EXECUTION COPY
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of September 29, 2003 (this "Agreement"),
by Midwest Express Holdings, Inc., a Wisconsin corporation ("Holdings"), Midwest
Airlines, Inc., a Wisconsin corporation ("Midwest"), Skyway Airlines, Inc., a
Delaware corporation ("Skyway" and together with Midwest, "Carriers"), and YX
Properties, LLC, a Nebraska limited liability company ("YX") (each individually
"Debtor," and collectively "Debtors"), SF Capital Partners, Ltd. as agent (in
such capacity, "Collateral Agent") for the benefit of the parties identified on
Schedule A hereto and their respective successors and assigns (each individually
"Noteholder" and collectively, "Noteholders") and Noteholders.
RECITALS
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A. Holdings is the direct or indirect, as applicable, 100% parent of
Carriers and YX.
B. Debtors have issued, or intend to issue, to Noteholders those certain
6.75% Convertible Senior Secured Notes due October 1, 2008, in an aggregate
principal amount of $25,000,000 (the "Notes").
C. As a condition to their willingness to purchase the Notes, Noteholders
have required that Debtors execute and deliver this Agreement to secure Debtors'
respective obligations under the Notes.
AGREEMENTS
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In consideration of the Recitals, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the
designated meanings:
a. The term "Act" means Title 49 of the United States Code which,
among other things, recodified and replaced the U.S. Federal Aviation Act
of 1958, and the regulations promulgated thereunder, or any subsequent
legislation that amends, supplements or supersedes such provisions.
b. The term "Aircraft" shall have the meaning ascribed to it in
Section 1(e)(ii).
c. The term "Appliance" means any instrument, mechanism, equipment,
part, apparatus, appurtenance or accessory, including communications
equipment, that is used in operating or controlling an aircraft in flight,
is installed in or attached to the aircraft, and is not part of an Aircraft
or Engine.
d. The term "Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks are authorized or required by law to
be closed in the state of New York.
e. The term "Collateral" means all of the following property which
Debtors own on the date hereof, wherever located:
i. all equipment and fixtures, other than Aircraft, Engines,
Spare Parts and Appliances;
ii. the aircraft described on Schedule B hereto (individually and
collectively "Aircraft"), together with (and the term "Aircraft" shall
include) all appliances, parts, instruments, appurtenances,
accessories and equipment (including communication and radar
equipment) now owned by either Carrier and now or hereafter
incorporated or installed in or attached to any of such aircraft, and
all substitutions, replacements and renewals of any and all thereof
now owned by either Carrier and all other property now owned by either
Carrier which shall hereafter become physically incorporated or
installed in or attached to such aircraft, exclusive of Engines (as
defined below); provided, however, that if any DC9 Collateral is sold
or otherwise disposed of, pursuant to Section 7(b) of the Notes, prior
to the termination of the Escrow Agreement (as defined in the
Securities Purchase Agreement), Collateral Agent hereby authorizes
Debtors to redact Schedule B accordingly and make such conforming
changes as are necessary to any FAA filings or related documents;
iii. all aircraft engines described on Schedule C hereto or
described in any Supplemental Security Agreement (as hereinafter
defined) (individually "Engine" and collectively "Engines") together
with (and the terms "Engine" and "Engines" shall include) all
appliances, parts, instruments, appurtenances, accessories and
equipment now owned by either Carrier and now or hereafter
incorporated or installed in or attached to any of such aircraft
engines, and all substitutions, replacements and renewals of any and
all thereof now owned by either Carrier and all other property now
owned by either Carrier which shall hereafter become physically
incorporated or installed in or attached to such aircraft engines,
exclusive of Aircraft (as defined above); provided, however, that if
any DC9 Collateral is sold or otherwise disposed of, pursuant to
Section 7(b) of the Notes, prior to the termination of the Escrow
Agreement, Collateral Agent hereby authorizes Debtors to redact
Schedule B accordingly and make such conforming changes as are
necessary to any FAA filings or related documents;
iv. all Spare Parts;
v. all Appliances;
vi. the rights and operational authority now held by any Debtor
in and to the operating authority granted by the FAA (pursuant to
Title 14 of the United States Code of Federal Regulations, Part 93,
Subparts K and S, as amended from time to time, or any successor or
recodified regulation) to conduct one Instrument Flight Rule (as
defined under the federal aviation regulations) landing or takeoff
operation in a specified time period at Xxxxxx Xxxxxx Washington
National Airport (DCA) or La Guardia Airport (LGA) (such rights and
operational authority are referred to in this Agreement as the
"Slots," and are described on Schedule E hereto);
vii. all books, records and documents of any Debtor relating to
Collateral described in clauses (i) through (vii) above, including,
records and documents relating to such Collateral's operation,
maintenance or repair, including manufacturer's manuals, service
bulletins, Aircraft log books and, flight manuals and minimum
equipment lists for the Aircraft, Engines, Spare Parts or Appliances
(the "Collateral Records");
viii. all proceeds of any and all of the properties described in
paragraphs (i) through (vii) above, including rents, leases and
profits and insurance proceeds (and Debtors' rights to receive such
insurance proceeds) with respect to any of the foregoing Collateral
and other proceeds of any kind resulting from any Event of Loss with
respect to any Aircraft or Engine;
provided, however, that the Collateral shall not include the Excluded
Assets.
f. The term "Collateral Records" shall have the meaning ascribed to it
in Section 1(e)(vii).
g. The term "DC9 Collateral" means all Aircraft of Model DC9-14 or
DC9-32 identified on Schedule B, together with all Engines attached to any
such Aircraft and all equipment, Spare Parts and Appliances designed to be
installed in or attached to such Aircraft.
h. The term "DOT" means the Department of Transportation of the United
States of America, and any successor governmental authority.
i. The terms "Engine" and "Engines" shall have the meanings ascribed
to them in Section 1(e)(iii).
j. The term "Event of Loss" means any of the following events with
respect to any Aircraft or any Engine:
i. The actual total loss of such Aircraft or such Engine;
ii. Such Aircraft or such Engine shall become lost, stolen (and
not returned within 30 days), destroyed, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever;
iii. Any damage to such Aircraft or such Engine that shall result
in an insurance settlement with respect thereto on the basis of a
total loss; or
iv. The condemnation, confiscation or seizure of, or requisition
of title to or use (other than use by the United States government)
of, such Aircraft or such Engine continuing to the earlier of the
expiration of 60 days thereafter or the receipt of insurance or other
proceeds with respect thereto.
k. The term "Excluded Assets" means assets subject to Permitted Liens
described in clause (ii) and (viii) of the definition of Permitted Liens.
l. The term "Existing Bank Liens" means all liens on and security
interests in Collateral securing obligations arising under that certain
Senior Secured Revolving Credit Agreement, dated as of August 31, 2001, as
amended, by and among Holdings, the Lenders party thereto and U.S. Bank
National Association, as a Lender and as Agent.
m. The term "FAA" means the Federal Aviation Administration of the
United States of America, and any successor governmental authority.
n. The term "GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature
and authority within the U.S. accounting profession), which are applicable
to the circumstances as of the date of determination.
o. The term "Obligations" means:
i. Any and all present and future debts, obligations and
liabilities of Debtors to Noteholders pursuant to the Notes, whether
due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, whether for principal, contract interest
(whether before or after maturity) or other debts, obligations or
liabilities, and whether or not any or all such debts, obligations and
liabilities are or become barred by any statute of limitations or
otherwise unenforceable;
ii. All debts, obligations and liabilities of Debtors under this
Agreement.
p. The term "Permitted Liens" means:
i. the liens and security interests created or contemplated by
this Agreement;
ii. liens and security interests securing indebtedness incurred
in the ordinary course of business and arising out of the lease or
purchase of goods, or the financing or refinancing of goods previously
acquired, provided that such liens and security interests cover only
such goods and contract rights, deposits and/or other intangible
assets related to such goods and proceeds of any of the foregoing;
iii. transfers of possession, exchanges and other acts permitted
by Section 3(a)(x) of this Agreement;
iv. liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and diligently
concluded; provided that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made
therefor;
v. mechanics', materialmen's, carriers', warehousemen's and other
like liens arising in the ordinary course of business in respect of
obligations not overdue
for a period in excess of 30 days or that are being contested in good
faith by appropriate proceedings promptly instituted and diligently
prosecuted; provided further that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been
made therefore;
vi. easements, rights of way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not material in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
applicable Debtor;
vii. any right of the United States government to requisition any
Aircraft or otherwise to compel a Carrier to deliver possession of or
provide use of any Aircraft for government purposes;
viii. liens on and security interests in fixtures located at the
facility at 0000 X. Xxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxxxxx 00000; and
ix. any attachment or judgment lien not constituting an Event of
Default under the Notes.
q. The term "Person" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof (collectively, "Persons").
r. The term "Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of September 29, 2003, by and among
Holdings and the Initial Investors, as defined therein, as the same may be
amended, restated or otherwise modified from time to time.
s. The term "Required Noteholders" means at any time particular
Noteholders holding at least two-thirds of the then outstanding principal
amount of the Notes.
t. The term "Securities Purchase Agreement" means that certain
Securities Purchase Agreement, dated as of September 29, 2003, by and among
Debtors and Noteholders, as the same may be amended, restated or otherwise
modified from time to time.
u. The term "Slots" shall have the meaning ascribed to it in Section
1(e)(vi).
v. The term "Spare Part" means any accessory, appurtenance or part of
an Aircraft, Engine or Appliance, that is to be installed at a later time
in an Aircraft, Engine or Appliance.
w. The term "Unrestricted Cash Balance" shall have the meaning
ascribed to it in the Notes.
All capitalized terms used in this Agreement and not otherwise defined in
this Agreement shall have the meanings given to them in the Securities Purchase
Agreement or the Notes.
2. Security Interest.
To secure the payment and performance of the Obligations, each Debtor
hereby mortgages to Collateral Agent, and grants to Collateral Agent a security
interest in, for the ratable benefit of Noteholders, all Collateral owned on the
date hereof, wherever located.
3. Certain Representations, Warranties and Covenants.
a. Each Debtor hereby represents and warrants and hereby covenants as
follows:
i. Debtor has delivered to Collateral Agent all: (A) UCC-1
financing statements and FAA lien registration statements; (B) UCC
financing statement, lien or similar search reports for all
jurisdictions in which any portion of the Collateral is located; and
(C) FAA title reports regarding the Aircraft and Engines, in each case
as have been reasonably requested by Collateral Agent. The documents
delivered pursuant to clauses (B) and (C) above do not reveal any
mortgage, lien, security interest, charge or encumbrance on the
Collateral, other than Existing Bank Liens (which liens will be
released in connection with the closing of this Agreement) and
Permitted Liens.
ii. Debtor agrees to maintain all Collateral free and clear of
all mortgages, deeds of trust, liens, security interests and other
charges or encumbrances except Permitted Liens.
iii. Upon: (1) the due filing of appropriate UCC-1 financing
statements with: (a) the Office of the Department of Financial
Institutions of the State of Wisconsin for Collateral owned by
Holdings or Midwest; (b) the Office of the Secretary of State of
Delaware for Collateral owned by Skyway; and (c) the Office of the
Nebraska Secretary of State for Collateral owned by YX; and (2) the
due recordation of this Agreement or any Supplemental Security
Agreement with the FAA, Collateral Agent on behalf of Noteholders will
have a valid and perfected security interest in the Collateral prior
to the rights of all other Persons therein, subject to:
(1) Permitted Liens;
(2) the rights and interests of the FAA in the Slots,
including the ability of the FAA to withdraw Slots pursuant to
the Act; and
(3) the possibility of loss of a valid and perfected
security interest in Spare Parts and Appliances when such
Collateral is not situated at one of the locations described on
Schedule D.
iv. The execution, delivery and performance of this Agreement by
such Debtor:
(1) have been duly authorized by all necessary corporate
action or limited liability company action, as applicable;
(2) do not and will not require any consent or approval of
such Debtor's shareholders or members, as applicable;
(3) do not violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability
to such Debtor;
(4) do not violate any provision of such Debtor's articles
of incorporation, bylaws, articles of organization, operating
agreement or other organizational documents, as applicable;
(5) do not result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which such Debtor is a party or
by which it or its properties may be bound or affected; and
(6) do not require authorization, consent, approval,
license, exemption of or filing a registration with any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, other than filings to
perfect Collateral Agent's interest in the Collateral, as
contemplated hereby.
v. This Agreement is the legal, valid and binding obligation of
such Debtor enforceable against it in accordance with the terms
hereof, subject to the effect of general principles of equity and any
applicable bankruptcy, receivership, insolvency, reorganization,
moratorium, fraudulent conveyance or transfer or similar laws
affecting creditors' rights generally.
vi. Subject to the rights and interests of the FAA in the Slots,
including the ability of the FAA or other governmental authority to
withdraw Slots or otherwise modify the rights or obligations of such
Debtor with respect to the Slots, such Debtor holds the requisite
authority to hold each of its Slots pursuant to authority granted by
the FAA; and it has, at all times after obtaining each such Slot,
complied in all material respects with all of the terms, conditions
and limitations of each rule or regulation of the FAA and DOT
regarding each such Slot and with all applicable provisions of the Act
and there exists no violation as of the date hereof of such terms,
conditions or limitations that gives the FAA or DOT the right to
terminate, cancel, withdraw or modify the rights of such Debtor in any
such Slot.
vii. Such Debtor is utilizing its Slots in a manner consistent
with applicable regulations and contracts in order to preserve the
value of such Slots.
viii. No such Debtor has received any notice from the FAA, or is
aware of any other event or circumstance, other than the proposed 2007
partial phase-out of Slots at La Guardia Airport, that would be
reasonably likely to impair the Slots or their value.
ix. Except for sales or dispositions pursuant to Section 3(a)(x),
such Debtor will take, or cause to be taken, all actions as may be
necessary now or in the future to maintain, renew and obtain the
rights, licenses, authorizations or certifications as are necessary to
the continued use by such Debtor of its Slots.
x. Such Debtor will not, without the prior written consent of
Collateral Agent, sell, assign, lease or otherwise dispose of or
relinquish possession of any of the Collateral, except that, unless an
Event of Default (as defined in Section 12) shall have occurred and be
continuing, such Debtor may:
(1) in the case of either Carrier, transfer possession of
any of its Aircraft or Engines to the United States government
pursuant to a contract or lease pursuant to which the United
States government assumes all liability for any damage, loss,
destruction or failure to return possession of such Aircraft or
such Engine at the end of the term of such contract, a copy of
which shall be furnished to Collateral Agent;
(2) in the case of either Carrier, transfer possession in
the ordinary course of business of any of its Aircraft, Engines,
Spare Parts or Appliances to the manufacturer thereof or any
other organization for testing, repairs, servicing, maintenance,
overhaul, alterations or modifications;
(3) in the case of either Carrier, exchange Engines in the
ordinary course of business for equivalent engines, provided that
such Carrier complies with the terms and conditions of Section 8
for Replacement Engines; provided, however, that: (i) such
replacement engines shall be made Collateral subject to the lien
of this Agreement; and (ii) the representations and warranties
made herein with respect to Engines shall be true and correct in
all material respects as to such Replacement Engines;
(4) exchange Collateral other than Engines in the ordinary
course of business for Collateral of substantially comparable
value and utility; provided, however, that such replacement
Collateral is made subject to the lien of this Agreement; and
(5) in the case of any Debtor, sell or otherwise dispose of
Collateral as permitted under Section 7(b) of the Notes.
(6) in the case of any Debtor, and with the exception of
real property, Aircraft and Engines, sell or otherwise dispose of
any Collateral, that is no longer of any utility to such Debtor.
xi. The Slots identified on Schedule E are all of the Slots held
by such Debtor that such Debtor may sell or lease under the Act.
xii. The chief executive office (as such term is used in Article
9 of the Uniform Commercial Code) of each Debtor is accurately set
forth beneath the signature of such Debtor below.
b. Each of the Carriers hereby represents and warrants and hereby
covenants as follows:
i. Schedule B and Schedule C identify, respectively, all Aircraft
and Engines owned by such Carrier, free and clear of any mortgage,
lien, security interest or other charge or encumbrance, except
Existing Bank Liens and Permitted Liens.
ii. Such Carrier has, and at all time will have, good title to
the Aircraft and the Engines identified on Schedule B or Schedule C,
as applicable, free and clear of all mortgages, liens, security
interests and other charges or encumbrances except Existing Bank Liens
and Permitted Liens, and has, and at all times will have, full power
and authority to mortgage and xxxxx x xxxx and security interest in,
and assign rights in, the Aircraft and Engines.
iii. Such Carrier has, and at all time will have, good title to
the Spare Parts and Appliances owned by it, as applicable, free and
clear of all mortgages, liens, security interests and other charges or
encumbrances except Existing Bank Liens and Permitted Liens, and has,
and at all times will have, full power and authority to xxxxx x xxxx
and security interest in, and assign rights in, the Spare Parts, and
Appliances.
iv. With the exception of the DC9 Collateral, such Carrier agrees
to keep the Spare Parts and Appliances at one of the facilities
identified on Schedule D, it being understood that, the Spare Parts
and Appliances may from time to time in the ordinary course of
business be installed on aircraft (including, but not limited to,
Aircraft) and that during such time as such equipment is so installed
such equipment shall not be included within the definition "Spare
Parts" or "Appliances" and shall not, if installed on aircraft that
are not Aircraft, be subject to this Agreement or the Collateral
Agent's security interest hereunder.
v. The Spare Parts and Appliances are maintained by or on behalf
of such Carrier.
vi. Such Carrier is, and at all times will be: (i) a "Citizen of
the United States" as defined in Section 40l02(a)(15) of 49 U.S.C.;
(ii) an air carrier as to which the provisions of Section 1110 of the
United States Bankruptcy Code apply; and (iii) an air carrier
certificated under Sections 41102(a) and 44705 of 49 U.S.C.
vii. Each of the Aircraft is registered with the Federal Aviation
Administration in the name of the applicable Carrier indicated on
Schedule B and such Carrier will take all necessary action to cause
such registration to remain in effect.
viii. Such Carrier's Collateral Records (as defined in Section
1(e)(vii)) are located only at the locations listed on Schedule F, or
such Carrier's respective chief executive office, as set forth beneath
the signature of such Carrier below.
ix. Such Carrier shall bear all risk of loss or damage to its
Collateral.
x. With the exception of the DC9 Collateral, such Carrier, at its
own cost and expense, shall service, repair and maintain each of its
Aircraft and Engines in accordance with an FAA-approved maintenance
program and all manufacturer's aircraft maintenance manuals and
airworthiness directives, and, subject to such Carrier's right to
apply proceeds of insurance in accordance with Section 10(f) below,
shall install replacement equipment and parts on each of its Aircraft
and Engines so as to keep each such Aircraft or Engine in such
operating condition as may be required to permit each such Aircraft
and Engine to be utilized in commercial charter operations and
scheduled airline service in the United States and shall maintain all
records, logs and other materials that may be required to permit each
such Aircraft and Engine to be so utilized.
xi. Such Carrier will comply and will cause compliance with all
laws, regulations or orders of any government or governmental
authority, domestic or foreign, having jurisdiction over such Carrier
or its Collateral, including all applicable operational and
maintenance requirements of the Federal Aviation Administration, and
will at all times maintain in effect appropriate United States FAA
Certificates of Airworthiness for each of its Aircraft.
xii. With the exception of the DC9 Collateral, such Carrier shall
maintain its Collateral in compliance with all applicable
manufacturer's manuals and service bulletins, and agrees that such
Collateral will not be maintained, used or operated in violation of
any law or any rule, regulation or order of any government or
governmental authority, domestic or foreign, having jurisdiction over
such Carrier, or in violation of any airworthiness certificate,
license or registration relating to such Collateral issued by any such
government or governmental authority, and in the event that such laws,
rules, regulations or orders require alteration of any of such
Collateral, such Carrier, at its own cost and expense, will conform
thereto or obtain conformance therewith within the time period
allotted for compliance by such government or governmental authority,
and will maintain the same in proper operating condition under such
laws, rules, regulations and orders; provided, however, that such
Carrier may, in good faith, contest the validity or application of any
such law, rule, regulation or order in any reasonable manner that does
not materially and adversely affect the interests of Collateral Agent
under this Agreement.
xiii. Without the prior written consent of Collateral Agent, such
Carrier shall not fly any of its Aircraft or Engines or suffer any
thereof to be flown or located to, from or within:
(1) any area excluded from coverage by any insurance policy
required hereunder to be maintained in effect with respect to
each of such Aircraft or any such Engine; or
(2) any area of hostilities recognized or designated by the
United States government or an insurance carrier then insuring
aircraft in such Carrier's fleet, unless fully covered by
war-risk hull insurance or unless such Aircraft or Engine is
operated or used under contract or lease with the government of
the United States of America pursuant to which the government
of the United States assumes all liability for any damage, loss,
destruction or failure to return possession of such Aircraft or
Engine at the end of the term of such contract.
4. Inspection.
Upon reasonable request, Debtors will permit any authorized representatives
of Collateral Agent to inspect the Collateral or any part thereof, and
reasonably to examine, copy or make extracts from the Collateral Records.
5. Liens, Encumbrances and Claims.
Debtors will not directly or indirectly create, incur, assume or suffer to
exist any lien, security interest, charge or encumbrance on or with respect to
any part or all of the Collateral, title thereto or any interest therein, except
any Permitted Liens. Each Debtor shall, at its sole expense, defend the security
interest in the Collateral that it owns against any and all claims of any party
(other than holders of Permitted Liens) adverse to any Noteholders and take such
action and execute such financing statements and other documents as Noteholders
may from time to time reasonably request to maintain the perfected status of the
security interest granted hereunder and Collateral Agent is hereby authorized to
file all such financing statements and other documents without further action on
the part of Debtors.
6. Collateral Agent.
a. Appointment of Collateral Agent. Subject to the terms and
conditions of this Agreement, Noteholders hereby appoint SF Capital
Partners, Ltd. as Collateral Agent for the benefit of Noteholders with
respect to the liens upon, and the security interests in, the Collateral,
and with respect to the rights and remedies granted under and pursuant to
this Agreement, and SF Capital Partners, Ltd. hereby accepts such
appointment and agrees to act as agent for the benefit of Noteholders. The
appointment of Collateral Agent shall be effective with respect to all
financing statements filed in any UCC filing office, all FAA lien
registration statements and all other filings or recordings of Collateral
Agent's security interest and lien pursuant to this Agreement.
b. Duties of Collateral Agent. Each Noteholder hereby irrevocably
authorizes Collateral Agent to take such action on its behalf under the
provisions of this Agreement and to exercise such powers and to perform
such duties hereunder as are specifically delegated to or required of
Collateral Agent by the terms hereof and such other powers as are
reasonably incidental hereto. The duties of Collateral Agent shall be
mechanical and administrative in nature; Collateral Agent shall not have by
reason of this Agreement a fiduciary relationship with any Noteholder.
Noteholders hereby expressly authorize Collateral Agent on behalf of all
Noteholders, without the necessity of any notice to, or further consent
from, any Noteholder, from time to time, to take any action with respect to
any Collateral that may be necessary to perfect or maintain the perfection
of the security interest in and liens upon the Collateral granted pursuant
to this Agreement.
c. Collateral Agent's Release of Security Interest. Noteholders hereby
authorize Collateral Agent, at its discretion, to release the Collateral
from the security interest granted by this Agreement pursuant to Section 16
of this Agreement.
d. Liability of Collateral Agent. In the absence of gross negligence,
willful misconduct or breach of this Agreement, Collateral Agent will not
be liable to Noteholders for any action or failure to act or any error of
judgment, negligence, mistake or oversight on Collateral Agent's part or on
the part of any of its attorneys, employees or agents.
e. Indemnification of Collateral Agent. Each Noteholder shall
reimburse and indemnify Collateral Agent, in proportion to each
Noteholder's respective holding of the outstanding Notes, for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, attorneys' fees or disbursements which
may be imposed on, incurred by or asserted against the Collateral Agent in
performing its duties hereunder; provided, however, that no Noteholder
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, attorneys'
fees or disbursements resulting from the Collateral Agent's gross
negligence or willful misconduct.
f. No Reliance on Collateral Agent. Neither Collateral Agent nor any
of its attorneys, employees or agents shall be deemed to have made any
representations or warranties, express or implied, with respect to, nor
shall Collateral Agent or any such attorney, employee or agent be liable to
Noteholders for:
(1) any recitals, representations, warranties or covenants
made by Debtors in this Agreement;
(2) the due or proper execution or authorization of this
Agreement by any party other than Collateral Agent;
(3) the present or future solvency or financial worth of
Debtors; or
(4) the value, condition, existence or ownership of any of
the Collateral or the sufficiency of any filing or other
procedure taken or to be taken to attach or perfect any lien or
security interest in the Collateral.
g. Collateral Agent's Right to Perform for Debtors. If any Debtor
shall fail to make any payment required hereunder or shall fail to perform
or comply with any of such Debtor's agreements contained herein, Collateral
Agent may, upon ten (10) days' prior written notice to such Debtor, make
such payment or perform or comply with such agreement, and each Debtor
shall be obligated to reimburse the Collateral Agent for such Debtor's
ratable share of the amount of such payment.
h. Collateral Agent as Attorney. Each Debtor hereby irrevocably and
severally appoints Collateral Agent, effective while an Event of Default
exists, the true and lawful attorney of such Debtor (with full power of
substitution) in the name, place and stead of, and at the expense of, such
Debtor in connection with the enforcement of the rights and remedies
provided for in Sections 12 and 13:
i. to give any necessary receipts or acquittances for amounts
collected or received thereunder;
ii. to make all necessary transfer of all or any part of the
Collateral in connection with any sale, lease or other disposition
made pursuant hereto; and
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.
i. Collateral Agent's Rights as Noteholder. Collateral Agent shall
have the same rights and powers under this Agreement as any other
Noteholder and may exercise such rights and powers as though it were not
Collateral Agent.
j. Successor Collateral Agent. Collateral Agent may, upon sixty days'
written notice to Noteholders, Holdings and Debtors, resign at any time,
and Noteholders may, by an affirmative vote of Required Noteholders, remove
Collateral Agent at any time. Upon any such resignation or removal,
Noteholders shall have the right to appoint a successor Collateral Agent,
by affirmative vote of Required Noteholders, and shall provide notice of
appointment of such successor Collateral Agent to Holdings and Debtors. No
resignation or removal of Collateral Agent shall become effective until a
replacement Collateral Agent has been appointed and such successor agent
has accepted such appointment.
7. Early Termination.
If: (i) Debtors maintain the Unrestricted Cash Balance as shown by the
quarterly financial statements of Holdings as filed with the SEC at no less than
$75,000,000 as of the end of any fiscal quarter for any period of six
consecutive fiscal quarters, which period begins with a fiscal quarter ending on
or after March 31, 2005; provided, however, that if the sum of the First Closing
(as defined in the Securities Purchase Agreement) proceeds released to Debtors
from escrow under the Escrow Agreement in respect of the principal amount of
Notes and the Second Closing (as defined in the Securities Purchase Agreement)
proceeds is less than $25,000,000, then the dollar amount set forth in this
clause (i) shall be reduced by an amount equal to the product of 3.0 times the
amount by which such sum is less than $25,000,000; or (ii) at any time the
aggregate balance of Notes outstanding is less than or equal to $10,000,000 and
the Unrestricted Cash Balance as shown by the financial statements of Holdings
as filed with the SEC is no less than $37,500,000 as of the most recent fiscal
quarter-end; then this Agreement and the liens and security interests granted
hereunder shall be terminated pursuant to Section 16 below.
8. Replacement Engines.
If an Event of Loss shall occur with respect to an Engine, the applicable
Carrier shall give Collateral Agent prompt written notice thereof and shall
either:
(i) elect to apply and/or deposit the insurance proceeds arising from such
Event of Loss pursuant to the provisions of Section 10(f); or
(ii) within 60 days after such notice, duly convey to Collateral Agent, for
the benefit of itself and Noteholders, a lien and security interest in another
equivalent engine of the same model and manufacturer owned or acquired by such
Carrier (and not already subject to a security interest securing the
Obligations), free and clear of all security interests, liens, charges and other
encumbrances (except Permitted Liens) and having a value and utility reasonably
equivalent to, and being in as good operating condition as, and having
performance and durability characteristics reasonably equivalent to, the Engine
with respect to which such Event of Loss occurred if such Engine were in the
condition and repair as required by the terms hereof immediately prior to the
occurrence of such Event of Loss (each, a "Replacement Engine").
In connection with any substitutions hereunder, the applicable Carrier
shall deliver to Collateral Agent the following:
a. a Supplemental Security Agreement substantially in the form of
Exhibit 8(a) (the "Supplemental Security Agreement") hereto duly executed
by such Carrier describing the Replacement Engine(s) to be subjected to the
lien and security interest of this Agreement;
b. a certificate signed by the Treasurer or other authorized officer
of such Carrier (an "Officer's Certificate"), dated as of the date of
execution of such Supplemental Security Agreement, stating:
i. that such Carrier is the owner of the Replacement Engine(s)
described in such Supplemental Security Agreement, free and clear of
all security interests, liens, charges and other encumbrances except
Permitted Liens and that legal and beneficial title thereto is vested
in such Carrier;
ii. that such Supplemental Security Agreement has been duly
authorized, executed and delivered by such Carrier;
c. an opinion or opinions of counsel for such Carrier reasonably
acceptable to Collateral Agent to be dated the date of execution of such
Supplemental Security Agreement, stating:
(1) that the Replacement Engine(s) described in such
Supplemental Security Agreement are free and clear of all
recorded security interests, liens, charges and other
encumbrances, except Permitted Liens;
(2) that such Supplemental Security Agreement:
(a) has been duly authorized, executed and delivered by
such Carrier and is enforceable against such Carrier; and
(b) creates a valid first security interest in and to
the Replacement Engine or Engines described in such
Supplemental Security Agreement, subject to Permitted Liens,
enforceable, wherever such Replacement Engine(s) are located
within the United States, against all third parties and
securing all obligations purported to be secured thereby,
and such security interest is fully perfected; and
(3) that such Supplemental Security Agreement has been duly
filed for recordation in accordance with the provisions of the
Act;
d. such evidence of title of such Carrier to such Replacement
Engine(s), of the value thereof and compliance with the insurance
provisions of Section 10 with respect thereto, as Collateral Agent may
reasonably request; it being understood that it shall not be reasonable,
absent an Event of Default, for Collateral Agent to request an appraisal of
such Replacement Engine(s) if such Carrier would not ordinarily do so under
the circumstances.
9. Alterations; Modification and Additions.
As applicable, either Carrier, at its own cost and expense, may from time
to time make such alterations and modifications in and additions to any Aircraft
or any Engine as such Carrier may deem desirable in the proper conduct of its
business; provided, however, that no such alteration, modification or addition
shall diminish the value, utility, condition or airworthiness of any Aircraft or
any Engine below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition. The parties
acknowledge and agree that this Section 9 shall not limit either Carrier's
discretion to modify the configuration of passenger seats on any Aircraft in any
manner consistent with the program of passenger service in which such Aircraft
is or is to be deployed.
10. Insurance, Events of Loss, Etc.
a. As applicable, Carriers, at their own cost and expense, will at all
times carry and maintain in effect, or cause to be carried and maintained
in effect, on the Collateral:
i. third party and passenger liability insurance in an amount not
less than the greater of (x) $400,000,000 per occurrence and (y) the
amount of such insurance applicable to any other aircraft of the same
model and manufacturer as the aircraft described on Schedule B hereto
which is operated by the applicable Carrier either as owner or as
original primary lessee (and not as sublessee or assignee of another
primary lessee) on which such Carrier carries insurance;
ii. property damage liability insurance;
iii. aircraft hull risk insurance for each Aircraft and the
Engines belonging to, installed in or appurtenant to each Aircraft
(which all-risk hull insurance shall include coverage of Engines and
Parts while temporarily removed from the Aircraft and not replaced by
similar components) in an amount not less than the most recent
appraised value of such Aircraft. Engines that are attached to an
Aircraft are included in the overall agreed value of the Aircraft, and
Engines that are detached from the Aircraft (and replaced by similar
components) are insured on a replacement cost basis;
iv. all-risk of physical loss or damage insurance on Engines
while removed from the Aircraft;
v. all-risk of physical loss or damage insurance on other
tangible Collateral; and
vi. baggage and cargo liability insurance;
In each case in such amounts (except where amounts are specified above) and
in such form, including without limitation the form of the loss payable
clause and the designation of named insureds (as applicable), and with such
insurance companies, underwriters or funds of recognized responsibility as
shall be reasonably satisfactory to Collateral Agent and as shall be
declared from time to time by independent aircraft insurance brokers (who
may be the brokers regularly employed by Carriers), appointed by Carriers
and reasonably acceptable to Collateral Agent, to be necessary or advisable
(in view of the insurance usually carried by corporations engaged in the
same or a similar business as Carriers, similarly situated with Carriers
and owning similar aircraft and engines) for the protection of the
interests of Collateral Agent.
b. All insurance required hereunder shall provide for payment in the
United States in U.S. Dollars. All third party and passenger liability and
property damage liability insurance shall insure against liability that
Collateral Agent, Noteholders or either Carrier might incur by reason of
the ownership or operation of any of the Aircraft in or over any area
(including the high seas) in which any of the Aircraft is operated or
located, shall be of the type usually carried by corporations engaged in
the same or a similar business, similarly situated with Carriers, and
owning similar aircraft and engines and shall cover risks of the kind
customarily insured against by such corporations and, in the case of
property damage liability insurance, shall be in amounts that are not less
than property damage liability insurance applicable to the other aircraft
in the applicable Carrier's fleet on which such Carrier carries such
insurance.
c. All liability policies shall name Collateral Agent as an additional
insured as its interests may appear. All other policies required hereby
covering loss or damage to the Collateral shall name Collateral Agent as an
additional insured as its interests may appear and as a lender loss payee
and shall provide that any payment thereunder for any loss or damage shall
be paid to Collateral Agent; provided, however, if no Event of Default has
occurred and is continuing, and the aggregate amount of all insurance
proceeds of all losses and damage for the year are less than $2,500,000
(the "Insurance Proceeds Floor Amount") and the applicable Carrier is
otherwise entitled to receive a payment thereunder, proceeds under such
policies shall be paid to the applicable Carrier for application as
determined by such Carrier in its sole discretion. If no Event of Default
has occurred and is continuing, but the aggregate amount of all insurance
proceeds of all losses and damage for the year exceeds the Insurance
Proceeds Floor Amount, and the applicable Carrier is otherwise entitled to
receive a payment thereunder, proceeds under such policies in excess of the
Insurance Proceeds Floor Amount that are received by Collateral Agent may
be disbursed by Collateral Agent to such Carrier upon the written request
of such Carrier subject to and provided that each of the following
conditions is satisfied in form and substance satisfactory to Collateral
Agent:
i. all such proceeds shall be applied to repair in full any such
loss or damage;
ii. Collateral Agent, in consultation with the Carrier and the
insurer, shall have determined that such repairs are feasible and
economically prudent;
iii. there are sufficient proceeds on deposit with Collateral
Agent to completely repair any such loss or damage, or the Carrier
shall deposit funds with Collateral Agent in the amount of any
deficiency;
iv. all disbursements of such proceeds shall be paid by
Collateral Agent from time to time as work progresses based upon
disbursement procedures acceptable to Collateral Agent;
v. the repairs can be completed within sixty (60) days from the
date of such loss or damage or such other time agreed to in writing
between the Carrier and Collateral Agent; and
vi. the Carrier shall pay or reimburse Collateral Agent for all
of its reasonable costs and expenses incurred in connection with the
disbursement of such proceeds;
provided, however, that even once the aggregate amount of insurance
proceeds of all losses and damage for the year exceeds the Insurance
Proceeds Floor Amount, insurance proceeds for a loss or damage of less than
$100,000 per loss shall be paid to the applicable Carrier for application
as determined by such Carrier in its sole discretion.
d. All policies shall insure the interests of Collateral Agent
regardless of any breach or violation by Carriers of warranties,
declaration or conditions contained in such policies or any action or
inaction of Collateral Agent or others; each such policy shall be primary
without right of contribution from any other insurance that is carried by
Carriers and shall expressly provide that all provisions thereof, except
the limits of liability, shall operate in the same manner as if there were
a separate policy covering each insured; each such policy shall waive any
right of subrogation of the insurers against Collateral Agent; each such
policy shall waive any right of the insurers to any set-off or counterclaim
or any other deduction, whether by attachment or otherwise, in respect of
any liability of Collateral Agent; and each such policy shall provide that,
if any premium or installment is not paid when due, or if such insurance is
canceled or terminated for any reason whatsoever, or if the scope of
coverage or the limits of liability are reduced or any other material
adverse change is made in or to the rights of Collateral Agent, the
insurers will promptly notify Collateral Agent in writing and any such
cancellation, termination or change shall not be effective as to Collateral
Agent for 30 days after receipt of such notice, and that appropriate
certification shall be made to Collateral Agent by each insurer with
respect thereto.
e. Carriers will cause such broker(s) to agree to advise Collateral
Agent in writing promptly of any default in the payment of any premium and
of any other act or omission on the part of either Carrier that it shall
have knowledge that might invalidate or render unenforceable, in whole or
in part, any such insurance. Carriers will promptly deliver to Collateral
Agent, if requested by Collateral Agent, copies of certificates of
insurance evidencing all such insurance.
f. Notwithstanding any of the foregoing, upon the occurrence of an
Event of Loss with respect to an Aircraft or Engine, the applicable Carrier
may, by written notice to Collateral Agent at any time within sixty (60)
days after such Event of Loss, elect, in lieu of
repairing or replacing any such Aircraft or Engine, that all insurance
proceeds relating to such Event of Loss shall be (x) applied to optional
redemption of the Notes, to the extent that such optional redemption shall
then be permitted under Section 8 of the Notes, or (y) deposited in a
deposit account or securities account reasonably acceptable to Collateral
Agent and in which Collateral Agent holds a perfected security interest, to
the extent that such optional redemption shall not then be permitted under
Section 8 of the Notes, and the amounts so deposited shall be applied to
the redemption of the Notes at such time and to such extent as such
redemption shall become permitted. In the event that either Carrier elects
to apply and/or deposit insurance proceeds pursuant to the preceding
sentence, such Carrier shall have no repair or replacement obligations with
respect to the Aircraft and/or Engine that was the subject of such Event of
Loss.
11. Indemnification and Expenses.
Each Debtor does hereby assume liability for, and does hereby agree to
indemnify, protect, save and keep harmless Collateral Agent and Noteholders and
their successors, assigns, representatives, officers, directors, agents and
servants (collectively, the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions, suits,
costs, expenses and disbursements, including legal expenses, of whatsoever kind
and nature imposed on, incurred by or asserted against any of the Indemnitees
(whether or not also indemnified against by any other Person) in any way
relating to or arising out of this Agreement or the ownership, lease, service,
control, repair, overhaul, testing, inspection, possession, management, use,
operation, condition, sale or other disposition of any Collateral; provided,
however, that Debtors shall not be required to indemnify anyone for the willful
misconduct or gross negligence of any of the Indemnitees. The indemnities
contained in this Section shall continue in full force and effect
notwithstanding the termination of this Agreement with respect to claims arising
or liabilities incurred prior to such termination.
12. Event of Defaults; Remedies.
a. Each of the following events shall constitute an "Event of Default"
(whether any such event shall be voluntary or involuntary or come about or
be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) and each such Event of Default
shall be deemed to exist and continue so long as, but only as long as, it
shall not have been remedied:
i. Any Debtor shall fail to perform or observe any covenant or
agreement to be performed or observed by it hereunder and such failure
shall continue unremedied for a period of thirty (30) days after
written notice thereof by Collateral Agent;
ii. any material representation or warranty made by any Debtor
herein or any document or certificate furnished by such Debtor to
Collateral Agent in connection herewith shall at any time prove to
have been incorrect in any material respect when made; or
iii. any Event of Default shall have occurred and be continuing
under, and as defined in, the Notes.
b. If any Event of Default shall occur and be continuing, then, in any
such event, Collateral Agent shall have all remedies available under this
Agreement and applicable law. Without limitation of the foregoing,
Collateral Agent may forthwith to the extent permitted by applicable law:
(i) apply to a court of competent jurisdiction to obtain specific
performance or observance by any Debtor of any covenant, agreement or
undertaking on the part of such Debtor hereunder that such Debtor shall
have failed to observe or perform or to obtain aid in the execution of any
power granted herein; and/or (ii) proceed to foreclose upon and against the
lien and security interest created by this Agreement according to the laws
of the applicable jurisdiction by doing any one or more or all of the acts
described in paragraph (c) below and/or the following acts, as Collateral
Agent in its sole and complete discretion may then elect:
i. institute legal proceedings to foreclose upon and against the
lien and security interest granted by this Agreement, to recover
judgments for the Obligations then due and owing and secured hereby,
and to collect the same out of any of or all the Collateral or the
proceeds of any sale thereof;
ii. institute legal proceedings for the sale, under the judgment
or decree of any court of competent jurisdiction, of any of or all the
Collateral;
iii. without regard to the adequacy of the security for the
Obligations by virtue of this Agreement or any other collateral or to
the solvency of any Debtor, institute legal proceedings for the
appointment of a receiver or receivers with respect to any of or all
the Collateral pending foreclosure hereunder or for the sale of any of
or all the Collateral under the order of a court of competent
jurisdiction or under other legal process; or
iv. Personally or by agents or attorneys, enter upon any premises
where the Collateral or any part thereof may then be located, and take
possession of all or any part thereof, and hold, store and keep idle,
or lease, operate or otherwise use or permit the use of, the
Collateral or any part thereof, for such time and upon such terms as
Collateral Agent may in its discretion deem to be in its best
interest, and demand, collect, and retain all rent, earnings, and
other sums due and to become due in respect of the same from any party
whomsoever, accounting only for net earnings, if any, arising from
such use and charging against all receipts from the use of the same or
from the sale thereof, by court proceedings or pursuant to paragraph
(c) below, all other costs, expenses, charges, damages and other
losses resulting from such use.
At any sale pursuant to this Section 12, whether under the power of
sale or by virtue of judicial proceedings, it shall not be necessary for
Collateral Agent or a public officer under order of a court to have present
physical or constructive possession of the Collateral to be sold. Upon any
sale hereunder of any of or all the Collateral or any interest therein, the
written receipt issued by the officer making such sale under judicial
proceedings or of Collateral Agent shall be sufficient discharge to the
purchaser for the purchase money, and such purchaser shall not be obligated
to see to the application thereof. Any sale hereunder of
any of or all the Collateral or any interest therein shall, to the extent
permitted by applicable law, be a perpetual bar against the applicable
Debtor with respect to such Collateral or interest therein, as the case may
be.
c. If any Event of Default shall occur and be continuing and
Collateral Agent shall have determined in its discretion in order to effect
a foreclosure disposition of one or more of the Slots, or in order to
preserve the value of the Slots pending foreclosure, that the named holder
of the Slots should be the Collateral Agent or its designee(s), then, in
any such event, Midwest and YX agree to execute and deliver such necessary
deeds of conveyance, assignments and other documents or instruments,
including any notices or applications to the DOT, FAA or any other
governmental or regulatory authority having jurisdiction over any or all of
the Slots, as Collateral Agent may demand in order to effect the transfer
of the Slots in the records of any such governmental or regulatory
authority to Collateral Agent or such designee(s).
d. If Collateral Agent should elect to foreclose upon and against the
lien and security interest created in and by this Agreement, each Debtor
shall, upon demand of Collateral Agent, deliver to Collateral Agent all or
any part of such Debtor's Collateral at such time or times and place or
places as Collateral Agent may specify; and Collateral Agent is hereby
authorized and empowered to the extent permitted by law, with or without
the aid of process of law, to enter upon any premises where the Collateral
or any part thereof may be located and take possession of and remove the
same. Collateral Agent may thereafter sell, lease and dispose of, or cause
to be sold, leased or disposed of, all or any part of the Collateral at one
or more public or private sales, leasings or other dispositions, at such
places and times and on such terms and conditions as Collateral Agent may
deem fit. Collateral Agent agrees to give Debtors at least ten (10) days'
written notice of the date fixed for any public sale, or the date on or
after that will occur the execution of any contract for any private sale,
of any of the Collateral.
13. Application of Proceeds.
If an Event of Default shall occur and be continuing, the proceeds of any
sale, lease or other disposition of all or any part of the Collateral under this
Agreement and all other sums realized by Collateral Agent pursuant to this
Agreement shall be applied in the following order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or realization, including reasonable compensation to Collateral
Agent's counsel, and all reasonable expenses, liabilities and advances made or
incurred by Collateral 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 Agreement (except any taxes or liens to which the
respective sale, lease, disposition or realization shall have been subject) and
to the payment of expenses incurred and the reimbursement of payments made by
Collateral Agent pursuant to Section 6(g);
Second: To the reimbursement (whether to Collateral Agent or Noteholders)
of any liabilities, obligations, losses, damages, penalties, costs, expenses
fees or disbursements that are the subject of indemnification obligations
pursuant to Section 6(e) or Section 11;
Third: To the payment of the remainder of the Obligations, pro rata among
Noteholders; and
Fourth: Upon payment in full of the Obligations, the balance, if any, to
any Debtor or to such other Person(s) as may lawfully be entitled to the
remainder or as any court of competent jurisdiction may direct.
14. Remedies Cumulative.
No failure or delay on the part of Collateral Agent in exercising, and no
course of dealing with respect to, any rights, power or remedy under this
Agreement, and no notice or demand that may be given to or made upon any Debtor
with respect to any such right, power or remedy, shall constitute a waiver
thereof or limit or impair the rights of Collateral Agent to take any other or
similar action or to exercise any other right, power or remedy granted in this
Agreement or otherwise available to Collateral Agent; nor shall any single or
partial exercise of any rights, power or remedy granted under this Agreement
include any other or further exercise thereof or the exercise of any other
right, power or remedy granted in this Agreement or otherwise available to
Collateral Agent or prejudice its rights against any Debtor in any respect. Each
and every remedy of Collateral Agent shall be cumulative and shall not be
exclusive of any other remedies provided now or hereafter at law, in equity or
otherwise.
15. Further Assurances.
Debtors shall, at their own cost and expense (except as otherwise stated
below) cause this Agreement, and any and all additional instruments that shall
be executed pursuant to the terms hereof, to be kept, filed and recorded, at all
times, in such places in the United States and such places outside the United
States to which any of the Aircraft shall be operated as shall be required in
order to perfect and preserve the rights of Collateral Agent hereunder and
furnish to Collateral Agent an opinion or opinions of counsel and, without
limitation of any of the foregoing, at the request of Collateral Agent, promptly
correct any defect, error or omission that may at any time hereafter be
discovered in the contents of this Agreement or in the execution, acknowledgment
or delivery hereof, and will execute, acknowledge and deliver to Collateral
Agent such further documents and assurances and take such further action as
Collateral Agent may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Agreement and to establish
and protect the rights and remedies created or intended to be created in favor
of Collateral Agent hereunder. Without limiting anything set forth above,
Debtors shall promptly file and record such financing statements, continuation
statements and other instruments or documents with respect to the lien and
security interest created hereby as Collateral Agent may reasonably deem
necessary or appropriate fully to perfect the lien and security interest, or
fully to protect its interests, hereunder. Debtors hereby authorize Collateral
Agent to file initial financing statements, amendments and continuation
statements in any jurisdiction that Collateral Agent believes is necessary to
perfect its security interest in the Collateral.
16. Termination of Agreement; Release of Collateral.
This Agreement and the security interest granted under this Agreement shall
terminate at the earlier of the date determined pursuant to Section 7 above or
the date when the Obligations shall have been irrevocably paid in full (or the
Obligations shall have been reduced to zero by
conversion, redemption and/or payment of the Notes). In the event that a Debtor
exchanges or sells Collateral pursuant to clause (3), (4), (5) or (6) of Section
3(a)(x) above, Collateral Agent's liens and security interests on or in such
Collateral shall automatically terminate. Upon termination of this Agreement or
termination of Collateral Agent's security interest in Collateral pursuant to
this Section 16, Collateral Agent shall execute and deliver to Debtors at
Debtors' expense, such instruments of release and termination as shall be
appropriate in order to effect such termination.
17. Miscellaneous.
Any provision of this Agreement which shall be 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 applicable law, Debtors hereby
waive any provision of law that renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by Debtors and Collateral Agent. The captions in this Agreement
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
18. Governing Law.
This Agreement shall be construed and enforced in accordance with, and
governed by the internal laws of the State of Wisconsin, without reference to
any principles of conflict of laws or choice of laws. All terms not otherwise
defined have the meanings assigned to them by the Act or by Articles 1 and 9 of
the Uniform Commercial Code of the State of Wisconsin, as it may be amended,
reenacted or otherwise in effect from time to time. Invalidity of any provision
of this Agreement shall not affect the validity of any other provision.
19. Amendment.
Any amendment or modification of this Agreement and any release of
Collateral from Collateral Agent's lien or security interest under this
Agreement (other than pursuant to Sections 7 and 16 hereof) must be made in
writing and signed by Collateral Agent, Required Noteholders and Debtors;
provided, however, that no amendment, modification or release shall, unless made
in writing and signed by Collateral Agent, all Noteholders, Holdings and
Debtors, do any of the following:
a. Amend or modify this Section 19 or the definition of "Required
Noteholders";
b. Amend or modify Section 13 regarding distribution of proceeds of
disposition of Collateral.
20. Notice.
Any notices required or permitted to be given under the terms of this
Agreement must be sent by certified or registered mail (return receipt
requested), or delivered personally or by courier to the respective address of
Debtors, Noteholders and Collateral Agent, each as set forth on the signature
pages hereof.
21. Persons Bound.
This Agreement benefits Collateral Agent, Noteholders, and their respective
successors and assigns, including every holder or owner of any of the
Obligations, and binds Debtors and their permitted successors and permitted
assigns. Debtors may not assign this Agreement without the prior written consent
of Collateral Agent.
22. Consent to Jurisdiction.
Notwithstanding anything to the contrary in this Agreement or any other
agreement between any of Debtors, Collateral Agent and Noteholders prior to the
date hereof, each Debtor, Collateral Agent and each Noteholder, to the extent it
may do so under applicable law, for purposes hereof, hereby:
(i) irrevocably submits itself to the non-exclusive jurisdiction of the
courts of the State of Wisconsin sitting in the City of Milwaukee, County of
Milwaukee, and to the non-exclusive jurisdiction of the U.S. District Court for
the Eastern District of Wisconsin, and to the non-exclusive jurisdiction of the
courts of the State of New York sitting in the City of New York, Borough of
Manhattan, and to the non-exclusive jurisdiction of the U.S. District Court for
the Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement, the subject matter hereof or any of
the transactions contemplated hereby brought by any of Debtors, Collateral Agent
and Noteholders, or their successors or assigns;
(ii) waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof or any of the transactions contemplated hereby may not be enforced in or
by such courts; provided that nothing in this paragraph shall be construed as a
waiver by any of Debtors, Collateral Agent or Noteholders of any right to seek
to remove any such suit, action or proceeding from a state court to a federal
court or from a federal court to a state court; and
(iii) irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such person at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof; provided that nothing in this paragraph
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
23. WAIVER OF JURY TRIAL.
EACH DEBTOR, COLLATERAL AGENT AND EACH NOTEHOLDER IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY
OR THEREBY OR THE SUBJECT MATTER OF ANY OF THE FOREGOING.
24. Execution and Delivery.
This Agreement may be executed in any number of counterparts (to include
facsimiles), and each such counterpart shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute one and the same
instrument.
25. Acknowledgement Regarding Noteholders.
Nothing contained herein, and no action taken by any Noteholder, shall be
deemed to constitute the Noteholders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Noteholders are in any way acting in concert or as a group with respect to the
Obligations or the transactions contemplated hereby, provided that the
Obligations or the transactions contemplated hereby may be modified, amended or
waived in accordance with the provisions hereof.
[Signature pages to follow]
IN WITNESS WHEREOF, the undersigned Debtors, Collateral Agent, and
Noteholders have caused this Security Agreement to be duly executed as of the
date first written above.
MIDWEST EXPRESS HOLDINGS, INC.
By:/s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
Address: 0000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxx 00000
MIDWEST AIRLINES, INC.
By:/s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
Address: 0000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxx 00000
SKYWAY AIRLINES, INC.
By:/s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
Address: 0000 Xxxx Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxx 00000
YX PROPERTIES, LLC
By:/s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
Address: 0000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxx 00000
SF CAPITAL PARTNERS, LTD.
By: Staro Asset Management, LLC, its
investment manager
/s/ Xxxxxxx X. Xxxx
----------------------------------------
By: Xxxxxxx X. Xxxx
Its: Managing Member
Address: 0000 Xxxxx Xxxx Xxxxx
Xx. Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
[SIGNATURE PAGES OF NOTEHOLDERS OMITTED]
NOTEHOLDERS
[NAME OF NOTEHOLDER]
*BY:
--------------------------------------
By:
--------------------------------------
Name:
Title:
SCHEDULE A
NOTEHOLDERS
[SCHEDULE OF NOTEHOLDERS OMITTED]
SCHEDULE B
AIRCRAFT
CARRIER MANUFACTURER MODEL MANUFACTURER SERIAL NUMBER U.S. REGISTRATION
NUMBER
------------------------------------------------------------------------------------------------------------------
Midwest Airlines, XxXxxxxxx Xxxxxxx DC-9-81 48006 N812ME
Inc. (MD-81)
Midwest Airlines, XxXxxxxxx Xxxxxxx DC-9-81 48030 N804ME
Inc. (MD-81)
Midwest Airlines, XxXxxxxxx Xxxxxxx DC-9-81 48032 N806ME
Inc. (MD-81)
Midwest Airlines, XxXxxxxxx Xxxxxxx DC-9-81 48033 N807ME
Inc. (MD-81)
Midwest Airlines, XxXxxxxxx Xxxxxxx DC-9-81 48007 N813ME
Inc. (MD-81)
Midwest Airlines, XxXxxxxxx Xxxxxxx DC-9-81 48010 N814ME
Inc. (MD-81)
Midwest Airlines, XxXxxxxxx Xxxxxxx DC-9-82 48072 N810ME
Inc. (MD-82)
Midwest Airlines, XxXxxxxxx Xxxxxxx DC-9-82 48071 N809ME
Inc. (MD-82)
Skyway Airlines, Dornier 000-000 0000 N359SK
Inc.
Skyway Airlines, Dornier 000-000 0000 N360SK
Inc.
Midwest Airlines, XxXxxxxxx Xxxxxxx DC9-14 45696 N700ME
Inc.
Midwest Airlines, XxXxxxxxx Xxxxxxx DC9-32 47190 N301ME
Inc.
Midwest Airlines, XxXxxxxxx Xxxxxxx DC9-32 47102 N302ME
Inc.
Midwest Airlines, XxXxxxxxx Xxxxxxx DC9-32 47133 N401ME
Inc.
Midwest Airlines, XxXxxxxxx Xxxxxxx DC9-32 47132 N501ME
Inc.
SCHEDULE C
ENGINES
Attached to Aircraft of Type Manufacturer Model Engine Serial Number
------------------------------------------------------------------------------------------------------------------
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 718492
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 718441
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 725406
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 725624
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 725472
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 725625
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 725987
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 717871
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 696360
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 725623
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
Attached to Aircraft of Type Manufacturer Model Engine Serial Number
------------------------------------------------------------------------------------------------------------------
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 725756
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 726864
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 716739
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 696405
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 718443
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-217C 725351
DC-9-81 (MD-81) or
DC-9-82 (MD-82)
Dornier 328-300 Xxxxx & Whitney 306B PCE-CD0225
Dornier 328-300 Xxxxx & Xxxxxxx 306B PCE-CD0228
Dornier 328-300 Xxxxx & Whitney 306B PCE-CD0226
Dornier 328-300 Xxxxx & Xxxxxxx 306B PCE-CD0235
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-7B 649644
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 655098
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 654427
DC9-14, DC9-15 or
DC9-32
Attached to Aircraft of Type Manufacturer Model Engine Serial Number
------------------------------------------------------------------------------------------------------------------
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx JT8D-7B 657106
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 649373
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 666283
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 657218
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 648927
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 654619
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 654157
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 649302
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 649674
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 657758
DC9-14, DC9-15 or
XX0-00
XxXxxxxxx Xxxxxxx Xxxxx & Xxxxxxx XX0X-0X 654159
DC9-14, DC9-15 or
DC9-32
SCHEDULE D
LOCATION OF SPARE PARTS AND APPLIANCES
1. Omaha, Nebraska:
Xxxxxx Airfield
0000 Xxxxxx Xxxxx
Xxxxx, XX 00000
2. Kansas City, Missouri:
Kansas City International Airport
X.X. Xxx 00000
Xxxxxx Xxxx, XX 00000
3. Milwaukee, Wisconsin:
General Xxxxxxxx International Airport
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Midwest Airlines Hangar
000 Xxxx Xxxxx Xxx
Xxxxxxxxx, XX 00000
Skyway Airlines Hangar
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
The Tracer Corporation
0000 X. Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
The Tracer Corporation
0000 X. Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
4. Washington, D.C.
Xxxxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxxx X
Xxxxxxxxxx, XX 00000
SCHEDULE E
SLOTS
Grantor Start Time Slot Type Slot ID # Airport
----------------------------------------------------------------------------------------------------------------------
YX 0700 1146 Xxxxxx Xxxxxx Washington National
Airport ("National")
YX 1000 1230 National
YX 1000 1010 National
YX 1100 1037 National
YX 1200 1613 National
YX 1800 1066 National
YX 1900 1098 National
YX 2100 1001 National
YX 2100 1544 National
YX 2100 1588 National
YX 0630 Departure 3664(1) La Guardia Airport
YX 1030 Arrival 3234 La Guardia Airport
YX 1130 Departure 3260 La Guardia Airport
YX 1530 Arrival 3232 La Guardia Airport
YX 1800 Arrival 3009 La Guardia Airport
YX 1900 Departure 3591 La Guardia Airport
YX 2100 Arrival 3191 La Guardia Airport
YX 2200 Arrival 3584(1) La Guardia Airport
-------------------------------
(1) Debtor intends to cease to operate the flights that use this Slot
effective October 26, 2003. Debtor will surrender this Slot to the FAA effective
at that time, although Debtor believes that it could reacquire rights to this
Slot if operational needs so required.
EXHIBIT 8(a)
FORM SUPPLEMENTAL SECURITY AGREEMENT
SUPPLEMENTAL SECURITY AGREEMENT NO. ___
THIS SUPPLEMENTAL SECURITY AGREEMENT executed as of _____________, 20__,
(this "Supplemental Security Agreement"), by _____________________ ("Debtor"), a
__________________________ having its chief place of business at 0000 Xxxxx
Xxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxxxxx 00000, in favor of Collateral Agent for the
benefit of Noteholders under that certain Security Agreement, dated as of
September 29, 2003 (the "Agreement"), by Midwest Express Holdings, Inc., a
Wisconsin corporation, Midwest Airlines, Inc., a Wisconsin corporation; Skyway
Airlines, Inc., a Delaware corporation; YX Properties, LLC, a Nebraska limited
liability company; _________________ as agent for the benefit of the parties
identified on Schedule A thereto (the "Noteholders"); and Noteholders.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to them in the Agreement.
WHEREAS, Debtor has heretofore executed and delivered to Collateral Agent
the Agreement covering the property of Debtor therein described, to secure the
due and punctual payment and performance of the Obligations;
WHEREAS, the Agreement was duly recorded with the Federal Aviation
Administration in Oklahoma City, Oklahoma, on _____________, 2003, as Conveyance
No. ___, pursuant to the Act;
WHEREAS, Debtor is the legal and beneficial owner of each of the Engines
(defined below), free and clear of all liens and encumbrances except Permitted
Liens, and desires to execute and deliver this Supplemental Security Agreement
for the purpose of specifically subjecting said Engines to the lien of the
Agreement;
WHEREAS, Debtor is an air carrier certificated under Section 401 of the
Act, and holds air carrier operating certificates; and
WHEREAS, all things necessary to make this Supplemental Security Agreement
valid, binding and legal obligation of Debtor, including all proper corporate
action on the part of the Debtor, have been done and performed and have
happened.
NOW, THEREFORE, to secure the payment and performance of the Obligations,
Debtor hereby mortgages to Collateral Agent a security interest in, for the
ratable benefit of Noteholders, the following engine(s) (the "Engines"):
Manufacturer Model Manufacturer's
Serial Number
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
This Supplemental Security Agreement shall be construed and enforced in
accordance with, and governed by the internal laws of the State of New York,
without reference to any principles of conflict of laws or choice of laws.
This Supplemental Security Agreement shall be construed as supplemental to
the Agreement and shall form a part thereof, and the Agreement is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned has caused this Supplemental Security
Agreement to be duly executed, as of the day and year first above written.
[CARRIER]
-------------------------------------------------
By:
Its:
