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EXHIBIT 10.80
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO.N523MC)
(SPARE ENGINE NOS. 530168 and 517530)
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:
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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");
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(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;
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(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.
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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.
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"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.
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"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.
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(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
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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
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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.
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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:
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(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
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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
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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
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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
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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
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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
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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
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(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
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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
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(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
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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
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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,
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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
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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
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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,
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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
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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
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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
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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.
SECTION 10. Further Assurances.
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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
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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.
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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.]
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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 21782 N523MC
36
SCHEDULE II-A
to Security Agreement
and Chattel Mortgage
ENGINES
Manufacturer's
Manufacturer Model Serial Number
------------ ----- -------------
General Electric CF6-50E2 528105
General Electric CF6-50E2 530166
General Electric CF6-50E2 517353
General Electric CF6-50E2 517265
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 530168
General Electric CF6-50E2 517530
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