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SECURITY AGREEMENT
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This SECURITY AGREEMENT dated as of August 1, 1997 (this "Agreement") is by
and between TOWER AIR, INC., ("Debtor"), and TRANSAMERICA BUSINESS CREDIT
CORPORATION (together with its successors and assigns, the "Secured Party").
WITNESSETH:
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WHEREAS, Debtor is the owner of the eight (8) Xxxxx & Xxxxxxx JT9D engines
described herein and desires to have Secured Party provide it with a loan on the
terms provided herein, the proceeds of which will be applied to refinance the
indebtedness currently existing with respect to such engines and for other
corporate purposes; and
WHEREAS, Secured Party has required as a condition to the making of its
Loan (as defined below) that Debtor grant to Secured Party a security interest
in the Collateral (as defined below) to secure Debtor's obligations to Secured
Party in connection with the Engine Notes (as defined below); and
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants contained herein, the parties hereto agree as follows:
1. Definitions: The following definitions apply to the Agreement:
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a. "Aggregate Original Amount" means $9,000,000.
b. "Business Day" means any day other than a day on which banking
institutions in Chicago, Illinois or New York City, New York are
authorized by law to close.
c. "Collateral" means (i) each Engine, (ii) all attachments,
replacements, substitutions, accessions and additions to each Engine
(including any Part thereof) whether now owned by Debtor or hereafter
acquired, (iii) proceeds (including any proceeds of a sale or lease or
any revenue or income from the disposition of any of the Collateral
and any insurance and requisition proceeds) therefrom, (iv) all right,
title, interest, claims and demands of Debtor, in to and under any
purchase agreement, any bills of sale and any other agreement entered
into by Debtor with respect to the Engines or any other Collateral,
and (v) the Other Collateral.
[Security Agreement]
d. "Closing Date"means the date on which the conditions precedent
specified in Article 4 herein have been satisfied (or waived in
writing by Secured Party) and Secured Party has made the Loan.
e. "Default" means an event which, with the passage of time or the giving
of notice or both, would constitute an Event of Default.
f. "Documents" means this Agreement (and any supplements hereto), each
Engine Note, the Other Security Agreements and any other documents
entered into in connection with the transactions contemplated hereby
or under the Other Security Agreements.
g. "Engine" means and includes (i) each of the (A) two Xxxxx & Xxxxxxx
Model JT9D-7J engines; (B) four (4) Xxxxx & Whitney Model JT9D-7A
engines; (C) one (1) Xxxxx & Xxxxxxx Model JT9D-7AH engine; and (D)
one (1) Xxxxx & Whitney Model JT9D-7Q3 secured hereby as more
particularly described in a security agreement supplement in
substantially the form of Attachment 1 hereto (which has 750 or more
rated take-off horsepower or the equivalent thereof) and (ii) any and
all Parts related thereto.
h. "Engine Note" means one or more certain promissory notes dated the
Closing Date and executed by Debtor to Secured Party, the form of
which is attached hereto as Attachment 2. The Engine Notes are
referred to individually as a 'Note" and collectively as the "Notes."
i. "Engine Original Amount" means, originally, $2,300,400 with respect to
that certain Xxxxx & Xxxxxxx model JT9D-7J Engine with serial number
662323; $2,092,500, with respect to that certain Xxxxx & Whitney model
JT9D-7J Engine with serial number 686106; $678,600 with respect to
that certain Xxxxx & Xxxxxxx model JT9D-7A Engine with serial number
662993; $482,400 with respect to that certain Xxxxx & Whitney model
JT9D-7AH Engine with serial number 662270; $612,000 with respect to
that certain Xxxxx & Xxxxxxx model JT9D-7A Engine with serial number
662550; $612,000 with respect to that certain Xxxxx & Whitney model
JT9D-7A Engine with serial number 662338; $571,500 with respect to
that certain Xxxxx & Xxxxxxx model JT9D-7A Engine with serial number
662838; $1,650,600 with respect to that certain Xxxxx & Whitney model
JT9D-7Q3 Engine with serial number 702083.
j. "Event of Default" has the meaning specified in Article 10.
k. "Event of Loss" means, with respect to any Engine, any of the
following events with respect to such property: (i) the loss of such
property or the use thereof due
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to the destruction of or damage to such property which renders repair
uneconomic or which renders such property permanently unfit for normal
use for any reason whatsoever; (ii) any damage to such property which
results in an insurance settlement with respect to such property on
the basis of a total loss, or a constructive or compromised total
loss; (iii) the theft or disappearance of such property; (iv) the
confiscation, condemnation, or seizure of, or requisition of title to,
or use of, such property by any governmental or purported governmental
authority, which in the case of any requisition of use of such
property referred to in such clause (iv) shall have resulted in the
loss of possession of such property by Debtor for a period in excess
of ninety (90) consecutive days; and (v) as a result of any law, rule,
regulation, order or other action by the FAA or other governmental
body asserting jurisdiction over such property, use of such property
in the normal course of the business of air transportation shall have
been prohibited for a period of ninety (90) consecutive days.
l. "Event of Loss Prepayment Fee" means, with respect to any prepayment
of all or a portion of the Engine Notes due solely to an Event of Loss
with respect to such Engine, 0.5% of the then outstanding Principal
Amount of the Engine Notes to be prepaid.
m. "Interest Period" means the successive periods through the term of the
Loan commencing on (and including) the Closing Date to (but excluding)
the immediately following Payment Date and thereafter from (and
including) such Payment Date to (but excluding) the immediately
following Payment Date.
n. "Interest Rate" has the meaning specified in Article 2(d) hereof.
o. "Loan" has the meaning specified in Article 2(a) hereof.
p. "Obligations" means (a ) the amount of principal and interest (if any)
and the Prepayment Fee (if any) and all other amounts due and owing,
from time to time, on the Engine Notes outstanding from time to time
(b) any and all additional amounts and other sums at any time due and
owing from or required to be paid by Debtor under this Agreement or
any other Document; (c) any expenses (including, but not limited to,
reasonable attorneys fees) incurred by Secured Party in enforcing its
rights hereunder; and (d) any other covenants, duties, agreements and
obligations of Debtor to Secured Party hereunder or under any other
Document.
q. "Other Collateral" means, with respect to any Other Security
Agreement, the "Collateral" described under such Other Security
Agreement.
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r. "Other Security Agreement" means each of (i) that certain Security
Agreement entered into as of February 18, 1997 between Debtor and
Lender; (ii) that certain Security Agreement entered into as of March
7, 1997 between Debtor and Lender; and (iii) any other agreement
pursuant to which Secured Party provides Debtor with a loan secured
by, among other things, the Other Collateral.
s. "Parts" means any and all appliances, parts, instruments,
appurtenances, accessories, furnishings, quick engine change kits and
other equipment of whatever nature (other than complete Engines or
Engine) which are from time to time incorporated or installed in or
attached to any Engine or which have been removed therefrom but where
title to which remains vested in the Debtor in accordance with Article
6 hereof.
t. "Payment Date" has the meaning specified in Article 2(b) hereof.
u. "Prepayment Fee" has the meaning specified in Article 2(c)(iv) hereof.
v. "Prime Rate" has the meaning specified in Article 2(d) hereof.
w. "Principal Amount" means, originally, the Aggregate Original Amount
and thereafter the amount of principal unpaid from time to time under
the Engine Notes.
x. "UCC" means Uniform Commercial Code as enacted in the State of
Illinois, as amended at the time in question.
2. Amount and Terms of Loan
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(a) Loan. Subject to the terms and conditions hereof, Secured Party
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agrees to make a loan to Debtor on the Closing Date, which loan shall be in an
aggregate principal amount of $9,000,000 (the "Loan"). In order to induce the
Secured Party to make its Loan available hereunder, the Debtor has agreed to pay
the Secured Party a fee equal to $80,000 (the "Loan Fee"). Whether or not the
transactions contemplated hereby shall be consummated on the Closing Date, the
Debtor agrees that the Loan Fee will be earned by the Secured Party as a
processing fee; provided, however, that if the transactions contemplated hereby
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shall fail to be consummated solely due to Secured Party's failure to provide
the Loan after satisfaction of all other conditions precedent set forth herein,
Secured Party agrees to refund the Loan Fee less an amount equal to the costs
and expenses (including, without limitation, legal fees and expenses and the
fees of the appraiser who prepared the appraisal referred to in Section 4(s)
hereof) incurred by the Secured Party in connection with the negotiation and
documentation of the transactions contemplated hereby.
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(b) Engine Notes. On the Closing Date, Debtor will furnish to Secured
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Party an Engine Note substantially in the form of Attachment 2 hereto, dated the
Closing Date and in the Aggregate Original Amount. Secured Party is hereby
authorized to record the date and amount of each payment applied to principal
and interest on the Engine Notes on the schedule annexed to and constituting a
part of the Engine Notes, and any such recordation shall constitute prima facia
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(but not conclusive) evidence of the accuracy of the information so recorded.
No failure to make any such notations shall affect the validity of Debtor's
obligations to repay the full unpaid principal amount of the Engine Notes or the
duties of Debtor hereunder or thereunder. Each Engine Note shall be stated to
be repaid in eighteen (18) equal consecutive monthly principal installments
commencing September 1, 1997 and the 1st day of each month thereafter (each, a
"Payment Date) as set forth in Annex A to such Engine Notes. Accrued and unpaid
interest shall be due and payable on each Payment Date.
(c) Prepayments.
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(i) Debtor may prepay all (but not less than all) of any
outstanding Engine Note by payment of 100% of the outstanding Principal
Amount of such Engine Note and accrued interest thereon to the date of such
prepayment plus the Prepayment Fee, together with all other amounts due
hereunder and under the Engine Notes and the other Documents; provided,
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that Debtor will provided Secured Party at least 30 days' prior irrevocable
written notice of any such prepayment (which notice shall specify the date
of prepayment and the principal, interest and Prepayment Fee to be paid on
such date).
(ii) If an Event of Loss with respect to any Engine shall occur,
then on the date on which Debtor is required to make payment of the amounts
specified in Article 9 hereof, Debtor shall pay to Secured Party a portion
of the outstanding Principal Amount equal to the product obtained by
multiplying (i) the aggregate outstanding principal amount of the Engine
Notes by (ii) a fraction (x) the numerator of which is the Engine Original
Amount with respect to the Engine that suffered the Event of Loss and (y)
the denominator of which is an amount equal to (1) the Aggregate Original
Amount less (2) the Engine Original Amount with respect to any Engine that
has previously suffered an Event of Loss and accrued interest thereon to
the date of such prepayment plus the Prepayment Fee, together with all
other amounts due hereunder and under such Engine Note.
(iii) Debtor shall pay, with respect to each Engine Note, the
principal amount of such Engine Note on the dates and in the amounts set
forth in Annex A to such Engine Note.
(iv) As used herein, "Prepayment Fee" means either, (A) with respect
to any prepayment of all or a portion of the Engine Notes due solely to an
Event of Loss with respect to an Engine, an amount equal to the Event of
Loss Prepayment Fee or (B) with respect to any other prepayment of all or a
portion of the Engine Notes, an amount equal
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[Security Agreement]
to (i) 2% of the then outstanding Principal Amount of the Engine Notes to
be prepaid if such prepayment occurs on or prior to the First anniversary
of the Closing Date or (ii) 1% of the then outstanding Principal Amount of
the Engine Note if such prepayment occurs at any time thereafter.
(v) Amounts prepaid on account of the Loan may not be reborrowed.
(vi) No Engine Note may be prepaid in whole or in part except in
accordance with this Article 2(c) or in connection with the exercise of
remedies by Secured Party hereunder.
(d) Interest Rate and Payment Dates. (a) Each Engine Note shall bear
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interest at a rate with respect to each Interest Period equal to the lesser of
(a) as of any date of determination, the highest published prime rate which
appears in the Money Rates section of The Wall Street Journal on the Closing
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Date (with respect to the first Interest Period) and three Business Days prior
to each Payment Date (with respect to each subsequent Interest Period) (the
"Prime Rate") plus two and three quarters (2-3/4) percent per annum (calculated
on the basis of a 360-day year comprised of twelve 30-day months) and (b) the
maximum rate allowed under applicable law (the "Interest Rate") on the unpaid
principal amount thereof from time to time outstanding, payable in arrears on
each Payment Date until maturity. In the event that a court determines that
Secured Party has received interest hereunder in excess of the maximum amount
permitted by law, (i) Secured Party shall apply such excess to any unpaid
principal owed by Debtor to Secured Party or, if the amount of such excess
exceeds the unpaid balance of such principal, Secured Party shall promptly
refund such excess interest to the Debtor (ii) the provisions hereof shall be
deemed amended to provided for such permissible rate. All sums paid, or agreed
to be paid, by Debtor which are, or hereafter may be construed to be,
compensation for the use, forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated, spread and allocated
throughout the full term of all such indebtedness until the indebtedness is paid
in full.
Notwithstanding the foregoing, the final payment made under the Engine
Notes shall be in an amount sufficient to discharge in full the unpaid principal
amount, and all accrued and unpaid interest on, and any other amounts due under,
the Engine Notes and the other Documents. Debtor shall pay Secured Party, on
demand, interest at the per annum rate of the Prime Rate plus seven percent
(7%), calculated on the basis of a 360-day year comprised of twelve 30-day
months on any part of the principal amount, Prepayment Fee, if any, and to the
extent permitted by applicable law, interest and any other amounts payable
hereunder or under the Engine Notes or any other Document not paid when due for
any period during which the same shall be overdue, in each case for the period
the same is overdue. Amounts shall be over due if not paid when due (whether
stated maturity, by acceleration or otherwise).
Each payment made by Debtor under the Engine Notes shall be distributed as
follows:
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First, so much of such funds as shall be required for the purpose
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shall be distributed and paid to Secured Party to pay any fees, costs,
charges, or expenses (including interest on overdue amounts and Prepayment
Fee, if any) due and payable to Secured Party hereunder or under any other
Document;
Second, if any amounts shall remain after satisfying the amounts
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specified in clause First, above, so much of such funds as shall be
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required for the purpose shall be distributed and paid to Secured Party to
pay in full the aggregate amount of interest and Prepayment Fee, if any,
then due under the Engine Notes;
Third, if any amounts shall remain after satisfying the amounts
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specified in clauses First and Second above, such remaining amounts shall
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to the extent available be applied to pay the due and owing principal
payments under the Engine Notes; and
Fourth, if any amounts shall remain after satisfying the amounts
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specified in clauses, First, Second, and Third above, so much of such funds
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as shall be required for the purpose shall be distributed and paid to
Secured Party to pay in full all other amounts due and owing to such party
hereunder or under any other Document on a pro rata basis.
(e) Payments. All payments (including prepayments) to be made by Debtor
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hereunder, under the Engine Notes, and under any other Document, whether on
account of principal, interest, fees or otherwise, shall be made without set-
off, counterclaim or withholding of any kind by wire transfer of good,
unrestricted and immediately available bank funds to Secured party's account
number 55-41948, ABA #000000000, Reference: Transamerica Equipment Finance and
Leasing, Attention: Xxx Xxxxxxx, at The First National Bank of Chicago, Xxx
Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 (or such other accounts as Secured
Party may specify to Debtor) and shall be made prior to 12:00 Noon, Chicago
time, on the due date thereof. If any payment hereunder becomes due and payable
on a day other than a Business Day, then such payment shall be made on next
succeeding Business Day and if such payment is made on the next succeeding
Business Day, no interest shall accrue on the amount of such payment during such
extension; provided, however, that any such "extension day" shall be included in
the interest calculation in connection with the next payment under the Engine
Note.
(f) Mutilation, Destruction, Loss or Theft. If any Engine Note shall
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become mutilated, destroyed, lost or stolen, Debtor shall, upon the written
request and at the expense of Secured Party execute and deliver to Secured
Party, in replacement thereof, a new Engine Note in the same face amount, with
the same designation and dated the same date as the Engine Note so mutilated,
destroyed, lost or stolen. If the Engine Note being replaced has become
mutilated, such Engine Note shall be surrendered to Debtor. If the Engine Note
being replaced has been destroyed, lost or stolen, Secured Party shall furnish
to Debtor such security or indemnity as may reasonably be required by it to save
it harmless and evidence reasonably satisfactory to Debtor of the destruction,
loss or theft of such Engine Note and the ownership thereof; provided, however,
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that if Secured Party is Transamerica Business Credit Corporation or any
institutional investor, the written undertaking of such holder delivered to
Debtor shall be sufficient security and indemnity.
3. Security Interest. In order to secure the full and complete payment
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and performance of the Obligations when due, and in consideration of the
premises and of the premises and of the covenants herein and in the other
Documents, Debtor hereby grants, transfers, assigns, bargains, sells, conveys,
mortgages, hypothecates and pledges to Secured Party a valid and perfected first
priority security interest in and lien on all right, title and interest of
Debtor in and to the Collateral. Such security interest is granted as security
only and shall not offset or modify any Obligations of Debtor with respect to
any of the Collateral or any transaction involving or giving rise thereto and
the Secured Party shall have no obligation or liability by reason of or arising
out of the assignment hereunder, nor shall the Secured Party be required or
obligated to perform or fulfill any obligations of Debtor under any other
Document.
Debtor hereby constitutes the Secured Party the true and lawful attorney of
Debtor, irrevocably, coupled with an interest and with full power of
substitution, and with full power (in the name of Debtor or otherwise) to ask
for, require, demand, and receive, any and all monies and claims for monies (in
each case including insurance and requisition proceeds) due and to be come due
under or arising out of any agreement assigned or pledged hereunder and all
other property which now or hereafter constitutes part of the Collateral, to
endorse any checks or other instruments or orders in connection there with and
to file any claims or to take any action or to institute any proceedings which
the Secured Party may deem to be necessary or advisable in the premises. Without
limiting the provisions of the foregoing and subject to the terms hereof, the
Secured Party shall have the right under such power of attorney to xxx for,
compound and give acquittance for, to accept any offer of any purchaser to
purchase the Engines as provided herein and upon such purchase to execute and
deliver in the name of and on behalf o Debtor an appropriate xxxx of sale and
other instruments of transfer relating to the Engines, when purchased by such
purchaser, and to perform all other necessary or appropriate acts with respect
to any such purchase, and in its discretion to file any claim or take any other
action or proceedings, either in its own name or in the name of Debtor or
otherwise, which the Secured Party may reasonably deem necessary or appropriate
to protect and preserve the right, title and interest of the Secured Party in
and to such rents and other sums and the security intended to be afforded
hereby.
It is hereby further agreed that any and all property described or referred
to in the definition of Collateral which is hereafter acquired by Debtor shall
ipso facto, and without any further conveyance, assignment or act on the part of
Debtor or the Secured Party, become and be subject to the lien and security
interest herein granted as fully and completely as though specifically described
herein.
4. Conditions Precedent: The agreement of Secured Party to make the Loan
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to Debtor and to enter into this Agreement and each of the other Documents to
which it is a party
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[Security Agreement]
on the Closing Date is subject to the satisfaction (or written waiver by Secured
Party) of the following conditions precedent:
(a) Secured Party shall have received each of the following documents,
duly authorized, executed and delivered by all parties thereto, in form and
substance satisfactory to the Secured Party:
(i) this Agreement and the Supplement hereto dated the Closing
Date; and
(ii) each Engine Note;
(b) the Secured Party shall have received a duly executed officer's
incumbency certificate of Debtor, in form and substance satisfactory to the
Secured Party;
(c) the Secured Party shall have received independent insurance
certificates and broker's undertaker letter, in form and substance
satisfactory to the Secured Party relating to the Engines;
(d) the Secured Party each shall have received true and complete
copies of (i) the Articles of Incorporation of Debtor; (ii) the By-laws of
Debtor; (iii) the resolutions of the Boards of Directors or other competent
authority of Debtor with respect to the due authorization of the
transactions contemplated by this Agreement and the other Operative
Documents; and (iv) good standing certificates for Debtor in the States of
Delaware and New York, certified by the Secretary of Debtor;
(e) the Secured Party shall have received the legal opinions of (i)
Hewes, Gelband, Xxxxxxx & Xxxx, counsel to Debtor and (ii) Xxxxxxxxx,
Xxxxxx & Xxxxxxxx, special counsel in Oklahoma City, Oklahoma, in each
case, in form and substance satisfactory to the Secured Party and addressed
to the Secured Party;
(f) the Secured Party shall (i) have received a preliminary July, 1997
income statement of Debtor; (ii) have received the financial statements of
Debtor as of December 31, 1996 and the related statements of earning and
cash flow of Debtor for the fiscal year and the preliminary financial
statements of Debtor as of June 30, 1997, which statements shall be
prepared in accordance with GAAP and, in the case of the annual financial
statements, accompanied by an unqualified auditor's report of a firm of
independent certified public accountants of recognized national standing
satisfactory to the Secured Party; (iii) have received satisfactory
assurances that since December 31, 1996, there has been no material adverse
change in the financial condition, business, profits, prospects or
operations of Debtor; and (iv) have determined that the financial
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[Security Agreement]
results set forth in such statements are acceptable to it (in Secured
Party's sole discretion);
(g) the Secured Party shall have received a copy, certified as true
and correct by an officer of Debtor of each approval and consent, if any,
of any governmental or other regulatory authorities in the United States,
which are necessary for the execution, performance and delivery of each of
the Documents by each of the parties thereto;
(h) the Secured Party shall have received evidence satisfactory to it
that the Engines and all other Mortgaged Property are the property of
Debtor free and clear of all Liens and adverse claims or rights and that
the Secured Party has, or will on the Closing Date have, a first priority
perfected Lien therein;
(i) no Default or Event of Default shall have occurred and be
continuing and no Event of Loss or event which, with the passage of time or
the giving of notice or both, would constitute an Event of Loss with
respect to any Engine shall have occurred;
(j) no action or proceeding shall have been instituted nor shall any
governmental action be threatened before any court or governmental agency,
nor shall any order, judgment or decree have been issued or proposed to be
issued by any court or governmental agency pertaining in any way to the
Engines or the transactions contemplated by this Agreement;
(k) there shall not have been, in the opinion of the Secured Party,
any material adverse change in the business, operations, property or
condition (financial or other) of Debtor;
(l) the representations and warranties made by Debtor in this
Agreement and each other Document shall be true and correct on and as of
the Closing Date and the Debtor shall provide a certificate of an
appropriate officer of Debtor to such effect;
(m) on the Closing Date, the following statements shall be true and
the Secured Party shall have received evidence satisfactory to it to the
effect that:
(1) Debtor has authority to operate the Engines and the aircraft
on which the Engines are installed; and
(2) this Agreement and the Supplement have been duly filed with
the FAA for recordation;
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[Security Agreement]
(n) a Uniform Commercial Code financing statement or statements
covering all the security interests created by this Agreement shall have
been executed and delivered by Debtor, and such financing statement or
statements shall have been duly filed in all places necessary or advisable,
and any additional Uniform Commercial Code financing statements deemed
advisable by the Mortgagee shall have been executed and delivered by Debtor
and duly filed;
(o) the Secured Party shall have received evidence satisfactory to it
that any Liens with respect to the Engines shall have been released and any
necessary release documentation shall have been filed with the FAA or other
applicable agency;
(p) all appropriate action required to have been taken prior to the
Closing Date by the Federal Aviation Administration or any governmental or
political agency, subdivision or instrumentality of the United States in
connection with the transactions contemplated hereby shall have been taken
and all orders, permits, waivers, authorizations, exemptions and approvals
of such entities required to be in effect on the Closing Date in connection
with the transactions contemplated hereby shall have been issued, and all
such orders, permits, waivers, authorizations, exemptions and approvals
shall be in full force and effect on the date hereof and on the Closing
Date;
(q) Secured Party shall have received proof of ownership,
satisfactory to Secured Party, from Debtor as to Debtor's ownership of the
Engines, including bills of sale for such Engines;
(r) Secured Party shall have received the current engine status
reports for each Engine, certified by a vice president of quality assurance
of Debtor as being "true, accurate and correct";
(s) the Secured Party shall have received an appraisal and inspection
report, in form and substance satisfactory to it; and
(t) the Secured Party shall have received such further documents,
instruments and agreements as it shall reasonably require in connection
with the transactions contemplated by the Documents.
5. Representations and Warranties of Debtor: Debtor represents and
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warrants that:
(a) upon the granting of the security interest hereunder (i) it has
good and marketable title to the Collateral, free and clear of all liens,
charges, mortgages, and
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[Security Agreement]
encumbrances except for the security interest granted hereby; (ii) it has
full power and authority to grant, sell, transfer, convey, mortgage, and
give security interest in the Collateral as herein provided; and (iii) it
has obtained any and all consents necessary to create said security
interest in the Collateral.
(b) this Agreement, the Notes and each of the other Documents have
been duly authorized, executed and delivered by Debtor and constitute the
legal, valid and binding obligations of Debtor, enforceable against Debtor
in accordance with their respective terms.
(c) It (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, (ii) has the power
and authority, and the legal right, to conduct the business in which it is
currently engaged, (iii) is in compliance with its organizational
documents, (iv) is in compliance with all laws, treaties, rules,
regulations and determinations of any arbitrator, court or governmental
authority applicable to or binding upon it and holds all licenses,
certificates, approvals and permits from the Federal governmental
authorities of the United States to use and operate the Engines in
accordance with this Agreement and applicable law and (v) is a "citizen of
the United States" as defined in Section 40102(a)(15) of the Federal
Aviation Act holding a carrier operating certificate issued by the
Secretary of Transportation pursuant to Section 44705 of the Federal
Aviation Act for aircraft capable of carrying ten or more individuals or
6,000 pounds or more of cargo.
(d) It has the power and authority to make, deliver and perform the
transactions contemplated in the Documents. No consent or authorization
of, filing with or notice to or approval or other act by or in respect of
any governmental authority is required in connection with the borrowing
hereunder or with the execution, delivery, performance, validity or
enforceability of the Documents except the filing of this Agreement (and
any supplements hereto) with the FAA.
(e) The execution, delivery and performance of this Agreement, the
other Documents, the borrowings hereunder and the use of the proceeds
thereof and the creation of the liens under certain of the other Documents
will not violate any laws, treaties, rules, regulations and determinations
of any arbitrator, court or governmental authority applicable to or binding
upon it or any lease, mortgage or other contract binding on Debtor or the
organizational documents of Debtor and to the best of Debtor's knowledge
will not result in, or require, the creation or imposition of any lien on
any of its or its properties or revenues.
(f) No event has occurred which constitutes, or with the giving of
notice and/or the passage of time and/or a relevant determination would
constitute, a contravention of, or default under, any lease, montage or
other contract binding on
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[Security Agreement]
Debtor. No Default or Event of Default has occurred or will occur as a
result of the consummation of the transactions contemplated hereby.
(g) There is no pending or, to the best of Debtor's knowledge,
threatened action or proceeding affecting Debtor before any court,
tribunal, governmental agency or arbitrator which may adversely affect the
financial condition or operations of Debtor or the ability of Debtor to
perform its obligations under the Documents or the Engines or any other
Collateral.
(h) The chief executive office and principal place of business (as
such terms are defined in the UCC) of Debtor are located at Xxxxxx 00, XXX
International Airport, Xxxxxxx, XX 00000.
6. Covenants: So long as the Obligations or any part thereof is
----------
outstanding, Debtor covenants that it will, as it owns cost and expense:
(a) Make due and punctual payment of the principal and interest and
Prepayment Fee, if any, on the Notes and perform all covenants and
agreements hereunder.
(b) Not permit the Collateral to become subject to any lien or
security interest of any kind or character other than the security interest
granted herein.
(c) Promptly notify Secured Party of any claim, action or proceeding
affecting title to all or any portion of the collateral, or the security
interest granted hereby, and at the request of Secured Party appear in and
defend, at Debtor's expense, any such action or proceeding.
(d) Keep the Collateral in as good condition and repair as the same
now is, ordinary wear and tear excepted.
(e) Install and keep affixed to each Engine a placard in the
following form:
"This Engine is subject to a security interest in favor of
TRANSAMERICA BUSINESS CREDIT CORPORATION, 00000 Xxxx Xxxx, Xxxxx
0000, Xxxxxx, Xxxxx, 00000"
(such placard to be replaced, if necessary, with a nameplate
reflecting the name of any successor Secured Party.)
(f) Keep the Collateral insured with policies of insurance of the
type and in the minimum amounts stated below with insurers and under terms
satisfactory to Secured
13
[Security Agreement]
Party; and, prior to the Closing Date and upon each annual anniversary
thereafter so long as the Obligations remain outstanding, Debtor will
furnish to Secured Party certificates of insurance (and a report of an
independent insurance broker, which broker and report shall be satisfactory
to Secured Party) evidencing such coverage.
(i) Comprehensive Airline Liability Insurance with an
aggregate limit of not less than Five Hundred Million Dollars
($500,000,000), naming Secured Party, its directors, officers, agents,
employees, successors and assigns as additional insureds.
(ii) Aircraft hull insurance covering all risks, ground and
flight, to the Engine in a minimum amount not less than one hundred five
percent (105%) of the principal and interest outstanding on the Engine
Notes (it being agreed and understood that when an Engine is on wing, such
minimum amount is in addition to any insurance maintained in respect of the
aircraft on which such Engine is installed and that such minimum amount is
maintained for the sole benefit of Secured Party). Such policy will
include Secured Party as first loss payee to the extent that the
Obligations are outstanding.
(iii) All risk spares insurance, including in transit
coverage, on the Engines covering any damage which may occur while in
Debtor's care, custody, and control but not then attached to an aircraft in
a minimum amount not less than the amount stated in paragraph f(ii) above.
Such policy will include Secured Party as first loss payee to the extent
that the Obligations are outstanding.
(iv) All insurance coverages listed above will include war
risk, hijack, and confiscation coverage in the amounts listed therein.
(v) All policies will provide that all insurance carriers,
including the hull insurance carrier for the Engine, waive any and all
rights of subrogation that such carriers may or could have against Secured
Party, its directors, officers, agents, and employees by virtue of such
insurance contracts.
(vi) The hull insurance deductible shall not exceed $500,000
when the Engine is on wing and $10,000 when the Engine is off wing. Any
permitted deductibles in the insurance coverage described in this Article
4(f) are the sole responsibility of Debtor and will be paid to Secured
Party by Debtor in the event of a loss or claim as Secured Party's
interests may appear.
(vii) All of the policies of insurance required of Debtor will
include breach of warranty protection in favor of Secured Party.
14
[Security Agreement]
(viii) All policies required of Debtor will provide that such
insurance will be primary insurance and that any other insurance of
Secured Party is secondary or excess insurance.
(ix) All policies will provide that Secured Party will be given
thirty (30) days prior written notice by the insurers of policy
cancellation or material change thereof except for coverages in
Article 6(f)(iv) which will require seven (7) days prior written
notice.
(x) All losses will be adjusted with Secured Party and Debtor.
(xi) All hull insurance policies will contain a fifty-fifty
(50/50) clause.
(g) Not transfer, lease, sell, assign, pledge or otherwise transfer
possession of the Collateral or any part thereof without the prior written
consent of Secured Party.
(h) Not maintain, use, service, repair, overhaul or operate the
Collateral or any aircraft on which the Collateral is installed in
violation of any law, regulation, or ordinance of any governmental
authority or in violation of any airworthiness certification, or policy of
insurance affecting the maintenance or use of such Collateral or such
aircraft.
(i) Maintain, service, repair and overhaul the Collateral so as to
keep the Engines in as good operating condition as when originally
subjected to the lien hereof and in such manner as may be necessary to
enable the applicable airworthiness certification for the Collateral to be
maintained in good standing at all times under the Federal Aviation Act,
and in substantially the same manner as Debtor maintains, services, repairs
and overhauls similar engines operated by Debtor in similar circumstances
and without in any way discriminating against the Engines.
(j) Maintain (in English) all records, logs, and other materials
required to be maintained in respect of the Engines by the FAA.
(k) Perform or cause to be performed all U.S. FAA airworthiness
directives or any other mandatory or recommended regulation, directive or
instruction (including manufacturer's changes, notices and/service
bulletins) issued by the manufacturer, the FAA or any other governmental
agency or authority asserting jurisdiction over the Engines or their use,
operation or maintenance which may from time to time be issued affecting
engines of the same type as the Engines (collectively, "Airworthiness
Directives").
(l) At all times (i) preserve and maintain in full force and effect
its existence as a Delaware corporation under the laws of the State of
Delaware and its qualification to do
15
[Security Agreement]
business in each jurisdiction in which the conduct of its business requires
such qualification, (ii) obtain and maintain in full force and effect all
consents, approvals, licenses and franchises required at any time in
connection with the registration, ownership or operation of the Engines and
its other properties and businesses and (iii) be a "citizen of the United
States" as defined in Section 40102(a)(15) of the Federal Aviation Act
holding a carrier operating certificate issued by the Secretary of
Transportation pursuant to Section 44705 of the Federal Aviation Act, for
aircraft capable of carrying then or more individuals or 6,000 pounds or
more of cargo.
(m) Promptly replace or cause to be replaced all Parts which may from
time to time become worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use for any reason
whatsoever, with replacement Parts owned by Debtor free and clear of all
liens in as good an operating condition as and having a value and utility
substantially equal to the Parts replaced assuming such replaced Parts were
in the condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from any Engine shall remain the property of
Debtor, no matter where located, until such time as such Parts shall be
replaced by Parts which meet the requirements for replacement Parts
specified above.
(n) Make such alterations and modifications in and additions to the
Engines as may be required to meet the applicable standards of the FAA or
any applicable regulatory agency or body of any other governmental body
asserting jurisdiction over the Engines.
(o) Not, without the prior written consent of Secured Party, submit
any or all of the Engines for servicing or maintenance under any engine
servicing agreement applicable to such Engine or Engines.
(p) Maintain at all times the lien of and first priority perfected
security interest created by this Agreement in the Collateral.
(q) Cause any lessor or secured party of any airframe leased to Debtor
or purchased by Debtor subject to a conditional sale or other security
agreement or any mortgagee of or any other holder of a security interest in
an airframe owned by Debtor, to expressly agree in writing (which agreement
may be contained in such lease, conditional sale or other security
agreement or mortgage) that neither it nor its successors or assigns will
acquire, as against Secured Party, any right, title or interest in an
Engine as a result of such Engine being installed on such airframe.
(r) Furnish to Secured Party:
16
[Security Agreement]
(i) As soon as practicable after the end of the first, second and
third quarterly fiscal periods in each fiscal year of Debtor, and in
any event within 60 days thereafter, duplicate copies of:
(x) a balance sheet of Debtor as at the end of such quarter
setting forth in comparative form the amount for the end of the
corresponding period of the preceding fiscal year,
(y) statements of income and retained earnings of Debtor for
such quarterly period, and
(z) statements of cash flow of Debtor for the portion of the
fiscal year ending with said quarter;
in each case prepared in accordance with generally accepted accounting
principles in the United States of America in effect from time to time
and consistently applied ("GAAP") and certified by the Chief Financial
Officer of Debtor as having been prepared in accordance with GAAP; and
(ii) As soon as practicable after the end of each fiscal year of
Debtor, and in any event within 90 days thereafter, duplicate copies
of:
(x) a balance sheet of Debtor as at the end of such year,
(y) statements of income and retained earnings of Debtor for
such year, and
(z) statements of cash flow of Debtor as at the end of such
year,
in each case prepared in accordance with generally accepted accounting
principles in the United States of America in effect from time to time
and consistently applied ("GAAP") and setting forth in each case in
comparative form the figures for the previous fiscal year and
accompanied by an unqualified auditor's report of a firm of
independent certified public accountants of recognized national
standing satisfactory to the Secured Party stating that such balance
sheet and combined and combining statements have been prepared in
accordance with GAAP;
(iii) Concurrently with the delivery of the financial
statements referred to in clauses (i) and (ii) above, Debtor will
deliver to Secured Party a certificate of Debtor, signed by the
President, a Vice President, the Chief Financial Officer or the
principal accounting officer of Debtor to the effect that the signer
is familiar
17
[Security Agreement]
with or has reviewed the relevant terms of each of the Documents and
the signer does not have knowledge of the existence, as of the date of
such certificate, of any condition or event which constitutes a
Default or an Event of Default;
(iv) Debtor shall, upon request from Secured Party, promptly
provide Secured Party with any additional information Secured Party
may deem necessary or appropriate to protect its interest in the
Engines, the Documents or any other portion of the Collateral.
(s) Not consolidate with or merge into any other corporation or
convey, transfer or lease all or substantially all of its assets as an
entirety to any person unless:
(i) the corporation formed by such consolidation or into which
Debtor is merged or the person which acquires by conveyance, transfer
or lease all or substantially all of the assets of Debtor as an
entirety (the "Successor") shall be an "air carrier" and a "citizen of
the United States", as such terms are defined in Section 40102(a) of
the Federal Aviation Act, operating under certificates issued under
Sections 41102 and 44705 of the Federal Aviation Act and shall have a
tangible net worth not less than the tangible net worth of Debtor
immediately prior to such merger, conveyance, transfer or lease;
(ii) Successor shall execute and deliver to Secured Party a duly
authorized, valid, binding and enforceable agreement in form and
substance reasonably satisfactory to Debtor containing an assumption
by the Successor of the due and punctual performance and observance of
each covenant and condition of the Documents to be performed or
observed by Debtor;
(iii) immediately after giving effect to such transaction and
as a result of giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing; and
(iv) Debtor shall have delivered to Secured Party a certificate
signed by the President or any Vice President of Debtor, and an
opinion of counsel satisfactory to Secured Party, each stating that
such consolidation, merger, conveyance, transfer or lease and the
assumption agreement mentioned in clause (ii) above comply with this
Article 6(s) and that all conditions precedent herein provided for
relating to such transaction have been complied with.
Upon any consolidation or merger, or any conveyance, transfer or lease of all or
substantially all of the assets of Debtor in accordance with this Article 6(s),
the Successor shall succeed to, and be substituted for, and may exercise every
right and power of, and shall have every obligation to the same extent as,
Debtor under this Agreement with the same effect as if such Successor had been
18
[Security Agreement]
named as Debtor herein. No such conveyance, transfer or lease of all or
substantially all of the assets of Debtor as an entirety shall have the effect
of releasing Debtor or any Successor which shall theretofore have become such in
the manner prescribed in this Article 6(s) from its liability in respect of any
Document to which it is a party.
(t) Furnish to Secured Party:
(i) Within 15 days after the end of each month and with respect
to each Engine, a maintenance status report identifying engine time
and cycles since new, since overhaul, since hot section, and since
gear box inspection (if required), a list of major components removed
for repair/overhaul during the previous month; the location of Engines
and a list of major repairs or modifications performed during the
previous month (reports under this paragraph will be based on
information and reports ordinarily compiled by and reasonably
available to Debtor).
(ii) Within 15 days after the end of each calendar month and with
respect to each Engine, a maintenance status report identifying
current status of all major time controlled or life components
relative to Debtor's approved maintenance program and schedule,
including engine/turbine wheel and discs, cooling/air cycle machines;
current status and frequency of maintenance inspections as per
Debtor's approved maintenance program; a listing of Manufacturer's
Service Bulletins that have been embodied during the previous quarter;
a listing of the Airworthiness Directives that have been embodied or
complied with during the previous month, annotated by method of
compliance (report under this paragraph will be based on information
and report ordinarily complied by and reasonably available to Debtor).
7. US Government Indemnification. Secured Party agrees to accept
-----------------------------
indemnification by the United States Government in lieu of the insurance
required pursuant to Article 6(f) so long as the Obligations are outstanding, if
Debtor is unable to provide the insurance required pursuant to Article 6(f);
provided, however, that such indemnification shall provide substantially the
same coverage as the insurance required pursuant to Article 6(f) shall not be an
Event of Default hereunder so long as such indemnification is in effect.
8. Further Agreements of Debtor. Debtor further agrees as follows:
----------------------------
(a) to defend at Debtor's own cost any action, proceeding, or claim
affecting the Collateral;
19
[Security Agreement]
(b) to pay reasonable attorneys' fees and other expenses incurred by
Secured Party in enforcing its rights (including collection rights) under
this Agreement, the Notes and the other Documents;
(c) to reimburse Secured Party for all expenses (including reasonable
attorneys' fees) incurred by Secured Party in connection with the
preparation, negotiation, review, and recordation of this Agreement and
other Documents, filing financing statements, and searches of any
appropriate records including the Federal Aviation Administration ("FAA")
records;
(d) to pay when due all taxes, assessments, license fees, and other
public or private charges when levied or assessed against the Collateral,
and the security interest of Secured Party in the Collateral, so that the
lien of and first priority perfected security interest created by this
Agreement in the Collateral shall at all times be wholly preserved at the
cost of Debtor and without expense to Secured Party;
(e) that the Collateral will be used at all times in accordance with
the laws, rules, regulations, and ordinances of the Unites States, the
several states and municipalities thereof, and any other foreign
jurisdictions in which the Collateral may be used;
(f) that under no circumstances will the Collateral be operated at any
time when the full amount of insurance required under Article 6(f) is not
in effect, or in any area excluded from coverage of any insurance in
effect, or in violation or any term of any policy of insurance in effect;
(g) that Debtor shall not change its corporate name or the location of
its chief executive office without providing at least thirty (30) business
days prior written notice thereof to Secured Party;
(h) that Debtor shall notify Secured Party within four (4) days after
each and every occasion the domicile location of the Collateral has changed
and advise of such new domicile location; for the purposes hereof domicile
location of the Collateral means the location where the Collateral is
based;
(i) that Debtor shall promptly give Secured Party notice of any Event
of Default, as hereinafter defined, or any event which, after notice or
lapse of time or both, would cause an Event of Default; and
(j) at all reasonable times, and upon at least five (5) days prior
written notice to Debtor (except during the continuance of a Default or
Event of Default when the inspections do not have to be at reasonable times
and do not require prior written notice), Secured Party may inspect the
Collateral and inspect and make copies (at Secured Party's
20
[Security Agreement]
expense) of the books and records of Debtor relating to maintenance of the
Collateral; any such inspection shall be limited to a visual, walk around
inspection and shall not include opening any panels or the like (e.g.
borescope) without the express consent of Debtor, which consent shall not
be unreasonably withheld. Debtor will give Secured Party not less than
fifteen (15) days notice of any scheduled Engine removals. The Secured
Party shall not have any duty to make any such inspection and shall not
incur any liability or obligation by reason of not making any such
inspection.
9. Event of Loss. Upon the occurrence of an Event of Loss with respect
-------------
to any Engine, Debtor shall (a) forthwith (and in any event, within ten days
after such occurrence) give the Secured Party written notice of such Event of
Loss and (b) not later than the earlier of (x) the Business Day next succeeding
the 60th day following the occurrence of such Event of Loss, to the extent not
previously paid to Secured Party as insurance proceeds, and (y) two Business
Days following receipt by Debtor of insurance/requisition proceeds, pay or cause
to be paid to Secured Party (i) that portion of the outstanding principal amount
of the Engine Notes specified in Article 2(c)(ii), (ii) that portion of accrued
and unpaid interest with respect to the principal amount to be prepaid on the
Engine Notes as of the date of prepayment specified in Article 2(c)(ii), (iii)
the Event of Loss Prepayment Fee with respect to the principal amount to be
prepaid calculated by reference to the date of the Event of Loss and (iv) all
other Obligations due and owing hereunder and under the other Documents with
respect to such Engine and the principal amount to be prepaid. At such time as
Secured Party shall have received the amount specified in the immediately
preceding sentence, together with all other amounts that then may be due
hereunder and under the other Documents (y) this Agreement shall terminate
solely with respect to the Engine which was subject to such Event of Loss and
(z) Debtor will be subrogated to all claims of Secured Party, if any, against
third parties to the extent the same relate to physical damage to or loss of
such Engine.
10. Events of Default. The occurrence of any of the following events of
-----------------
default (each, an "Event of Default"), including but not limited to the Events
of Default set forth in clause (a) below, shall permit Secured Party, by written
notice to Debtor, to declare the principal of, and accrued interest (if any) and
Prepayment Fee (if any) on the Engine Notes to be immediately due and payable in
full, whereupon the same shall immediately become due and payable in full
without presentment, demand, protest, or other notice of any kind (including
without limitation notice of intention to accelerate or notice of acceleration)
all of which are hereby waived by Debtor; provided, however, that if any of the
Events of Default set forth in clauses (a), (f) or (g) below shall occur, then
the principal of and accrued interest (if any) and Prepayment Fee (if any) on
the Engine Notes shall automatically, without any action of Secured Party,
become immediately due and payable in full, without presentment, demand, protest
or other notice of any kind( including without limitation, notice of intention
to accelerate or notice of acceleration) all of which are hereby waived by
Debtor:
21
[Security Agreement]
(a) Debtor fails to pay when due, whether at maturity, by acceleration
or otherwise, and payment of principal or interest (if any) and Prepayment
Fee (if any) on the Engine Notes or any other amount due hereunder or under
any other Document;
(b) Debtor fails to observe or perform any agreement or covenant
contained in Article 6(f), 8(d) or 8(f) above;
(c) Debtor fails to observe to perform any agreement or covenant
contained in this Agreement or the Engine Notes or any other Document
(other than an agreement or covenant contained in the provisions referred
to in Article 10(b) above) and such failure continues for ten (10) days
after written notice thereof to Debtor from Secured Party;
(d) Any statement, representation, warranty, or certificate made or
furnished by Debtor to Secured Party in connection with this Agreement, the
Engine Notes or any other Document, or as inducement to Secured Party to
enter into this Agreement or any other Document or to accept the Engine
Notes, shall have been false, incorrect, or incomplete in any material
respect when made, or shall have contained a misstatement, or shall have
omitted to state a fact necessary to make such statement, representation,
warranty, or certificate not misleading, which falsehood, misstatement or
omission shall remain at the time in question;
(e) A default occurs under any material agreement to which Debtor is a
party with third parties resulting in a right of such third parties to
declare any indebtedness thereunder due and payable before its stated
maturity, whether or not acceleration occurs;
(f) Debtor (i) becomes generally unable or admits in writing its
inability to pay its debts as they become due, (ii) makes an assignment for
the benefit of credits, (iii) is adjudicated insolvent or bankrupt, (iv)
files a petition in bankruptcy, (v) petitions or applies for the
appointment or any taking of possession by a receiver, custodian, trustee,
or liquidator of itself or of all or a substantial part of its property,
(vi) commences any proceeding relating to Debtor under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or state of any jurisdiction, whether now or hereafter in
effect;
(g) There is commenced against Debtor any proceedings described in
Article 10(f)(iv), (v) or (vi) above, and Debtor acquiesces or consents
thereto or such proceedings remain undismissed for a period of sixty (60)
days;
(h) Debtor suffers a final judgment for payment of money aggregating
in excess of $250,000 and does not discharge the same within a period of
thirty (30) days, unless execution of such judgment has been effectively
stayed or fully bonded;
22
[Security Agreement]
(i) Secured Party shall not have a first priority perfected security
interest in the Collateral; or
(j) Debtor shall default under any other agreement between Debtor and
Secured Party, including without limitation, any Other Security Agreements.
11. Remedies
--------
(a) After the occurrence of an Event of Default, Secured Party shall have
all of the rights and remedies available to a secured party under the Uniform
Commercial Code of any applicable jurisdiction, and all rights and remedies
available to it under any other law or otherwise available to it, including,
without limitation, the right to: (i) without notice, demand or legal process
enter upon any premises of Debtor and take possession of all or any part of the
Collateral, (ii) require Debtor to assemble, at Debtor's expense, the Collateral
at any place designated by Secured Party and to make the same available to
Secured Party for repossession or otherwise, and (iii) without demand of
performance and, to the extent permitted by applicable law, without notice of
instruction to sell or of time or place of sale or of redemption or other notice
or demand whatsoever to Debtor, all of which are hereby expressly waived; sell,
lease, assign, transfer, and deliver all or any part of the Collateral at public
or private sale for cash, upon credit or for other property, for immediate or
future delivery, for such price or prices and on such terms as Secured Party in
its sole discretion shall deem appropriate. Upon consummation of any such sale,
Secured Party shall have the right to assign, transfer, and deliver the
applicable Collateral to the purchaser thereof. Such purchaser at any such sale
shall hold the property so sold absolutely free from any claim or right on the
part of Debtor, and Debtor does hereby waive (to the extent permitted by law)
all rights of redemption, stay and appraisal which Debtor now has or may at any
time in the future have under any rule of law, statute, or otherwise now
existing or hereafter enacted;
(b) Any notice required to be given by Secured Party or other disposition
or other intended action by Secured Party with respect to any of the Collateral
which is deposited in the United States mails, postage prepaid and duly
addressed to Debtor at the address specified in Article 17 hereof, at least ten
(10) Business Days prior to such proposed action shall constitute fair and
reasonable notice to Debtor of any such action. Secured Party shall not be
obligated to make any sale of the Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of the Collateral may have been
given;
(c) Secured Party may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case sale
of the Collateral is made on credit or for future delivery, the Collateral so
sold may be retained by Secured Party until the sale price is paid by the
purchaser or purchasers thereof, but Secured Party shall not incur any liability
in case any such
23
[Security Agreement]
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again by Secured
Party;
(d) At any sale made pursuant to this Article 11, Secured Party may bid for
or purchase, free (to the extent permitted by law) from any right of redemption,
stay and appraisal of the part of Debtor (all said rights being hereby waived
and released to the extent permitted by law), any portion of or all the
Collateral offered for sale and may make payment on account thereof by using any
of the obligations, or any portion thereof, then due and payable to Secured
Party from Debtor as a credit against the purchase price;
(e) As an alternative to exercising the power of sale herein conferred upon
it, Secured Party may proceed by suit or suits at law or in equity to foreclose
the security interest created under this Agreement or otherwise enforce its
rights with respect to the Collateral, and sell the Collateral pursuant to
judgment or decree of any court having competent jurisdiction; and
(f) Each and every right, power and remedy given to the Secured Party
specifically or otherwise in this Agreement shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given or now
or hereafter existing at law, in equity or by statute, and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by the Secured Party, and the exercise or the beginning of the
exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Secured Party in the exercise of any right,
remedy or power or in the pursuance of any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of the
Debtor or to be an acquiescence therein.
12. Payment. Upon satisfaction in full of the Obligations, Secured Party
-------
will, at the Debtor's sole cost and expense, take such steps as are necessary to
release the Collateral. Upon payment in full of the Obligations, the security
interests granted hereby shall cease and become null and void.
13. Section 1110. It is the intention of the parties hereto that Secured
------------
Party shall be entitled to the benefits of Section 1110 of the United States
Bankruptcy Code with respect to the right to repossess the Engines and Parts as
provided herein, and in any circumstances where more than one construction of
the terms and conditions of this Agreement is possible, a construction which
would preserve such benefits shall control over any construction which would not
preserve such benefits or would render them doubtful. Debtor further agrees
that neither it nor any successor will take a contrary position in any
bankruptcy proceedings, nor will it take any action to interfere with Secured
Party's rights under such Section 1110.
14. Indemnification, Release and Waiver.
-----------------------------------
24
[Security Agreement]
(a) Debtor hereby releases, and agrees to indemnify, defend and hold
harmless, on an after-tax basis, Secured Party and its assignee, if any, their
directors, officers, employees and agents ("Indemnitee(s)") from and against any
and all liabilities, damages, losses, expenses, demands, claims, suits or
judgments of any kind whatsoever (including reasonable attorneys' fees, costs
and expenses in connection therewith or incident thereto), in any way relating
to or arising out of or which would not have occurred but for (i) this
Agreement, the other Documents or any documents contemplated hereby or thereby
or any amendments, supplements or modifications hereto or thereto (including any
misrepresentations or breach of warranty of Debtor contained herein or therein
and the breach by Debtor of any covenant or agreement contained herein or
therein) or the enforcement of any of the terms of any thereof; (ii) the
manufacture, purchase or acceptance of any Engine; (iii) any Engine whether or
not arising out of the finance, ownership, delivery, nondelivery, storage,
lease, sublease, possession, use, non-use, operation, maintenance, modification,
alteration, condition, replacement, repair, substitution, sale, return, transfer
of title or other disposition, registration, re-registration or airworthiness of
any Engine, including, without limitation, latent or other defects, whether or
not discoverable, strict tort liability and any claim for patent, trademark or
copyright infringement; (iv) any payment or prepayment of the principal of, and
interest on, or Prepayment Fee, if any, on the Engine Notes or any other amounts
payable hereunder or under the other Documents; (v) the offer, sale or delivery
of the Engine Notes (the indemnity in this clause (v) to extend also to any
person who controls an Indemnitee, its successors, assigns, employees, servants
and agents within the meaning of Section 15 of the Securities Act of 1933, as
amended); or (vi) deaths of or injuries to any persons whomsoever, and for the
loss of, damage to, delay in delivery of or destruction of any property
whatsoever (including without any limitation the Collateral, and any property
installed on or contained in the Collateral), in any manner arising out of or in
any way connected with the Collateral sold hereunder or the use of any such
Collateral by Debtor, or by Debtor's assignees, or by any third party with
Debtor's consent, regardless of the negligence, active or passive, of any
Indemnitee, except to the extent caused by the willful or wanton misconduct of
any Indemnitee. Debtor will, at the request of Secured Party, negotiate any
claim or defend any action or suit brought against Secured Party, based upon any
matters for which Debtor has indemnified any Indemnitee as hereinabove provided.
(b) IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY REASON FOR SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SUCH AS LOST REVENUES, LOST PROFITS, OR
LOSS OF PROSPECTIVE ECONOMIC ADVANTAGE.
(c) It is intended that Debtor shall pay all costs and expenses of every
character, whether foreseen or unforeseen, ordinary or extraordinary or
structural or nonstructural, in connection with the use, operation, maintenance,
repair, replacement of Parts, taxes and required alterations and modifications
of, on or in respect of the Engines by Debtor, including the costs and expenses
particularly set forth in this Agreement and the other Documents. The principal
amount of, all interest on and Prepayment Fee, if any, with respect to the
Engine Notes and all other amounts which Debtor is obligated to pay shall be
paid without notice or demand and without set-
25
[Security Agreement]
off, counterclaim, abatement, suspension, deduction or defense or any other
right which Debtor may have against Secured Party for any reason whatsoever.
(d) Except as otherwise expressly provided, this Agreement shall not
terminate, nor shall Debtor have any right to terminate this Agreement or the
other Documents or be entitled to abatement, suspension, deferment or reduction
of the principal amount of, any interest on, or Prepayment Fee, if any, or other
amount which Debtor is obligated to pay hereunder or thereunder, nor shall the
obligations hereunder of Debtor be affected, by reason of (A) any damage to or
the destruction or loss of al or any portion of any Engine or Part from whatever
cause, (B) the loss, theft or inaccessibility of any portion of any Engine or
Part, (C) the taking of any Engine or Part or any portion thereof by
condemnation, confiscation, requisition or otherwise, (D) the prohibition,
limitation or restriction of Debtor's use of all or any part of any Engine or
Part, or the interference with such use by any person, (E) the inadequacy or
incorrectness of the description of any portion of any Engine or Part, (F)
Debtor's ownership of all or any part of any Engine or Part, (G) any defect in
compliance with specifications, condition, merchantability, design,
airworthiness, quality, durability, operation or fitness for use or any purpose
of any Engine or Part or any portion thereof, (H) any defect in the tiel to, or
registration of or the existence of any liens or rights of others whatsoever
with respect to, any Engine or Part or any portion thereof, (I) any insolvency,
bankruptcy, reorganization or similar proceedings by or against Debtor or any
other person, (J) any breach, default or misrepresentation by the Secured Party
under this Agreement or any other Document or any of the documents referred to
herein or therein, (K) any invalidity or unenforceability, in whole or in part,
of this Agreement or any other Document or any of the documents referred to
herein or therein, or any other infirmity herein or therein, or any lack of
power or authority of any party to this Agreement or any other Document or any
such documents to enter into the same or any termination of this Agreement by
operation of law, or (L) any other circumstance, happening or act whatsoever,
whether or not foreseen or similar to any of the foregoing, it being the
intention of the parties hereto that the obligations of Debtor shall be absolute
and unconditional and shall be separate and independent covenants and agreements
and shall continue unaffected unless and until the covenants have been
terminated pursuant to an express provision of this Agreement.
Except as expressly provided herein, Debtor waives all rights now or
hereafter conferred by law (x) to quit, terminate, rescind or surrender this
Agreement or any Engine or any part thereof, or (y) to any abatement,
suspension, deferment, return or reduction of the outstanding principal amount
of the Engine Notes, accrued and unpaid interest thereon, or Prepayment Fee, if
any.
15. Other Documents and Further Assurances.
--------------------------------------
(a) Secured Party shall be entitled at any time to file a financing
statement or the Agreement or a facsimile or other reproduction of the Agreement
as a financing statement, but the failure of Secured Party to do so shall not
impair the validity or enforceability of the Agreement.
26
[Security Agreement]
Debtor will execute, at the closing, a UCC-1 form applicable to the transaction.
Debtor will reimburse Secured Party for all documentary stamp taxes, filing
fees, and recording fees associated with the perfection of Secured Party's
security interest in the Collateral.
(b) Debtor shall, from time to time, do and perform such other and further
acts and execute and delivery such other instruments as may be required by law
or reasonably requested by Secured Party, including a UCC-1 financing statement,
to establish, maintain or protect Secured Party's rights and remedies or to
carry out and effect the intent and purpose of this Agreement.
(c) Debtor agrees that it will execute and deliver all amendments or
supplements to this Agreement and the Other Security Agreements in order to
effectuate the intent of the parties hereto to cross-collateralize this
Agreement and the Other Security Agreements.
(d) Secured Party may carry for its own account at its sole cost and
expense insurance with respect to its interest in the Engines.
16. Choice of Law. THE TERMS AND PROVISIONS OF THIS AGREEMENT WILL BE
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF ILLINOIS.
THIS AGREEMENT HAS BEEN DELIVERED IN CHICAGO, ILLINOIS. EACH OF DEBTOR AND
SECURED PARTY HEREBY (I) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO
ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT OR THE
OTHER DOCUMENTS; (II) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED IN XXXX COUNTY, ILLINOIS, OVER ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT OR THE
OTHER DOCUMENTS; (III) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
ANY SUCH ACTION OR PROCEEDING; (IV) AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW;
AND (V) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST ANY OTHER
PARTY HERETO OR ANY OF SUCH PARTY'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT IN
ANY COURT OTHER THAN ONE LOCATED IN XXXX COUNTY, ILLINOIS.
27
[Security Agreement]
17. Notices. Notices under the terms of this Agreement will be in writing
-------
and sent by prepaid certified mail, return receipt requested, or by telegram,
telex, or facsimile to the following:
To Secured Party: TRANSAMERICA BUSINESS CREDIT CORPORATION
Equipment Finance and Lease Division
00000 Xxxx Xxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: IFG Region Manager and Legal Department
Fax: (000) 000-0000
With a copy to: VEDDER, PRICE, XXXXXXX & KAMMHOLZ
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
To Debtor: TOWER AIR, INC.
Hangar #00
XXX Xxxxxxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn: Vice President, Maintenance & Engineering
Facsimile: 000-000-0000
(or such other address as either party shall inform the other party). Notices
will be effective on the first Business Day following receipt thereof. Notices
sent by certified mail will be deemed received on the date of delivery as
indicated on the return receipt; notices sent by telegram, telex or facsimile
will be deemed received on the date transmitted.
18. Waiver. No waiver by either party of any default or breach by the
------
other party of any provision of this Agreement will operate as or be deemed a
waiver of any subsequent default or breach.
19. Assignment. Debtor shall not assign this Agreement, in whole or in
----------
part, to anyone for any purpose. Secured Party, without the consent of Debtor,
may from time to time assign all or any portion of its right, title and interest
in and to this Agreement, including but not limited to the Engine Notes, or
grant an interest in or assign all or any portion or portions of its security
interest in this Agreement and the Collateral, in whole or part, to various
assignees, their agents or trustees (each and any one hereinafter referred to as
an "Assignee"). Any such Assignee shall have all of the assigned rights of
Secured Party under this Agreement. Any assignment of any of Secured Party's
right, title or interest in this Agreement or the Collateral shall be effective
without notice to or consent of Debtor. DEBTOR AGREES THAT, UPON NOTICE OF
28
[Security Agreement]
ASSIGNMENT AND IF SO INSTRUCTED, IT SHALL PAY DIRECTLY TO THE ASSIGNEE OR ITS
TRUSTEE OR AGENT, WITHOUT ABATEMENT, DEDUCTION OR SET-OFF, ALL AMOUNTS WHICH
BECOME DUE HEREUNDER. DEBTOR FURTHER AGREES THAT IT SHALL NOT ASSERT AGAINST
ANY ASSIGNEE, TRUSTEE OR AGENT ANY DEFENSE, CLAIM, COUNTERCLAIM OR SET-OFF ON
ACCOUNT OF ANY REASON WHATSOEVER WITH RESPECT TO ANY PAYMENTS OR OTHER AMOUNTS
DUE HEREUNDER OR WITH RESPECT TO ANY ACTION BROUGHT TO OBTAIN POSSESSION OF THE
ENGINE PURSUANT TO THIS AGREEMENT.
20. Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which will be deemed to be an original but which
together shall constitute one and the same instrument. A facsimile signature on
any counterpart hereto will be deemed an original for all purposes.
21. Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction.
22. Amendments. This Agreement may be changed, modified or amended from
----------
time to time only by express written agreement of the parties executed by their
authorized representatives.
23. Entire Agreement. This Agreement constitutes the entire agreement and
----------------
understanding of the parties hereto with respect to the transactions
contemplated hereby, supersedes any and all prior agreements and understandings
related to the subject matter hereof, and may not be modified or amended except
in writing signed by all of the parties hereto. The attachments hereto form an
integral part of this Agreement. If there is any actual or apparent conflict
between the term of any attachments hereto and the body of this Agreement, the
provisions of the attachment shall apply.
24. Headings. The headings contained in this Agreement are inserted for
--------
convenience of reference only and will not affect the meaning or interpretation
of this Agreement.
25. Payment of Expenses and Taxes. Regardless of whether or not the
-----------------------------
transactions contemplated hereby are consummated, Debtor agrees (a) to pay or
reimburse the Secured Party for all of its out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of this
Agreement and the Engine Notes and the other Documents and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of special counsel to the Secured Party, of
FAA counsel and of the appraiser
29
[Security Agreement]
who prepared the appraisal referred to in Section 4(s) hereof, (b) to pay or
reimburse the Secured Party for all of its out-of-pocket costs and expenses
incurred in connection with any amendment, supplement or modification to this
Agreement, the Engine Notes, and the other Documents, including without
limitation, the reasonable fees and disbursements of their respective counsel,
(c) to pay or reimburse the Secured Party for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement, the Engine Notes, the other Documents and any such other
documents, including, without limitation, reasonable fees and disbursements of
their respective counsel, and (d) to pay, indemnify, and hold the Secured Party
harmless from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the Engine Notes, the other
Documents and any such other documents. The agreements in this Section 25 shall
survive repayment of the Engine Notes and all other amounts payable hereunder.
* * *
30
[Security Agreement]
IN WITNESS WHEREOF, the Debtor and the Secured Party have executed this
Security Agreement as of the day and year first above written.
TOWER AIR, INC.,
Debtor
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------
Its: CFO/VP Finance
---------------------------------
TRANSAMERICA BUSINESS CREDIT
CORPORATION,
Secured Party
By:
----------------------------------
Its:
---------------------------------
[Security Agreement]
IN WITNESS WHEREOF, the Debtor and the Secured Party have executed this
Security Agreement as of the day and year first above written.
TOWER AIR, INC.,
Debtor
By:
----------------------------------
Its:
---------------------------------
TRANSAMERICA BUSINESS CREDIT
CORPORATION,
Secured Party
By: /s/ Xxxx X. Fate
----------------------------------
Its: Senior Vice President
---------------------------------
SECURITY AGREEMENT SUPPLEMENT NO. 1
-----------------------------------
Security Agreement Supplement No. 1 dated August 6, 1997 Tower Air, Inc., a
Delaware corporation having its general office at Xxxxxx 00, XXX
International Airport, Jamaica, New York 11430 (the "Debtor") and
Transamerica Business Credit Corporation, a Delaware corporation with
offices at 00000 Xxxx Xxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000 (together with
its successors and assigns, the "Secured Party").
WHEREAS, the Debtor and the Secured Party, having heretofore entered into a
Security Agreement dated as of August 1, 1997, which security agreement is being
filed concurrently herewith (the "Security Agreement" and the defined terms
therein, unless otherwise noted, being hereinafter used with the same meaning).
The Security Agreement provides for the execution and delivery from time to time
of Security Agreement Supplements, each substantially in the form hereof, for
the purpose of mortgaging and granting a security interest to the Secured Party
in specific Collateral under the Security Agreement.
The Security Agreement relates to the Collateral described below.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, the Debtor and the Secured Party hereby agree as
follows:
1. The Debtor does hereby grant, transfer, assign, bargain, sell, convey,
mortgage, hypothecate and pledge unto the Secured Party, its successors and
assigns, a valid and perfected first priority security interest in and lien on
all right, title and interest of Debtor in and to the Collateral (as defined
below) under the Security Agreement and the Secured Party does hereby accept
such security interest under the Security Agreement in the following Engines
(together with all Parts which are from time to time installed on such Engines):
(a) Two (2) Xxxxx & Xxxxxxx Model JT9D-7J engines, bearing
manufacturer's serial numbers 662323 and 686106;
(b) four (4) Xxxxx & Whitney model JT9D-7A engines, bearing
manufacturer's serial numbers 662993, 662550, 662338 and 662838;
(c) one (1) Xxxxx & Xxxxxxx model JT9D-7AH bearing
manufacturer's serial number 662270; and
(d) One (1) Xxxxx & Whitney Model JT9D-7Q3 engine, bearing
manufacturer's serial number 702083.
(each of which engines described in subparagraphs (a), (b) and (c)
above has 750 or more rated takeoff horsepower or the equivalent of
such horsepower).
2. The Debtor hereby represents and warrants that it is an air carrier as
defined in Section 40102(a) of Title 49 of the US Code.
3. All of the terms and provisions of the Security Agreement are hereby
incorporated by reference in this Security Agreement Supplement to the same
extent as if fully set forth herein.
* * *
2
[Security Agreement Supplement No.1]
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement Supplement to be duly executed as of the day and year first
above written.
TOWER AIR INC.,
Debtor
By: [SIGNATURE APPEARS HERE]
-------------------------------------------
Its: CFO/VP FINANCE
-------------------------------------------
TRANSAMERICA BUSINESS CREDIT
CORPORATION,
Secured Party
By:
-------------------------------------------
Its:
-------------------------------------------
[Security Agreement Supplement No.1]
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement Supplement to be duly executed as of the day and year first
above written.
TOWER AIR INC.,
Debtor
By:
-------------------------------------------
Its:
-------------------------------------------
TRANSAMERICA BUSINESS CREDIT
CORPORATION,
Secured Party
By: /s/ Xxxx X. Fate
-------------------------------------------
Its:
-------------------------------------------
XXXX X. FATE
SENIOR VICE PRESIDENT
