and constitutes the Trustee as the Issuer's attorney-in-fact (with
full power of substitution) to exercise to the fullest extent permitted by law
all of the following powers upon and at any time after the occurrence and
during the continuance of an Event of Default: (a) collection of proceeds of
any Collateral; (b) conveyance of any item of Collateral to any purchaser
thereof; (c) giving of any notices or
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recording of any Liens under Section 6 hereof; and (d) paying or discharging
taxes or Liens levied or placed upon the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by the
Trustee in its sole reasonable discretion, and such payments made by the
Trustee to become part of the Obligations of the Issuer to the Trustee, due and
payable immediately upon demand. The Trustee's authority under this Section 8
shall include, without limitation, the authority to endorse and negotiate any
checks or instruments representing proceeds of Collateral in the name of the
Issuer, execute and give receipt for any certificate of ownership or any
document constituting Collateral, transfer title to any item of Collateral,
sign the Issuer's name on all financing statements (to the extent permitted by
applicable law) or any other documents deemed necessary or appropriate by the
Trustee to preserve, protect or perfect the security interest in the Collateral
and to file the same, prepare, file and sign the Issuer's name on any notice of
Lien, and to take any other actions arising from or incident to the powers
granted to the Trustee in this Escrow Agreement. This power of attorney is
coupled with an interest and is irrevocable by the Issuer.
SECTION 9. No Assumption of Duties; Reasonable Care. The
rights and powers granted to the Trustee hereunder are being granted in order
to preserve and protect the security interest of the Trustee and the Holders of
the Notes in and to the Collateral granted hereby and shall not be interpreted
to, and shall not impose any duties on the Trustee in connection therewith
other than those expressly provided herein, in the Indenture or imposed under
applicable law. Except as provided by applicable law or by the Indenture, the
Trustee shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Trustee accords similar
property held by the Trustee for similar accounts, it being understood that the
Trustee in its capacity as such shall not have any responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities or other matters relative to any Collateral, whether or not the
Trustee has or is deemed to have knowledge of such matters, (b) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral or (c) investing or reinvesting any of the Collateral or any loss on
any investment. The Trustee may reasonably rely on the written instructions of
the Issuer without any further investigation on its part. Furthermore, the
Trustee assumes no responsibility for the validity of the Pledged Securities
nor the sufficiency of such Pledged Securities to cover the payment of the
Obligations.
SECTION 10. Indemnity. The Issuer shall indemnify, hold
harmless and defend the Trustee and its directors, officers, agents and
employees, from and against any and all claims, actions, obligations,
liabilities and expenses, including reasonable defense costs, reasonable
investigative fees and costs, and reasonable legal fees and damages arising
from the Trustee's performance as Trustee under this Escrow Agreement, except
to the extent that such claim, action, obligation, liability or expense is
directly attributable to the bad faith, gross negligence or wilful misconduct
of such indemnified person.
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SECTION 11. Remedies Upon Event of Default. If any Event of
Default under the Indenture or default hereunder (any such Event of Default or
default being referred to in this Escrow Agreement as an "Event of Default")
shall have occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have,
in addition to all other rights given by law or by this Escrow
Agreement or the Indenture, all of the rights and remedies with
respect to the Collateral of a secured party under the UCC in effect
in the State of New York at that time. In addition, with respect to
any Collateral that shall then be in or shall thereafter come into the
possession or custody of the Trustee, the Trustee may sell or cause
the same to be sold at any broker's board or at public or private
sale, in one or more sales or lots, at such price or prices as the
Trustee may deem best, for cash or on credit or for future delivery,
without assumption of any credit risk. The purchaser of any or all
Collateral so sold shall thereafter hold the same absolutely, free
from any claim, encumbrance or right of any kind whatsoever created by
or through the Issuer. Unless any of the Collateral threatens, in the
reasonable judgment of the Trustee, to decline speedily in value or is
or becomes of a type sold on a recognized market, the Trustee will
give the Issuer reasonable notice of the time and place of any public
sale thereof, or of the time after which any private sale or other
intended disposition is to be made. Any requirements of reasonable
notice shall be met if such notice is mailed to the Issuer as provided
in Section 14.1 hereof at least ten (10) days before the time of the
sale or disposition. The Trustee or any Holder of Notes may, in its
own name or in the name of a designee or nominee, buy any of the
Collateral at any public sale and, if permitted by applicable law, at
any private sale. All expenses (including court costs and reasonable
attorneys' fees, expenses and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from
the proceeds of the sale or other disposition of the Collateral.
(b) The Issuer further agrees to use its reasonable best
efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Collateral pursuant to this Section 11 valid and binding and in
compliance with any and all other applicable requirements of law. The
Issuer further agrees that a breach of any of the covenants contained
in this Section 11 will cause irreparable injury to the Trustee and
the Holders of the Notes, that the Trustee and the Holders of the
Notes have no adequate remedy at law in respect of such breach and, as
a consequence, that each and every covenant contained in this Section
11 shall be specifically enforceable against the Issuer, and the
Issuer hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense
that no Event of Default has occurred.
SECTION 12. Expenses. Except as otherwise provided for
herein, the Issuer will upon demand pay to the Trustee the amount of any and
all reasonable expenses, including, without limitation, the reasonable fees,
expenses and disbursements of its counsel, experts and
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agents retained by the Trustee, that the Trustee may incur in connection with
(a) the review, negotiation and administration of this Escrow Agreement, (b)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (c) the exercise or enforcement of any
of the rights of the Trustee and the Holders of the Notes hereunder or (d) the
failure by the Issuer to perform or observe any of the provisions hereof.
SECTION 13. Security Interest Absolute. All rights of the
Trustee and the Holders of the Notes and security interests hereunder, and all
obligations of the Issuer hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the
Indenture or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the
Indenture;
(c) any exchange, surrender, release or non-perfection of
any Liens on any other collateral for all or any of the Obligations;
or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to,
or a discharge of, the Issuer in respect of the Obligations or of this
Escrow Agreement.
SECTION 14. Miscellaneous Provisions.
Section 14.1. Notices. Any notice or communication given
hereunder shall be sufficiently given if in writing and delivered in person or
mailed by first class mail, commercial courier service or telecopier
communication, addressed as follows:
if to the Issuer:
Kitty Hawk, Inc.
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▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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with copy to:
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
if to the Trustee:
Bank One, N.A.
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▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Trust Department
Section 14.2. No Adverse Interpretation of Other Agreements.
This Escrow Agreement may not be used to interpret another pledge, security or
debt agreement of the Issuer. No such pledge, security or debt agreement
(other than the Indenture) may be used to interpret this Escrow Agreement.
Section 14.3. Severability. The provisions of this Escrow
Agreement are severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner affect such
clause or provision in any other jurisdiction or any other clause or provision
of this Escrow Agreement in any jurisdiction.
Section 14.4. Headings. The headings in this Escrow
Agreement have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 14.5. Counterpart Originals. This Escrow Agreement
may be signed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same
agreement.
Section 14.6. No Third Party Beneficiaries. Nothing in this
Escrow Agreement, express or implied, shall give the Holders of the Notes, any
Placement Agent with respect to the Notes or any person, other than the parties
hereto and their permitted successors hereunder, any benefit or any legal or
equitable right, remedy or claim under this Escrow Agreement.
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Section 14.7. Amendments, Waivers and Consents. Any
amendment or waiver of any provision of this Escrow Agreement and any consent
to any departure by the Issuer from any provision of this Escrow Agreement
shall be effective only if made or duly given in compliance with all of the
terms and provisions of the Indenture, and neither the Trustee nor any Holder
of Notes shall be deemed, by any act, delay, indulgence, omission or otherwise,
to have waived any right or remedy hereunder or to have acquiesced in any Event
of Default or in any breach of any of the terms and conditions hereof. Failure
of the Trustee or any Holder of Notes to exercise, or delay in exercising, any
right, power or privilege hereunder shall not preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Trustee or any Holder of Notes of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy that
the Trustee or such Holder of Notes would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
Section 14.8. Entireties; Interpretation of Agreement. The
Escrow Agreement and Indenture shall constitute the entire agreement of the
parties hereto with respect to the subject matter hereof; provided, that to the
extent a term or provision of this Escrow Agreement conflicts with the
Indenture, the Indenture shall control with respect to the subject matter of
such term or provision. Acceptance of or acquiescence in a course of
performance rendered under this Escrow Agreement shall not be relevant to
determine the meaning of this Escrow Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and
opportunity for objection.
Section 14.9. Continuing Security Interest; Termination. (a)
This Escrow Agreement shall create a continuing security interest in and to the
Collateral and shall, unless otherwise provided in this Escrow Agreement,
remain in full force and effect until the payment in full in cash of the
Obligations. This Escrow Agreement shall be binding upon the Issuer, its
transferees, successors and assigns, and shall inure, together with the rights
and remedies of the Trustee hereunder, to the benefit of the Trustee, the
Holders of the Notes and their respective successors, transferees and assigns.
(b) This Escrow Agreement (other than Issuer's obligations under
Sections 10 and 12) shall terminate upon the earlier of (i) the payment in full
in cash of the Obligations, (ii) the release of all funds and provided for
herein in accordance with the terms hereof and (iii) on any date on which, as a
result of releases provided for in Section 4 hereof, less than $5.0 million is
held in the Escrow Account. At such time, the Trustee shall, pursuant to an
Issuer Order, reassign and redeliver to the Issuer all of the Collateral
hereunder that has not been sold, disposed of, retained or applied by the
Trustee in accordance with the terms of this Escrow Agreement and the Indenture
and take all actions that are necessary to release the security interest
created by this Escrow Agreement in and to the Collateral, including the
execution and delivery of all termination statements necessary to terminate any
financing or continuation
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statements filed with respect to the Collateral. Such reassignment and
redelivery shall be without warranty by or recourse to the Trustee in its
capacity as such, except as to the absence of any Liens on the Collateral
created by or arising through the Trustee, and shall be at the reasonable
expense of the Issuer.
Section 14.10. Survival of Representations and Covenants.
All representations, warranties and covenants of the Issuer contained herein
shall survive the execution and delivery of this Escrow Agreement, and shall
terminate only upon the termination of this Escrow Agreement.
Section 14.11. Waivers. The Issuer waives presentment and
demand for payment of any of the Obligations, protest and notice of dishonor or
default with respect to the Obligations, and all other notices to which the
Issuer might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
Section 14.12. Authority of the Trustee. (a) The Trustee
shall have and be entitled to exercise all powers hereunder that are
specifically granted to the Trustee by the terms hereof and the Indenture,
together with such powers as are reasonably incident thereto. The Trustee may
perform any of its duties hereunder or in connection with the Collateral
referenced herein by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel concerning all
such matters. Except as otherwise expressly provided in this Escrow Agreement
or the Indenture, neither the Trustee nor any director, officer, employee,
attorney or agent of the Trustee shall be liable to the Issuer for any action
taken or omitted to be taken by the Trustee, in its capacity as Trustee,
hereunder, except for its own bad faith, gross negligence or willful
misconduct, and the Trustee shall not be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security furnished
pursuant hereto. The Trustee and its directors, officers, employees, attorneys
and agents shall be entitled to rely on any communication, instrument or
document believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons.
(b) The Issuer acknowledges that the rights and responsibilities
of the Trustee under this Escrow Agreement with respect to any action taken by
the Trustee or the exercise or non-exercise by the Trustee of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Escrow Agreement shall, as between the Trustee
and the Holders of the Notes, be governed by the Indenture and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Trustee and the Issuer, the Trustee shall be conclusively
presumed to be acting as agent for the Holders of the Notes with full and valid
authority so to act or refrain from acting, and the Issuer shall not be
obligated or entitled to make any inquiry respecting such authority.
Section 14.13. Rights of Holders of the Notes. No Holder of
Notes shall have any independent rights hereunder other than those rights
granted to individual Holders of the
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Notes pursuant to the Indenture; provided that nothing in this subsection shall
limit any rights granted to the Trustee under the Notes or the Indenture.
SECTION 14.14. GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL; WAIVER OF DAMAGES. (A) THIS ESCROW AGREEMENT SHALL BE
GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, EXCEPT
WITH RESPECT TO THE PERFECTION OF THE SECURITY INTEREST CREATED HEREBY WHICH
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS TO THE EXTENT APPLICABLE.
NOTWITHSTANDING THE FOREGOING: THE MATTERS IDENTIFIED IN 31 C.F.R. PART 357,
61 FED. REG. 43626 (AUG. 23, 1996) SHALL BE GOVERNED SOLELY BY THE LAWS
SPECIFIED THEREIN.
(B) THE ISSUER AGREES THAT THE TRUSTEE SHALL, IN ITS
CAPACITY AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
ISSUER OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD
FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE ISSUER OR THE
COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE TRUSTEE. THE ISSUER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT IN THE COUNTY OF NEW YORK ONCE THE TRUSTEE HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS.
(C) THE ISSUER AGREES THAT NEITHER ANY HOLDER OF NOTES
NOR (EXCEPT AS OTHERWISE PROVIDED IN THIS ESCROW AGREEMENT OR THE INDENTURE)
THE TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE ISSUER
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
ISSUER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS ESCROW
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE
TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH,
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(D) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
ISSUER WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY
HOLDER OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO
ENFORCE ANY JUDGMENT OR OTHER COURT
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ORDER PERTAINING TO THIS ESCROW AGREEMENT, OR TO ENFORCE BY SPECIFIC
PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT
INJUNCTION, THIS ESCROW AGREEMENT.
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IN WITNESS WHEREOF, the Issuer and the Trustee have each
caused this Escrow Agreement to be duly executed and delivered as of the date
first above written.
Issuer:
KITTY HAWK, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Name:
Title:
Trustee:
BANK ONE, N.A.,
as Trustee
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name:
Title:
17
EXHIBIT A
BANK ONE, N.A.
OFFICER'S CERTIFICATE
Pursuant to Section 3(d) of the Escrow and Security Agreement
(the "Escrow Agreement") dated as of November 19, 1997 between Kitty Hawk, Inc.
(the "Issuer") and Bank One, N.A. as Trustee (the "Trustee") for the holders of
the Issuer's 9.95% Senior Secured Notes due 2004, the undersigned officer of
the Trustee, on behalf of the Trustee, makes the following certifications to
the Issuer. Capitalized terms used and not defined in this Officer's
Certificate have the meanings set forth or referred to in the Escrow Agreement.
1. Substantially contemporaneously with the execution and
delivery of this Officer's Certificate, the Trustee has established a
securities account in the name of "Bank One, N.A., as Trustee for the benefit
of the holders of the 9.95% Senior Secured Notes due 2004 of Kitty Hawk, Inc.
Escrow Account", Administrative Account No. ___________ with respect to which
the Trustee is the entitlement holder and through which the Trustee has
acquired a security entitlement to the United States Treasury securities
identified in Annex 1 to this Officer's Certificate (the "Pledged Securities")
and has made appropriate book entries in its records establishing that the
Pledged Securities and the Trustee's securities entitlement thereto have been
credited to and are held in the Bank One, N.A. Administrative Account No.
__________ entitled "Bank One, N.A., as Trustee for the benefit of the holders
of the 9.95% Senior Secured Notes due 2004 of Kitty Hawk, Inc. Escrow Account"
(the "Escrow Account").
2. The Trustee has established and maintained and will
maintain the Escrow Account and all securities entitlements and other positions
carried in the Escrow Account solely in its capacity as Trustee and has not
asserted and will not assert any claim to or interest in the Escrow Account or
any such securities entitlements or other positions except in such capacity.
3. The Trustee has acquired its security entitlement to the
Pledged Securities for value and without notice to an officer of the Trustee of
any adverse claim thereto. Without limiting the generality of the foregoing,
the Pledged Securities are not and the Trustee's security entitlement to the
Pledged Securities is not, to the Trustee's knowledge, subject to any lien
granted by the Trustee in favor of any securities intermediary (including,
without limitation, the Federal Reserve Bank of New York) through which the
Trustee derives its security entitlement to the Pledged Securities.
4. The Trustee has not caused or permitted the Pledged
Securities or its security entitlement thereto to become subject to any Lien
created by or arising through the Trustee.
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IN WITNESS WHEREOF, the undersigned officer has executed this
Officer's Certificate on behalf of Bank One, N.A. as Trustee this 19th day of
November, 1997.
Bank One, N.A., as Trustee
By:
----------------------------------
Name:
Title:
---------------------------
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EXHIBIT B
Issue Order
[Date]
Bank One, N.A., as Trustee
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
Kitty Hawk Escrow Release
Dear Sir or Madam:
Pursuant to Section 4(a) of the Escrow and Security Agreement
between Bank One, N.A. and Kitty Hawk, Inc. dated November 19, 1997 (the
"Escrow Agreement") you are hereby directed to release $_____________. You are
directed to transfer such funds to the account of ___________ [name of
recipient], account number _____________, at __________ [name of financial
institution]. You are directed to wire transfer such funds no later than
__________ [time] on _________ [date] upon telephone instructions of
_____________ [name of releasing individual]. Capitalized terms used herein
have the meanings ascribed thereto in the Escrow Agreement.
Kitty Hawk, Inc. certifies that such funds will be used to pay
the purchase price of or reimburse it for prior payment of the purchase price
of one or more of the Optioned Boeing 747s or other Eligible Aircraft.
Kitty Hawk, Inc.
By:
Title:
20
EXHIBIT C
Issuer Reconfiguration Order
[Date]
Bank One, N.A., as Trustee
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
Kitty Hawk Escrow Release
Dear Sir or Madam:
Pursuant to Section 4(b) of the Escrow and Security Agreement
between Bank One, N.A. and Kitty Hawk, Inc. dated November 19, 1997 (the
"Escrow Agreement") you are hereby directed to release $_____________. You are
directed to transfer such funds to the account of ___________ [name of
recipient], account number _____________, at __________ [name of financial
institution]. You are directed to wire transfer such funds no later than
__________ [time] on _________ [date] upon telephone instructions of
_____________ [name of releasing individual]. Capitalized terms used herein
have the meanings ascribed thereto in the Escrow Agreement.
Kitty Hawk, Inc. certifies that such funds will be used to pay
the price of or reimburse it for prior payment of the price of [a portion
of]/[all of] the reconfiguration of one or more Optioned Boeing 747s or other
Eligible Aircraft.
Kitty Hawk, Inc.
By:
Title:
21
EXHIBIT D
Other Release Order
[Date]
Bank One, N.A., as Trustee
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
Kitty Hawk Escrow Release
Dear Sir or Madam:
Pursuant to Section 4(c) of the Escrow and Security Agreement
between Bank One, N.A. and Kitty Hawk, Inc. dated November 19, 1997 (the
"Escrow Agreement") you are hereby directed to release $_____________. You are
directed to transfer such funds to the account of ___________ [name of
recipient], account number _____________, at __________ [name of financial
institution]. You are directed to wire transfer such funds no later than
__________ [time] on _________ [date] upon telephone instructions of
_____________ [name of releasing individual]. Capitalized terms used herein
have the meanings ascribed thereto in the Escrow Agreement.
Kitty Hawk, Inc. certifies that it is entitled to such funds
as a result of a payment by it of a payment for which the Collateral is
security from Issuer Funds.
Kitty Hawk, Inc.
By:
Title:
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Schedule I
$42 million U.S. Treasury ▇▇▇▇ maturing January 8, 1998
$14 million U.S. Treasury ▇▇▇▇ maturing May 14, 1998