Exhibit 10.4


 


[Execution
Copy]


 


 


GUARANTEE
AND COLLATERAL

AGREEMENT


 


 


dated as of April 26, 2006


 


 


among


 


 


AEROTURBINE, INC., as Borrower


 


 


THE SUBSIDIARY GUARANTORS OF AEROTURBINE,
INC.


PARTY HERETO, as Subsidiary Guarantors


 


 


and


 


 


CALYON New York Branch,


as Collateral Agent


 


 






 


CALYON, Head Office,

as Lead Arranger and Bookrunner


 

















 


Table of Contents


 


	
   

  	
   

  	
  Page

  
	
  SECTION 1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  GUARANTEES BY LIEN GRANTORS

  	
  4

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  GRANT OF LIENS

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  GENERAL REPRESENTATIONS AND
  WARRANTIES

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  FURTHER ASSURANCES, GENERAL
  COVENANTS

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  ACCOUNTS

  	
  9

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  PLEDGED SUBSIDIARY STOCK

  	
  11

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  REMEDIES UPON EVENT OF DEFAULT

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  APPLICATION OF PROCEEDS

  	
  15

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  FEES AND EXPENSES;
  INDEMNIFICATION

  	
  16

  
	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
  AUTHORITY TO ADMINISTER
  COLLATERAL

  	
  16

  
	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
  LIMITATION ON DUTY IN RESPECT OF
  COLLATERAL

  	
  17

  
	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
  GENERAL PROVISIONS CONCERNING
  THE COLLATERAL AGENT

  	
  17

  
	
   

  	
   

  	
   

  
	
  SECTION 14.

  	
  TERMINATION OF LIENS; RELEASE OF
  COLLATERAL

  	
  20

  
	
   

  	
   

  	
   

  
	
  SECTION 15.

  	
  THE BORROWER AND SUBSIDIARY
  GUARANTORS

  	
  20

  
	
   

  	
   

  	
   

  
	
  SECTION 16.

  	
  NOTICES

  	
  20

  
	
   

  	
   

  	
   

  
	
  SECTION 17.

  	
  NO IMPLIED WAIVERS; REMEDIES NOT
  EXCLUSIVE

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION 18.

  	
  SUCCESSORS AND ASSIGNS

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION 19.

  	
  AMENDMENTS AND WAIVERS

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION 20.

  	
  CHOICE OF LAW

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION 21.

  	
  WAIVER OF JURY TRIAL

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION 22.

  	
  SEVERABILITY

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 23.

  	
  COLLATERAL AGENT SUBJECT TO
  DIRECTION OF AGENTS

  	
  22

  



 


	
  EXHIBITS:

  	
   

  
	
   

  	
   

  
	
   

  	
  Exhibit A

  	
  Guarantee and Collateral Agreement Supplement

  	
   

  
	
   

  	
  Exhibit B

  	
  Perfection Certificate

  	
   

  



 


i

















 


GUARANTEE AND COLLATERAL
AGREEMENT


 


THIS GUARANTEE AND COLLATERAL AGREEMENT
(this “Agreement”), dated as of
April 26, 2006, among AeroTurbine, Inc., a Delaware corporation, each
Subsidiary Guarantor of AeroTurbine, Inc., a party hereto (the “Subsidiary Guarantors”) and CALYON New York
Branch, as Collateral Agent (the “Collateral
Agent”).


 


WHEREAS, AeroTurbine, Inc. is the successor
in interest by merger to AerCap AT, Inc. (AeroTurbine, Inc., as such successor,
the “Borrower”);


 


WHEREAS, the Borrower, the Senior Lenders
(as defined therein) and CALYON New York Branch, as administrative agent for
the Senior Lenders (the “Senior Agent”),
are parties to a Senior Credit Agreement dated as of the date hereof (the “Senior Credit Agreement”) providing for the
making of certain Senior Loans to the Borrower;


 


WHEREAS, the Borrower, the Junior Lenders
(as defined therein) and CALYON, Head Office, as agent for the Junior Lenders
(the “Junior Agent”), are parties
to a Junior Credit Agreement dated as of the date hereof (the “Junior Credit Agreement”; and, collectively
with the Senior Credit Agreement, the “Credit
Agreements”) providing for the making of certain Junior Loans to the
Borrower;


 


WHEREAS, the Borrower is willing to secure
its obligations under the Credit Agreements and certain other obligations
described herein by granting Liens on certain of its assets to the Collateral
Agent as provided in the Security Documents;


 


WHEREAS, the Borrower is willing to cause
each of the Subsidiary Guarantors to guarantee the foregoing obligations of the
Borrower and to secure its guarantee thereof by granting Liens on certain of
its assets to the Collateral Agent as provided in the Security Documents; and


 


WHEREAS, the Senior Lenders and the Junior
Lenders are not willing to make financial accommodation available under the
Credit Agreements unless (i) the foregoing obligations of the Borrower are
secured and guaranteed as described above and (ii) each guarantee thereof is
secured by Liens on assets of the Subsidiary Guarantors as provided in the
Security Documents.


 


NOW, THEREFORE, for good and valuable
consideration, receipt whereof has been duly received, the parties hereto agree
as follows:


 


Section 1.                                          Definitions.


 


(a)                                  Capitalized
terms used herein shall have the meanings assigned thereto in Appendix I of
each Credit Agreement. In addition, the following terms shall have the
following meanings:


 


“Cash Collateral
Account” has the meaning set forth in Section 6 of this
Agreement.


 

















 


“Collateral”
or “General Collateral”
means all property, whether now owned or hereafter acquired, on which a Lien is
granted or purports to be granted to the Collateral Agent pursuant to this
Agreement. The Collateral or General Collateral excludes the Aircraft Asset
Collateral on which a Lien is granted or purports to be granted to the
Collateral Agent pursuant to Aircraft Asset Security Agreement.


 


“Collateral Agent”
means CALYON New York Branch, in its capacity as Collateral Agent for the
Senior Loan Agent, the Junior Loan Agent, the Senior Lenders and the Junior
Lenders under the Security Documents, and its successors in such capacity.


 


“Contracts”
means all contracts for the sale, lease, exchange or other disposition of
Inventory, whether or not performed and whether or not subject to termination
upon a contingency or at the option of any party thereto.


 


“Closing Date”
means the Closing Date as defined in the Credit Agreement; provided that with
respect to any Lien Grantor which becomes a party hereto subsequent to such
Closing Date, “Closing Date” means the date this Agreement becomes effective
with respect to such Lien Grantor.


 


“Guarantee and
Collateral Agreement Supplement” means a Guarantee and Collateral
Agreement Supplement, substantially in the form of Exhibit A, signed and
delivered to the Collateral Agent for the purpose of adding a Subsidiary of the
Borrower as a party hereto pursuant to Section 15(b) and/or adding
additional property to the Collateral.


 


“Lien Grantors”
means, collectively, (i) the Borrower and each Subsidiary listed on the
signature pages hereof under the caption “Subsidiary Guarantors”, and their
respective successors, and (ii) each Subsidiary that shall, at any time
after the date hereof, become a Lien Grantor pursuant to Section 15(b),
and “Lien Grantor” means any of the foregoing.


 


“Liquid
Investment” means (i) direct obligations of the United
States or any agency thereof, (ii) obligations guaranteed by the United
States or any agency thereof, (iii) time deposits and money market deposit
accounts issued by or guaranteed by or placed with a Deposit Bank, and
(iv) fully collateralized repurchase agreements for securities described
in clause (i) or (ii) above entered into with a United States office of a
financial institution having a credit rating of at least AA/Aa, provided in
each case that such Liquid Investment (x) matures within 30 days
after it is first included in the Collateral and (y) is in a form, and is
issued and held in a manner, that in the reasonable judgment of the Collateral
Agent permits appropriate measures to have been taken to perfect security
interests therein.


 


“Opinion of
Counsel” means a written opinion of legal counsel in form and
substance reasonably satisfactory to the Collateral Agent, which is addressed
and delivered to the Collateral Agent.


 


“Perfection
Certificate” means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit B, completed and
supplemented with the schedules contemplated thereby to the reasonable
satisfaction of the Collateral Agent, and signed by an officer of such Lien
Grantor.


 


2

















 


“Permitted Liens”
means any other Liens on the Collateral permitted to be created by or
contemplated in the Credit Agreements or hereunder.


 


“Pledged”,
when used in conjunction with any type of asset, means at any time an asset of
such type that is included (or that creates rights that are included) in the
Collateral at such time.


 


“Pledged Subsidiary Stock”
means the Capital Stock of each Subsidiary Guarantor.


 


“Post-Petition
Interest” means any interest that accrues after the commencement
of any case, proceeding or other action relating to the bankruptcy, insolvency
or reorganization of a Lien Grantor (or would accrue but for the operation of
applicable bankruptcy or insolvency laws), whether or not such interest is
allowed or allowable as a claim in any such proceeding.


 


“Proceeds”
means all proceeds of, and all other profits, products, rents or receipts, in
whatever form, arising from the collection, sale, lease, exchange, assignment,
licensing or other disposition of, or other realization upon, any Collateral,
including all claims of the relevant Lien Grantor against third parties for
loss of, damage to or destruction of, or for proceeds payable under, or
unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral.


 


“Receivables”
means, with respect to any Lien Grantor, all Accounts owned by it and all other
rights, titles or interests which, in accordance with GAAP, would be included
in receivables on its balance sheet (including any such Accounts and/or rights,
titles or interests that might be characterized as Chattel Paper, Instruments
or General Intangibles under the Uniform Commercial Code in effect in any
jurisdiction), in each case arising from the sale, lease, exchange or other
disposition of Inventory, and all of such Lien Grantor’s rights to any goods,
services or other property related to any of the foregoing (including returned
or repossessed goods and unpaid seller’s rights of rescission, replevin,
reclamation and rights to stoppage in transit), and all collateral security and
supporting obligations of any kind given by any Person with respect to any of
the foregoing.


 


“Secured
Guarantee” means, with respect to each Subsidiary Guarantor, its
guarantee of the Obligations under Section 2 hereof or Section (a) of
a Guarantee and Collateral Agreement Supplement.


 


“UCC”
means the Uniform Commercial Code as in effect from time to time in the State
of New York; provided that, if
perfection or the effect of perfection or non-perfection or the priority of any
Lien on any Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than New York, “UCC”
means the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.


 


(b)                                 Terms
Defined in UCC. As used herein, each of the following terms has the meaning
specified in Article 9 of UCC: “Account”, “Authenticate”, “Chattel Paper”,
“Commercial Tort Claims”, “Deposit Account”, “Documents”, “General Intangibles”,
“Goods”,


 


3

















 


“Instruments”, “Inventory”, “Investment Property”, “Letter
of Credit Rights” and “Supporting Obligations”.


 


(c)                                  Other
Definitional Provisions. Section 1.2 of the Credit Agreements shall apply
as if set out fully herein.


 


Section 2.                                          Guarantees by Lien Grantors.


 


(a)                                  Secured
Guarantees. Each Subsidiary Guarantor unconditionally guarantees to the
Collateral Agent for the benefit of the Lenders the full and punctual
satisfaction of each Obligation of the Borrower under the Loan Documents when
due (whether at stated maturity, upon acceleration or otherwise). If the
Borrower fails to satisfy any Obligation punctually when due, each Subsidiary
Guarantor jointly and severally agrees that it will forthwith on demand pay the
amount not so paid at the place and in the manner specified herein or in any
other relevant Loan Document.


 


(b)                                 Secured
Guarantees Unconditional. The obligations of each Subsidiary Guarantor
under its Secured Guarantee shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:


 


(i)                                     any
extension, renewal, settlement, compromise, waiver or release in respect of any
obligation of the Borrower, any Subsidiary Guarantor or any other Person under
any Security Document, by operation of law or otherwise;


 


(ii)                                  any
modification or amendment of or supplement to any Security Document;


 


(iii)                               any release, impairment,
non-perfection or invalidity of any direct or indirect security for any
obligation of the Borrower, any Subsidiary Guarantor or any other Person under
any Security Document;


 


(iv)                              any
change in the corporate existence, structure or ownership of the Borrower, any
Subsidiary Guarantor or any other Person or any of their respective
subsidiaries, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower, any Subsidiary Guarantor or any other Person
or any of their assets or any resulting release or discharge of any obligation
of the Borrower, any Subsidiary Guarantor or any other Person under any
Security Document;


 


(v)                                 the
existence of any claim, set-off or other right that such Subsidiary Guarantor
may have at any time against the Borrower, any Subsidiary Guarantor, the
Collateral Agent, the Agents, any Lender or any other Person, whether in
connection with the Loan Documents or any unrelated transactions, provided that
nothing herein shall prevent the assertion of any such claim by separate suit
or compulsory counterclaim;


 


(vi)                              any
invalidity or unenforceability relating to or against the Borrower, any
Subsidiary Guarantor or any other Person for any reason of any Security
Document, or any provision of applicable law or regulation purporting to
prohibit the


 


4

















 


payment
of any amount in satisfaction of any Obligation by the Borrower, any Subsidiary
Guarantor or any other Person; or


 


(vii)                           any other act or omission to
act or delay of any kind by the Borrower, any Subsidiary Guarantor, any other
party to any Security Document, the Collateral Agent, the Agents, any Lender or
any other Person, or any other circumstance whatsoever that might, but for the
provisions of this Section 2(b)(vii), constitute a legal or equitable discharge
of or defense to any obligation of the Borrower or any Subsidiary Guarantor
hereunder.


 


(c)                                  Release
of Secured Guarantees. (i)  All the
Secured Guarantees will be released when all Obligations of the Borrower under
the Loan Documents have been satisfied. If at any time any payment in
satisfaction of an Obligation is rescinded or must be otherwise restored or
returned upon the insolvency or receivership of the Borrower or otherwise, the
Secured Guarantees shall be reinstated with respect thereto as though such
payment had been due but not made at such time.


 


(ii)                                  If
all the capital stock of a Subsidiary Guarantor or all the assets of a
Subsidiary Guarantor are sold to a Person other than a Borrower or a Subsidiary
of a Borrower in a transaction not prohibited by the Credit Agreements (any
such sale, a “Sale of Subsidiary Guarantor”),
the Collateral Agent shall release such Subsidiary Guarantor from its Secured
Guarantee. Such release shall not require the consent of the Agents or any
Lender, and the Collateral Agent and any third party shall be fully protected
in relying on a certificate of the Borrower as to whether any particular sale
constitutes a Sale of Subsidiary Guarantor.


 


(d)                                 Waiver
by Subsidiary Guarantors. Each Subsidiary Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against the Borrower, any Subsidiary Guarantor or any other Person.


 


(e)                                  Subrogation.
Each Subsidiary Guarantor irrevocably waives any and all rights to which it may
be entitled, by operation of law or otherwise, upon making any payment
hereunder to be subrogated to the rights of the payee with respect to such
payment or against any direct or indirect security therefor, or otherwise to be
reimbursed, indemnified or exonerated in respect thereof.


 


(f)                                    Contribution;
Subordination. All rights of the Subsidiary Guarantors of contribution and
any other rights of indemnity, contribution or subrogation under applicable law
or otherwise shall be fully subordinated to the indefeasible payment in full in
cash in satisfaction of the Obligations.


 


(g)                                 Stay
of Acceleration. If acceleration of the time for payment of any Obligation
by the Borrower is stayed by reason of the insolvency or receivership of the
Borrower or otherwise, all Obligations otherwise subject to acceleration under
the terms of any Security Document shall nonetheless be payable by the
Subsidiary Guarantors hereunder forthwith on demand by the Collateral Agent.


 


5

















 


(h)                                 Right
of Set-Off. If any Obligation is not paid promptly when due, each of the
Lenders and each of their Affiliates which is a Deposit Bank is authorized, to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other obligations at any time owing by such Lender or Affiliate to or for the
credit or the account of any Subsidiary Guarantor against the obligations of
such Subsidiary Guarantor under its Secured Guarantee, irrespective of whether
such Lender shall have made any demand thereunder and although such obligations
may be unmatured. The rights of each Lender under this subsection are in
addition to all other rights and remedies (including other rights of setoff)
that such Lender may have and are subject to the provisions of Section 10.7 of
the applicable Credit Agreement.


 


(i)                                     Continuing
Guarantee. Each Secured Guarantee is a continuing guarantee, shall be
binding on the relevant Subsidiary Guarantor and its successors and assigns,
and shall be enforceable by the Collateral Agent. If all or part of any Lender’s
interest in any Obligation is assigned or otherwise transferred, the transferor’s
rights in respect of each Secured Guarantee, to the extent applicable to the
obligation so transferred, shall automatically be transferred with such
obligation.


 


(j)                                     Limitation
on Obligations of Subsidiary Guarantors. The obligations of each Subsidiary
Guarantor under its Secured Guarantee shall be limited to an aggregate amount
equal to the largest amount that would not render such Secured Guarantee
subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provisions of applicable law.


 


Section 3.                                          Grant of Liens.


 


(a)                                  The
Borrower, in order to secure its Obligations under the Loan Documents, and each
Subsidiary Guarantor listed on the signature pages hereof, in order to secure
its Secured Guarantee, grants to the Collateral Agent for the benefit of the
Agents and the Lenders a continuing security interest in all the following
property of such Borrower or such Subsidiary Guarantor, as the case may be,
whether now owned or existing or hereafter acquired or arising and regardless
of where located:


 


(i)                                     all
Accounts;


 


(ii)                                  all
Chattel Paper;


 


(iii)                               all Commercial Tort
Claims;


 


(iv)                              all
Deposit Accounts;


 


(v)                                 all
Documents;


 


(vi)                              all
General Intangibles;


 


(vii)                           all Goods;


 


6

















 


(viii)                        all Instruments, including,
without limitation, the Capital Stock of each Subsidiary Guarantor;


 


(ix)                                all
Inventory;


 


(x)                                   all
Investment Property;


 


(xi)                                all
Letter of Credit Rights;


 


(xii)                             all Supporting
Obligations;


 


(xiii)                          all Receivables;


 


(xiv)                         all Contracts;


 


(xv)                            all
books and records (including customer lists, credit files, computer programs,
printouts and other computer materials and records) of such Original Lien
Grantor pertaining to any of its Collateral; and


 


(xvi)                         all Proceeds of the Collateral
described in the foregoing clauses (i) through (xv).


 


Aircraft
Asset Collateral is excluded from the above grant.


 


(b)                                 With
respect to each right to payment or performance included in the Collateral from
time to time, the Lien granted therein includes a continuing security interest
in all right, title and interest of the applicable Lien Grantor in and to
(i) any Supporting Obligation that supports such payment or performance
and (ii) any Lien that (x) secures such right to payment or
performance or (y) secures any such Supporting Obligation.


 


(c)                                  The
Liens are granted as security only and shall not subject the Collateral Agent
or any Lender to, or transfer or in any way affect or modify, any obligation or
liability of any Lien Grantor with respect to any of the Collateral or any
transaction in connection therewith.


 


Section 4.                                          General Representations and Warranties.
As of the Closing Date and as of the Borrowing Date each Lien Grantor
represents and warrants that:


 


(a)                                  such
Lien Grantor is a duly organized, validly existing and in good standing under
the laws of the jurisdiction identified as its jurisdiction of organization in
its Perfection Certificate;


 


(b)                                 such
Lien Grantor has good and marketable title to all its Collateral (subject to
exceptions that are, in the aggregate, not material), free and clear of any
Lien other than Permitted Liens;


 


(c)                                  no
financing statement, security agreement, mortgage or similar or equivalent
document or instrument covering all or part of the Collateral owned by such
Lien Grantor is on file or of record in any jurisdiction in which such filing
or recording would be


 


7

















 


effective to perfect or record a Lien on such
Collateral, except financing statements, mortgages or other similar or
equivalent documents with respect to Permitted Liens; and


 


(d)                                 except
for the filing of such UCC financing statements, no other registration,
recordation or filing with any governmental body, agency or official is
required to establish and perfect the Collateral Agent’s security interest in
the General Collateral pursuant to the UCC.


 


Section 5.                                          Further Assurances, General Covenants.


 


Each
Lien Grantor covenants as follows:


 


(a)                                  Such
Lien Grantor will, from time to time, at the Borrower’s expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action (including any filing of
financing or continuation statements under the UCC) that from time to time may
be reasonably necessary or desirable, or that the Collateral Agent may
reasonably request, in order to:


 


(i)                                     create,
preserve, perfect, confirm or validate the Liens created by the Security
Documents on such Lien Grantor’s Collateral;


 


(ii)                                  enable
the Collateral Agent and the Lenders to obtain the full benefits of the
Security Documents; or


 


(iii)                               enable the Collateral
Agent to exercise and enforce any of its rights, powers and remedies with
respect to any of such Lien Grantor’s Collateral.


 


To the
extent permitted by applicable law, such Lien Grantor authorizes the Collateral
Agent to execute and file such financing statements or continuation statements
without such Lien Grantor’s signature appearing thereon. Such Lien Grantor
agrees that a copy or reproduction of this Agreement or of a financing
statement is sufficient as a financing statement to the extent permitted by law.
Each Lien Grantor constitutes the Collateral Agent its attorney-in-fact to execute
and file all filings required or so requested for the foregoing purposes, all
acts of such attorney being hereby ratified and confirmed; and such power,
being coupled with an interest, shall be irrevocable until all the Liens
granted by such Lien Grantor terminate pursuant to Section 13. The
Borrower will pay the costs of, or incidental to, any recording or filing of
any financing or continuation statements or other documents recorded or filed
pursuant hereto.


 


(b)                                 Such
Lien Grantor will not (i) change its name or corporate structure, (ii) change
its location (determined as provided in UCC Section 9-307) or (iii) except
with respect to a Permitted Lien, become bound, as provided in UCC
Section 9-203(d) or otherwise, by a security agreement entered into by
another Person, unless it shall have given the Collateral Agent prior notice
thereof and delivered an Opinion of Counsel with respect thereto in accordance
with Section 5(c).


 


(c)                                  Before
it takes any action contemplated by Section 5(b), such Lien Grantor, at
the Borrower’s expense, will cause to be delivered to the Collateral Agent an
Opinion of Counsel, in form and substance reasonably satisfactory to the
Collateral Agent, to the effect


 


8

















 


that (i) all financing statements and amendments or
supplements thereto, continuation statements and other documents required to be
filed or recorded in order to perfect and protect (except with respect to
Permitted Liens) the Liens created by the Security Documents against all
creditors of and purchasers from such Lien Grantor after it takes such action
(except any applicable continuation statements that are to be filed more than
six months after the date thereof) have been filed or recorded in each office
necessary for such purpose, (ii) all fees and taxes, if any, payable in
connection with such filings or recordations have been paid in full, and (iii)
such action will not (except with respect to Permitted Liens) adversely affect
the perfection or priority of the Lien created by the Security Documents on any
Collateral to be owned by such Lien Grantor after it takes such action or the
accuracy of such Lien Grantor’s representations and warranties herein relating
to the grant and perfection of a security interest in such Collateral.


 


(d)                                 Except
in the ordinary course of business, such Lien Grantor will not sell, lease,
exchange, assign or otherwise dispose of, or grant any option with respect to,
any of its Collateral; provided
that such Lien Grantor may do any of the foregoing unless (i) doing so
would violate a covenant in the Credit Agreement, or (ii) the Loans shall
have been accelerated pursuant to Section 8 of the Senior Credit Agreement and
the Collateral Agent shall have notified such Lien Grantor that its right to do
so is terminated, suspended or otherwise limited. Concurrently with any sale or
other disposition (except a sale or disposition to another Lien Grantor or a
lease) permitted by the foregoing proviso,
the Liens created by the Security Documents on the assets sold or disposed of
(but not in any Proceeds arising from such sale or disposition) will cease
immediately without any action by the Collateral Agent or any Lender. The
Collateral Agent will, at the Borrower’s expense, promptly execute and deliver
to the relevant Lien Grantor such documents as such Lien Grantor shall
reasonably request to evidence the fact that any asset so sold, leased or
disposed of is no longer subject to a Lien under any Security Document.


 


(e)                                  Such
Lien Grantor will, promptly upon request, provide to the Collateral Agent all
information and evidence concerning such Lien Grantor’s Collateral that the
Collateral Agent may reasonably request from time to time to enable it to
enforce the provisions of the Security Documents.


 


Section 6.                                          Accounts.


 


(a)                                  As
of the Closing Date, the Collateral Agent shall have established an account
(the “Restricted Account”), in the
name and under the exclusive control of the Collateral Agent, the contents of
which are to be applied pursuant to this Section 6(a).


 


(i)                                     the
Borrower shall cause (and each other Lien Grantor shall take all actions
required on its part to cause) to be deposited in the Restricted Account,
promptly upon receipt thereof:


 


(A)                              the
amounts of any Revolving Loan whose borrowing date has been postponed pursuant
to Section 2.5 of the Senior Credit Agreement;


 


9

















 


(B)                                all
proceeds collected with respect to the Key Man Insurance and the Key Man
Guarantee;


 


(C)                                all
Net Cash Proceeds from any Recovery Event;


 


(D)                               all
sale proceeds from the disposition of Eligible Equipment and Eligible Inventory
to the extent such proceeds are included in the Borrowing Base;


 


(E)                                 all
amounts related to engines in overhaul that comprise Eligible Equipment as
contemplated in Section 3.2(g)(ii) of the Senior Credit Agreement.


 


The
Borrower shall also deposit into the Restricted Account any cash collateral
required to be deposited in lieu of the Key Man Guarantee pursuant to Section
6.9 of the Senior Credit Agreement, provided that such cash collateral shall be
promptly released by the Collateral Agent to the Borrower upon the delivery of
the Key Man Guarantee as provided in Section 6.9 of the Senior Credit Agreement.
Such cash collateral shall be applied in the same amount and in the same manner
as proceeds under the Key Man Guarantee would have been applied and shall be
released when and to the extent the Key Man Guarantee would be terminated.


 


(ii)                                  Unless
the maturity of the Loans (or other Obligations) shall have been accelerated
pursuant to Section 8 of the Senior Credit Agreement:


 


(A)                              The
Collateral Agent shall apply the amounts referred to in clauses (A), (B) and
(C) of Section 6(a)(i) as specified in the Senior Credit Agreement; and


 


(B)                                Amounts
specified in clauses (D) and (E) of Section 6(a)(i) shall be paid to or as
directed by the Borrower promptly after the submission of the next Borrowing
Base Report indicating that such assets are no longer included within the
Borrowing Base.


 


After
the maturity of the Loans (or other Obligations) shall have been accelerated
pursuant to Section 8 of the Senior Credit Agreement, the Collateral Agent may
apply all sums held in the Restricted Account pursuant to Section 9.


 


(iii)                               Funds held in the
Restricted Account may, until withdrawn or required to be applied pursuant
hereto, be invested and reinvested in such Liquid Investments as the Borrower
shall request from time to time.


 


(b)                                 Except
for the Restricted Account or as permitted in clause (c) below, neither the
Borrower nor any Lien Grantor shall establish or maintain any Deposit Account
unless such Deposit Account is pledged to the Collateral Agent pursuant to an
Account Control Agreement, provided, that the Borrower’s existing Investment
Account 3091-9218 with


 


10

















 


Wachovia Securities shall not be required to be
pledged so long as the sole holding in such account is 886 shares (or less) of
the common stock of Ace Aviation Holdings, Inc.


 


(c)                                  Neither
the Borrower nor any Lien Grantor shall be required to pledge any Deposit
Account established or maintained by it and exclusively used to fund:


 


(i)                                     current
payroll obligations;


 


(ii)                                  fiduciary
obligations (such as pension plans).


 


(d)                                 The
Collateral Agent shall not give the “Notice”, under and as defined in the
initial Account Control Agreement (or equivalent notice in any subsequent
Account Control Agreement) unless the Loans shall have been accelerated
pursuant to Section 8 of the Senior Credit Agreement.


 


Section 7.                                          Pledged
Subsidiary Stock.


 


(a)                                  Each
Lien Grantor shall concurrently with the execution and delivery hereof deliver
to the Collateral Agent all certificates representing the Capital Stock of each
of its Subsidiaries together with a stock power or powers with respect thereto
endorsed in blank and within ten Business Days of forming or acquiring any new
Subsidiary will execute and deliver to the Collateral Agent all certificates
representing the Capital Stock of such Subsidiary together with a stock power
or powers with respect thereto endorsed in blank. The Collateral Agent agrees
to hold the same subject to the terms and conditions of this Agreement.


 


(b)                                 So
long as the Loans have not been accelerated pursuant to Section 8 of the Senior
Credit Agreement:


 


(i)                                     Such
Lien Grantor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Subsidiary Stock, or any part
thereof, for any purpose not inconsistent with the terms of this Agreement or
the other Loan Documents; provided, however, (A) that such Lien Grantor shall
not exercise any voting or consensual rights with respect to the commencement
of a voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to such Subsidiary or such Subsidiary’s debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect or
consent to the entry of an order for relief in an involuntary case under any
such law or seeking the appointment of a trustee, receiver, liquidator,
sequestrator, assignee, custodian or other similar official of such Subsidiary
or any substantial part of such Subsidiary’s property without obtaining the
prior written consent of the Collateral Agent; (B) that such Lien Grantor shall
not amend or approve any amendment to or modification, alteration or repeal of
the Certificate of Incorporation of By-Laws or any other organizational
documents, as the case may be, of such Subsidiary without obtaining the prior
written consent of the Collateral Agent which consent shall not be unreasonably
withheld or delayed; (C) that such Lien Grantor shall not increase the number
of directors or modify in any way the composition of the board of directors of
the Borrower (other than by replacing any officers or employees of such Lien Grantor
or an Affiliate of such Lien Grantor who are directors with other officers or
employees of such Lien Grantor or an Affiliate of such Lien Grantor) as same
exists as of


 


11

















 


the
date hereof without obtaining the prior written consent of the Collateral Agent
which consent shall not be unreasonably withheld or delayed; and (D) such Lien
Grantor shall not approve an increase in the authorized number of shares of
stock or stated capital of such Subsidiary or the issuance of any additional
shares of stock or the granting of any options or warrants of the without the
prior written consent of the Collateral Agent, which consent shall not be
unreasonably withheld or delayed provided that the Collateral Agent is granted
a first priority security interest in all such shares; and


 


(ii)                                  the
Collateral Agent shall execute and deliver (or cause to be executed and
delivered) to such Lien Grantor all such proxies and other instruments as such
Lien Grantor may reasonably request for the purpose of enabling such Lien
Grantor to exercise the voting and other rights which it is entitled to
exercise pursuant to paragraph (i) above.


 


(c)                                  If
the Loans have been accelerated pursuant to Section 8 of the Senior Credit
Agreement, all rights of such Lien Grantor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
Section 7(b)(i) shall cease and all such rights shall thereupon become vested
in the Collateral Agent, without further act who shall thereupon have the sole
right to exercise such voting and other consensual rights and remedies.


 


Section 8.                                          Remedies Upon Event of Default.


 


(a)                                  Remedies:


 


(i)                                     If
the Loans have been accelerated pursuant to Section 8 of the Senior Credit
Agreement, then in every such case, the Collateral Agent may do one or more of
the following, to the extent permitted by, and subject to compliance with any
mandatory requirements of, Applicable Law then in effect:


 


(A)                              cause
the Borrower or the relevant Lien Grantor upon the written demand of the
Collateral Agent and at the Borrower’s or the relevant Lien Grantor’s expense,
to deliver promptly, and the Borrower shall deliver promptly, the Collateral
(or any portion thereof) as the Collateral Agent may so demand to the
Collateral Agent, or the Collateral Agent, at its option, may enter upon the
premises where all or any part of the Collateral is located and take immediate
possession (to the exclusion of the Borrower or the relevant Lien Grantor and
all Persons claiming under or through the Borrower or the relevant Lien
Grantor) of and remove the same by summary proceedings;


 


(B)                                subject
to the notice required by Section 11, sell the Collateral (or any portion
thereof) at public or private sale, whether or not the Collateral Agent shall
at the time have possession thereof, as the Collateral Agent may determine, or
lease or otherwise dispose of, all or any part of any Airframe, any Engine or
any Inventory as the Collateral Agent, in its sole discretion, may determine,
all free and clear of any rights


 


12

















 


of
the Borrower or the relevant Lien Grantor, except as hereinafter set forth in
this Section 7; provided, however, that the Borrower or the relevant Lien
Grantor shall be entitled at any time prior to any such disposition to redeem
the Collateral by paying in full all of the Obligations; or


 


(C)                                exercise
any or all of the rights and powers and pursue any and all remedies of a
secured party under the Uniform Commercial Code of the State of New York.


 


(ii)                                  Any
Lender shall be entitled, at any sale pursuant to this Section 7, to credit
against any purchase price bid at such sale by such holder all or any part of
the unpaid obligations owing to such Lender and secured by the Lien of this
Agreement. Any Lender shall, upon any purchase, acquire good title to the
property so purchased, to the extent permitted by applicable law, free of all
rights of redemption.


 


(iii)                               In the event of any sale
of the Collateral, or any part thereof, pursuant to any judgment or decree of
any court or otherwise in connection with the enforcement of any of the terms
of this Agreement, the unpaid principal amount of all Loans then outstanding,
together with accrued interest thereon, and other amounts due thereunder, shall
immediately become due and payable without presentment, demand, protest or
notice, all of which are hereby waived.


 


(iv)                              Any
sale of the Collateral or any part thereof or any interest therein, whether
pursuant to foreclosure or power of sale or otherwise hereunder, shall forever
be a bar against the Borrower or the relevant Lien Grantor, after the
expiration of the period, if any, during which the Borrower or the Lien Grantor
shall have the benefit of Section 7(a)(ii) hereof or any redemption laws which
may not be waived.


 


(v)                                 Any
sale or other conveyance of the Collateral by the Collateral Agent made
pursuant to the terms of this Agreement shall bind the Lenders and the Borrower
and the relevant Lien Grantors and shall be effective to transfer or convey all
right, title and interest of the Borrower and the relevant Lien Grantors. No
purchaser or other grantee shall be required to inquire as to the
authorization, necessity, expediency or regularity of such sale or conveyance
or as to the application of any sale or other proceeds with respect thereto by
the Collateral Agent.


 


(b)                                 Return
of Collateral, etc.


 


(i)                                     If
the Loans have been accelerated pursuant to Section 8 of the Senior Credit
Agreement, at the request of the Collateral Agent, the Borrower and/or the
relevant Lien Grantors shall promptly execute and deliver to the Collateral
Agent such instruments of title and other documents as the Collateral Agent may
deem necessary or advisable to enable the Collateral Agent or an agent or
representative designated by the Collateral Agent, at such time or times and
place or places as the Collateral Agent may specify, to obtain possession of
all or any part of the Collateral to which the Collateral Agent shall at the
time be entitled hereunder. If the Borrower shall for any reason fail to


 


13

















 


execute
and deliver such instruments and documents after such request by the Collateral
Agent, the Collateral Agent may (i) obtain a judgment conferring on the
Collateral Agent the right to immediate possession and requiring the Borrower
to execute and deliver such instruments and documents to the Collateral Agent,
to the entry of which judgment the Borrower hereby specifically consents to the
fullest extent permitted by applicable law, and (ii) pursue all or part of such
Collateral wherever it may be found and may enter any of the premises of the
Borrower wherever such Collateral may be or be supposed to be and search for
such Mortgaged Property and take possession of and remove such Mortgaged
Property. All expenses of obtaining such judgment or of pursuing, searching for
and taking such property shall, until paid, be secured by the Lien of this
Agreement.


 


(ii)                                  Upon
every such taking of possession, the Collateral Agent may, from time to time,
at the expense of the Collateral, make all such expenditures for maintenance,
use, operation, storage, insurance, leasing, control, management, disposition,
modifications or alterations to and of the Collateral, as it may deem proper. In
each such case, the Collateral Agent shall have the right to maintain, use,
operate, store, insure, lease, control, manage, dispose of, modify or alter the
Collateral and to carry on the business and to exercise all rights and powers of
the Borrower and/or the relevant Lien Grantors relating to the Collateral, as
the Collateral Agent shall deem best, including the right to enter into any and
all such agreements with respect to the maintenance, use, operation, storage,
insurance, leasing, control, management, disposition, modification or
alteration of the Mortgaged Property or any part thereof as the Collateral
Agent may determine, and the Collateral Agent shall be entitled to collect and
receive directly all tolls, rents, revenues, issues, income, products and
profits of the Collateral and every part thereof, without prejudice, however,
to the right of the Collateral Agent under any provision of this Agreement to
collect and receive all cash held by, or required to be deposited with, the Collateral
Agent hereunder. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of the maintenance, use,
operation, storage, insurance, leasing, control, management, disposition,
improvement, modification or alteration of the Collateral and of conducting the
business thereof, and to make all payments which the Collateral Agent may be
required or may elect to make, if any, for taxes, assessments, insurance or
other proper charges upon the Mortgaged Property or any part thereof (including
the employment of engineers and accountants to examine, inspect and make
reports upon the properties and books and records of the Borrower), and all
other payments which the Collateral Agent may be required or authorized to make
under any provision of this Agreement, as well as just and reasonable
compensation for the services of the Collateral Agent, and of all persons
properly engaged and employed by the Collateral Agent with respect hereto.


 


(c)                                  Discontinuance
of Proceedings. In case the Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the Borrower,
the Lien Grantors and the Collateral Agent shall, subject to any determination
in such proceedings, be restored to their former positions and rights hereunder
with respect to the Collateral, and all rights, remedies and powers of the
Borrower, the Lien Grantors or the Collateral Agent shall continue as if no
such proceedings had been instituted.


 


14

















 


(d)                                 Appointment
of Receiver. The Collateral Agent shall, as a matter of right, be entitled
to the appointment of a receiver (who may be the Collateral Agent or any
successor or nominee thereof) for all or any part of the Collateral, whether
such receivership be incidental to a proposed sale of the Collateral or the
taking of possession thereof or otherwise, and the Borrower hereby consents to
the appointment of such a receiver and will not oppose any such appointment. Any
receiver appointed for all or any part of the Collateral shall be entitled to
exercise all the rights and powers of the Collateral Agent with respect to the
Collateral.


 


Section 9.                                          Application of Proceeds.


 


(a)                                  If
the Loans have been accelerated pursuant to Section 8 of the Senior Credit
Agreement, the Collateral Agent may apply the proceeds of any sale or other
disposition of all or any part of the Collateral, in the order of priorities:


 


first, to pay the expenses of such sale or
other disposition, including reasonable compensation to agents of and counsel for
the Collateral Agent, and all expenses, liabilities and advances incurred or
made by the Collateral Agent in connection with the Security Documents, and any
other amounts then due and payable to the Collateral Agent in connection with
the Security Documents;


 


second, to pay ratably all interest (including
Post-Petition Interest) and all facility and other fees and indemnity amounts
payable in connection with the Senior Loans, until payment in full of all such
interest and other fees and indemnity amounts shall have been made;


 


third, to pay the unpaid principal on the
Senior Loans and all other Obligations (including in connection with Specified
Hedge Agreements) in connection with the Senior Loans;


 


fourth, to pay ratably all interest (including
Post-Petition Interest) and all facility and other fees and indemnity amounts
payable in connection with the Junior Loans, until payment in full of all such
interest and other fees and indemnity amounts shall have been made;


 


fifth, to pay the unpaid principal on the
Junior Loans and pay all other Obligations in connection with the Junior Loans;
and


 


finally, to pay to the relevant Lien Grantor,
or as a court of competent jurisdiction may direct, any surplus then remaining
from the proceeds of the Collateral owned by it;


 


provided
that Collateral owned by a Lien Grantor and any proceeds thereof shall be
applied pursuant to the foregoing clauses first, second, third, fourth and
fifth only to the extent permitted by the limitation in Section 2(j). The
Collateral Agent may make such distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof.


 


(b)                                 In
making the payments and allocations required by this Section 8, the Collateral
Agent may rely upon information supplied to it pursuant to Section 12(g). All
distributions made by the Collateral Agent pursuant to this Section 8
shall be final (except in the


 


15

















 


event of manifest error) and the Collateral Agent
shall have no duty to inquire as to the application by either Agent or any
Lender of any amount distributed to it.


 


Section 10.                                   Fees and Expenses; Indemnification. The Borrower will forthwith upon
demand pay to the Collateral Agent:


 


(i)                                     the
amount of any Taxes that the Collateral Agent may have been required to pay by
reason of the Liens created by the Security Documents or to free any Collateral
from any other Lien thereon (other than Permitted Liens);


 


(ii)                                  the
amount of any and all reasonable out-of-pocket expenses, including transfer Taxes
and reasonable fees and expenses of counsel and other experts, that the
Collateral Agent may incur in connection with (x) the administration or
enforcement of the Security Documents, including such expenses as are incurred
to preserve the value of the Collateral or the validity, perfection, rank or
value of any Lien created by the Security Documents, (y) the collection, sale
or other disposition of any Collateral, or (z) the exercise by the Collateral
Agent of any of its rights or powers under the Security Documents;


 


(iii)                               the amount of any fees
that the Borrower shall have agreed in writing to pay to the Collateral Agent
and that shall have become due and payable in accordance with such written
agreement; and


 


(iv)                              the
amount required to indemnify the Collateral Agent for, or hold it harmless and
defend it against, any loss, liability or expense (including the reasonable
fees and expenses of its counsel and any experts or sub-agents appointed by it
hereunder) incurred or suffered by the Collateral Agent in connection with the
Security Documents, except to the extent that such loss, liability or expense
arises from the Collateral Agent’s gross negligence or willful misconduct or a
breach of any duty of the Collateral Agent under this Agreement (after giving
effect to Sections 11 and 12).


 


Any such amount not paid to the Collateral Agent on
demand will bear interest for each day thereafter until paid at the highest
rate of interest payable in connection with the Obligations under the Credit
Agreements.


 


Section 11.                                   Authority to Administer Collateral.
Each Lien Grantor irrevocably appoints the Collateral Agent its true and lawful
attorney, with full power of substitution, in the name of such Lien Grantor,
any Lender or otherwise, for the sole use and benefit of the Lender, but at the
Borrower’s expense, to the extent permitted by law to exercise, at any time and
from time to time if the Loans have been accelerated pursuant to Section 8
of the Senior Credit Agreement, all or any of the following powers with respect
to all or any of such Lien Grantor’s Collateral (to the extent necessary to pay
the Obligations in full):


 


(a)                                  to
demand, sue for, collect, receive and give acquaintance for any and all monies
due or to become due upon or by virtue thereof;


 


(b)                                 to
settle, compromise, compound, prosecute or defend any action or proceeding with
respect thereto;


 


16

















 


(c)                                  to
sell, lease, license or otherwise dispose of the same or the proceeds or avails
thereof, as fully and effectually as if the Collateral Agent were the absolute
owner thereof; and


 


(d)                                 to
extend the time of payment of any or all thereof and to make any allowance or
other adjustment with reference thereto;


 


provided
that, except in the case of Collateral that is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Collateral Agent will give the relevant Lien Grantor at least
twenty days’ prior written notice of the time and place of any public sale
thereof or the time after which any private sale or other intended disposition
thereof will be made. The Collateral Agent and each Lien Grantor agree that
such notice shall be considered to have been “sent within a reasonable time”
pursuant to UCC Section 9-612. Such notice shall (i) contain the
information specified in UCC Section 9-613, (ii) be Authenticated and
(iii) be sent to the parties required to be notified pursuant to UCC
Section 9-611(c); provided that, if the Collateral Agent fails to comply with
this sentence in any respect, its liability for such failure shall be limited
to the liability (if any) imposed on it as a matter of law under the UCC.


 


Section 12.                                   Limitation on Duty in Respect of Collateral. Beyond the exercise of reasonable
care in the custody and preservation thereof, the Collateral Agent will have no
duty as to any Collateral in its possession or control or in the possession or
control of any sub-agent or bailee or any income therefrom or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. The Collateral Agent will be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in its possession or control
if such Collateral is accorded treatment substantially equal to that which it
accords its own property, and will not be liable or responsible for any loss or
damage to any Collateral, or for any diminution in the value thereof, by reason
of any act or omission of any sub-agent or bailee selected by the Collateral
Agent in good faith or by reason of any act or omission by the Collateral Agent
pursuant to instructions from the Agents or the Lenders, except to the extent
that such liability arises from the Collateral Agent’s gross negligence or
willful misconduct.


 


Section 13.                                   General Provisions Concerning the Collateral
Agent.


 


(a)                                  Authority.
The Collateral Agent is authorized to take such actions and to exercise such
powers as are delegated to the Collateral Agent by the terms of the Loan
Agreements, together with such actions and powers as are reasonably incidental
thereto.


 


(b)                                 Coordination
with Collateral Agent. The Collateral Agent will promptly notify each Agent
of each notice or other communication received by the Collateral Agent
hereunder and/or deliver a copy thereof to such Agent. As to any matters not
expressly provided for herein (including (i) the timing and methods of
realization upon the Collateral, and (ii) the exercise of any power that the
Collateral Agent may, but is not expressly required to, exercise under any
Security Document), the Collateral Agent shall act or refrain from acting other
than in accordance with written instructions from the Agents or, in the absence
of such instructions, in accordance with its discretion (subject to the following
provisions of this Section 12).


 


17

















 


(c)                                  Rights
and Powers as a Lender. The Person serving as the Collateral Agent shall,
in its capacity as a Lender, have the same rights and powers as any other
Lender and may exercise the same as though it were not the Collateral Agent. Such
Person and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower, any of its Subsidiaries or
their respective Affiliates as if it were not the Collateral Agent hereunder.


 


(d)                                 Limited
Duties and Responsibilities. The Collateral Agent shall not have any duties
or obligations under the Security Documents except those expressly set forth
therein. Without limiting the generality of the foregoing, (a) the Collateral
Agent shall not be subject to any fiduciary or other implied duties, regardless
of whether an Event of Default has occurred and is continuing, (b) the
Collateral Agent shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated by the Security Documents that the Collateral Agent is
required in writing to exercise by the Agents, and (c) except as expressly set
forth in the Security Documents, the Collateral Agent shall not have any duty
to disclose, and shall not be liable for any failure to disclose, any
information relating to the Borrower or any of its Subsidiaries that is
communicated to or obtained by the bank serving as Collateral Agent or any of
its Affiliates in any capacity. The Collateral Agent shall not be liable for
any action taken or not taken by it with the consent or at the request of the
Agents or in the absence of its own gross negligence or willful misconduct. The
Collateral Agent shall not be responsible for the existence, genuineness or
value of any Collateral or for the validity, perfection, priority or
enforceability of any Lien, whether impaired by operation of law or by reason
of any action or omission to act on its part under the Security Documents. The
Collateral Agent shall be deemed not to have knowledge of any Event of Default
unless and until written notice thereof is given to the Collateral Agent by the
Borrower, any Subsidiary Guarantor, and Agent or a Lender, and the Collateral
Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection
with any Security Document, (ii) the contents of any certificate, report or
other document delivered thereunder or in connection therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth in any Security Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Security Document or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in any Security Document.


 


(e)                                  Authority
to Rely on Certain Writings, Statements and Advice. The Collateral Agent shall
be entitled to rely on, and shall not incur any liability for relying on, any
notice, request, certificate, consent, statement, instrument, document or other
writing believed by it to be genuine and to have been signed or sent by the
proper Person. The Collateral Agent also may rely on any statement made to it
orally or by telephone and believed by it to be made by the proper Person, and
shall not incur any liability for relying thereon. The Collateral Agent may
consult with legal counsel (who may be counsel for the Borrowers or any of
their Subsidiaries), independent accountants and other experts selected by it,
and shall not be liable for any action taken or not taken by it in accordance
with the advice of any such counsel, accountant or expert.


 


(f)                                    Sub-Agents
and Affiliates. The Collateral Agent may perform any of its duties and
exercise any of its rights and powers through one or more sub-agents appointed
by it. The Collateral Agent and any such sub-agent may perform any of its
duties and exercise any of


 


18

















 


its rights and powers through its Affiliates. The
exculpatory provisions of Section 11 and this Section 12 shall apply
to any such sub-agent and to the Affiliates of the Collateral Agent and any such
sub-agent.


 


(g)                                 Information
as to Secured Guarantees and Actions by Lenders. For all purposes of the
Security Documents, including determining the amounts of the Secured Guarantees
or whether any action has been taken under any Security Document, the Collateral
Agent will be entitled to rely on information from (i) the Agents, and
actions taken by them, (ii) any Lender (or any trustee, agent or similar
representative designated pursuant to subsection (f) to supply such
information) for information as to its Secured Guarantees and actions taken by
it, to the extent that the Collateral Agent has not obtained such information
from the foregoing sources, and (iii) the Borrower or any Subsidiary
Guarantor, to the extent that the Collateral Agent has not obtained information
from the foregoing sources.


 


(h)                                 Distribution
of Notices. Within two Domestic Business Days after it receives or sends
any notice referred to in this subsection, the Collateral Agent shall send each
Agent copies of any notice given by the Collateral Agent to any Lien Grantor,
or received by it from any Lien Grantor, pursuant to Section 7, 8, 10,
13(j) or 14.


 


(i)                                     Refusal
to Act. The Collateral Agent may refuse to act on any notice, consent,
direction or instruction from either Agent or any agent, trustee or similar
representative thereof that, in the Collateral Agent’s opinion, (i) is
contrary to law or the provisions of any Security Document, (ii) may
expose the Collateral Agent to liability (unless the Collateral Agent shall
have been indemnified, to its reasonable satisfaction, for such liability by
the Lender), or (iii) is unduly prejudicial to the Agent or Lenders not
joining in such notice, consent, direction or instruction.


 


(j)                                     Resignation;
Successor Collateral Agent. Subject to the appointment and acceptance of a
successor Collateral Agent as provided in this subsection, the Collateral Agent
may resign at any time by notifying the Agents and the Borrower. Upon
acceptance of its appointment as Collateral Agent hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Collateral Agent hereunder, and the
retiring Collateral Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrowers to a successor Collateral Agent
shall be the same as those payable to its predecessor unless otherwise agreed
by the Borrowers and such successor. After the Collateral Agent’s resignation
hereunder, the provisions of Section 11 and this Section 12 shall
continue in effect for the benefit of such retiring Collateral Agent, its
sub-agents and their respective Affiliates in respect of any actions taken or
omitted to be taken by any of them while the retiring Collateral Agent was
acting as Collateral Agent.


 


Subject
to Section 12(d), the Collateral Agent hereby agrees to be bound by the
terms and provisions of all Loan Documents applicable to it.


 


Section 14.                                   Termination of Liens; Release of Collateral.


 


(a)                                  The
Liens granted by the Borrower and the Lien Grantors under this Agreement shall
terminate upon the payment in full of the unpaid principal amount of all Loans,


 


19

















 


all accrued and unpaid interest thereon, and any other
Obligations payable under the Loan Documents and the reduction of all
outstanding Commitments to zero.


 


(b)                                 The
Liens granted by a Subsidiary Guarantor under this Agreement shall terminate
when its Secured Guarantee is released pursuant to Section 2(c).


 


(c)                                  Upon
any termination of a Lien granted under this Agreement or release of
Collateral, the Collateral Agent will, at the expense of the Borrower or the
relevant Subsidiary Guarantor, promptly execute and deliver to such Borrower or
Subsidiary Guarantor such documents as such Borrower or Subsidiary Guarantor
shall reasonably request to evidence the termination of such Lien or the
release of such Collateral, as the case may be.


 


(d)                                 The
Borrower and any Subsidiary Guarantor may sell, exchange, assign or otherwise
dispose of any of its Equipment or Inventory in the ordinary course of business
unless (i) doing so would violate a covenant in the Credit Agreements or (ii)
the Loans shall have been accelerated pursuant to Section 8 of the Senior
Credit Agreement and the Collateral Agent shall have notified the Borrower or
such Subsidiary Guarantor that its right to do so is terminated, suspended or
otherwise limited. If such sale is to a Person which is not a Lien Grantor,
then concurrently with any sale or other disposition permitted by the foregoing
sentence, the Liens created by the Security Documents on the assets sold or
disposed of will cease immediately without any action by the Collateral Agent
or any Lender and the Collateral Agent will, at the expense of the Borrower or
the relevant Subsidiary Guarantor, promptly execute and deliver to such
Borrower or Subsidiary Guarantor such documents as such Borrower or Subsidiary
Guarantor shall reasonably request to evidence the termination of such Lien on
such assets.


 


Section 15.                                   The
Borrower and Subsidiary Guarantors.


 


(a)                                  The
Borrower hereby represents and warrants that the Subsidiary Guarantors listed
on the signatures pages hereof represent all the Subsidiaries of the Borrower
on the date hereof.


 


(b)                                 If
any additional Subsidiary (including, without limitation, any Special Purpose
Vehicle) is formed or acquired after the date hereof, the Borrower will, within
ten Business Days after such Subsidiary is formed or acquired, notify the
Collateral Agent thereof and cause such Subsidiary to become a party hereto by
signing and delivering to the Collateral Agent a Guarantee and Collateral
Agreement Supplement, whereupon such Subsidiary shall become a “Subsidiary
Guarantor” as defined herein.


 


Section 16.                                   Notices. All notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered, or
three Business Days after being deposited in the mail, postage prepaid, or, in
the case of telecopy notice, when received, addressed as set forth in Schedule
10.2 of the relevant Credit Agreement in the case of the Borrower and the
Agents, as set forth in an administrative questionnaire delivered to the Agent
in the case of the Lenders, as set forth below in respect of the Collateral
Agent and as set forth next to the signature thereof or in the relevant
Guarantee and Collateral Agreement Supplement in the case of any Subsidiary
Guarantor, or such other address as may be


 


20

















 


hereafter notified by the respective parties hereto;
provided that any notice, request or demand to or upon the Collateral Agent,
the Agents or the Lenders shall not be effective until received. The Collateral
Agent’s details are:


 


CALYON New
York Branch


1301 Ave of the Americas


New York, NY 10019-6022


Attention:  Brian Bolotin and Sandra Markovic


Facsimile:  (212)
459-3180


Telephone:  (212) 261-7669

E-mail:  brian.bolotin@us.calyon.com


 


Section 17.                                   No Implied Waivers; Remedies Not Exclusive.
No failure by the Collateral Agent or the Agents or any Lender to exercise, and
no delay in exercising and no course of dealing with respect to, any right or
remedy shall operate as a waiver thereof; nor shall any single or partial
exercise by the Collateral Agent or any Lender of any right or remedy preclude
any other or further exercise thereof or the exercise of any other right or
remedy. The rights and remedies specified herein and in each other are
cumulative and are not exclusive of any other rights or remedies provided by
law.


 


Section 18.                                   Successors and Assigns. This
Agreement is for the benefit of the Collateral Agent, the Agents and the
Lenders. If all or any part of any Lenders’ interest in any Obligation is
assigned or otherwise transferred, the transferor’s rights hereunder, to the
extent applicable to the obligation so transferred, shall be automatically
transferred with such obligation. This Agreement shall be binding on the Lien
Grantors and their successors and assigns.


 


Section 19.                                   Amendments and Waivers. Neither
this Agreement nor any provision hereof may be waived, amended, modified or
terminated except pursuant to an agreement or agreements in writing entered
into by the parties hereto.


 


Section 20.                                   Choice of Law. This Agreement
shall be construed in accordance with and governed by the laws of the State of
New York, except as otherwise required by mandatory provisions of law and
except to the extent that remedies provided by the laws of any jurisdiction
other than the State of New York are governed by the laws of such jurisdiction.


 


Section 21.                                   Waiver of Jury Trial. EACH PARTY
HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO ANY SECURITY DOCUMENT OR ANY TRANSACTION
CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE


 


21

















 


BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.


 


Section 22.                                   Severability. If any provision of
any Security Document is invalid or unenforceable in any jurisdiction, then, to
the fullest extent permitted by law (i) the other provisions of the Security
Documents shall remain in full force and effect in such jurisdiction and shall
be liberally construed in favor of the Collateral Agent, the Agents and the
Lenders in order to carry out the intentions of the parties thereto as nearly
as may be possible, and (ii) the invalidity or unenforceability of such
provision in such jurisdiction shall not affect the validity or enforceability
thereof in any other jurisdiction.


 


Section 23.                                   Collateral
Agent Subject to Direction of Agents.


 


(a)                                  The
Collateral Agent hereby covenants and agrees to serve as the Collateral Agent
subject to the direction of the Agents in accordance herewith. Should the
Collateral Agent fail or refuse to take or cause to be taken any action
required or permitted to be taken or caused to be taken by it pursuant to this
Agreement or any other Security Document, one or more of the Agents may take or
cause to be taken such action consistently with the Loan Documents. At the
request of any Agent, the Collateral Agent shall refrain from taking or causing
to be taken any action permitted (but not required) to be taken or caused to be
taken by it hereunder or under any other Loan Document. The Agents shall be
entitled to all of the rights, remedies, benefits and protections granted to
the Collateral Agent pursuant to this Agreement and the other Loan Documents to
the same extent as granted herein or therein to the Collateral Agent. The
provisions hereof are for the benefit of the Agents and the Lenders and may not
be directly or indirectly modified without the prior written consent of each
Agent. The foregoing shall apply notwithstanding anything to the contrary
contained herein, in any other Security Document or otherwise.


 


(b)                                 The
Collateral Agent acknowledges that, for the purposes of the Loan Documents, it
shall act solely at the direction of the Senior Agent until all Obligations
related to the Senior Loans have been repaid and all Commitments have been
terminated, and shall thereafter act at the direction of the Junior Agent,
unless otherwise specifically provided for in the Loan Documents.


 


22

















 


IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.


 


	
   

  	
  AEROTURBINE,
  INC., as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  AEROTURBINE
  CAPITAL CORP., as

  Subsidiary Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  CALYON New
  York Branch, as Collateral

  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 

















 


EXHIBIT A

to Guarantee and Collateral Agreement


 


GUARANTEE AND COLLATERAL
AGREEMENT SUPPLEMENT


 


GUARANTEE
AND COLLATERAL AGREEMENT SUPPLEMENT dated as of
            ,
200  , between [NAME OF LIEN GRANTOR] (the “Lien Grantor”) and CALYON New York Branch,
as collateral agent (the “Collateral Agent”).


 


WHEREAS,
AeroTurbine, Inc. (the “Borrower”),
the Subsidiary Guarantors party thereto and the Collateral Agent are parties to
a Guarantee and Collateral Agreement dated as of April 26, 2006 (as heretofore
amended and/or supplemented, the “Collateral
Agreement”) under which the Borrower secures certain of its
obligations (the “Obligations”)
and the Subsidiary Guarantors guarantee the Obligations and secure their
respective guarantees thereof;


 


WHEREAS,
the Lien Grantor [desires to become] [is] a party to the Collateral Agreement
as a Lien Grantor thereunder(1

); and


 


WHEREAS,
terms defined in the Collateral Agreement (or whose definitions are
incorporated by reference in Section 1 of the Collateral Agreement) and
not otherwise defined herein have, as used herein, the respective meanings
provided for therein;


 


NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:


 


(a)                                  Secured
Guarantee.(2)  The Lien Grantor
unconditionally guarantees the full and punctual payment of each Obligation
when due (whether at stated maturity, upon acceleration or otherwise). The Lien
Grantor acknowledges that, by signing this Guarantee and Collateral Agreement
Supplement and delivering it to the Collateral Agent, the Lien Grantor becomes
a “Lien Grantor” for all purposes of the Collateral Agreement and that its
obligations under the foregoing Secured Guarantee are subject to all the
provisions of the Collateral Agreement (including those set forth in
Section 2 thereof) applicable to the obligations of a Lien Grantor
thereunder.


 


(b)                                 Grant
of Liens.


 


(i)                                     Subject
to all of the terms and conditions of the Collateral Agreement, in order to
secure [its Secured Guarantee](3) [its Obligations under the Loan Documents](4),
the Lien Grantor grants to the Collateral Agent for the benefit of the Lenders
a continuing security interest in all the following property of the Lien
Grantor,


 






(1)  If the Lien Grantor is the
Borrower, delete this recital and paragraph (a) hereof.


(2)  Delete this paragraph if the Lien Grantor is
the Borrower or a Guarantor that is already a party to the Security Agreement.


(3)  Delete bracketed words if the Lien Grantor is
the Borrower.


(4) 
Delete bracketed words if the Lien Grantor is a Guarantor.


 


1

















 


whether
now owned or existing or hereafter acquired or arising and regardless of where
located (the “New Collateral”):


 


[describe property being added to the Collateral]


 


(ii)                                  With
respect to each right to payment or performance included in the Collateral from
time to time, the Lien granted therein includes a continuing security interest
in all right, title and interest of the Lien Grantor in and to (A) any
Supporting Obligation that supports such payment or performance, and
(B) any Lien that (x) secures such right to payment or performance,
or (y) secures any such Supporting Obligation.


 


(iii)                               The foregoing Liens are
granted as security only and shall not subject the Collateral Agent, either
Agent or any Lender, or transfer or in any way affect or modify, any obligation
or liability of the Lien Grantor with respect to any of the New Collateral or
any transaction in connection therewith.


 


(c)                                  Party
to Collateral Agreement. Upon delivering this Guarantee and Collateral
Agreement Supplement to the Collateral Agent, the Lien Grantor will become a
party to the Collateral Agreement and will thereafter have all the rights and
obligations of a Lien Grantor and be bound by all the provisions thereof as
fully as if the Lien Grantor were one of the original parties thereto.(5)


 


(d)                                 Address
of Lien Grantor. The address, facsimile number and e-mail address of the
Lien Grantor for purposes of Section 15 of the Collateral Agreement are:


 


[address, facsimile number and e-mail address of Lien
Grantor]


 


(e)                                  Representations
and Warranties. The Lien Grantor represents and warrants as follows:


 


(i)                                     the
Lien Grantor is a [corporation] duly organized, validly existing and in good
standing under the laws of [jurisdiction of organization];


 


(ii)                                  the
Lien Grantor has delivered a Perfection Certificate to the Collateral Agent. The
information set forth therein is correct and complete as of the date hereof;


 


(iii)                               the execution and
delivery of this Guarantee and Collateral Agreement Supplement by the Lien
Grantor and the performance by it of its obligations under the Collateral
Agreement as supplemented hereby are within its corporate or other powers, have
been duly authorized by all necessary corporate or other action, require no
action by or in respect of, or filing with, any governmental body, agency or
official (other than the filing of UCC financing statements as contemplated by
the above Perfection Certificate) and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of its
organizational documents, or of any agreement,


 






(5)  Delete paragraphs (c) and (d) if the
Lien Grantor is already a party to the Security Agreement.


 


2

















 


judgment,
injunction, order, decree or other instrument binding upon it or result in the
creation or imposition of any Lien on any of its assets;


 


(iv)                              the
Collateral Agreement as supplemented hereby constitutes a valid and binding
agreement of the Lien Grantor, enforceable in accordance with its terms, except
as limited by (A) applicable bankruptcy, insolvency, fraudulent conveyance
or other similar laws affecting creditors’ rights generally and
(B) general principles of equity; and


 


(v)                                 each
of the representations, warranties and covenants set forth in Sections 4
and 5 of the Collateral Agreement is true as applied to the Lien Grantor and
the New Collateral. For purposes of the foregoing sentence, references in said
Sections to an “Original Lien Grantor” or a “Lien Grantor” shall be deemed to
refer to the Lien Grantor, references to “Collateral” shall be deemed to refer
to the New Collateral, and references to the “Closing Date” shall be deemed to
refer to the date on which the Lien Grantor signs and delivers this Guarantee
and Collateral Agreement Supplement.


 


(f)                                    Governing
Law. This Guarantee and Collateral Agreement Supplement shall be construed
in accordance with and governed by the laws of the State of New York.


 


3

















 


IN
WITNESS WHEREOF, the parties hereto have caused this Guarantee and Collateral
Agreement Supplement to be duly executed by their respective authorized
officers as of the day and year first above written.


 


 


	
   

  	
  [NAME OF
  LIEN GRANTOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  CALYON New
  York Branch, as Collateral

  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


4

















 


EXHIBIT B

to Guarantee and Collateral Agreement


 


PERFECTION CERTIFICATE


 


The
undersigned is a duly authorized officer of [NAME OF LIEN GRANTOR] (the “Lien
Grantor”). With reference to the Guarantee and Collateral Agreement dated as of
April 26, 2006 among AeroTurbine, Inc. (the “Borrower”), the Subsidiary Guarantors party thereto and CALYON
New York Branch (the “Collateral Agent”),
the undersigned certifies to the Collateral Agent on behalf of each Agent and
the Lenders as follows:


 


1.                                       Jurisdiction
of Organization. The Lien Grantor is a [corporation] organized under the
laws of                  .


 


2.                                       Name.
The exact [corporate] name of the Lien Grantor as it appears in its
[certificate of incorporation] is as follows:


 


3.                                       Prior
Names. (a)  Set forth below is each
other [corporate] name that the Lien Grantor has had within the past three
years, together with the date of the relevant change:


 


(b)                                 Except
as set forth in the attachments hereto, the Lien Grantor has not changed its
corporate structure in any way within the past three years.


 


(c)                                  None
of the Lien Grantor’s Collateral was acquired from another Person within the
past three years, except:


 


(i)                                     property
sold to the Lien Grantor by another Person in the ordinary course of such other
Person’s business;


 


(ii)                                  property
with respect to which the Liens are to be perfected by taking possession or
control thereof;


 


(iii)                               property
acquired in transactions described in the attachments hereto; and


 


(iv)                              other
property having an aggregate fair market value not exceeding $                    .


 

















 


Attached
hereto is a true copy of a file search report provided by [name of search
company] from the central UCC filing office in each jurisdiction of
organization.


 


IN
WITNESS WHEREOF, I have hereunto set my hand this    day of                  ,
200[  ].


 


 


	
   

  	
  Name:

  	
   

  
	
   

  	
  Title: