SECURITY AND PLEDGE AGREEMENT
dated as of December 3, 1997
among
WESTERN PACIFIC AIRLINES, INC., as
Debtor and Debtor-in Possession
and
ENERGY MANAGEMENT CORPORATION
and
SUNDANCE VENTURE PARTNERS, X.X. XX,
as Lenders
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.......................................................3
Section 1.1 DEFINITIONS...................................................3
ARTICLE II COLLATERAL.......................................................6
Section 2.1 SECURITY INTEREST IN THE COLLATERAL...........................6
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................9
Section 3.1 REPRESENTATIONS AND WARRANTIES................................9
ARTICLE IV CASH PROCEEDS OF COLLATERAL.....................................11
Section 4.1 COLLATERAL ACCOUNT...........................................11
Section 4.2 PROCEEDS OF ACCOUNTS.........................................11
ARTICLE V FURTHER ASSURANCES; REMEDIES.....................................11
Section 5.1 FURTHER ASSURANCES; REMEDIES.................................11
Section 5.2 DELIVERY AND OTHER PERFECTION................................11
Section 5.3 PRESERVATION OF RIGHTS.......................................12
Section 5.4 SPECIAL PROVISIONS RELATING TO CERTAIN COLLATERAL............12
Section 5.5 EVENTS OF DEFAULT, ETC.......................................13
Section 5.6 DEFICIENCY...................................................15
Section 5.7 REMOVALS, ETC................................................15
Section 5.8 APPLICATION OF PROCEEDS......................................15
Section 5.9 ATTORNEY-IN-FACT.............................................16
Section 5.10 PERFECTION..................................................16
Section 5.11 TERMINATION.................................................16
Section 5.12 EXPENSES AND INDEMNITIES....................................16
Section 5.13 FURTHER ASSURANCES..........................................17
Section 5.14 RELEASES.....................................................17
Section 5.15 OTHER FINANCING STATEMENTS AND LIENS.........................17
ARTICLE VI MISCELLANEOUS...................................................17
Section 6.1 NO WAIVER....................................................17
Section 6.2 NOTICES......................................................17
Section 6.3 AMENDMENTS, ETC..............................................18
Section 6.4 SUCCESSORS AND ASSIGNS.......................................18
Section 6.5 CAPTIONS.....................................................18
Section 6.6 COUNTERPARTS.................................................18
Section 6.7 GOVERNING LAW................................................18
Section 6.8 SEVERABILITY.................................................18
ANNEXES
Annex 1.....Pledged Stock
Annex 2.....Aircraft Leasehold Interests
Annex 3.....Aircraft Order Positions
Annex 4.....Locations
Annex 5.....List of Copyrights
Annex 6.....List of Patents
Annex 7.....List of Trade Names
SECURITY AND PLEDGE AGREEMENT
SECURITY AND PLEDGE AGREEMENT, dated as of December 3, 1997 by and
among WESTERN PACIFIC AIRLINES, INC., (the "BORROWER"), a Delaware corporation
and a debtor and debtor-in-possession, ENERGY MANAGEMENT CORPORATION, a Colorado
corporation, and SUNDANCE VENTURE PARTNERS, X.X. XX, a Delaware limited
partnership (each, a "LENDER" and collectively, the "LENDERS").
W I T N E S S E T H :
WHEREAS, the Borrower and the Lenders have entered into a Credit
Agreement (as amended and in effect from time to time, the "Credit Agreement"),
dated as of December 3, 1997, pursuant to which the Lenders have agreed to
provide the Borrower with a $30,000,000 multiple draw term loan facility, and
upon the terms and subject to the conditions set forth therein, the Lenders have
agreed to provide such facility;
WHEREAS, it is a condition precedent to the effectiveness of the
Credit Agreement that the Borrower shall have executed and delivered to the
Lenders a Security and Pledge Agreement in substantially the form hereof;
NOW THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make the Loans, the Borrower hereby
agrees as follows:
ARTICLE I
DEFINITIONS
Section 1. 1 DEFINITIONS. All terms used in this Agreement that are
not otherwise defined shall have the meanings assigned to such terms in the
Credit Agreement. As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of the terms defined:
"ACCOUNTS" shall have the meaning assigned to that term in Section
2.1(h) hereof.
"AGREEMENT" shall mean this Security and Pledge Agreement, as the same
may be modified, supplemented or amended from time to time in accordance with
its terms.
"AIRCRAFT LEASEHOLDS" shall mean all leases or other agreements under
which the Borrower holds a leasehold interest in aircraft.
"AIRCRAFT ORDER POSITION" shall mean any firm commitment or option
entered into by the Borrower to purchase Flight Equipment from one or more
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manufacturers, including the position the Borrower holds for delivery of such
Flight Equipment VIS A VIS other Persons that also hold delivery positions for
Flight Equipment of the same type.
"COLLATERAL" shall have the meaning assigned to that term under
Section 2.1 hereof.
"COLLATERAL ACCOUNT" shall have the meaning assigned to that term in
Section 4.1 hereof.
"CONTRACTS" shall mean all contracts and leases between the Borrower
and one or more additional parties including, but not limited to, Aircraft Order
Positions and contracts, if any, for the sale, lease or other disposition by the
Borrower or of any of its property.
"CONTRACT RIGHTS" shall mean all rights of the Borrower under each
Contract (including, without limitation, (i) all right to receive moneys due or
to become due under or pursuant to all Contracts, (ii) all rights to terminate,
and to perform under, all Contracts, compel performance and otherwise exercise
all remedies under all Contracts, including, but not limited to, rights to
indemnification, and (iii) all rights to any payments, distributions or proceeds
the Borrower from time to time in connection with, or with respect to, the
Borrower's interest in any Person or any partnership or joint venture agreement
to which the Borrower is or may hereafter be a party).
"COPYRIGHTS" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation, all
renewals and extensions thereof, the right to recover for all past, present and
future infringements thereof, and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto.
"DOCUMENTS" shall have the meaning assigned to that term in Section
2.1(n) hereof.
"EQUIPMENT" shall have the meaning assigned to that term under Section
2.1(l) hereof.
"FLIGHT EQUIPMENT" shall mean any aircraft, aircraft engine, aircraft
simulator or Spare Parts for the foregoing.
"GATES" shall mean all of the rights, title, interests and privileges
of the Borrower in all airline passenger ground facilities at airports,
including, without limitation, gates, associated passenger loading bridges,
baggage handling and sortation equipment, baggage conveyors, ticket and service
counters and associated back office space.
"GOVERNMENTAL AUTHORITY" shall mean (i) any government or political
subdivision thereof, whether foreign or domestic, national, state, county,
municipal or regional or any other government authority, (ii) any agency or
other instrumentality of any such government, political subdivision or other
governmental entity (including any central bank or comparable agency), (iii) any
court, arbitral tribunal or arbitrator and (iv) any non-governmental regulating
body, to the extent that the rules, regulations or orders of such body have the
force of law.
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"INTELLECTUAL PROPERTY" shall mean, collectively, all Copyrights, all
Patents and all Trademarks, together with (a) all inventions, processes,
production methods, proprietary information, know-how and trade secrets; (b) all
licenses or user or other agreements granted to the Borrower with respect to any
of the foregoing, in each case whether now or hereafter owned or used; (c) all
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, computer and automatic machinery
software and programs; (e) all accounting information and all media in which or
on which any information or knowledge or data or records may be recorded or
stored and all computer programs used for the compilation or printout of such
information, knowledge, records or data; (f) all licenses, consents, permits,
variances, certifications and approvals of governmental agencies now or
hereafter held by the Borrower; and (g) all causes of action, claims and
warranties now or hereafter owned or acquired by the Borrower in respect of any
of the items listed above.
"ISSUERS" shall mean, collectively, the Subsidiaries of the Borrower
identified on Annex 1 hereto under the caption "ISSUER" and any other
corporation that is or becomes a Subsidiary of the Borrower at any time on or
after the date of this Agreement.
"INSTRUMENTS" shall have the meaning assigned to that term in Section
2.1(i) hereof.
"INVENTORY" shall have the meaning assigned to such term in Section
2.1(j) hereof.
"MOTOR VEHICLES" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership, having a fair market value in excess of
[$40,000].
"PATENTS" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties, damages and
payments now or hereafter due and/or payable under and with respect thereto,
including, without limitation, damages and payments for past or future
infringements thereof, the right to xxx for past, present and future
infringements thereof, and all rights corresponding thereto throughout the
world.
"PLEDGED STOCK" shall have the meaning assigned to such term in
Section 2.1(a) hereof.
"ROUTES" shall mean all of the rights, title, interests and privileges
held by the Borrower or its Subsidiaries in the international route authorities
issued to the Borrower or any of its Subsidiaries by the United States
Department of Transportation, a similar regulatory authority established in
replacement thereof, or a predecessor agency.
"SPARE PARTS" shall mean all "spare parts," as defined in the Federal
Aviation Act of 1958.
"STOCK COLLATERAL" shall have the meaning assigned to such term in
Section 2.1(a) hereof.
"TRADEMARKS" shall mean all trade names, trademarks and service marks,
logos, trademark and service xxxx registrations, and applications for trademark
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and service xxxx registrations, including, without limitation, all renewals of
trademark and service xxxx registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service xxxx.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the State of New York.
ARTICLE II
COLLATERAL
Section 2. 1 SECURITY INTEREST IN THE COLLATERAL. As collateral
security for the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations, the Borrower hereby pledges,
grants and assigns to the Lenders a lien and security interest in all right,
title and interest of the Borrower in the following property, whether now owned
by the Borrower or hereafter acquired, and whether now existing or hereafter
coming into existence (all being collectively referred to herein as
"COLLATERAL"):
( a) the shares of capital stock of each Issuer represented by
the certificates identified in Annex 1 hereto and all other shares of capital
stock of whatever class of each Issuer, now or hereafter owned by the Borrower,
in each case, together with the certificates representing the same
(collectively, the "Pledged Stock");
( b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or return
of capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the Pledged Stock
or otherwise received in exchange therefor, and any subscription warrants,
rights or options issued to the holders of, or otherwise in respect of, the
Pledged Stock;
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( c) without affecting the obligations of the Borrower under any
provision prohibiting such action hereunder or under the Credit Agreement, in
the event of any consolidation or merger in which an Issuer is not the surviving
business entity, all shares of each class of the capital stock of the successor
business entity (unless such successor business entity is the Borrower) formed
by or resulting from such consolidation or merger (the Pledged Stock, together
with all other certificates, shares, securities, properties or moneys as may
from time to time be pledged hereunder pursuant to clause (a) or (b) above and
this clause (c) being herein collectively called the "Stock Collateral");
( d) proceeds of any kind resulting from any disposition of any
Aircraft Leasehold, including proceeds in respect of any assumption and
assignment of any Aircraft Leasehold, and including but not limited to any
consideration payable by assignees to the Borrower for the right to obtain the
assignment or any reimbursement to the Borrower of security deposits or
maintenance reserves resulting from the assignee's assumption and performance of
the obligation to pay such deposits or reserves;
( e) all Routes;
( f) all Gates;
( g) all Aircraft Order Positions;
( h) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Borrower constituting any right to the payment
of money, including (but not limited to) all moneys due and to become due to the
Borrower in respect of any loans or advances or for Inventory or Equipment or
other goods sold or leased or for services rendered, all moneys due and to
become due to the Borrower under any guarantee (including a letter of credit) of
the purchase price of Inventory or Equipment sold by the Borrower and all tax
refunds (such accounts, general intangibles and moneys due and to become due
being herein called collectively "Accounts");
( i) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Borrower evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances
(herein collectively called "INSTRUMENTS");
( j) all inventory (as defined in the Uniform Commercial Code) of
the Borrower, including Motor Vehicles held by the Borrower for lease (including
lease to Subsidiaries of the Borrower), fuel, tires and other spare parts,
including Spare Parts, all goods obtained by the Borrower in exchange for such
inventory, and any products made or processed from such inventory including all
substances, if any, commingled therewith or added thereto (herein collectively
called "INVENTORY");
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( k) all other accounts or general intangibles of the Borrower
not constituting Accounts;
( l) all equipment (as defined in the Uniform Commercial Code) of
the Borrower, including all Flight Equipment and all Motor Vehicles (herein
collectively called "EQUIPMENT");
( m) each contract and other agreement of the Borrower relating
to the sale or other disposition of Inventory or Equipment;
( n) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of the Borrower covering, evidencing or representing
Inventory or Equipment (herein collectively called "DOCUMENTS");
( o) all rights, claims and benefits of the Borrower against any
Person arising out of, relating to or in connection with Inventory or Equipment
purchased by the Borrower, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such Inventory or
Equipment;
( p) all Contracts, together with all Contract Rights;
( q) the balance from time to time in the Collateral Account;
( r) all Intellectual Property, other than non-assignable rights
owned by the Borrower or any of its Subsidiaries under licenses whose ownership
is solely incidental to the commercial activities of the Borrower and its
Subsidiaries;
( s) any Avoidance Actions;
( t) all other property of the Borrower's estate (within the
meaning of the Bankruptcy Code), including all rights of payment arising
pursuant to the provisions of the Bankruptcy Code; and
( u) all other tangible and intangible personal property and
fixtures of the Borrower, including, without limitation, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of the Borrower described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by the Borrower in respect of any of the items listed above) and,
to the extent related to any property described in said clauses or such
proceeds, products and accessions, all books, correspondence, credit files,
records, invoices and other papers, including without limitation all tapes,
cards, computer runs and other papers and documents in the possession or under
the control of the Borrower or any computer bureau or service company from time
6
to time acting for the Borrower; but excluding any right, title and interest of
the Borrower in, to or under any Collateral (the "EXCLUDED PROPERTY") to the
extent the security interest created hereby or an assignment as security of all
or part of the Borrower's right, title or interest in, to or under such Excluded
Property would breach, violate or cause a default (which would not be excused or
permissible under the relevant provisions of the Bankruptcy Code or by entry of
the Final Order or Interim Order, as the case may be) under any Contract,
Instrument or Aircraft Leasehold to which the Borrower is a party or by which it
is bound relating to such Excluded Property (it being understood, however, that
the proceeds of Excluded Property shall not be excluded from the Collateral).
Without limiting the Borrower's obligations under the Credit Agreement with
respect to such matters, the foregoing grant of a security interest in and of
itself shall not be deemed (i) to constitute, require or prevent the assumption
of any obligation in the Chapter 11 Case or (ii) to prohibit the rejection of
any obligation in the Chapter 11 Case. Anything herein contained to the contrary
notwithstanding, the Borrower shall remain liable under any agreements,
Contracts, Instruments or Aircraft Leaseholds referred to in this Section 2 and
to perform all of its respective obligations thereunder, all in accordance with
the respective terms and provisions thereof, but subject to the relevant
provisions of the Bankruptcy Code, and the Lenders shall have no obligation or
liability under any of the aforementioned agreement by reason of or arising out
of the foregoing grant, nor shall any Lender be required or obligated in any
manner to perform or fulfill any obligation of the Borrower pursuant thereto, or
to make any payment, or to present or file any claim, or to take any action to
collect or enforce the payment of any amounts which may have been assigned to
Lender or to which it may be entitled at any time. However, the Majority Lenders
shall, at their option, have the right, but not the obligation, to cure any
defaults under any such agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3. 1 REPRESENTATIONS AND WARRANTIES. The Borrower represents
and warrants to the Lenders as of the date hereof as follows:
( a) The Borrower is (or will be at the time the Lien created
hereby attaches) and will continue to be until all of the Obligations have been
satisfied in full the sole legal, beneficial and record owner of the Collateral
in which it purports to grant a security interest pursuant to Section 2 hereof
and no Lien exists or will exist upon such Collateral at any time (and no right
or option to acquire the same exists in favor of any other Person), except for
the Liens and security interests in favor of the Lender created or provided for
herein, and in the Credit Agreement and the Liens permitted under Section 9.2 of
the Credit Agreement, which Liens and security interests constitute first
priority perfected Liens and security interests in and to all of such
Collateral, except for the Permitted Liens to which the Lenders' security
interest herein is junior and subordinate. There is no financing statement
naming the Borrower as debtor (or similar documents or instrument of
registration under the law of any jurisdiction) now on file or registered in any
public office covering any interest of the Borrower in any Collateral, except as
permitted under Section 9.2 of the Credit Agreement.
7
( b) This Agreement creates a valid first priority security
interest in favor of the Lenders in the Collateral, as security for the
Obligations, except for Permitted Liens to which the Lender's security interest
herein is junior and subordinate. Upon entry of the Interim Order or Final
Order, as the case may be, such security interest is, or in the case of
Collateral in which the Borrower obtains rights after the date hereof, will be,
a perfected first priority security interest, subject to Permitted Liens. Upon
entry of the Interim Order or Final Order, as the case may be, all action
necessary or desirable to perfect and protect such security interest has been
duly taken.
( c) The Pledged Stock represented by the certificates identified
in Annex 1 hereto is, and all other Stock Collateral in which the Borrower shall
hereafter grant a security interest pursuant to Section 2 hereof will be, duly
authorized, validly issued, fully paid and non-assessable and none of such
Pledged Stock is or will be subject to any contractual restriction, or any
restriction under the charter or by-laws of the Issuer, including any
restrictions upon the transfer of such Pledged Stock.
( d) Annex 1 hereto correctly identifies, as at the date hereof,
the Issuers of such Pledged Stock, the respective class and par value of the
shares comprising such Pledged Stock, the respective number of shares (and
registered owners thereof) represented by each such certificate and the
percentage represented thereby of the total issued and outstanding shares of
capital stock of such class of stock of the Issuers.
( e) Annex 2 hereto sets forth all material Contracts, Aircraft
Leaseholds and other material agreements under which the Borrower holds, as of
the date of this Agreement, a leasehold or proprietary interest, which Annex
shall be updated from time to time promptly after the disposition or acquisition
of any such leasehold or proprietary interests.
( f) Annex 3 hereto sets forth all agreements creating Aircraft
Order Positions in existence as of the date of this Agreement, which Annex shall
be updated from time to time promptly after the creation or termination of any
agreements creating Aircraft Order Position.
( g) Annexes 5, 6 and 7 hereto set forth a complete and correct
list of all Copyrights, Patents and Trademarks (other than immaterial rights
arising under common law) owned by the Borrower on the date hereof; the Borrower
owns and possesses the right to use, and has done nothing to authorize or enable
any other Person to use, any Copyright, Patent or Trademark listed in said
Annexes 5, 6 and 7, and all registrations listed in said Annexes 5, 6 and 7 are
valid and in full force and effect; the Borrower owns and possesses the right to
use all Copyrights, Patents and Trademarks.
( h) The chief executive office of the Borrower is located at
0000 X. Xxxxxx Xxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000.
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ARTICLE IV
CASH PROCEEDS OF COLLATERAL
Section 4. 1 COLLATERAL ACCOUNT. At the Majority Lenders' option,
there may be established a cash collateral account (the "COLLATERAL ACCOUNT") in
the name and under the control of the Lenders into which there may be deposited
from time to time the cash proceeds of any of the Collateral (including proceeds
of insurance thereon) and any additional amounts deposited by the Borrower from
time to time as collateral security for the Obligations. The balance from time
to time in the Collateral Account shall constitute part of the Collateral
hereunder and shall not constitute payment of the Obligations until applied in
accordance with the terms of the Credit Agreement.
Section 4. 2 PROCEEDS OF ACCOUNTS. At any time after the occurrence
and during the continuance of an Event of Default, the Borrower shall, upon the
request of the Majority Lenders, instruct all account debtors and other Persons
obligated in respect of all Accounts to make all payments in respect of the
Accounts directly to the Lenders (by instructing that such payments be remitted
to a post office box which shall be in the name and under the control of the
Lenders). In addition to the foregoing, the Borrower agrees that, at any time
after the occurrence and during the continuance of an Event of Default, if the
proceeds of any Collateral hereunder (including the payments made in respect of
Accounts) shall be received by it, the Borrower shall, upon the request of the
Majority Lenders, as promptly as possible deposit such proceeds into the
Collateral Account. Until so deposited, all such proceeds shall be held in trust
by the Borrower for and as the property of the Lenders and shall not be
commingled with any other funds or property of the Borrower.
ARTICLE V
FURTHER ASSURANCES; REMEDIES
Section 5. 1 FURTHER ASSURANCES; REMEDIES. In furtherance of the grant
of the security and pledge interest pursuant to Section 2 hereof, the Borrower
hereby agrees with each Lender as follows:
Section 5. 2 DELIVERY AND OTHER PERFECTION. The Borrower shall:
( a) if any of the shares, securities, moneys or property
required to be pledged by the Borrower under Section 2.1 hereof are received by
the Borrower, forthwith either (i) transfer and deliver to either Lender such
shares or securities so received by the Borrower (together with the certificates
for any such shares and securities duly endorsed in blank or accompanied by
undated stock powers duly executed in blank), all of which thereafter shall be
held by the Lenders, pursuant to the terms of this Agreement, as part of the
Collateral or (ii) take such other action as either Lender shall deem necessary
or reasonably appropriate to duly record the Lien created hereunder in such
shares, securities, moneys or property in said clauses (a) and (b) of Section
2.1 herein;
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( b) deliver and pledge to the Lenders any and all Instruments,
endorsed and/or accompanied by such instruments of assignment and transfer in
such form and substance as the Majority Lender may request PROVIDED that so long
as no Default shall have occurred and be continuing, the Borrower may retain for
collection in the ordinary course any Instruments received by the Borrower in
the ordinary course of business and the Lenders shall, promptly upon request of
the Borrower make appropriate arrangements for making any other Instrument
pledged by the Borrower available to the Borrower for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent deemed
appropriate by the Lenders, against trust receipt or like document);
( c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may be
necessary or desirable (in the reasonable judgment of any Lender) to create,
preserve, perfect or validate the security interest granted pursuant hereto or
to enable the Lenders to exercise and enforce its rights hereunder with respect
to such security and pledge interest, including, without limitation, causing any
or all of the Stock Collateral to be transferred into the name of the Lenders or
their respective nominees;
( d) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise xxxx such books and records in such manner as
the Lenders may reasonably require in order to reflect the security interests
granted by this Agreement; and
( e) permit representatives of either Lender, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, and permit
representatives of either Lender to be present at the Borrower's place of
business to receive copies of all communications and remittances relating to the
Collateral, and forward copies of any notices or communications received by the
Borrower with respect to the Collateral, all in such manner as the Lender may
reasonably require.
Section 5. 3 PRESERVATION OF RIGHTS. Neither Lender shall be required
to take steps necessary to preserve any rights against prior parties to any of
the Collateral.
Section 5. 4 SPECIAL PROVISIONS RELATING TO CERTAIN COLLATERAL.
( a) Stock Collateral.
( i) The Borrower will cause the Stock Collateral to include all of the capital
stock in each Issuer, other than in respect of Mountain Air.
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( ii) So long as no Event of Default shall have occurred and be continuing, the
Borrower shall have the right to exercise all voting, consensual and other
powers of ownership pertaining to the Stock Collateral for all purposes not
inconsistent with the terms of this Agreement and the other Facility Documents,
PROVIDED that the Borrower agrees that it will not vote the Stock Collateral in
any manner that is inconsistent with the terms of this Agreement or any other
Facility Document, and each Lender shall execute and deliver to the Borrower or
cause to be executed and delivered to the Borrower all such proxies, powers of
attorney, dividend and other orders, and all such instruments, without recourse,
as the Borrower may reasonably request for the purpose of enabling the Borrower
to exercise the rights and powers which they are entitled to exercise pursuant
to this Section 5.4.
( b) Intellectual Property.
( i) For the purpose of enabling the Lenders to exercise
rights and remedies under Section 5.5 hereof at such time as the Lenders shall
be lawfully entitled to exercise such rights and remedies, and for no other
purpose, the Borrower hereby grants to the Lenders, to the extent assignable
without any consent not theretofore obtained, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to the
Borrower) to use, assign, license or sublicense any of the Intellectual Property
now owned or hereafter acquired by the Borrower, wherever the same may be
located.
( ii) Notwithstanding anything contained herein to the
contrary, but subject to the provisions of Section 9.6 of the Credit Agreement
which limit the right of the Borrower to dispose of its property, so long as no
Event of Default shall have occurred and be continuing, the Borrower will be
permitted to exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Intellectual Property. The
exercise of rights and remedies under Section 5.4(b) hereof by the Lender shall
not terminate the rights of the holders of any licenses or sublicenses
theretofore granted by the Borrower in accordance with the first sentence of
this clause (2).
( c) EQUIPMENT. The Borrower shall, upon the request of any
Lender, deliver to the Lenders originals of the certificates of title or
ownership for all Equipment, including Motor Vehicles, covered by a certificate
of title owned by the Borrower with the Lenders listed as lienholder, and take
such other action as any Lender shall deem appropriate to perfect the security
interest created hereunder in all such Equipment.
Section 5. 5 EVENTS OF DEFAULT, ETC. During any period during which an
Event of Default shall have occurred and be continuing, but subject to the
relevant provisions of Section 10.3 of the Credit Agreement:
11
( a) the Borrower shall, at the request of any Lender, assemble
the Collateral owned by it at such place or places, reasonably convenient to
both the Lenders and the Borrower, designated in such Lender's request;
( b) the Majority Lenders may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, any of the Collateral;
( c) each Lender shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights and
remedies are asserted) and such additional rights and remedies to which a
secured party is entitled under the laws in effect in any jurisdiction where any
rights and remedies hereunder may be asserted, including, without limitation,
the right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral as
directed by the Majority Lenders as if the Lenders were the sole and absolute
owner thereof (and the Borrower agrees to take all such action as may be
appropriate to give effect to such right);
( d) the Majority Lenders in their discretion may, in their name
or in the name of the Borrower or otherwise, demand, xxx for, collect or receive
any money or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to do so;
( e) foreclose on this agreement and the security interests
created thereby, and sell, lease, assign or otherwise dispose of all or any part
of the Collateral or any part thereof which shall then be or shall thereafter
come into the possession, custody or control of either Lender or any of its
agents in a public or private sale; and/or
( f) provided that an Event of Default has occurred and is
continuing, the Majority Lender shall have the following rights:
( i) to direct the Borrower pursuant to Section 365(f) of
the Bankruptcy Code to assume and assign any Aircraft Leasehold;
( ii) to direct the Borrower to seek any other consent
(other than the consent of the lessor) necessary to the assumption and
assignment or the assignment of any Aircraft Leasehold;
( iii) to collect and retain any proceeds payable to the
Borrower as a result of such disposition of the Aircraft Leasehold, including
but not limited to any consideration payable by the assignees to the Borrower
for the right to obtain the assignment or any reimbursement to the Borrower of
security deposits or maintenance reserves resulting from the assignee's
assumption and performance of the obligation to pay such deposits or reserves.
12
( g) Notwithstanding anything herein to the contrary, neither the
Borrower nor any of its successors and assigns, including any chapter 11 or
chapter 7 trustee for the Borrower, and regardless of whether an Event of
Default has occurred and is continuing, shall have the right to reject or
terminate any Aircraft Leasehold under Section 365(d) of the Bankruptcy Code or
otherwise without the express written consent of the Majority Lenders.
Section 5. 6 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.5 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Obligations, the Borrower shall remain liable for any deficiency.
Section 5. 7 REMOVALS, ETC. Without at least 30 days' prior written
notice to the Lenders, the Borrower shall not maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any Inventory or Equipment to be
located anywhere, other than at one of the locations identified in Annex 4
hereto under its name or in transit from one of such locations to another or
(ii) change its name, or the name under which it does business, from the name
shown on the signature pages hereto.
Section 5. 8 APPLICATION OF PROCEEDS. Except as otherwise herein
expressly provided, the proceeds of any collection, sale or other realization of
all or any part of the Collateral of the Borrower under Section 5.5 hereof, and
any other cash of the Borrower at the time held by the Lender under and in
accordance with Section 4 hereof or this Section 5, shall be applied as follows:
FIRST, to the payment of the costs and expenses of such collection,
sale or other realization, including the reasonable out-of-pocket costs and
expenses of each Lender and the fees and expenses of its agents and counsel, and
all expenses incurred and advances made by either Lenders in connection
therewith;
SECOND, to the payment of the Carve-Out Expenses, in each case
equally and ratably in accordance with the respective amounts thereof then due
and owing;
THIRD, to the payment of all other costs and expenses incurred by,
or payable to, the Lenders hereunder or under Section 11.4 of the Credit
Agreement;
FOURTH, to the payment in full of all other Obligations, in each
case equally and ratably in accordance with the respective amounts thereof then
due and owing; and
FINALLY, to the Borrower, or its successors and assigns, or as the
Bankruptcy Court or another court of competent jurisdiction may direct.
13
As used in this Section 5, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Borrower or any Issuer of any of the
Collateral.
Section 5. 9 ATTORNEY-IN-FACT. Without limiting any rights or powers
granted by this Agreement to any Lender while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default, each Lender is hereby appointed the attorney-in-fact of the Borrower
for the purpose of carrying out the provisions of this Section 5 and subject to
Section 10.3(a) of the Credit Agreement may take any action and execute any
instruments which the Majority Lenders may deem necessary or reasonably
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.
Section 5. 10 PERFECTION. Prior to or concurrently with the execution
and delivery of this Agreement (or such later date as the Majority Lenders shall
request), the Borrower shall (a) file such financing statements and other
documents in such offices as any Lender may request to perfect the security
interests granted by Section 2.1 hereof and (b) deliver to either Lender all
certificates identified in Annex 1 hereto, accompanied by undated stock powers
duly executed in blank.
Section 5. 11 TERMINATION. When all the Obligations shall have been
paid in full and the Commitments of the Lenders under the Credit Agreement shall
have expired or been terminated, this Agreement shall terminate, and the Lenders
shall forthwith cause to be assigned, transferred and delivered, against receipt
but without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of the
Borrower and to be released and canceled all licenses and rights referred to in
Section 5.4(b) hereof. Each Lender shall also execute and deliver to the
Borrower upon such termination such Uniform Commercial Code termination
statements, certificates for terminating the Liens on the Motor Vehicles and
such other documentation as shall be reasonably requested by the Borrower to
effect the termination and release of the Lien of this Agreement on the
Collateral.
Section 5. 12 EXPENSES AND INDEMNITIES.
( a) The Borrower agrees to reimburse the Lender for all
reasonable out-of-pocket expenses of each Lender (including, without limitation,
the reasonable fees and expenses of legal counsel) of, or incident to (i) any
Event of Default and any enforcement or collection proceeding resulting
therefrom, including, without limitation, (ii) performance by either Lender of
any obligations of the Borrower in respect of the Collateral that the Borrower
have failed or refused to perform, (iii) any actual or attempted sale, or any
14
exchange, enforcement, collection, compromise or settlement in respect of any of
the Collateral, and for the care of the Collateral and defending or asserting
rights and claims of the Lenders in respect thereof, by litigation or otherwise,
including expenses of insurance, (iv) judicial or regulatory proceedings and (v)
the enforcement of this Section 5, and all such expenses shall be Obligations to
the Lenders secured under Section 2 hereof.
( b) The Borrower agrees to indemnify each Lender from and
against any and all claims, losses and liabilities (including, without
limitation, the reasonable fees, client charges and other expenses of the
Lender's counsel) growing out of or resulting from this Agreement or the
enforcement of any of the terms hereof (including, without limitation, the sale
of Collateral pursuant to a public or private offering and each and every
document produced in furtherance thereof), except claims, losses or liabilities
resulting primarily from any Lender's gross negligence or willful misconduct.
Section 5. 13 FURTHER ASSURANCES. The Borrower agrees that, from time
to time upon the written request of any Lender, the Borrower will execute and
deliver such further documents and do such other acts and things as the Lender
may reasonably request in order fully to effect the purposes of this Agreement.
Section 5. 14 RELEASES. Without limiting the obligations of the
Borrower hereunder and under the Credit Agreement, upon the sale, assignment,
transfer or other disposition of any property effected in accordance with the
Credit Agreement, the Lenders shall, at the Borrower's expense, execute and
deliver to the Borrower such Uniform Commercial Code termination statements and
such other documentation as shall be reasonably requested by the Borrower to
effect the termination and release of the Lien of this Agreement on such
property.
Section 5. 15 OTHER FINANCING STATEMENTS AND LIENS. Except as
otherwise permitted under Section 9.2 of the Credit Agreement and except for
precautionary financing statements filed with respect to operating leases (as
defined in accordance with GAAP) entered into by the Borrower, the Borrower
shall not file or suffer to be on file, or authorize or permit to be filed or to
be on file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Lenders are not named as the sole secured
parties.
ARTICLE VI
MISCELLANEOUS
Section 6. 1 NO WAIVER. No failure on the part of any Lender or any
agent of such Lender to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by any Lender or any
agent of such Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
Section 6. 2 NOTICES. All notices, requests, consents and demands
hereunder shall be made in the manner and at the addresses set forth in Section
11.6 of the Credit Agreement.
15
Section 6. 3 AMENDMENTS, ETC. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by the
Borrower and the Lenders. Any such amendment or waiver shall be binding upon the
Lender and the Borrower.
Section 6. 4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Borrower, including any chapter 11 or chapter 7 trustee for the Borrower, and
each Lender (PROVIDED that the Borrower shall not assign or transfer its rights
hereunder without the prior written consent of the Lenders).
Section 6. 5 CAPTIONS. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
Section 6. 6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 6. 7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal law of the State of New York, without
regard to choice of law provisions thereof.
Section 6. 8 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Lenders order to
carry out the intentions of the parties hereto as nearly as may be possible and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused
this Security and Pledge Agreement to be duly executed and delivered as of the
day and year first above written.
16
WESTERN PACIFIC AIRLINES, INC.
By:
Title:
ENERGY MANAGEMENT CORPORATION
By:
Title:
SUNDANCE VENTURE PARTNERS, X.X. XX
By: XXXXXXXX & XXXXX COMPANY,
As General Partner
By:
Title:
17
ANNEX 1
PLEDGED STOCK
A. PLEDGED STOCK
CERTIFICATE REGISTERED
ISSUER NOS. OWNER NUMBER OF SHARES
------ ---- ----- ----------------
[Issuer #1] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #2] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #3] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #4] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #5] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
ANNEX 2
AIRCRAFT LEASEHOLD INTERESTS AND OTHER MATERIAL CONTRACTS
[Agreement] [Aircraft Leasehold Interest(s)]
ANNEX 3
AIRCRAFT ORDER POSITIONS
[Agreement] [Aircraft Order Position(s)]
ANNEX 4
LIST OF LOCATIONS
[See Section 5.7]
ANNEX 5
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
[Complete for each Obligor:]
[NAME OF OBLIGOR]
APPLICATION (A) OR REGISTRATION OR
TITLE REGISTRATION (R) NO. FILING DATE
----- -------------------- -----------
ANNEX 6
LIST OF PATENTS AND PATENT APPLICATIONS
[Complete for each Obligor:]
[NAME OF OBLIGOR]
APPLICATION (A) OR ISSUE EXPIRATION
TITLE REGISTRATION (R) NO. COUNTRY DATE DATE
----- -------------------- ------- ---- ----
ANNEX 7
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE XXXX REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE XXXX REGISTRATIONS
U.S. TRADEMARKS
[Complete for each Obligor:]
[NAME OF OBLIGOR]
APPLICATION (A)
REGISTRATION (R) REGISTRATION
XXXX OR SERIES NO. (S) OR FILING DATE
---- ----------------- --------------
