Exhibit 10.24


 


***Indicates CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.


 


 




 





MORTGAGE AND SECURITY AGREEMENT


 


 


Dated as of November 16, 2004


 


 


between


 


 


NORTHWEST AIRLINES, INC.


 


 


and


 


 


***,

as Collateral Agent


 


 


One Airbus A330-223 Aircraft

FAA Registration No. N *** NW


 




 





 





















 


TABLE OF CONTENTS


 


	
  ARTICLE I

  
	
   

  	
   

  	
   

  
	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Certain Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  	
   

  	
   

  
	
  SECURITY

  
	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  Grant of Security Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  	
   

  	
   

  
	
  COVENANTS OF THE COMPANY

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  Liens

  	
   

  
	
  Section 3.2.

  	
  Possession, Operation and Use, Maintenance
  and Registration

  	
   

  
	
  Section 3.3.

  	
  Inspection

  	
   

  
	
  Section 3.4.

  	
  Replacement and Pooling of Parts;
  Alterations, Modifications and Additions; Substitution of Engines

  	
   

  
	
  Section 3.5.

  	
  Loss, Destruction or Requisition

  	
   

  
	
  Section 3.6.

  	
  Insurance

  	
   

  
	
  Section 3.7.

  	
  Filings

  	
   

  
	
  Section 3.8.

  	
  Corporate Existence

  	
   

  
	
  Section 3.9.

  	
  Merger, Consolidation

  	
   

  
	
  Section 3.10.

  	
  Notice of Change of the Company’s Location

  	
   

  
	
  Section 3.11.

  	
  Interests in the Purchase Agreement

  	
   

  
	
  Section 3.12.

  	
  General Covenant

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  	
   

  	
   

  
	
  REMEDIES OF THE COLLATERAL AGENT

  UPON AN EVENT OF DEFAULT

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Event of Default

  	
   

  
	
  Section 4.2.

  	
  Remedies with Respect to Collateral

  	
   

  
	
  Section 4.3.

  	
  Waiver of Appraisement, etc., Laws

  	
   

  
	
  Section 4.4.

  	
  Remedies Cumulative

  	
   

  
	
  Section 4.5.

  	
  Discontinuance of Proceedings

  	
   

  
					



 


i





















 


	
  ARTICLE V

  
	
   

  	
   

  	
   

  
	
  DUTIES OF THE COLLATERAL AGENT

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Action Upon Event of Default

  	
   

  
	
  Section 5.2.

  	
  Action Upon Instructions

  	
   

  
	
  Section 5.3.

  	
  Indemnification

  	
   

  
	
  Section 5.4.

  	
  No Duties Except as Specified in Mortgage
  or Instructions

  	
   

  
	
  Section 5.5.

  	
  No Action Except Under Mortgage or
  Instructions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  	
   

  	
   

  
	
  SUPPLEMENTS AND AMENDMENTS

  TO THIS MORTGAGE AND OTHER DOCUMENTS

  
	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
  Supplemental Mortgages

  	
   

  
	
  Section 6.2.

  	
  Collateral Agent Protected

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
   

  	
   

  	
   

  
	
  INVESTMENT OF SECURITY FUNDS

  
	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
  Investment of Security Funds

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Termination of Mortgage

  	
   

  
	
  Section 8.2.

  	
  Alterations to Mortgage

  	
   

  
	
  Section 8.3.

  	
  No Legal Title to Collateral in Noteholder

  	
   

  
	
  Section 8.4.

  	
  Sale of the Aircraft by Collateral Agent Is
  Binding

  	
   

  
	
  Section 8.5.

  	
  Benefit of Mortgage

  	
   

  
	
  Section 8.6.

  	
  Section 1110 of the Bankruptcy Code

  	
   

  
	
  Section 8.7.

  	
  Notices

  	
   

  
	
  Section 8.8.

  	
  Severability

  	
   

  
	
  Section 8.9.

  	
  No Waiver; Cumulative Remedies

  	
   

  
	
  Section 8.10.

  	
  Separate Counterparts

  	
   

  
	
  Section 8.11.

  	
  Successors and Assigns

  	
   

  
	
  Section 8.12.

  	
  Headings

  	
   

  
	
  Section 8.13.

  	
  Governing Law

  	
   

  
	
  Section 8.14.

  	
  Normal Commercial Relations

  	
   

  
	
  Section 8.15.

  	
  Language

  	
   

  
	
  Section 8.16.

  	
  Interpretation

  	
   

  
	
  Section 8.17.

  	
  Execution of Financing Statements

  	
   

  
					



 


ii





















 


	
  Appendix A

  	
  –

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  –

  	
  Form of Mortgage and Security Agreement
  Supplement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule I

  	
  –

  	
  Schedule of Countries For Permitted
  Lessees

  	
   

  



 


iii





















 


MORTGAGE AND SECURITY AGREEMENT


 


This MORTGAGE
AND SECURITY AGREEMENT, dated as of November 16, 2004, between NORTHWEST
AIRLINES, INC., a Minnesota corporation (together with its successors and
permitted assigns, the “Company”), and ***, a Delaware corporation, as
Collateral Agent for the benefit of the Administrative Agent and the
Noteholders (together with its permitted successors and assigns, the “Collateral
Agent”);


 


W I
T  N  E  S  S  E  T  H :


 


WHEREAS, the
Lenders have agreed, pursuant and subject to the terms and conditions of the
Credit Agreement, to make a Loan to the Company in connection with the
acquisition of the Aircraft to be evidenced by the Notes; and


 


WHEREAS, the
Company desires by this Mortgage, among other things, to grant to the
Collateral Agent a Lien on the Collateral in accordance with the terms hereof,
as security for the Obligations.


 


NOW,
THEREFORE, to secure the due and punctual payment of the Obligations, it is
hereby covenanted and agreed by and between the parties hereto as follows:


 


ARTICLE I


 


DEFINITIONS


 


Section 1.1.                                   Certain
Definitions.  Unless otherwise
defined herein or the context requires otherwise, capitalized terms used herein
shall have the meanings set forth in Appendix A hereto.


 


ARTICLE II


 


SECURITY


 


Section 2.1.                                   Grant
of Security Interest.  The Company,
in order to secure (i) the prompt payment when due of the Obligations and (ii)
the performance and observance by the Company of all agreements, covenants and
provisions contained herein and in the Notes and in the Credit Agreement and in
the other Loan Documents, and in consideration of the premises and of the
covenants herein contained, and of other good and valuable consideration, the
receipt of which is hereby acknowledged, has granted, bargained, sold,
assigned, transferred, conveyed, mortgaged, pledged and confirmed and does
hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and
confirm unto the Collateral Agent, its permitted successors and assigns, for
the security and benefit of the Administrative Agent and the Noteholders,
forever, a continuing security interest in, and mortgage lien on, all estate,
right, title and interest of the Company in, to and under the following
described properties, rights, interests and privileges (which, collectively,
including all property hereafter specifically subjected to the lien of this
Mortgage by any instrument supplemental hereto, are referred to herein as the “Collateral”):


 





















 


(a)                                  the Airframe and the Engines,
each of which Engines is of 750 or more rated takeoff horsepower or the
equivalent of such horsepower, and in the case of such Engines, whether or not
any such Engine shall be installed in or attached to the Airframe or any other
airframe, together with all accessories, equipment, parts and appurtenances
appertaining or attached to the Airframe (other than jet aircraft engines not
constituting Engines) or Engines, whether now owned or hereafter acquired, and all
substitutions, renewals and replacements of and additions, improvements,
accessions and accumulations to the Airframe and Engines and all records, logs
and other documents at any time maintained with respect to the foregoing;


 


(b)                                 the Contract Rights, but subject
always to the provisions of Section 3.11 hereof;


 


(c)                                  all proceeds with respect to the
requisition of title to or use of the Aircraft or any part thereof, and all
insurance proceeds with respect to the Aircraft or any part thereof, but
excluding any insurance maintained by the Company and not required under Section 3.6
hereof;


 


(d)                                 all moneys and securities now or
hereafter paid or deposited or required to be paid or deposited to or with the
Collateral Agent in pledge hereunder and held or required to be held by the
Collateral Agent hereunder;


 


(e)                                  any and all property that may,
from time to time hereafter, in accordance with the provisions of this
Mortgage, by delivery or by Mortgage Supplement or by other writing of any
kind, for the purposes hereof be in any way subjected to the lien and security
interest hereof or be expressly conveyed, mortgaged, assigned, transferred,
deposited, in which a security interest may be granted by the Company and/or
pledged by the Company, or by any Person authorized to so do on its behalf or
with its consent, to and with the Collateral Agent, who is hereby authorized to
receive the same at any and all times as and for additional security hereunder;


 


(f)                                    all proceeds of the foregoing;


 


PROVIDED,
HOWEVER, that notwithstanding any of the foregoing provisions of this Section 2.1,
so long as no Event of Default shall have occurred and be continuing, (i) the
Company shall have the right, to the exclusion of the Collateral Agent, to
quiet enjoyment of the Airframe and Engines, and to possess, use, retain and
control the Airframe and Engines and all revenues, income and profits derived
therefrom, in accordance with the terms of the Loan Documents and (ii) the
Collateral Agent, acting on behalf of the Lenders, shall not, through its own
actions or inactions, interfere with, or suffer to exist with respect to the
Aircraft any Lien attributable to the Collateral Agent which might interfere
with, the Company’s (or any Lessee’s) continued possession, use and operation
of, and quiet enjoyment (including, without limitation, administrative quiet
enjoyment) of, the Aircraft during the term of this Mortgage in accordance with
the terms of the Loan Documents so long as no Event of Default shall have
occurred and be continuing.


 


2





















 


TO HAVE AND TO
HOLD the Collateral unto the Collateral Agent, its permitted successors and
assigns, forever, upon the terms herein set forth, in trust for the benefit,
security and protection of the Administrative Agent and the Noteholders,
without any priority of any one Note over any other, and for the uses and
purposes and subject to the terms and provisions set forth in this Mortgage.


 


It is
expressly agreed that anything herein contained to the contrary notwithstanding,
the Company shall remain liable under each of the Loan Documents to which it is
a party to perform all of the obligations assumed by it thereunder, all in
accordance with and pursuant to the terms and provisions thereof, and neither
the Administrative Agent, the Collateral Agent nor the Noteholders shall have
any obligation or liability under any of the Loan Documents to which the
Company is a party by reason of or arising out of the assignment hereunder, nor
shall the Administrative Agent, the Collateral Agent or the Noteholders be
required or obligated in any manner to perform or fulfill any obligations of
the Company under any of the Loan Documents to which the Company is a party,
or, except as herein expressly provided, to make any payment, or to make any
inquiry as to the nature or sufficiency of any payment received by it, or
present or file any claim, or take any action to collect or enforce the payment
of any amounts which may have been assigned to it or to which it may entitled
at any time or times.


 


The Company
does hereby irrevocably constitute and appoint the Collateral Agent the true
and lawful attorney of the Company (which appointment is coupled with an
interest) with full power (in the name of the Company or otherwise) to ask,
require, demand, receive, compound and give acquittance for any and all moneys
and claims for moneys (in each case including insurance and requisition
proceeds) and all other property which now or hereafter constitutes part of the
Collateral, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or to take any action or to institute any
proceeding which the Collateral Agent may deem to be necessary or advisable in
the premises; provided that the
Collateral Agent shall not exercise any such rights except upon the occurrence
and during the continuance of an Event of Default.


 


The Company
agrees that at any time and from time to time, upon the written request of the
Collateral Agent, the Company will promptly and duly execute and deliver or
cause to be duly executed and delivered any and all such further instruments
and documents as the Collateral Agent may reasonably deem desirable in
obtaining the full benefits of the assignment hereunder and of the rights and
powers herein granted.


 


The Company
does hereby warrant and represent that it has not assigned or pledged, and
hereby covenants that it will not assign or pledge, so long as the assignment
hereunder shall remain in effect, any of its right, title or interest hereby
assigned, to anyone other than the Collateral Agent.


 


3





















 


ARTICLE III


 


COVENANTS OF THE COMPANY


 


Section 3.1.                                   Liens.


 


The Company
will not directly or indirectly create, incur, assume or permit to exist any Lien
on or with respect to any of the Collateral or title thereto or any interest
therein except:


 


(a)                                  the Lien of this Mortgage;


 


(b)                                 the rights of others under
agreements or arrangements to the extent permitted by Sections 3.2 and 3.4
hereof;


 


(c)                                  Liens for taxes of the Company
(or any Lessee) either not yet due or payable or being contested in good faith
by appropriate proceedings so long as such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Airframe or any Engine or
any interest therein or adversely affect the Lien of this Mortgage;


 


(d)                                 materialmen’s, mechanics’,
workmen’s, repairmen’s, employees’ or other like Liens arising in the ordinary
course of the Company’s (or, if a Lease is then in effect, Lessee’s) business
(including those arising under maintenance agreements entered into in the
ordinary course of business) securing obligations that are not overdue for a
period of more than sixty (60) days or are being contested in good faith by
appropriate proceedings so long as such proceedings do not involve any material
risk of the sale, forfeiture or loss of the Airframe or any Engine or any
interest therein or adversely affect the Lien of this Mortgage;


 


(e)                                  Liens arising out of any
judgment or award against the Company (or any Lessee), unless the judgment
secured shall not, within sixty (60) days after the entry thereof, have been
discharged, vacated, reversed or the execution thereof stayed pending appeal or
shall not have been discharged, vacated or stayed within sixty (60) days after
the expiration of such stay;


 


(f)                                    any other Lien with respect to
which the Company (or any Lessee) shall have provided a bond, cash collateral
or other security adequate in the reasonable opinion of the Collateral Agent;
and


 


(g)                                 Liens approved in writing by the
Collateral Agent.


 


Liens
described in clauses (a) through (g) above are referred to herein as “Permitted
Liens.” The Company shall promptly, at its own expense, take such action as
may be necessary to duly discharge any Lien other than a Permitted Lien arising
at any time.


 


4





















 


Section 3.2.                                   Possession,
Operation and Use, Maintenance and Registration.


 


(a)                                  Possession.


 


The Company
shall not, without the prior written consent of the Collateral Agent, lease or
otherwise in any manner deliver, transfer or relinquish possession of the
Airframe or any Engine or install or permit any Engine to be installed in any
airframe other than the Airframe or enter into any Wet Lease; provided that so long as no Default of the
type referred to in Section 4.1(a), 4.1(d) or 4.1(e) or Event of Default
shall have occurred and be continuing at the time of such lease, delivery,
transfer or relinquishment of possession or installation or such Wet Lease, so
long as the action to be taken shall not deprive the Collateral Agent of the
first priority Lien of this Mortgage on the Airframe and so long as the Company
(or any Lessee) shall comply with the provisions of Sections 3.2(c) and 3.6
hereof, the Company may, without the prior written consent of the Collateral
Agent:


 


(i)  
subject the Airframe and the Engines or engines then installed thereon
to normal interchange agreements or any Engine to normal pooling or similar
arrangements, in each case customary in the airline industry and entered into
by the Company (or any Lessee) in the ordinary course of its business; provided that (A) no such agreement or arrangement contemplates or requires
the transfer of title to the Airframe, (B) if the Company’s
title to any Engine shall be divested under any such agreement or arrangement,
such divestiture shall be deemed to be an Event of Loss with respect to such
Engine and the Company shall (or shall cause Lessee to) comply with Section 3.4(e)
hereof in respect thereof and (C) any interchange agreement to which the
Airframe may be subject shall be with a U.S. Air Carrier or a Foreign Air
Carrier;


 


(ii)  
deliver possession of the Airframe or any Engine to the manufacturer
thereof (or for delivery thereto) or to any organization (or for delivery
thereto) for testing, service, repair, maintenance or overhaul work on the
Airframe or Engine or any part thereof or for alterations or modifications in
or additions to such Airframe or Engine to the extent required or permitted by
the terms of Section 3.4(d) hereof;


 


(iii)  
install an Engine on an airframe which is owned by the Company (or any
Lessee) free and clear of all Liens, except: (A) Permitted Liens and those
which apply only to the engines (other than Engines), appliances, parts,
instruments, appurtenances, accessories, furnishings and other equipment (other
than Parts) installed on such airframe (but not to the airframe as an
entirety), (B) the rights of third parties under interchange agreements which
would be permitted under clause (i) above provided that the Company’s title to
such Engine and the first priority Lien of this Mortgage shall not be divested
or impaired as a result thereof and (C) mortgage liens or other security
interests, provided that
(as regards this subclause (C)) such mortgage liens or other security interests
effectively provide that such Engine shall not become subject to such mortgage
or security interest, notwithstanding the installation thereof on such
airframe;


 


(iv)  
install an Engine on an airframe which is leased to the Company (or any
Lessee) or purchased by the Company (or any Lessee) subject to a conditional
sale or other security agreement, provided that
(x) such airframe is free and clear of all Liens,


 


5





















 


except: (A) the rights of the parties to the lease or conditional sale
or other security agreement covering such airframe, or their assignees, and (B)
Liens of the type permitted by clause (iii) of this Section 3.2(a) and (y)
such lease, conditional sale or other security agreement effectively provides
that such Engine shall not become subject to the lien of such lease,
conditional sale or other security agreement, notwithstanding the installation
thereof on such airframe;


 


(v)  
install an Engine on an airframe owned by the Company (or any Lessee),
leased to the Company (or any Lessee) or purchased by the Company (or any
Lessee) which is subject to a conditional sale or other security agreement
under circumstances where neither clause (iii) nor clause (iv) of this Section 3.2(a)
is applicable, provided that
such installation shall be deemed an Event of Loss with respect to such Engine
and that the Company shall (or shall cause any Lessee to) comply with Section 3.4(e)
hereof in respect thereof, the Collateral Agent not intending hereby to waive
any right or interest it may have to or in such Engine under applicable law
until compliance by the Company with such Section 3.4(e);


 


(vi)  
to the extent permitted by Section 3.4(c) hereof, subject any appliances,
Parts or other equipment owned by the Company and removed from the Airframe or
any Engine to any pooling arrangement referred to in such Section;


 


(vii)  
subject (or permit any Lessee to subject) the Airframe or any Engine to
the Civil Reserve Air Fleet Program and transfer (or permit any Lessee to
transfer) possession of the Airframe or any Engine to the United States of
America or any instrumentality or agency thereof pursuant to the Civil Reserve
Air Fleet Program, so long as the Company (or any Lessee) shall (A) promptly
notify the Collateral Agent upon subjecting the Airframe or any Engine to the
Civil Reserve Air Fleet Program in any contract year and provide the Collateral
Agent with the name and address of the Contracting Office Representative for
the Air Mobility Command of the United States Air Force to whom notice must be
given pursuant to Section 4.2 hereof, and (B) promptly notify the
Collateral Agent upon transferring possession of the Airframe or any Engine to
the United States of America or any agency or instrumentality thereof pursuant
to such program;


 


(viii)  
enter into a Wet Lease for the Airframe and Engines or engines then
installed thereon with any third party, provided that if the Company (or any Lessee) shall enter
into any Wet Lease for a period of more than one year (including renewal
options) the Company shall provide to the Collateral Agent written notice of
such Wet Lease (such notice to be given prior to entering into such Wet Lease,
if practicable, but in any event promptly after entering into such Wet Lease);


 


(ix)  
transfer possession of the Airframe or any Engine to the United States
of America or any instrumentality or agency thereof pursuant to a contract, a
copy of which shall be provided to the Collateral Agent; or


 


(x)  
the Company may, at any time, enter into any lease of the Airframe or
any Engine with (A) a U.S. Air Carrier, (B) any Person approved in writing by
the


 


6





















 


Collateral Agent (with the approval of the Required Lenders), (C) any
Permitted Lessee or (D) Koninklijke Luchtvaart Mastchappij N.V. (“KLM”) or any
other airline alliance partner of the Company that otherwise meets the
requirement of (A), (B) or (C) above or has been previously approved in writing
by the Collateral Agent, in any such case, if (1) the lessee under such lease
is not subject to a proceeding or final order under applicable bankruptcy,
insolvency or reorganization laws on the date such lease is entered into, (2)
in the event that the lessee under such lease is a foreign air carrier (other
than a foreign air carrier principally based in Taiwan), the United States
maintains diplomatic relations with the country in which such foreign air
carrier is principally based at the time such lease is entered into (or, in the
case of a lease to a lessee principally based in Taiwan, maintains diplomatic
relations at least as good as those in effect on the date of the Loan), and (3)
in the event that the lessee under such lease is a foreign air carrier, the
Collateral Agent shall receive at the time such lease is entered into an
opinion of counsel (in form and substance reasonably satisfactory to the
Collateral Agent) to the Company to the effect that (I) the terms of the
proposed lease will be legal, valid, binding and (subject to customary
exceptions in foreign opinions generally) enforceable against the proposed
lessee in the country in which the proposed lessee is principally based, (II)
there exist no possessory rights in favor of the lessee under such lease under
the laws of such lessee’s country of domicile that would, upon bankruptcy or
insolvency of or other default by the Company and assuming at such time such
lessee is not insolvent or bankrupt, prevent the return or repossession of the
Aircraft in accordance with the terms of this Mortgage, (III) the laws of such
lessee’s country of domicile require fair compensation by the government of
such jurisdiction payable in currency freely convertible into Dollars for the
loss of use of the Aircraft in the event of the requisition by such government
of such use, and (IV) the laws of such lessee’s country of domicile would give
recognition to the Company’s title to the Aircraft, to the registry of the
Aircraft in the name of the Company (or the proposed lessee, as “lessee”, as
appropriate), and to the Lien of this Mortgage.


 


The rights of
any Lessee or other transferee who receives possession by reason of a transfer
permitted by this Section 3.2(a) (other than the transfer of an Engine
which is deemed an Event of Loss) shall be effectively subject and subordinate
to, and any lease permitted by this Section 3.2(a) shall be expressly
subject and subordinate to, all the terms of this Mortgage and to the Lien of
this Mortgage, including, without limitation, the covenants contained in this Section 3.2
and the Collateral Agent’s rights to foreclosure and possession pursuant to Section 4.2
hereof and to avoid such lease upon such repossession, and the Company shall
remain primarily liable hereunder for the performance of all of the terms of
this Mortgage to the same extent as if such lease or transfer had not occurred,
and, except as otherwise provided herein, the terms of any such lease shall not
permit any Lessee to take any action not permitted to be taken by the Company
in this Mortgage with respect to the Aircraft. No pooling agreement, lease or
other relinquishment of possession of the Airframe or any Engine or Wet Lease
shall in any way discharge or diminish any of the Company’s obligations to the
Collateral Agent hereunder or constitute a waiver of the Collateral Agent’s
rights or remedies hereunder. Any lease permitted under this Section 3.2(a)
shall expressly prohibit any further sublease by the Lessee. The Collateral
Agent agrees, for the benefit of the Company (and any Lessee) and for the
benefit of any mortgagee or other holder of a security interest in any engine
(other than an Engine) owned by the Company (or any Lessee), any lessor of any
engine (other than an Engine) leased to the Company (or any Lessee) and any
conditional vendor of any engine (other than an Engine)


 


7





















 


purchased by
the Company (or any Lessee) subject to a conditional sale agreement or any
other security agreement, that no interest shall be created hereunder in any
engine so owned, leased or purchased and that neither the Collateral Agent nor
its successors or assigns will acquire or claim, as against the Company (or any
Lessee) or any such mortgagee, lessor or conditional vendor or other holder of
a security interest or any successor or assignee of any thereof, any right,
title or interest in such engine as the result of such engine being installed
on the Airframe; provided, however, that
such agreement of the Collateral Agent shall not be for the benefit of any
lessor or secured party of any airframe (other than the Airframe) leased to the
Company (or any Lessee) or purchased by the Company (or any Lessee) subject to
a conditional sale or other security agreement or for the benefit of any mortgagee
of or any other holder of a security interest in an airframe owned by the
Company (or any Lessee), unless such lessor, conditional vendor, other secured
party or mortgagee has expressly agreed (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 the
Collateral Agent, any right, title or interest in an Engine as a result of such
Engine being installed on such airframe. The Company shall provide to the
Collateral Agent (i) written notice of any lease hereunder (such notice to be
given not later than five days prior to entering into such lease) and (ii) a
copy of each lease which has a term of more than three months.


 


(b)                                 Operation
and Use.


 


The Company
will not maintain, use, service, repair, overhaul or operate the Aircraft (or
permit any Lessee or other Person to maintain, use, service, repair, overhaul
or operate the Aircraft) in violation of any law or any rule, regulation, order
or certificate of any government or governmental authority (domestic or
foreign) having jurisdiction, or in violation of any airworthiness certificate,
license or registration relating to the Aircraft issued by any such authority,
except to the extent that the Company (or any Lessee) is contesting in good
faith the validity or application of any such law, rule, regulation or order in
any reasonable manner which does not adversely affect the first priority Lien
of this Mortgage and does not involve any material risk of sale, forfeiture or
loss of the Aircraft.


 


The Company
shall not operate the Aircraft, or permit any Lessee to operate the Aircraft,
(a) in the event insurance (including, without limitation, aircraft war risk
and hijacking insurance) is not maintained in accordance with Section 3.6
hereof until such coverage is reinstated, or (b) in any area excluded from
coverage by any insurance required by the terms of Section 3.6 hereof,
whether before or after the occurrence of an Event of Default based on such
failure to maintain insurance; provided,
however, that the failure of the Company to comply with the
provisions of this sentence shall not give rise to an Event of Default
hereunder where such failure is attributable to causes beyond the reasonable
control of the Company (or any Lessee) or to extraordinary circumstances
involving an isolated occurrence or series of incidents not in the ordinary
course of the regular operations of the Company (or any Lessee) and in each
case the Company (or such Lessee, as the case may be) is taking all reasonable
steps to remedy such failure as soon as is reasonably practicable.


 


8





















 


(c)                                  Maintenance.


 


The Company,
at its own cost and expense, shall (or shall cause any Lessee to) maintain,
service, repair and overhaul (or cause to be maintained, serviced, repaired and
overhauled) the Aircraft so as to keep the Aircraft in as good an operating
condition as when initially subjected to the Lien hereof, ordinary wear and tear
excepted, and as may be necessary to enable the applicable airworthiness
certification for the Aircraft to be maintained in good standing at all times
(other than temporary periods of storage in accordance with applicable
regulations or during maintenance or modification permitted hereunder) under
the Transportation Code, except when all Airbus A330-200 series aircraft
powered by engines of the same type as those with which the Airframe shall be
equipped at the time of such grounding and registered in the United States have
been grounded by the FAA (although such certification need actually be
maintained only during such period as the Aircraft is registered in the United
States), or the applicable laws of any other jurisdiction in which the Aircraft
may then be registered from time to time in accordance with the terms hereof,
utilizing, except during any period that a Lease is in effect, the same manner
and standard of maintenance, service, repair or overhaul used by the Company
with respect to similar aircraft operated by the Company in similar
circumstances and utilizing, during any period that a Lease is in effect, the
same manner and standard of maintenance, service, repair or overhaul used by
the Lessee with respect to similar aircraft operated by the Lessee in similar
circumstances; provided, however, that in all circumstances the Aircraft shall
be maintained by the Company (or any Lessee) in accordance with maintenance
standards required by, or substantially equivalent to those required by, the
FAA or the central civil aviation authority of Canada, France, Germany, Japan,
the Netherlands or the United Kingdom. 
The Company shall maintain or cause to be maintained all records, logs
and other materials required to be maintained in respect of the Aircraft by the
FAA or the applicable regulatory agency or body of any other jurisdiction in
which the Aircraft may then be registered.


 


(d)                                 Identification
of Collateral Agent’s Interest.


 


On or prior to
the date of the Loan, or as soon as practicable thereafter, the Company agrees
to fix and maintain (or cause to be fixed and maintained), at its expense, in
the cockpit of the Airframe adjacent to the airworthiness certificate therein
and on each Engine a nameplate bearing the inscription:


 


“SUBJECT TO A
MORTGAGE AND SECURITY AGREEMENT IN FAVOR OF ***, AS COLLATERAL AGENT”


 


(such
nameplate to be replaced, if necessary, with a nameplate reflecting the name of
any successor Collateral Agent). Except as above provided, the Company will not
allow the name of any Person (other than the Company) to be placed on the
Airframe or on any Engine as a designation that might be interpreted as a claim
of security interest or ownership; provided that
nothing herein contained shall prohibit the Company (or any Lessee) from
placing its customary colors and insignia on the Airframe or any Engine.


 


9





















 


(e)                                  Registration.


 


The Company,
at its own expense, will (or will cause any Lessee to) cause the Aircraft to be
duly registered, and at all times to remain duly registered, in the name of the
Company under the Transportation Code, provided,
however, that, subject to the
last sentence of this Section 3.2(e), (i) at any time before the
fifth anniversary of the delivery of the Aircraft, the Company may elect to
effect a change in the registration of the Aircraft to the Netherlands, the
United Kingdom or Japan, at the Company’s expense, with the prior written
consent of the Collateral Agent (such consent not to be unreasonably withheld
or delayed) or (ii) at any time after the fifth anniversary of the
delivery of the Aircraft, the Company may elect to effect a change in the
registration of the Aircraft to any such or to another jurisdiction, at the
Company’s expense, without any Lender’s or the Collateral Agent’s consent, so
long as


 


(A)                              the proposed country of
registry of the Aircraft is a country listed on Schedule IV to the Credit
Agreement (or such other country as the Lender approves),


 


(B)                                the Company undertakes
to perform in such country that which is required to maintain the Lender’s
first and prior perfected Lien on the Collateral, and


 


(C)                                the following
conditions are met:


 


(i)                                     the
United States, France, Germany, the United Kingdom, the Netherlands or Japan,
as appropriate, maintain normal diplomatic relations with the proposed country
of registry of the Aircraft; and


 


(ii)                                  the
Lenders and the Collateral Agent shall have received favorable opinions
(subject to customary exceptions) addressed to each party, from counsel of
recognized reputation qualified in the laws of the relevant jurisdiction to the
effect that:


 


(a)                                  the
Collateral Agent’s Lien on and security interest in the Aircraft shall be
recognized under the laws of such jurisdiction,


 


(b)                                 the
obligations of the Company, and the rights and remedies of the appropriate
parties under the Loan Documents shall remain valid, binding and (subject to
customary bankruptcy and equitable remedies exceptions and to other exceptions
customary in foreign opinions generally) enforceable under the laws of such
jurisdiction (or the laws of the jurisdiction to which the laws of such
jurisdiction would refer as the applicable governing law),


 


(c)                                  after
giving effect to such change in registration, the Collateral Agent’s Lien and
security interest in and to the Aircraft shall continue as a valid and duly
perfected first priority security interest and all filing, recording or other
action necessary to establish, protect and perfect the same shall have been
accomplished (or, if such opinion cannot be


 


10





















 


given at the time of such proposed change in
registration because such change in registration is not effective, (i) the
opinion shall detail what filing, recording or other action is necessary and
(ii) the Lenders and the Collateral Agent shall have received a certificate
from the Company that all possible preparations to accomplish such filing,
recording and other action shall have been done, and such filing, recording and
other action shall be accomplished and a supplemental opinion to that effect
shall be delivered to the Lenders and the Collateral Agent on or prior to the
effective date of such change in registration),


 


(d)                                 it
is not necessary, solely as a consequence of such change in registration and
without giving effect to any other activity of the Lenders or the Collateral
Agent, for the Lenders or the Collateral Agent to qualify to do business in
such jurisdiction,


 


(e)                                  there
is no tort liability of the owner of an aircraft not in possession thereof
under the laws of such jurisdiction (it being agreed that, in the event such
latter opinion cannot be given in a form satisfactory to the appropriate
parties, such opinion shall be waived if insurance reasonably satisfactory to
the Collateral Agent is provided to cover such risk); and


 


(f)                                    (unless
the Company shall have agreed to provide insurance covering the risk of
requisition of use of the Aircraft by the government of such jurisdiction so
long as the Aircraft is registered under the laws of such jurisdiction) the
laws of such jurisdiction require fair compensation by the government of such
jurisdiction payable in currency freely convertible into Dollars for the loss
of use of the Aircraft in the event of the requisition by such government of
such use.


 


In addition, as a condition precedent to any such change in
registration, the Company shall furnish to the Lenders and to the Collateral
Agent an officer’s certificate to the effect that the insurance required by
this Agreement shall be in full force and effect at the time of such change in
registration after giving effect to such change in registration and that the
new country of registry imposes aircraft maintenance standards not materially
different from those of the United States of America, France, Germany, Japan,
the Netherlands or the United Kingdom. 
The Company shall pay all costs, expenses, fees, recording and
registration taxes, including the fees and expenses of counsel to the Lenders
and of the Collateral Agent and other charges in connection with any such
change in registration.  Notwithstanding
the foregoing, no change in registration of the Aircraft shall be permitted if
such change is reasonably likely to result in any adverse tax consequences to
the Collateral Agent or the Lenders for which the Company is not required to
indemnify under the Loan Documents or has not entered into a binding agreement
to indemnify in a manner reasonably satisfactory in form and substance to the
Collateral Agent.


 


Section 3.3.                                   Inspection.  At reasonable times and, so long as no Event
of Default shall have occurred and be continuing, on at least 15 days prior
written notice to the Company, the Collateral Agent or its authorized
representatives may (not more than once every


 


11





















 


calendar year (unless an Event of Default has occurred and is
continuing)) inspect the Aircraft and inspect and make copies (at the
Collateral Agent’s expense) of the books and records of the Company relating to
the maintenance of the Aircraft; any such inspection of the Aircraft shall be
limited to a visual, walk-around inspection and shall not include opening any
panels, bays or the like without the express consent of the Company; provided that no exercise of such inspection rights shall
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, the Company or any Lessee. The Collateral Agent 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.


 


Section 3.4.                                   Replacement and
Pooling of Parts; Alterations, Modifications and Additions; Substitution of
Engines.


 


(a)                                  Replacement
of Parts.


 


The Company,
at its own cost and expense, will so long as the Airframe or an Engine is
subject to the Lien of this Mortgage promptly replace or cause to be replaced
all Parts which may from time to time be incorporated or installed in or
attached to the Airframe or any Engine and which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair
or permanently rendered unfit for use for any reason whatsoever, except as
otherwise provided in Section 3.4(d) hereof or if the Airframe or an
Engine to which a Part relates has suffered an Event of Loss. In addition, the
Company (or any Lessee) may, at its own cost and expense, remove in the
ordinary course of maintenance, service, repair, overhaul or testing, any
Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, provided that the Company (or such
Lessee), except as otherwise provided in Section 3.4(d) hereof, will, at
its own cost and expense, replace such Parts as promptly as practicable. All
replacement Parts shall be free and clear of all Liens (except Permitted Liens
and pooling arrangements to the extent permitted by Section 3.4(c) and
except in the case of replacement property temporarily installed on an
emergency basis) and shall be in as good operating condition as, and shall have
a value and utility at least equal to, the Parts replaced assuming such
replaced Parts were in the condition and repair required to be maintained by
the terms hereof.


 


(b)                                 Parts.


 


Except as
otherwise provided in Section 3.4(d) hereof, all Parts at any time removed
from the Airframe or any Engine shall remain subject to the Lien of this
Mortgage, no matter where located, until such time as such Parts shall be
replaced by Parts that have been incorporated or installed in or attached to
such Airframe or Engine and which meet the requirements for replacement Parts
specified in Section 3.4(a) hereof. Immediately upon any replacement part
becoming incorporated or installed in or attached to an Airframe or Engine as
provided in Section 3.4(a) hereof, without further act (subject only to
Permitted Liens and any pooling arrangement to the extent permitted by Section 3.4(c)
hereof and except in the case of replacement property temporarily installed on
an emergency basis), (i) title to such replacement Part shall be owned by the
Company, (ii) the replaced Part shall thereupon be free and clear of all rights
of the Collateral Agent and the replacement part shall be deemed a Part
hereunder; and (iii) such replacement Part shall become subject to the Lien of
this Mortgage and be deemed part


 


12





















 


of such
Airframe or Engine, as the case may be, for all purposes hereof to the same
extent as the Parts originally incorporated or installed in or attached to such
Airframe or Engine.


 


(c)                                  Pooling
of Parts.


 


Any Part
removed from the Airframe or any Engine as provided in Section 3.4(a)
hereof may be subjected by the Company (or any Lessee) to a normal pooling
arrangement customary in the airline industry of which the Company (or any
Lessee) is a party entered into in the ordinary course of the Company’s (or
such Lessee’s) business; provided that
the Part replacing such removed Part shall be incorporated or installed in or
attached to such Airframe or Engine in accordance with Sections 3.4(a) and
3.4(b) hereof as promptly as practicable after the removal of such removed
Part. In addition, any replacement Part when incorporated or installed in or
attached to the Airframe or any Engine in accordance with Section 3.4(a)
hereof may be owned by any third party subject to such a normal pooling
arrangement, provided that the
Company (or any Lessee), at its expense, as promptly thereafter as practicable,
either (i) causes such replacement Part to become subject to the Lien of this
Mortgage, free and clear of all Liens except Permitted Liens (other than
pooling arrangements), at which time such temporary replacement Part shall
become a Part or (ii) replaces such replacement Part by incorporating or
installing in or attaching to such Airframe or Engine a further replacement
Part which is subject to the Lien of this Mortgage, free and clear of all Liens
except Permitted Liens (other than pooling arrangements).


 


(d)                                 Alterations;
Modifications and Additions.


 


The Company,
at its own expense, will make (or cause to be made) such alterations and
modifications in and additions to the Airframe and any Engine as may be
required to be made from time to time to meet the applicable standards of the
FAA or any applicable regulatory agency or body of any other jurisdiction in
which the Aircraft may then be registered as permitted by Section 3.2(e)
hereof; provided, however, that
the Company (or any Lessee) may, in good faith, contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not adversely affect the Collateral Agent. In addition, the Company
(or any Lessee), at its own expense, may from time to time add further parts or
accessories and make such alterations and modifications in and additions to the
Airframe or any Engine as the Company (or such Lessee) may deem desirable in
the proper conduct of its business, including, without limitation, removal of
Parts which the Company (or such Lessee) has determined in its reasonable
judgment to be obsolete or no longer suitable or appropriate for use on the
Airframe or such Engine (such parts, “Obsolete Parts”); provided that no such alteration,
modification or addition shall materially diminish the value, utility or
remaining useful life of such Airframe or such Engine below the value, utility
or remaining useful life thereof immediately prior to such alteration,
modification or addition, assuming such Airframe or Engine was then in the
condition required to be maintained by the terms of this Mortgage, except that
the value (but not the utility or remaining useful life) of the Airframe or any
Engine may be reduced by the value of Obsolete Parts which have been removed so
long as the aggregate value of all Obsolete Parts that shall have been removed
and not replaced shall not exceed $400,000. 
All Parts incorporated or installed in or attached or added to the
Airframe or any Engine as the result of such alteration, modification or
addition (the “Additional Parts”) shall become subject to the Lien of
this Mortgage. Notwithstanding the foregoing sentence, the Company (or any


 


13





















 


Lessee) may
remove or suffer to be removed any Additional Part, provided that such Additional Part (i) is in addition to,
and not in replacement of or in substitution for, any Part originally
incorporated or installed in or attached to such Airframe or Engine at the time
of delivery thereof hereunder or any Part in replacement of, or in substitution
for, any such Part, (ii) is not required to be incorporated or installed in or
attached or added to such Airframe or Engine pursuant to the terms of Section 3.2(a)
or (c) hereof or the first sentence of this Section 3.4(d), and (iii) can
be removed from such Airframe or Engine without diminishing or impairing the
value, utility or remaining useful life which such Airframe or Engine would
have had at the time of removal had such alteration, modification or addition
not occurred, assuming that such Airframe or Engine was in the condition and
repair required to be maintained by the terms hereof. Upon the removal by the
Company (or any Lessee) of any such Part as above provided, such Part shall,
without further act, be free and clear of all rights of the Collateral Agent
and such Part shall no longer be deemed a Part hereunder.


 


(e)                                  Substitution
of Engines.


 


The Company
shall have the right at its option at any time, on at least thirty (30) days’
prior written notice to the Collateral Agent, to substitute, and if an Event of
Loss shall have occurred with respect to an Engine (not involving an Event of
Loss with respect to the Airframe with respect to which the Company has elected
to prepay the Notes in accordance with Section 2.8(b) of the Credit
Agreement), shall within sixty (60) days after the occurrence of such Event of
Loss substitute, a Replacement Engine; provided
that both Engines shall be of the same make and model. In such
event, immediately upon the effectiveness of such substitution on the date set
forth in such notice and without further act, (i) the replaced Engine shall
thereupon be free and clear of all rights of the Collateral Agent and shall no
longer be deemed an Engine hereunder, and (ii) such Replacement Engine shall
become subject to the Lien of this Mortgage, free and clear of all Liens except
Permitted Liens, and be deemed part of the Aircraft for all purposes hereof to
the same extent as the Engine originally installed on or attached to the
Airframe. The Company’s right to make a replacement hereunder shall be subject
to the fulfillment of the following conditions precedent at the Company’s sole
cost and expense:


 


(i)  
The following documents shall have been duly authorized, executed and
delivered by the respective party or parties thereto and shall be in full force
and effect, and an executed counterpart of each shall have been delivered to
the Collateral Agent:


 


(A)                              a Mortgage Supplement
covering the Replacement Engine (filed for recording pursuant to the
Transportation Code, or the applicable laws, rules and regulations of any other
jurisdiction in which the Aircraft may then be registered as permitted hereby);


 


(B)                                an Officer’s
Certificate of the Company stating (i) that the Replacement Engine is of at
least equal value, utility and remaining useful life as the Engine it replaces assuming
such Engine had been maintained in the condition required hereunder and (ii)
each of the conditions specified in this paragraph (e) with respect to such
Replacement Engine, and any comparable provisions of any Lease permitted hereby
to which such Engine is subject, have been satisfied;


 


14





















 


(C)                                such Uniform Commercial
Code financing statements covering the Lien created by this Mortgage as deemed
necessary or desirable by counsel for the Collateral Agent to protect the
security interests of the Collateral Agent in the Replacement Engine; and


 


(D)                               a certificate,
reasonably acceptable to the Collateral Agent in form and substance, of an
aircraft engineer or qualified independent aircraft appraiser certifying, with
respect to such Replacement Engine, to the effect specified in Section 3.4(e)(i)(B)
hereof;


 


(ii)  
Upon request by the Collateral Agent, the Company shall furnish the
Collateral Agent with (A) an opinion addressed to the Collateral Agent, reasonably
satisfactory in form and substance to the Collateral Agent, of the Company’s
counsel, which may be the Company’s General Counsel or an Associate General
Counsel, to the effect that (x) such documents reasonably requested by the
Collateral Agent are sufficient to cause such Replacement Engine to be subject
to the Lien of this Mortgage and (y) the Collateral Agent will be entitled to
the benefits of Section 1110 of the Bankruptcy Code with respect to the
Replacement Engine; provided that
the opinion in clause (y) need not be delivered to the extent that the benefits
of Section 1110 of the Bankruptcy Code were not, solely by reason of a
change in law or governmental interpretation thereof, available with respect to
the Engine being substituted for immediately prior to such substitution, (B)
upon recordation, an opinion of qualified FAA counsel, or if applicable,
qualified counsel in the jurisdiction of the Aircraft’s registration addressed
to the Collateral Agent, in either case satisfactory in form and substance to
the Collateral Agent as to the due recordation of the Mortgage Supplement as a
first priority Lien on the Replacement Engine, registration of the ownership of
the Replacement Engine and the freedom from Liens of record (except Permitted
Liens), and (C) such evidence of compliance with the insurance provisions of Section 3.6
hereof with respect to such Replacement Engine as the Collateral Agent may
reasonably request; and


 


(iii)  
The Company shall have delivered to the Collateral Agent (A) a copy of
the bill of sale respecting such Replacement Engine or other evidence of the
Company’s ownership of such Replacement Engine, reasonably satisfactory to the
Collateral Agent and (B) appropriate instruments assigning to the Collateral
Agent the benefits, if any, of all manufacturer’s and vendor’s warranties
generally available and permitted to be assigned by the Company with respect to
such Replacement Engine.


 


Upon such
substitution, (x) the Collateral Agent shall execute and deliver to the Company
such documents and instruments, prepared at the Company’s expense, as the
Company shall reasonably request, to evidence the release of such replaced
Engine from the Lien of this Mortgage; (y) the Collateral Agent shall assign to
the Company all claims it may have against any other Person relating to an
Event of Loss of such replaced Engine giving rise to such substitution; and (z)
the Company shall receive all insurance proceeds and proceeds in respect of any
Event of Loss of such replaced Engine giving rise to such replacement to the
extent not previously applied to the purchase price of the Replacement Engine
as provided in Sections 3.6(b)(I), second paragraph, and 3.5(d)(ii) hereof.


 


15





















 


Section 3.5.                                   Loss, Destruction
or Requisition.


 


(a)                                  Event
of Loss With Respect to the Airframe.


 


Upon the
occurrence of an Event of Loss with respect to the Airframe or an Engine, the
Company shall forthwith (and in any event within fifteen (15) days after such
occurrence) give the Collateral Agent written notice of such Event of Loss. The
Company shall, within forty-five (45) days after the occurrence of an Event of
Loss with respect to the Airframe give the Collateral Agent written notice of
its election to perform one of the following options (it being agreed that, if
the Company shall not have given notice of such election within such 45 day
period, the Company shall be deemed to have elected to prepay the Notes in
accordance with Section 2.8(b) of the Credit Agreement). The Company may
elect either to (i) prepay the Notes, in which event not later than the earlier
of (x) the Business Day next succeeding the 120th day following the occurrence
of such Event of Loss or (y) the third Business Day following the receipt of
insurance proceeds in respect of such occurrence (but not earlier than thirty
(30) days after such occurrence), the Company shall prepay the Notes in
accordance with Section 2.8(b) of the Credit Agreement, or (ii) cause to
be subjected to the Lien of this Mortgage in replacement thereof not later than
the Business Day next succeeding the 120th day following the occurrence of such
Event of Loss, a Replacement Airframe (together with the same number of
Replacement Engines as the number of Engines, if any, installed on the Airframe
at the time such Event of Loss occurred), such Replacement Airframe and
Replacement Engines to be free and clear of all Liens except Permitted Liens,
to have a value, utility and remaining useful life at least equal to the
Airframe and Engines, if any, so replaced, as of the date of the Event of Loss
(assuming such Airframe and Engines were in the condition required by the terms
hereof); provided that if the
Company does not perform its obligation to effect such replacement in
accordance with this Section 3.5(a) during the period of time provided
herein, then the Company shall prepay the Notes pursuant to Section 2.8(b)
of the Credit Agreement on the Business Day next succeeding the 120th day
following the occurrence of such Event of Loss.


 


(b)                                 Effect
of Replacement.


 


Upon the
Company having provided a Replacement Aircraft as provided for in Section 3.5(a)
above, (x) the Lien of this Mortgage shall continue with respect to such
Replacement Aircraft as though no Event of Loss had occurred; the Collateral
Agent shall, at the cost and expense of the Company, release from the Lien of
this Mortgage the replaced Airframe and the Engine or engines, if any, attached
to the Airframe upon the occurrence of the Event of Loss by executing and
delivering to the Company such documents and instruments, prepared at the
Company’s expense, as the Company may reasonably request to evidence such
release; and (y) the Collateral Agent shall assign to the Company all claims it
may have against any other Person arising from the Event of Loss and the
Company shall receive all insurance proceeds and proceeds from any award in
respect of condemnation, confiscation, seizure or requisition, including any
investment interest thereon, to the extent not previously applied to the purchase
price of the Replacement Aircraft as provided in Sections 3.5(d)(i) and 3.6
hereof.


 


16





















 


(c)                                  Conditions
to Airframe Replacement.


 


(i)                                     The
Company’s right to make a replacement under Section 3.5(a) hereof shall be
subject to the fulfillment, at the Company’s sole cost and expense and in
addition to the conditions contained in such Section 3.5(a), of the
following conditions precedent:


 


(1)                                  On
the date that the Replacement Aircraft is delivered, which date shall be not
later than the Business Day next succeeding the 120th day following the Event
of Loss leading to such replacement (hereinafter referred to as the “Replacement
Closing Date”), no Event of Default shall have occurred and be continuing;


 


(2)                                  On
the Replacement Closing Date, the following documents shall have been duly
authorized, executed and delivered by the respective party or parties thereto
and shall be in full force and effect, and an executed counterpart of each
thereof shall have been delivered to the Collateral Agent:


 


(A)                              a
Mortgage Supplement covering the Replacement Aircraft (filed for recording
pursuant to the Transportation Code, or the applicable laws, rules and
regulations of any other jurisdiction in which the Aircraft may then be registered
as permitted hereby);


 


(B)                                such
Uniform Commercial Code financing statements covering the Lien created by this
Mortgage as deemed necessary or desirable by counsel for the Collateral Agent
to protect the security interests of the Collateral Agent in the Replacement
Aircraft; and


 


(C)                                a
certificate, reasonably acceptable to the Collateral Agent in form and
substance, of an aircraft engineer or qualified independent aircraft appraiser
certifying (I) that the Replacement Airframe is an Airbus A330-200 (or an
improved model, as the case may be) having a value, utility and remaining
useful life at least equal to the Airframe to be replaced, assuming such
Airframe had been maintained in the condition required hereunder and (II) with
respect to the Replacement Engines constituting part of such Replacement
Aircraft to the effect specified in Section 3.4(e)(i)(B) hereof;


 


(3)                                  On
or before the Replacement Closing Date, the Collateral Agent shall have
received from the Company such documents and evidence with respect to the
Company as the Collateral Agent may reasonably request in order to establish
the consummation of the transactions contemplated by this Section 3.5(c),
evidence of taking of all necessary corporate action in connection therewith
and compliance with the conditions set forth in this Section 3.5(c), in
each case in form and substance reasonably satisfactory to the Collateral
Agent;


 


(4)                                  The
Collateral Agent shall have received evidence satisfactory to the Collateral
Agent as to the due compliance with Section 3.6 hereof with respect to the
Replacement Aircraft;


 


17





















 


(5)                                  On
the Replacement Closing Date, (A) the Company shall cause the Replacement
Aircraft to be subject to the Lien of this Mortgage, free and clear of Liens
(other than Permitted Liens), (B) the Replacement Aircraft shall have been duly
certified by the FAA or the relevant body or agency of the jurisdiction then
applicable to the registration of the Airframe as to type and airworthiness in
accordance with the terms of this Mortgage, and the registration of the
Replacement Aircraft in the name of the Company (or any Lessee as lessee if the
Aircraft had been so registered immediately prior to the occurrence of the
Event of Loss with respect thereto) shall have been duly made with the FAA or
the relevant body or agency of the jurisdiction then applicable to the
registration of the Airframe and (C) the Collateral Agent shall have received
evidence satisfactory to it with respect to the matters covered by this
subparagraph (5);


 


(6)                                  On
the Replacement Closing Date, the following statements shall be true and the
Collateral Agent shall have received an Officer’s Certificate of the Company,
dated the Replacement Closing Date, stating that (A) the matters set forth in
subparagraph (1) above are confirmed, (B) no Event of Default will result from
the Company acquiring its interest in the Replacement Aircraft and (C) each of
the conditions specified in this paragraph (c) with respect to such Replacement
Airframe, and any comparable provisions of any lease permitted hereby to which
such Airframe is subject, have been satisfied;


 


(7)                                  The
Collateral Agent shall, at the expense of the Company, have received (A) an
opinion addressed to the Collateral Agent, reasonably satisfactory in form and
substance to the Collateral Agent, from Cadwalader, Wickersham & Taft LLP
or other counsel selected by the Company and reasonably satisfactory to
Collateral Agent to the effect that (i) the Replacement Airframe and Replacement
Engines, if any, has or have been made subject to the Lien of this Mortgage,
(ii) all required action has been taken in order to maintain, and such action
shall maintain, the effectiveness and priority of the interests in the
Collateral which the Mortgage purports to create, and (iii) the Collateral
Agent will be entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the Replacement Aircraft; provided that
such opinion need not be delivered to the extent that the benefits of 11 U.S.C.
Section 1110 (or any successor or replacement statute) were not, solely by
reason of a change in law or governmental interpretation thereof, available to
the Collateral Agent with respect to the Aircraft immediately prior to such
substitution and (B) an opinion of qualified FAA counsel or, if applicable,
qualified local counsel in the jurisdiction where the Aircraft is registered,
in either case addressed to the Collateral Agent and in form and substance
satisfactory to the Collateral Agent, respecting the due recordation of the
Mortgage Supplement as a first priority Lien respecting such Replacement
Aircraft, the registration of the ownership thereof and freedom from Liens of
record (other than Permitted Liens); and


 


(8)                                  The
Company shall have delivered to the Collateral Agent (A) a copy of the original
bill of sale respecting such Replacement Airframe and Replacement Engines, if
any, and (B) appropriate instruments assigning to the Collateral Agent the
benefits, if any, of all manufacturer’s and vendor’s warranties generally
available and permitted to be assigned by the Company with respect to such
Replacement Airframe or Replacement Engine.


 


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(d)                                 Non-Insurance
Payments Received on Account of an Event of Loss.


 


As between the
Collateral Agent and the Company, any payments on account of an Event of Loss
(other than insurance proceeds or other payments the application of which is
provided for in Section 3.6 hereof, or elsewhere in this Mortgage, as the
case may be, or payments in respect of damage to the business or property, of
the Company) with respect to the Aircraft, an Engine or any Part received at
any time by the Collateral Agent or by the Company from any governmental
authority or other Person will be applied as follows:


 


(i)  
if such payments are received with respect to an Event of Loss as to the
Aircraft, and the Airframe or the Airframe and the Engines or engines installed
thereon are being replaced by the Company pursuant to Section 3.5(a)
hereof, such payments shall be paid over to, or retained by, the Collateral
Agent as security and upon completion of such replacement (or upon the closing
therefor) and compliance with the provisions of Sections 3.5(a) and (c) with
respect to the Event of Loss for which such payments are made, paid over to or
retained by the Company;


 


(ii)  
if such payments are received with respect to an Event of Loss to an
Engine or Part (not involving an Event of Loss as to the Airframe) that has
been or is being replaced by the Company pursuant to Section 3.4(e)
hereof, such payments shall be paid over to, or retained by, the Company; and


 


(iii)  
if such payments are received with respect to an Event of Loss as to the
Aircraft, if the Airframe or the Airframe and the Engines or engines installed
thereon has not or have not been and will not be replaced as contemplated by Section 3.5(a)
hereof, such payments shall be applied to the prepayment of the Notes required
pursuant to Section 2.8(b) of the Credit Agreement and the payment of any
other Obligations then due and payable and after the Notes and such other
Obligations shall have been paid in full, the balance, if any, of such payment
shall be promptly paid over to, or retained by, the Company.


 


(e)                                  Requisition
of Use.


 


In the event
of a requisition for use by any government, so long as it does not constitute
an Event of Loss, of the Airframe and the Engines or engines installed on the
Airframe so long as the Airframe or an Engine is subject to the Lien of this
Mortgage, the Company shall promptly notify the Collateral Agent of such
requisition and all of the Company’s obligations under this Mortgage shall
continue to the same extent as if such requisition had not occurred. So long as
no Event of Default shall have occurred and be continuing, any payments
received by the Collateral Agent or the Company from such government with
respect to such requisition of use shall be paid over to, or retained by, the
Company. In the event of an Event of Loss of an Engine resulting from the
requisition for use by a government of such Engine (but not the Airframe), the
Company will replace such Engine hereunder by complying with the terms of Section 3.4(e)
hereof and any payments received by the Collateral Agent or the Company from
such government with respect to such requisition shall be paid over to, or
retained by, the Company.


 


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(f)                                    Application
of Payments During Existence of Event of Default.


 


Any amount
referred to in this Section 3.5 which is payable to the Company (or any
Lessee) shall not be paid to or retained by the Company (or such Lessee), if at
the time of such payment or retention an Event of Default shall have occurred
and be continuing, but shall be held by or paid over to the Collateral Agent as
security for the Obligations and, if the aggregate unpaid principal amount of
the Notes shall be declared to be due and payable pursuant to Section 4.2
hereof, applied against the Obligations as and when due. Upon the earlier of (a)
such time as there shall not be continuing any such Event of Default or (b) the
termination of this Mortgage in accordance with Section 8.1, such amount,
and any interest realized thereon pursuant to Section 7.1 hereof, shall be
paid over to the Company (or such Lessee) to the extent not previously applied
in accordance with the preceding sentence.


 


Section 3.6.                                   Insurance.


 


(a)                                  Public
Liability and Property Damage Insurance.


 


(I)                                    Except as provided in clause
(II) of this Section 3.6(a), the Company will carry or cause to be carried
at its or any Lessee’s expense (i) aircraft public liability (including,
without limitation, passenger legal liability) (and including aircraft war risk
and hijacking insurance, if and to the extent the same is maintained by the
Company (or any Lessee) with respect to other aircraft owned or leased, and
operated by the Company (or such Lessee) on the same routes, or if the Company
(or any Lessee) shall at any time operate the Aircraft, the Airframe or any
Engine in any war zone or area of recognized or threatened hostilities)
insurance and property damage insurance (exclusive of manufacturer’s product
liability insurance) with respect to the Aircraft, in an amount not less than
the greater of (x) the per occurrence amount of public liability and property
damage insurance from time to time applicable to aircraft owned or operated by
the Company of the same type as the Aircraft and (y) the amount set forth in Section 8.19
of the Credit Agreement, and (ii) cargo liability insurance, in the case of
both clause (i) and clause (ii), (A) of the type and covering the same risks as
from time to time applicable to aircraft operated by the Company of the same
type as the Aircraft and (B) which is maintained in effect with insurers of
recognized responsibility. Any policies of insurance carried in accordance with
this paragraph (a) and any policies taken out in substitution or replacement
for any of such policies (A) shall be amended to name the Collateral Agent (but
without imposing on any such party liability to pay the premiums for such
insurance) (and, if any Lease shall be in effect, the Company in its capacity
as lessor under the Lease) as an additional insured as its interest may appear,
(B) shall provide that in respect of the interest of the Collateral Agent (and,
if any Lease shall be in effect, the Company in its capacity as lessor under
the Lease) in such policies the insurance shall not be invalidated by any
action or inaction of the Company (or, if any Lease is then in effect, any Lessee)
or any other Person and shall insure the Collateral Agent (and, if any Lease
shall be in effect, the Company in its capacity as lessor under the Lease)
regardless of any breach or violation of any warranty, declaration or condition
contained in such policies by the Company (or, if any Lease is then in effect,
any Lessee), (C) may provide for self-insurance to the extent permitted by Section 3.6(d)
and (D) shall provide that, except to the extent not provided for by the
Company’s war risk and hijacking insurance provider in the event that the
Company maintains war risk and hijacking insurance required above, if the
insurers cancel such insurance for any reason whatever or if any material
change is made in such insurance which


 


20





















 


adversely affects the interest of the
Collateral Agent (or, if any Lease shall be in effect, the Company in its
capacity as lessor under the Lease), or such insurance shall lapse for non-payment
of premium, such cancellation, lapse or change shall not be effective as to the
Collateral Agent (or, if any Lease shall be in effect, the Company in its
capacity as lessor under the Lease) for thirty (30) days (seven (7) days in the
case of war risk and allied perils coverage) after issuance to the Collateral
Agent of written notice by such insurers of such cancellation, lapse or change;
provided, however, that if any
notice period specified above is not reasonably obtainable, such policies shall
provide for as long a period of prior notice as shall then be reasonably
obtainable. Each liability policy (1) shall be primary without right of
contribution from any other insurance which is carried by the Collateral Agent
or the Noteholders (or, if any Lease shall be in effect, the Company in its capacity
as lessor under the Lease), (2) shall expressly provide that all of the
provisions thereof, except the limits of liability, shall operate in the same
manner as if there were a separate policy covering each insured, and (3) shall
waive any right of the insurers to any set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability of
the Collateral Agent or the Noteholders (or, if any Lease shall be in effect,
the Company in its capacity as lessor under the Lease) to the extent of any
moneys due to the Collateral Agent (or, if any Lease shall be in effect, the
Company in its capacity as lessor under the Lease).  To the extent that the Company maintains war
risk and hijacking insurance and the Company’s war risk and hijacking insurance
provider does not provide for the provision of direct notice to the Collateral
Agent of cancellation, material change or lapse in the insurance required
hereunder, the Company hereby agrees that upon receipt of notice of any thereof
from such insurance provider it shall give the Collateral Agent immediate
notice of each cancellation or lapse of, or material change to, such insurance.


 


(II)                                During any period that the
Aircraft is on the ground and not in operation, the Company may carry or cause
to be carried, in lieu of the insurance required by clause (I) above, insurance
otherwise conforming with the provisions of said clause (I) except that (A) the
amounts of coverage shall not be required to exceed the amounts of public liability
and property damage insurance from time to time applicable to aircraft owned or
operated by the Company of the same type as the Aircraft and which are on the
ground and not in operation; and (B) the scope of the risks covered and the
type of insurance shall be the same as from time to time shall be applicable to
aircraft owned or operated by the Company of the same type which are on the
ground and not in operation.


 


(b)                                 Insurance
Against Loss or Damage to the Aircraft.


 


(I)                                    Except as provided in clause
(II) of this Section 3.6(b), the Company shall maintain or cause to be
maintained in effect, at its or any Lessee’s expense, with insurers of
recognized responsibility, all-risk ground and flight aircraft hull insurance
covering the Aircraft and all-risk ground and flight coverage of Engines and
Parts while temporarily removed from the Aircraft and not replaced by similar
components (including, without limitation, war risk and governmental
confiscation and expropriation (other than by the government of registry of the
Aircraft) and hijacking insurance, if and to the extent the same is maintained
by the Company (or, if a Lease is then in effect, any Lessee) with respect to
other aircraft owned or operated by the Company (or such Lessee) on the same
routes, except that the Company (or such Lessee) shall maintain war risk and
governmental confiscation and expropriation (other than by the government of
registry of the Aircraft) and hijacking insurance if the Aircraft is operated
on


 


21





















 


routes where the custom is for major
international air carriers flying comparable routes to carry such insurance, or
if the Company (or any Lessee) shall at any time operate the Aircraft, the
Airframe or any Engine in any war zone or area of recognized or threatened
hostilities) which is of the type as from time to time applicable to aircraft
owned or operated by the Company of the same type as the Aircraft; provided that such insurance shall at all
times while the Aircraft is subject to this Mortgage be for an amount (subject
to self-insurance to the extent permitted by Section 3.6(d)) not less than
100% of the then aggregate outstanding principal amount of the Notes (the “Loan
Loss Value”). Any policies carried in accordance with this paragraph (b)
covering the Aircraft and any policies taken out in substitution or replacement
for any such policies (i) shall be amended to name the Collateral Agent as an
additional insured, as its interest may appear (but without imposing on any such
party liability to pay premiums with respect to such insurance), (ii) may
provide for self-insurance to the extent permitted in Section 3.6(d),
(iii) shall provide that (A) in the event of a loss involving proceeds in
excess of $3,500,000 (or, if the Aircraft is then under a Lease, in excess of
$2,000,000), the proceeds in respect of such loss up to an amount equal to the
aggregate outstanding principal amount of the Notes, plus all accrued and
unpaid interest thereon and any other Obligations (including any Obligation
arising under Section 8.4(c) of the Credit Agreement) then due and payable
(the “Balance Due”), shall be payable to the Collateral Agent (except in the
case of a loss with respect to an Engine installed on an airframe other than
the Airframe, in which case the Company (or any Lessee) shall arrange for any
payment of insurance proceeds in respect of such loss to be held for the
account of the Collateral Agent whether such payment is made to the Company (or
any Lessee) or any third party), it being understood and agreed that in the
case of any payment to the Collateral Agent otherwise than in respect of an
Event of Loss, the Collateral Agent shall, upon receipt of evidence
satisfactory to it that the damage giving rise to such payment shall have been
repaired or that such payment shall then be required to pay for repairs then
being made, pay the amount of such payment to the Company or its order, and (B)
the entire amount of any loss involving total proceeds of $3,500,000 (or, if
the Aircraft is then under a Lease, of $2,000,000) or less or the amount of any
proceeds of any loss in excess of the Balance Due shall be paid to the Company
or its order unless an Event of Default shall have occurred and be continuing
and the insurers shall have been notified thereof by the Collateral Agent, (iv)
shall provide that, except to the extent not provided for by the Company’s hull
war risk and hijacking insurance provider in the event that the Company
maintains hull war risk and hijacking insurance, if the insurers cancel such
insurance for any reason whatever, or such insurance lapses for non-payment of
premium or if any material change is made in the insurance which adversely
affects the interest of the Collateral Agent, such cancellation, lapse or
change shall not be effective as to the Collateral Agent (or, if any Lease
shall be in effect, the Company in its capacity as lessor under the Lease) for
thirty (30) days (seven (7) days in case of hull war risk and allied perils
coverage) after issuance to the Collateral Agent (or, if any Lease is in
effect, the Company in its capacity as lessor under the Lease) of written
notice by such insurers of such cancellation, lapse or change; provided, however, that if any notice
period specified above is not generally obtainable, such policies shall provide
for as long a period of prior notice as shall then be generally obtainable, (v)
shall provide that in respect of the interest of the Collateral Agent (and, if
any Lease shall be in effect, the Company in its capacity as lessor under the
Lease) in such policies the insurance shall not be invalidated by any action or
inaction of the Company (or, if a Lease is then in effect, any Lessee) or any
other Person and shall insure the Collateral Agent (and, if any Lease shall be in
effect, the Company in its capacity as lessor under the Lease) regardless of
any breach or


 


22





















 


violation of any warranty, declaration or
condition contained in such policies by the Company (or, if a Lease is then in
effect, any Lessee), (vi) shall be primary without any right of contribution
from any other insurance which is carried by the Collateral Agent or the
Noteholders (or, if any Lease shall be in effect, the Company in its capacity
as lessor under the Lease), (vii) shall waive any right of subrogation of the
insurers against the Collateral Agent or the Noteholders (and if any Lease
shall be in effect, the Company in its capacity as lessor under the Lease), and
(viii) shall waive any right of the insurers to set-off or counterclaim or any
other deduction, whether by attachment or otherwise, in respect of any
liability of the Collateral Agent or the Noteholders or the Company (or any
Lessee) to the extent of any moneys due to the Collateral Agent. To the extent
that the Company maintains hull war risk and hijacking insurance and the
Company’s hull war risk and hijacking insurance provider does not provide for
the provision of direct notice to the Collateral Agent of cancellation,
material change or lapse in the insurance required hereunder, the Company
hereby agrees that upon receipt of notice of any thereof from such insurance
provider it shall give the Collateral Agent immediate notice of each
cancellation or lapse of, or material change to, such insurance.  In the case of a loss with respect to an
engine (other than an Engine) installed on the Airframe, the Collateral Agent
shall hold any payment to it of any insurance proceeds in respect of such loss
for the account of the Company or any other third party that is entitled to
receive such proceeds.


 


As between the
Collateral Agent and the Company, it is agreed that all insurance payments
received as the result of the occurrence of an Event of Loss will be applied as
follows:


 


(w)                               if
such payment is received as the result of an Event of Loss with respect to the
Airframe (or the Airframe and any Engines installed thereon) that has been or
is being replaced by the Company as contemplated by Section 3.5(a) hereof,
such payments shall be paid over to, or retained by, the Collateral Agent and
upon completion of such replacement be paid over to the Company;


 


(x)                                   if
such payments are received with respect to the Airframe (or the Airframe and
the Engines installed thereon) that has not been or is not being replaced by
the Company as contemplated by Section 3.5(a) hereof, so much of such
payments remaining, after reimbursement of the Collateral Agent for reasonable
costs and expenses, as shall not exceed the Balance Due shall be applied in
reduction of the Company’s obligation to pay the Balance Due, if not already
paid by the Company, or, if already paid by the Company, shall be applied to
reimburse the Company for its payment of such Balance Due, and the balance, if
any, of such payments remaining thereafter will be paid over to, or retained
by, the Company (or if directed by the Company, any Lessee); and


 


(y)                                 if
such payments are received with respect to an Engine under the circumstances
contemplated by Section 3.4(e) hereof, so much of such payments remaining,
after reimbursement of the Collateral Agent for reasonable costs and expenses,
shall be paid over to, or retained by, the Company (or if directed by the
Company, any Lessee); provided that
the Company shall have fully performed or, concurrently therewith, will fully
perform, the terms of Section 3.4(e) hereof with respect to the Event of
Loss for which such payments are made.


 


23





















 


As between the
Collateral Agent and the Company, the insurance payments for any property
damage or loss to the Airframe or any Engine not constituting an Event of Loss
with respect thereto will be applied in payment for repairs or for replacement
property in accordance with the terms of Sections 3.2(c) and 3.4 hereof, if not
already paid for by the Company (or any Lessee), and any balance (or if already
paid for by the Company (or any Lessee), all such insurance proceeds) remaining
after compliance with such Sections with respect to such loss shall be paid to
the Company (or any Lessee if directed by the Company).


 


(II)                                During any period that the
Aircraft is on the ground and not in operation, the Company may carry or cause
to be carried, in lieu of the insurance required by clause (I) above, insurance
otherwise conforming with the provisions of said clause (I) except that the
scope of the risks and the type of insurance shall be the same as from time to
time applicable to aircraft owned by the Company of the same type similarly on
the ground and not in operation; provided that
the Company shall maintain insurance against risk of loss or damage to the
Aircraft in an amount at least equal to the Loan Loss Value during such period
that the Aircraft is on the ground and not in operation.


 


(c)                                  Reports, etc.


 


The Company
will furnish, or cause to be furnished, to the Collateral Agent, on or before
the date of the Loan and on or before July 1, in each year thereafter
commencing July 1, 2004 a report, signed by Aon Risk Services, Inc. of
Minnesota, Marsh & McLennan, Incorporated or any other independent firm of
insurance brokers reasonably acceptable to the Collateral Agent (the “Insurance
Brokers”), describing in reasonable detail the insurance and reinsurance
then carried and maintained with respect to the Aircraft and stating the
opinion of such firm that the insurance then carried and maintained with
respect to the Aircraft complies with the terms hereof; provided, however, that (i) in the case of
war risk and hijacking insurance acquired by the Company from the FAA or other
instrumentality of the government of the United States, no opinion concerning
such coverage need be given and (ii) all information contained in the foregoing
report shall not be made available by the Collateral Agent or the Noteholders
to anyone except (A) to permitted transferees of the interest of the Collateral
Agent or the Noteholders who agree to hold such information confidential, (B)
to the Collateral Agent’s or the Noteholder’s counsel or independent public
accountants or independent insurance advisors who agree to hold such
information confidential or (C) as may be required by any statute, court or
administrative order or decree or governmental ruling or regulation. The
Company will cause such Insurance Brokers to agree to advise the Collateral
Agent in writing of any default in the payment of any premium and of any other
act or omission on the part of the Company of which it has knowledge and which
might invalidate or render unenforceable, in whole or in part, any commercial
insurance on the Aircraft. To the extent such agreement is reasonably
obtainable, the Company will also cause such Insurance Brokers to agree to
advise the Collateral Agent in writing at least thirty (30) days (seven (7)
days in the case of commercial war risk and allied perils coverage) prior to
the expiration or termination date of any commercial insurance carried and
maintained on the Aircraft pursuant to this Section 3.6. In addition, the
Company will also cause such Insurance Brokers to deliver to the Collateral
Agent, on or prior to the date of expiration of any commercial insurance policy
referenced in a previously delivered certificate of insurance, a new
certificate of insurance, substantially in the same form as delivered by the
Company to the Collateral Agent on the date of the Loan. In the event that the
Company or any


 


24





















 


Lessee shall
fail to maintain or cause to be maintained insurance as herein provided, the
Collateral Agent may at its sole option provide such insurance and, in such
event, the Company shall, upon demand, reimburse the Collateral Agent for the
cost thereof to the Collateral Agent, without waiver of any other rights the
Collateral Agent may have.


 


(d)                                 Self-Insurance.


 


The Company
may self-insure by way of deductible, premium adjustment or franchise
provisions or otherwise (including, with respect to insurance maintained
pursuant to Section 3.6(b), insuring for a maximum amount which is less than
the Loan Loss Value) in the insurance covering the risks required to be insured
against pursuant to this Section 3.6 under a program applicable to all
aircraft in the Company’s fleet, but in no case shall the aggregate amount of
self-insurance in regard to insurance of the type referred to in Section 3.6(a)
and Section 3.6(b) exceed during any policy year, with respect to all of
the aircraft in the Company’s fleet (including, without limitation, the
Aircraft), the lesser of (a) *** % of the largest replacement value of any
single aircraft in the Company’s fleet or (b) *** % of the average aggregate
insurable value (during the preceding policy year) of all aircraft (including,
without limitation, the Aircraft) on which the Company carries insurance.  In addition, the Company (and any Lessee) may
self-insure to the extent of any applicable mandatory minimum per aircraft (or,
if applicable, per annum or other period) hull or liability insurance
deductible imposed by the aircraft hull or liability insurers.


 


(e)                                  Additional
Insurance by the Collateral Agent and the Company.


 


The Company
(and any Lessee) may at its own expense carry insurance with respect to its
interest in the Aircraft in amounts in excess of that required to be maintained
by this Section 3.6, so long as such excess insurance is not in conflict
with the insurance otherwise required hereunder.


 


(f)                                    Indemnification
by Government in Lieu of Insurance.


 


Notwithstanding
any provisions of this Section 3.6 requiring insurance, the Collateral
Agent agrees to accept, in lieu of insurance against any risk with respect to
the Aircraft, indemnification from, or insurance provided by, the United States
Government or any agency or instrumentality thereof or, upon the written
consent of the Collateral Agent, other government of registry of the Aircraft
or any agency or instrumentality thereof, against such risk in an amount which,
when added to the amount of insurance against such risk maintained by the
Company (or any Lessee) with respect to the Aircraft (including permitted self-insurance)
shall be at least equal to the amount of insurance against such risk otherwise
required by this Section 3.6.


 


(g)                                 Application of
Payments During Existence of an Event of Default.


 


Any amount
referred to in paragraph (b) of this Section 3.6 which is payable to or
retainable by the Company (or any Lessee) shall not be paid to or retained by
the Company (or any Lessee) if at the time of such payment or retention an
Event of Default shall have occurred and be continuing, but shall be held by or
paid over to the Collateral Agent as security for the Obligations and, if the
aggregate unpaid principal amount of the Notes shall be declared to be


 


25





















 


due and
payable pursuant to Section 4.2 hereof, applied against the Obligations as
and when due. Upon the earlier of (a) such time as there shall not be
continuing any such Event of Default or (b) the termination of this Mortgage in
accordance with Section 8.1, such amount, and any interest realized
thereon pursuant to Section 7.1 hereof, shall be paid to the Company (or
such Lessee) to the extent not previously applied in accordance with the
preceding sentence.


 


Section 3.7.                                   Filings.


 


The Company
will take, or cause to be taken, at the Company’s cost and expense, such action
with respect to the recording, filing, re-recording and re-filing of this
Mortgage, each Mortgage Supplement and any financing statements or other
instruments as are necessary, or requested by the Collateral Agent and appropriate,
to maintain, so long as this Mortgage is in effect, the perfection of the Lien
created by this Mortgage, or will furnish to the Collateral Agent timely notice
of the necessity of such action, together with such instruments, in execution
form, and such other information as may be required to enable the Collateral
Agent to take such action.


 


Section 3.8.                                   Corporate
Existence.


 


The Company
shall at all times maintain its corporate existence except as permitted by Section 3.9
hereof.


 


Section 3.9.                                   Merger,
Consolidation.


 


The Company
shall not consolidate with or merge into any other corporation or convey,
transfer or lease substantially all its assets as an entirety to any Person
unless:


 


(i)  
the corporation formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety shall be a
Certificated Air Carrier;


 


(ii)  
the corporation formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety shall execute and
deliver to the Collateral Agent an agreement in form and substance reasonably
satisfactory to Collateral Agent containing an assumption by such successor
corporation or Person of the due and punctual performance and observance of
each covenant and condition of this Mortgage and the Notes and any other Loan
Document (to the extent any such covenant or condition in any such other Loan
Document pertains to the Loan or the Notes) to be performed or observed by the
Company;


 


(iii)  
immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing; and


 


(iv)  
the Company shall have delivered to the Collateral Agent an Officer’s
Certificate, and an opinion of counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and the assumption agreement mentioned in
clause (ii)


 


26





















 


above comply with this Section 3.9 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 substantially
all of the assets of the Company as an entirety in accordance with this Section 3.9,
the successor corporation or Person formed by such consolidation or into which
the Company is merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Mortgage with the same effect as if such
successor corporation or Person had been named as the Company herein. No such
conveyance, transfer or lease of substantially all of the assets of the Company
as an entirety shall have the effect of releasing the Company or any successor
corporation or Person which shall theretofore have become such in the manner
prescribed in this Section 3.9 from its liability in respect of any Loan
Document to which it is a party.


 


Section 3.10.                             Notice
of Change of the Company’s Location.


 


The Company
will notify the Collateral Agent of any change in the location of the Company
(for purposes of Article 9 of the Uniform Commercial Code) promptly after
making such change and in any event within a reasonable period of time prior to
the date by which it is necessary under applicable law to make any filing in
order to prevent the lapse of perfection (absent refiling) of financing
statements filed under or with respect to this Mortgage.


 


Section 3.11.                             Interests
in the Purchase Agreement.


 


The grant by
the Company to the Collateral Agent of the Company’s interests in and to the
Contract Rights as set forth in granting clause (b) of Section 2.1 hereof
is subject to the following:


 


(a)                                  If and so long as AVSA shall not
have received notice from the Collateral Agent in writing addressed to its
Chief Executive Officer at 2, rond Point Maurice Bellonte, 31700 Blagnac,
France that an Event of Default under this Mortgage has occurred and is
continuing, the Collateral Agent (1) authorizes the Company, on behalf of but
to the exclusion of the Collateral Agent, to exercise in the Company’s own name
the Contract Rights and (2) at the Company’s expense, shall cooperate with the
Company and take such actions as the Company reasonably deems necessary to
enable the Company to enforce the Contract Rights.


 


(b)                                 Effective upon the receipt by
AVSA of notice from the Collateral Agent that an Event of Default under this
Mortgage has occurred and is continuing and thereafter until AVSA shall have
received written notice from the Collateral Agent that such Event of Default
has been cured or waived: (1) at the Collateral Agent’s option, the
authorization given to the Company under clause (a) of this Section 3.11
to enforce the Contract Rights shall henceforth cease to be effective and the
Collateral Agent and its successors and assigns, to the exclusion of the
Company, shall be entitled to assert and enforce Contract Rights as substitute
party plaintiff or otherwise and the Company, at the request of the Collateral
Agent or its successors or assigns and at the Company’s expense, shall
cooperate with and take such action as reasonably necessary to enable the


 


27





















 


Collateral Agent and its successors and
assigns to enforce Contract Rights, and the Collateral Agent, if it shall elect
to enforce Contract Rights, shall use its best efforts to assert and enforce
Contract Rights, and (2) the Company will be deemed to have irrevocably
constituted the Collateral Agent and its successors and permitted assigns the
Company’s true and lawful attorney (it being acknowledged that such appointment
is coupled with an interest, namely the Collateral Agent’s rights acquired and
to be acquired hereunder) with full power (in the name of the Company or
otherwise) to ask, require, demand, receive, compound and give acquittance for
any and all monies and claims due and to become due under, or arising out of,
the Purchase Agreement in respect of the Aircraft, to the extent that the same
have been assigned under granting clause (b) of Section 2.1 of this
Mortgage, and for such period as the Collateral Agent may exercise rights with
respect thereto under this clause (2), to endorse any checks or other
instruments or orders in connection therewith and to file any claims or take
any orders in connection therewith and to file any action or institute (or, if
previously commenced, assume control of) any proceedings and to obtain any
recovery in connection therewith with the Collateral Agent may deem to be
necessary or advisable in the premises.


 


(c)                                  Notwithstanding granting clause
(b) of Section 2.1, this Section 3.11 and anything in this Mortgage
to the contrary, all amounts that AVSA or the Manufacturer is obligated to pay
to the Company pursuant to the Contract Rights (a “Manufacturer Payment”)
will be payable and applicable as follows: all the Manufacturer Payments shall
be paid to the Company unless and until AVSA shall have received written notice
from the Collateral Agent that an Event of Default under this Mortgage has
occurred and is continuing, whereupon AVSA and the Manufacturer will make any
and all such payments directly to the Collateral Agent, until AVSA shall have
received written notice from the Collateral Agent that all Events of Default
under this Mortgage have been cured or waived. Any amounts received by the
Collateral Agent pursuant to the immediately preceding sentence, to the extent not
theretofore applied in satisfaction of the Obligations, shall be returned to
the Company promptly after all Events of Default hereunder have been cured or
waived.


 


(d)                                 For all purposes of this
Mortgage, AVSA shall not be deemed to have knowledge of a declaration of an
Event of Default under this Mortgage or of the discontinuance or waiver of an
Event of Default unless and until the Manufacturer shall have received written
notice addressed to AVSA as provided in paragraph (a) above, and in acting in
accordance with the terms and conditions of the Purchase Agreement and this
Mortgage, AVSA and the Manufacturer may rely conclusively upon any such notice.


 


(e)                                  Anything herein contained to the
contrary notwithstanding: (1) the Company shall at all times remain liable to
AVSA and the Manufacturer under the Purchase Agreement in respect of the
Aircraft to perform all of its duties and obligations thereunder to the same
extent as if this Mortgage had not been executed; (2) the exercise by the
Collateral Agent of any of the Company’s rights assigned hereunder shall not
release the Company from any of its duties or obligations to AVSA or the
Manufacturer under the Purchase Agreement in respect of the Aircraft except to
the extent that such exercise by the Collateral Agent shall constitute
performance of such duties and obligations; and (3) except as provided in
clause (f) of this Section 3.11, the Collateral


 


28





















 


Agent shall not have any obligation or
liability under the Purchase Agreement by reason of, or arising out of, this
Mortgage or be obligated to perform any of the obligations or duties of the
Company under the Purchase Agreement or to make any payment or make any inquiry
as to the sufficiency of any payment received by it or to present or to file
any claim or to take any other action to collect or enforce any claim for any
payment assigned hereunder.


 


(f)                                    Without in any way releasing the
Company from any of its duties or obligations under the Purchase Agreement, the
Collateral Agent confirms for the benefit of AVSA and the Manufacturer that,
insofar as the provisions of the Purchase Agreement relate to the Aircraft, in
exercising any rights under the Purchase Agreement, or in making any claim with
respect to the Aircraft or other goods and services delivered or to be
delivered pursuant to the Purchase Agreement, the terms and conditions of the
Purchase Agreement shall apply to, and be binding upon, the Collateral Agent to
the same extent as the Company.


 


(g)                                 Nothing contained in this
Mortgage shall (1) subject AVSA or the Manufacturer to any liability to which
it would not otherwise be subject under the Purchase Agreement or (2) modify in
any respect AVSA’s or the Manufacturer’s contract rights thereunder.


 


Section 3.12.                             General
Covenant.  The Company agrees to
timely pay and perform each of its covenants and agreements contained in the
other Loan Documents.


 


ARTICLE IV


 


REMEDIES OF
THE COLLATERAL AGENT

UPON AN EVENT OF DEFAULT


 


Section 4.1.                                   Event of Default.  Each of the following events shall constitute
an Event of Default (whether any such event shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body) and each such Event
of Default shall continue so long as, but only as long as, it shall not have
been remedied:


 


(a)                                  the Company shall fail to make
any payment within ten (10) days after the same shall have become due of
principal of, or interest on, any Notes; or the Company shall fail to make any
payment when the same shall become due of any other Obligations, and such
failure shall continue unremedied for twenty-five (25) days after the receipt
by the Company of written notice thereof from the Collateral Agent or the
Administrative Agent; or


 


(b)                                 the Company shall have failed to
perform or observe (or caused to be performed and observed) in any material
respect any covenant or agreement to be performed or observed by it under this
Mortgage or the Credit Agreement, and such failure shall continue unremedied
for a period of thirty (30) days after receipt by the


 


29





















 


Company of written notice thereof from the
Collateral Agent or the Administrative Agent; provided,
however, that if the Company shall have undertaken to cure any such
failure which arises under Section 3.2(c), or under the first sentence of Section 3.2(b)
as it relates to maintenance, service, repair or overhaul or under Section 3.4(a),
(b), (c) or (d) hereof and, notwithstanding the diligence of the Company in
attempting to cure such failure, such failure is not cured within said thirty-day
period but is curable with future due diligence, there shall exist no Event of
Default under this Section 4.1(b) so long as the Company is proceeding
with due diligence to cure such failure and such failure is remedied not later
than one hundred eighty (180) days after receipt by the Company of such written
notice; or


 


(c)                                  any representation or warranty
made by the Company herein or in the Credit Agreement or any document or
certificate furnished by the Company in connection herewith or therewith or
pursuant hereto or thereto shall prove to have been incorrect in any material
respect at the time made and such incorrectness shall not have been cured (to
the extent of the adverse impact of such incorrectness on the interests of the
Lenders) within thirty (30) days after the receipt by the Company of a written
notice from the Collateral Agent or the Administrative Agent advising the
Company of the existence of such incorrectness; or


 


(d)                                 the commencement of an
involuntary case or other proceeding in respect of the Company in an
involuntary case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law in the United States or seeking the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or for all or substantially all of its property, or
seeking the winding-up or liquidation of its affairs and the continuation of
any such case or other proceeding undismissed and unstayed for a period of
ninety (90) consecutive days or an order, judgment or decree shall be entered
in any proceeding by any court of competent jurisdiction appointing, without
the consent of the Company, a receiver, trustee or liquidator of the Company,
or of any substantial part of its property, or sequestering any substantial
part of the property of the Company and any such order, judgment or decree or
appointment or sequestration shall be final or shall remain in force
undismissed, unstayed or unvacated for a period of ninety (90) days after the
date of entry thereof; or


 


(e)                                  the commencement by the Company
of a voluntary case under the Federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar law in the United States, or the consent by the
Company to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of the
Company or for all or substantially all of its property, or the making by the
Company of any assignment for the benefit of creditors or the Company shall
take any corporate action to authorize any of the foregoing; or


 


(f)                                    the Company shall fail to carry
and maintain on or with respect to the Aircraft (or cause to be carried and
maintained) insurance required to be maintained in accordance with the
provisions of Section 3.6 hereof and such failure shall continue


 


30





















 


unremedied for a period of fifteen (15) days
after receipt by the Company of written notice thereof from the Collateral
Agent; or


 


(g)                                 for so long as the Loan is then
held in whole or in part by a Lender (or Lenders) who controls at such time the
ability to accelerate the Loan, the maturity of any other Airbus Loan then held
in whole or in part by a Lender (or Lenders) who controls at such time the
ability to accelerate such other Airbus Loan shall have been accelerated;


 


provided, however, that, notwithstanding
anything to the contrary contained in Section 4.1(b) or (c) hereof, any
failure of the Company to perform or observe any covenant, condition, agreement
or any error in a representation or warranty shall not constitute an Event of
Default if such failure or error is caused solely by reason of an event that
constitutes an Event of Loss so long as the Company is continuing to comply
with all of the terms of Section 3.5 hereof.


 


Section 4.2.                                   Remedies
with Respect to Collateral.


 


(a)                                  Remedies Available.


 


Upon the
occurrence of any Event of Default and at any time thereafter so long as the
same shall be continuing, the Collateral Agent (in accordance with the
provisions of Article 5 hereof) may, and upon the written instructions of
a Majority in Interest of Noteholders, the Collateral Agent shall, do one or
more of the following; provided, however,
that during any period the Aircraft is subject to the Civil Reserve Air Fleet
Program in accordance with the provisions of Section 3.2(a) hereof and in
possession of the United States government or an agency or instrumentality of
the United States, the Collateral Agent shall not, on account of any Event of
Default, be entitled to exercise any of the remedies specified in the following
clauses (A), (B) and (C) in such manner as to limit the Company’s control under
this Mortgage of the Airframe or any Engines installed thereon, unless at least
sixty (60) days’ (or such lesser period as may then be applicable under the Air
Mobility Command program of the United States Air Force) written notice of
default hereunder shall have been given by the Collateral Agent by registered
or certified mail to the Company (and any Lessee) with a copy addressed to the
Contracting Office Representative for the Air Mobility Command of the United
States Air Force under any contract with the Company (or by Lessee) relating to
the Aircraft:


 


(A)                              cause
the Company, upon the written demand of the Collateral Agent, at the Company’s
expense, to deliver promptly, and the Company shall deliver promptly, all or
such part of the Airframe or any Engine or other Collateral as the Collateral
Agent may so demand to the Collateral Agent or its order, or the Collateral
Agent, at its option, may enter upon the premises where all or any part of the
Airframe or any Engine or other Collateral are located and take immediate
possession (to the exclusion of the Company and all Persons claiming under or
through the Company) of and remove the same by summary proceedings or otherwise
together with any engine which is not an Engine but which is installed on the
Airframe, subject to all of the rights of the owner, lessor, lienor or secured
party of such engine; provided that
the Airframe with an engine (which is not an Engine) installed thereon may be
flown or


 


31





















 


returned only to a location within the
continental United States, and such engine shall be held for the account of any
such owner, lessor, lienor or secured party or, if owned by the Company, may at
the option of the Collateral Agent, be exchanged with the Company for an Engine
in accordance with the provisions of Section 3.4(e) hereof;


 


(B)                                sell
all or any part of the Airframe and any Engine or other Collateral 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 the Airframe or such Engine or other
Collateral as the Collateral Agent, in its sole discretion, may determine, all
free and clear of any rights or claims of whatsoever kind of the Company; provided, however, that the Company shall
be entitled at any time prior to any such disposition to redeem the Collateral
by paying in full all of the Obligations; and/or


 


(C)                                exercise
any or all of the rights and powers and pursue any and all remedies of a
secured party under applicable law, including without limitation, the Uniform
Commercial Code of the State of New York.


 


Upon every
taking of possession of Collateral under this Section 4.2, the Collateral
Agent may, from time to time, at the expense of the Collateral Agent, make all
such expenditures for maintenance, insurance, repairs, replacements,
alterations, additions and improvements to and of the Collateral, as it may
deem proper. In each such case, the Collateral Agent shall have the right to
maintain, store, lease, control or manage the Collateral and to exercise all
rights and powers of the Company relating to the Collateral in connection
therewith, as the Collateral Agent shall deem best, including the right to enter
into any and all such agreements with respect to the maintenance, insurance,
storage, leasing, control, management or disposition of the Collateral 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 Mortgage 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 storage, leasing, control, management or disposition of the Collateral,
and of all maintenance, repairs, replacements, alterations, additions and
improvements, 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 Collateral 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 Company), and all other
payments which the Collateral Agent may be required or authorized to make under
any provision of this Mortgage, 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.


 


In addition,
the Company shall be liable for all legal fees and other costs and expenses
incurred by reason of the occurrence of any Event of Default or the exercise of
the


 


32





















 


Collateral
Agent’s remedies with respect thereto, including all costs and expenses
incurred in connection with the retaking or return of the Airframe or any
Engine in accordance with the terms hereof or under applicable law, including
without limitation, the Uniform Commercial Code of the State of New York, which
amounts shall, until paid, be secured by the Lien of this Mortgage.


 


If an Event of
Default shall have occurred and be continuing and the Notes shall have been
accelerated pursuant to this Section 4.2, at the request of the Collateral
Agent the Company 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 Company shall for any reason fail to execute
and deliver such instruments and documents after such request by the Collateral
Agent, the Collateral Agent may obtain a judgment conferring on the Collateral
Agent the right to immediate possession and requiring the Company to execute
and deliver such instruments and documents to the Collateral Agent, to the
entry of which judgment the Company hereby specifically consents to the fullest
extent it may lawfully do so.


 


Nothing in the
foregoing shall affect the right of each Noteholder to receive all payments of
principal of, and interest on, the Note or Notes held by such Noteholder and
all other amounts owing to such Noteholder as and when the same may be due.


 


(b)                                 Notice of Sale.


 


The Collateral
Agent shall give the Company at least fifteen (15) days’ prior written notice
of the date fixed for any public sale of the Airframe or any Engine or of the
date on or after which any private sale will be held, which notice the Company
hereby agrees is reasonable notice, and any such public sale shall be conducted
in general so as to afford the Company (and any Lessee) a reasonable
opportunity to bid.


 


(c)                                  Receiver.


 


If any Event
of Default shall occur and be continuing, to the extent permitted by law, the
Collateral Agent shall be entitled, as a matter of right as against the
Company, without notice or demand and without regard to the adequacy of the
security for the Notes or the solvency of the Company, upon the commencement of
judicial proceedings by it to enforce any right under this Mortgage, to the
appointment of a receiver of the Collateral and of the tolls, rents, revenues,
issues, income, products and profits thereof.


 


(d)                                 Concerning Sales.


 


At any sale
under this Article, any Lender or the Collateral Agent or the Administrative
Agent may bid for and purchase the property offered for sale, may make payment
on account thereof as herein provided, and, upon compliance with the terms of
sale, may hold, retain and dispose of such property without further
accountability therefor.  Any purchaser
shall be entitled, for the purpose of making payment for the property
purchased, to deliver any of the Notes in lieu of cash in the amount which
shall be payable thereon as principal or interest.  Said


 


33





















 


Notes, in case
the amount so payable to the holders thereof shall be less than the amounts due
thereon, shall be returned to the holders thereof after being stamped or
endorsed to show partial payment.


 


Section 4.3.                                   Waiver
of Appraisement, etc., Laws.  To the
full extent that it may lawfully so agree, the Company agrees that it will not
at any time insist upon, plead, claim or take the benefit or advantage of, any
appraisement, valuation, stay, extension, or redemption law now or hereafter in
force, in order to prevent or hinder the enforcement of this Mortgage or the
absolute sale of the Collateral, or any part thereof, or the possession thereof
by any purchaser at any sale under this Article; but the Company, for itself
and all who may claim under it, so far as it or they now or hereafter lawfully
may, hereby waives the benefit of all such laws.  The Company, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to have the
property in the Collateral marshalled upon any foreclosure hereof, and agrees
that any court having jurisdiction to foreclosure this Mortgage may order the
sale of the Collateral as an entirety.


 


Section 4.4.                                   Remedies
Cumulative.


 


Each and every
right, power and remedy herein specifically given to the Collateral Agent or
otherwise in this Mortgage 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 Collateral Agent, 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 time or thereafter any other right, power or remedy.
No delay or omission by the Collateral Agent 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 Company or to be an acquiescence therein.


 


Section 4.5.                                   Discontinuance of
Proceedings.


 


If the
Collateral Agent shall have proceeded to enforce any right, power or remedy
under this Mortgage by foreclosure, entry or otherwise, and such proceedings
shall have been discontinued or abandoned for any reason, then and in every
such case the Company and the Collateral Agent shall be restored to their
former positions and rights hereunder with respect to the property, subject to
the Lien of this Mortgage, and all rights, remedies and powers of the
Collateral Agent shall continue, as if no such proceedings had been undertaken
(but otherwise without prejudice).


 


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ARTICLE V


 


DUTIES OF THE
COLLATERAL AGENT


 


Section 5.1.                                   Action
Upon Event of Default.


 


Subject to the
terms of Sections 4.2 and 5.3 hereof, the Collateral Agent shall take such
action, or refrain from taking such action, with respect to an Event of Default
(including with respect to the exercise of any rights or remedies hereunder),
as the Collateral Agent shall be instructed in writing by a Majority in
Interest of Noteholders. If the Collateral Agent shall not have received
instructions as above provided within twenty (20) days after the mailing of any
request for such instructions to the Noteholders, the Collateral Agent may,
subject to instructions thereafter received pursuant to the preceding
provisions of this Section 5.1, but shall not be obligated to, take such
action, or refrain from taking such action, with respect to such Event of
Default as it shall determine to be advisable in the best interests of the
Noteholders; provided that the
Collateral Agent may not sell the Airframe or any Engine without the consent of
a Majority in Interest of Noteholders.


 


Section 5.2.                                   Action
Upon Instructions.


 


Subject to the
terms of Sections 4.2, 5.1, 5.3 and Article 6 hereof, upon the written
instructions at any time of a Majority in Interest of Noteholders, the
Collateral Agent shall take such of the following actions as may be specified
in such instructions and permitted by this Mortgage: (i) give such notice,
direction or consent, or exercise such right, remedy or power hereunder or,
subject to the provisions of Article 2 and Section 3.11 hereof, in
respect of all or any part of the Collateral, or  (ii) take such other action as shall be
specified in such instruction; it being understood that without the written
instructions of a Majority in Interest of Noteholders the Collateral Agent
shall not take any action pursuant to this Section 5.2. The Collateral
Agent will execute and file or cause to be filed (at the expense of the
Company) such continuation statements with respect to financing statements
relating to the security interest created hereunder in the Collateral as may be
specified from time to time in written instructions of a Majority in Interest
of Noteholders (which instructions may, by their terms, be operative only at a
future date and which shall be accompanied by the execution form of such
continuation statement so to be filed).


 


Section 5.3.                                   Indemnification.


 


The Collateral
Agent shall not be required to take any action or refrain from taking any
action under Section 5.1 or 5.2 or Article 4 hereof if it shall have
reasonable grounds for believing that repayment of any funds expended by it or
adequate indemnification against any risks incurred in connection therewith is
not reasonably assured to it. The Collateral Agent shall not be required to
take any action under Section 5.1 or 5.2 or Article 4 hereof, nor
shall any other provision of this Mortgage be deemed to impose a duty on the
Collateral Agent to take any action, if the Collateral Agent shall have been
advised in writing by independent counsel that such action is contrary to the
terms hereof or is otherwise contrary to law.


 


Section 5.4.                                   No
Duties Except as Specified in Mortgage or Instructions.


 


The Collateral
Agent shall not have any duty or obligation to manage, control, use, sell,
operate, store, dispose of or otherwise deal with the Aircraft or any other
part of the Collateral, or to otherwise take or refrain from taking any action
under, or in connection with, this Mortgage, except as expressly provided by
the terms of this Mortgage or as expressly provided in written instructions
received pursuant to the terms of Section 5.1 or 5.2 hereof; and


 


35





















 


no implied
duties or obligations shall be read into this Mortgage against the Collateral
Agent. The Collateral Agent nevertheless agrees that it will, at its own cost
and expense, promptly take such action as may be necessary duly to discharge
any Liens on any part of the Collateral, or on any properties of the Company
assigned, pledged or mortgaged as part of the Collateral, which result from
claims against the Collateral Agent in its individual capacity not related to
the administration of the Collateral or any other transaction under this
Mortgage or any document included in the Collateral.


 


Section 5.5.                                   No
Action Except Under Mortgage or Instructions.


 


The Collateral
Agent agrees that it will not manage, control, use, sell, operate, store,
dispose of or otherwise deal with the Aircraft or other property constituting
part of the Collateral except (i) in accordance with the powers granted to, or
the authority conferred upon, the Collateral Agent pursuant to this Mortgage,
or (ii) in accordance with the express terms hereof or with written
instructions pursuant to Section 5.1 or 5.2 hereof.


 


ARTICLE VI


 


SUPPLEMENTS
AND AMENDMENTS

TO THIS MORTGAGE AND OTHER DOCUMENTS


 


Section 6.1.                                   Supplemental
Mortgages.


 


With the
written consent of a Majority in Interest of Noteholders, the Company may, and
the Collateral Agent, subject to Section 6.2 hereof, shall, at any time
and from time to time, enter into a Mortgage or Mortgages supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Mortgage or of modifying in any manner
the rights and obligations of the Company under this Mortgage; provided, however, without the consent of
each Noteholder affected thereby, no such supplemental Mortgage shall:


 


(i)  
create any Lien with respect to the Collateral except such as are permitted
by this Mortgage, or deprive the Administrative Agent or any Noteholder of the
benefit of the Lien on the Collateral created by this Mortgage; or


 


(ii)  
change the definition of “Majority in Interest of Noteholders” so as to
reduce the percentage of principal amount of the Notes, the consent of whose
holders is required for any such supplemental mortgage, or the consent of whose
holders is required for any waiver (of compliance with certain provisions of
this Mortgage, or of certain defaults hereunder and their consequences)
provided for in this Mortgage; or


 


(iii)  
modify any provisions of this Section 6.1, except to provide that
certain other provisions of this Mortgage cannot be modified or waived without
the consent of each Noteholder affected thereby.


 


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Section 6.2.                                   Collateral
Agent Protected.


 


If in the
opinion of the Collateral Agent any document required to be executed pursuant
to the terms of Section 6.1 hereof adversely affects any right, duty,
immunity or indemnity in favor of the Collateral Agent under this Mortgage, the
Collateral Agent may in its discretion decline to execute such document.


 


ARTICLE VII


 


INVESTMENT OF
SECURITY FUNDS


 


Section 7.1.                                   Investment
of Security Funds.


 


Any monies paid
to or retained by the Collateral Agent which are required to be paid to the
Company or applied for the benefit of the Company (including, without
limitation, amounts payable to the Company under Sections 3.5(d), 3.5(f),
3.6(b) and 3.6(g) hereof), but which the Collateral Agent is entitled to hold
under the terms hereof pending the occurrence of some event or the performance
of some act (including, without limitation, the remedying of an Event of
Default), shall, until paid to the Company or applied as provided herein, be
invested by the Collateral Agent at the written authorization and direction of
the Company from time to time at the sole expense and risk of the Company in
Permitted Investments. After the occurrence and during the continuance of an
Event of Default, Permitted Investments will be selected by the Collateral
Agent at its discretion. At the time of such payment or application, there
shall be remitted to the Company any gain (including interest received)
realized as the result of any such investment (net of any fees, commissions,
other expenses or losses, if any, incurred in connection with such investment)
unless an Event of Default shall have occurred and be continuing. The
Collateral Agent shall not be liable for any loss relating to a Permitted
Investment made pursuant to this Article 7. The Company will promptly pay
to the Collateral Agent, on demand, the amount of any loss (net of any gains,
including interest received) realized as the result of any such investment
(together with any fees, commissions and other expenses, if any, incurred in
connection with such investment).


 


ARTICLE VIII


 


MISCELLANEOUS


 


Section 8.1.                                   Termination
of Mortgage.


 


Upon the
payment in full of the principal of, and interest on, all Notes, and all other
Obligations then due and payable (and regardless of whether any Default or
Event of Default (or any “default” or “event of defaults” under any other Loan
Document) shall have occurred and be continuing), the Collateral Agent shall,
upon the written request of the Company execute and deliver to, or as directed
in writing by, the Company an appropriate instrument (in due form for
recording) releasing the Aircraft and the balance of the Collateral from the
Lien of this Mortgage and, in such event, this Mortgage shall terminate and
this Mortgage shall be of no further force or effect.


 


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Section 8.2.                                   Alterations
to Mortgage.


 


This Mortgage
shall not be varied except by an instrument in writing of even date herewith or
subsequent hereto executed by each of the parties hereto through its duly
authorized representative.


 


Section 8.3.                                   No
Legal Title to Collateral in Noteholder.


 


No Noteholder
shall have legal title to any part of the Collateral. No transfer, by operation
of law or otherwise, of a Note or other right, title and interest of a
Noteholder in and to the Collateral or this Mortgage shall operate to terminate
this Mortgage or entitle any successor or transferee of such Noteholder to an
accounting or to the transfer to it of legal title to any part of the
Collateral.


 


Section 8.4.                                   Sale
of the Aircraft by Collateral Agent Is Binding.


 


Any sale or
other conveyance of the Aircraft, the Airframe, any Engine or any interest
therein by the Collateral Agent made pursuant to the terms of this Mortgage
shall bind the Noteholders and the Company, and shall be effective to transfer
or convey all right, title and interest of the Collateral Agent, the Company,
and the Noteholders in and to the Aircraft, the Airframe, any Engine or any interest
therein. 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.


 


Section 8.5.                                   Benefit
of Mortgage.


 


Nothing in
this Mortgage, whether express or implied, shall be construed to give to any
Person other than the Company, the Collateral Agent, and the Noteholders any
legal or equitable right, remedy or claim under or in respect of this Mortgage
or any Note.


 


Section 8.6.                                   Section 1110
of the Bankruptcy Code.


 


It is the
intention of the parties hereto that the security interest created hereby
entitles the Collateral Agent on behalf of the Administrative Agent and Noteholders
to all of the benefits of Section 1110 of the Bankruptcy Code in the event
of any reorganization of the Company under the Bankruptcy Code.


 


Section 8.7.                                   Notices.


 


Unless
otherwise expressly specified or permitted by the terms hereof, all notices required
or permitted under the terms and provisions hereof shall be in writing, and
shall become effective when received, or, if promptly confirmed by first-class
mail, postage prepaid, when dispatched by telegram, telex, telecopy or other
written telecommunication addressed:


 


38





















 


(i)   if to the Company, at its office at


 


2700 Lone Oak
Parkway

Eagan, MN 55121

Telecopy: 612-726-2221

Attention:  Senior Vice President-Finance


and Treasurer


 


or at such
other address as the Company shall from time to time designate by written
notice to the Collateral Agent in accordance with this Section 8.7; and


 


(2)   if to the Collateral Agent, at its office at


 


***Avenue


 


New York, NY
10017

Telecopy: 212- ***

Attention: General Counsel


 


with a copy
to:


 


***


Telecopy: ***


Attention:
Contract Administration


 


or at such
other address as the Collateral Agent shall from time to time designate by
written notice to the Company in accordance with this Section 8.7.


 


Section 8.8.                                   Severability.


 


Should any one
or more provisions of this Mortgage be determined to be illegal or
unenforceable by a court of any jurisdiction, such provision shall be
ineffective to the extent of such illegality or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction. The Company and
the Collateral Agent agree, as to such jurisdiction and to the extent permitted
by such jurisdiction’s laws, to replace any provision of this Mortgage which is
so determined to be illegal or unenforceable by a valid provision which has as
nearly as possible the same effect; provided
that such replacement provision shall not expand the Company’s or
the Collateral Agent’s obligations hereunder.


 


Section 8.9.                                   No
Waiver; Cumulative Remedies.


 


No failure on
the part of the Collateral Agent to exercise, and no course of dealing with
respect to, and no delay in exercising, any remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral
Agent of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.


 


39





















 


Section 8.10.                             Separate
Counterparts.


 


This Mortgage
may be executed in any number of counterparts (and each of the parties hereto
shall not be required to execute the same counterpart). Each counterpart of
this Mortgage including a signature page executed by each of the parties hereto
shall be an original counterpart of this Mortgage, but all of such counterparts
together shall constitute one instrument.


 


Section 8.11.                             Successors
and Assigns.


 


All covenants
and agreements contained herein shall be binding upon, and inure to the benefit
of, the Company and its successors and permitted assigns, and the Collateral
Agent and its successors and permitted assigns, and the Noteholders, all as
herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by a Noteholder (unless withdrawn by such Noteholder or
successor or assign prior to it being acted upon by the Collateral Agent) shall
bind the successors and assigns of such Noteholder.


 


Section 8.12.                             Headings.


 


The headings
of the various Articles and Sections herein are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof.


 


Section 8.13.                             Governing
Law.


 


THIS MORTGAGE
IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO ANY CHOICE OF LAW PRINCIPLE THAT WOULD DICTATE THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION.


 


Section 8.14.                             Normal
Commercial Relations.


 


Anything
contained in this Mortgage to the contrary notwithstanding, the Company, any
Noteholder or the Collateral Agent or any Affiliate of the Company, any
Noteholder or the Collateral Agent may enter into commercial banking or other
financial transactions with each other, and conduct banking or other commercial
relationships with each other, fully to the same extent as if this Mortgage
were not in effect, including, without limitation, the making of loans or other
extensions of credit for any purpose whatsoever.


 


Section 8.15.                             Language.  All correspondence, documents and any other
written matters in connection with this Mortgage shall be in English.


 


Section 8.16.                             Interpretation.  In the event of any inconsistency between the
terms of this Mortgage and the terms of the Letter Agreement, the terms of this
Mortgage will prevail over the terms of the Letter Agreement.


 


40





















 


Section 8.17.                             Execution
of Financing Statements.  Pursuant to
the Uniform Commercial Code, the Company authorizes the Collateral Agent to
file or record financing statements and amendments thereto and any other
filings under the Uniform Commercial Code with respect to the Collateral
without the signature of the Company in such form and in such offices as the
Collateral Agent determines appropriate to perfect the security interests of
the Collateral Agent under this Mortgage. 
The Company hereby ratifies and authorizes the filing by the Collateral Agent
under the Uniform Commercial Code of any financing statement with respect to
the Collateral made prior to the date hereof.


 


41





















 


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


 


	
   

  	
  NORTHWEST AIRLINES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ***

  
	
   

  	
   as
  Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  



 





















 


APPENDIX A


 


NORTHWEST
AIRLINES, INC., FINANCING OF ONE

AIRBUS A330 AIRCRAFT


 


DEFINITIONS
RELATING TO THE

MORTGAGE AND SECURITY AGREEMENT


 


The
definitions stated herein shall apply equally to both the singular and plural
forms of the terms defined.


 


“Administrative Agent” has the meaning given
to such term in the Credit Agreement.


 


“AFC” means Airbus Finance Company Limited, an
Irish limited liability company.


 


“Affiliates” means, as to any Person, any
other Person that, directly or indirectly, controls, is controlled by or is
under common control with such Person or is a director or officer of such
Person. For purposes of this definition, the term “control” (including the
terms “controlling,” “controlled by” and “under common control with”) of a
Person means the possession, direct or indirect, of the power to vote 5% or
more of the voting stock of such Person or to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting stock, by contract or otherwise.


 


“Agent” or “Agents”
means, individually or collectively, as the case may be, the
Collateral Agent and the Administrative Agent.


 


“Airbus Lender” means the Manufacturer, AFC or
any of their Affiliates.


 


“Airbus Loan” means any loan (other than the
Loan) made by an Airbus Lender pursuant to the Letter Agreement.


 


“Aircraft” means the Airframe (or any
Replacement Airframe substituted therefor pursuant to Section 3.5 of the
Mortgage) together with the two Engines delivered in connection therewith (or
any Replacement Engine substituted for any of said Engines pursuant to Section 3.4
of the Mortgage), whether or not any of such initial or substitute Engines may
from time to time be installed on such Airframe or may be installed on any
other airframe or on any other aircraft.


 


“Airframe” means (A) the Airbus A330-223
aircraft delivered by the Manufacturer under the Purchase Agreement (except the
Engines or engines from time to time installed thereon), identified by U.S.
registration mark and manufacturer’s serial number in the initial Mortgage
Supplement; and (B) any and all Parts (other than Engines or engines) so long
as the same shall be incorporated or installed in or attached to such Airframe.


 


“AVSA” means AVSA, S.A.R.L., a société à
responsabilité limitée organized and existing under the laws of the Republic of
France.


 





















 


“Bankruptcy Code” means Title 11 of the
United States Code, as amended from time to time, and any successor provisions
thereof.


 


“Business Day” means (i) for all purposes
other than as covered by clause (ii) below, any day except Saturday, Sunday and
any day which shall be in New York, New York, Dublin, Ireland, Paris, France or
Minneapolis, Minnesota a legal holiday or a day on which banking institutions
are authorized or required by law or other government action to close and (ii)
with respect to all notices and determinations in connection with, and payments
of principal and interest on the Loan if it bears interest based upon the
Eurodollar Rate, any day which is a Business Day described in clause (i) above
and which is also a day for trading by and between banks in the interbank
Eurodollar market.


 


“Certificated Air Carrier” means a Citizen of
the United States holding a carrier operating certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49, United States
Code, for aircraft capable of carrying ten or more individuals or 6,000 pounds
or more of cargo.


 


“Citizen of the United States” has the
meaning specified in Section 40102(a)(15) of Title 49 of the United States
Code.


 


“Civil Reserve Air Fleet Program” means the
Civil Reserve Air Fleet Program, currently administered by the United States
Air Force Military Command pursuant to Executive Order No. 11490, as amended,
or any substantially similar program.


 


“Collateral” has the meaning given such
term in Section 2.1 of the Mortgage.


 


“Collateral Agent” has the meaning
specified in the recitals to the Mortgage.


 


“Company” has the meaning specified in the
recitals to the Mortgage.


 


“Contract Rights” means all of the Company’s
right, title and interest in and to the Purchase Agreement, as and to the
extent that the same relate to the Aircraft and the operation thereof,
including, without limitation, (a) all claims for damages in respect to the
Aircraft arising as a result of any default by the Manufacturer under the
Purchase Agreement, including, without limitation, all warranty, service life
policy, aircraft performance guarantee and indemnity provisions in the Purchase
Agreement in respect of the Aircraft and all claims thereunder and (b) any and
all rights of the Company to compel performance of the terms of the Purchase
Agreement in respect of the Aircraft; excluding and reserving to the Company,
however, (i) all of the Company’s right, title and interest in and to the
Purchase Agreement as and to the extent that it relates to any matters not in
respect of the Aircraft, (ii) all of the Company’s right, title and interest
under the Purchase Agreement (other than under Clauses 12 and 13 thereof),
(iii) all of the Company’s rights and interests in or arising out of any
payments or deposits made or to be made by the Company or amounts credited or
to be credited or paid or to be paid by the Manufacturer to the Company in
respect of the Aircraft under the Purchase Agreement, (iv) all of the Company’s
right, title and interest under the Product Support Agreement for Airbus A330
Aircraft, dated December 21, 2000 between AVSA and the Company and (v)
with respect to the Aircraft, all rights to demand, accept and retain all rights
in and to property (other than the Aircraft), data and services of any kind
which the Manufacturer is


 


2





















 


obligated to
provide or does provide pursuant to the Purchase Agreement with respect to the
Aircraft.


 


“Credit Agreement” means the Credit
Agreement, dated as of November 16, 2004, between the Company, AFC, as the
Initial Lender, and ***, as Administrative Agent, as amended, supplemented or
otherwise modified from time to time.


 


“Default” means an event which, with the
giving of notice, lapse of time or both would become an Event of Default.


 


“Dollars” and “$” means the lawful currency of the United States of
America.


 


“Engine” means: (A) each of the two Pratt
& Whitney PW4168A engines installed on the Airframe at the time of delivery
to the Company of such Airframe and listed by manufacturer’s serial number in
the initial Mortgage Supplement, whether or not from time to time installed on
the Airframe or installed on any other aircraft; and (B) any Replacement Engine
that may from time to time be substituted, pursuant to Section 3.4 of the
Mortgage, for such Engine; together in each case with any and all Parts
incorporated or installed in or attached thereto.


 


“Event of Default” has the meaning given such
term in Section 4.1 of the Mortgage.


 


“Event of Loss” with respect to the
Aircraft, Airframe or either Engine means any of the following events with
respect to such property:


 


(i)                                     the
loss of such property or the use thereof due to the destruction of or damage to
such property which renders repair uneconomic or which renders such property
permanently unfit for normal use by the Company 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, or
the confiscation, condemnation. or seizure of, or requisition of title to, or
use of, such property by any governmental or purported governmental authority
(other than a requisition for use by the United States government or any other
government of registry of the Aircraft, or any agency or instrumentality of any
thereof which in the case of any event referred to in this clause (iii) (other
than a requisition of title) shall have resulted in the loss of possession of
such property by the Company for a period in excess of 180 consecutive days or,
in the case of a requisition of title, the requisition of title shall not have
been reversed within 90 days from the date of such requisition of title; (iv)
as a result of any law, rule, regulation, order or other action by the Federal
Aviation Administration or other governmental body of the government of
registry of the Aircraft having jurisdiction, the use of such property in the
normal course of the business of air transportation shall have been prohibited
for a period of 180 consecutive days, unless the Company, prior to the
expiration of such 180 day period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable to
permit the normal use of such property by the Company, but in any event if such
use shall have been prohibited for a period of two consecutive years, provided
that no Event of Loss shall be deemed to have occurred if such prohibition is
applicable to the Company’s entire U.S. registered fleet of


 


3





















 


Airbus
A330-200 series aircraft and the Company, prior to the expiration of such two-year
period, shall have conformed at least one such aircraft in its fleet to the
requirements of any such law, rule, regulation, order or other action and
commenced regular commercial use of the same in such jurisdiction and shall be
diligently carrying forward, in a manner which does not discriminate against
the Aircraft in so conforming the Aircraft, all steps which are necessary or
desirable to permit the normal use of the Aircraft by the Company, but in any
event if such use shall have been prohibited for a period of three years, and
(v) any divestiture of title to an Engine treated as an Event of Loss pursuant
to Section 3.2(a) of the Mortgage. 
An Event of Loss with respect to the Aircraft shall be deemed to have
occurred if an Event of Loss occurs with respect to the Airframe.


 


“Federal Aviation Administration” and “FAA” mean the United States Federal
Aviation Administration, and any agency or instrumentality of the United States
government succeeding to its functions.


 


“Foreign Air Carrier” means any air carrier
which is not a U.S. Air Carrier and which performs maintenance, preventative
maintenance and inspections for the Aircraft, Airframe and/or any Engine or
engine to standards which are approved by, or which are substantially equivalent
to those required by, the Federal Aviation Administration, the Civil Aviation
Authority of United Kingdom, the Direction Generale de l’Aviation Civile of the
French Republic, the Luftfahrt Bundesamt of the Federal Republic of Germany,
the Rijflauchtraatdienst of the Kingdom of the Netherlands, the Ministry of
Transportation of Japan or the Federal Ministry of Transport of Canada (or any
agency or instrumentality of the applicable government succeeding to the
jurisdiction of the foregoing entities).


 


“Lease” means any lease permitted by the terms
of Section 3.2(a)(x) of the Mortgage.


 


“Lenders” has the meaning provided in the
Credit Agreement.


 


“Lessee” means any lessee permitted by the
terms of Section 3.2(a)(x) of the Mortgage.


 


“Letter Agreement” means the A330 Financing
Letter Agreement No. 1, dated as of December 21, 2000, between the
Company and AVSA, as amended by Amendment No. 1 dated December 20, 2002.


 


“Lien” means any lien (statutory or
otherwise), security interest or other charge or encumbrance of any kind, or
any other type of preferential arrangement, including, without limitation, the
lien or retained security title of a conditional vendor and any easement, right
of way or other encumbrance on title to real property.


 


“Loan” means the Loan made under the Credit
Agreement.


 


“Loan Documents” means the Mortgage, each
Mortgage Supplement, the Notes, and the Credit Agreement, and any other
agreement or instrument entered into or delivered by the Company pursuant to
any of the foregoing.


 


4





















 


“Loan Loss Value” has the meaning given such
term in Section 3.6(b)(I) of the Mortgage.


 


“Majority in Interest of Noteholders” means,
as of a particular date of determination, the holders of more than 662/3%
in aggregate unpaid principal amount of all Notes, if any, outstanding as of
such date, excluding any Notes owned or held, directly or indirectly, by the
Company or any Affiliate of the Company.


 


“Manufacturer” means Airbus S.A.S. (or any
person or any entity that succeeds to substantially all of the businesses and
operations thereof).


 


“Mortgage” means the Mortgage and Security
Agreement covering the Collateral dated as of November 16, 2004 between
the Company and the Collateral Agent, as the same may be amended, modified or
supplemented from time to time.


 


“Mortgage Supplement” means (a) the Mortgage
and Security Agreement Supplement No. 1 dated November 16, 2004,
substantially in the form of Exhibit A to the Mortgage, which shall
describe with particularity the Aircraft and the Engines and which creates a
security interest in the Aircraft and the Engines and (b) any other supplement
to the Mortgage from time to time executed and delivered.


 


“Note” means a promissory note of the Company
payable to the order of a Lender, substantially in the form of Exhibit A to the
Credit Agreement, evidencing the indebtedness of the Company to such Lender
resulting from the Loan.


 


“Noteholder” means and includes each Person
holding all or a portion of the Loan evidenced by a Note or Notes from time to
time for so long as such holder shall hold such Note or Notes.


 


“Obligations” means the Company’s obligation
to make the due and punctual (i) payment of the principal of and interest from
time to time due on the Notes (including interest at the rate specified in the
Credit Agreement after the occurrence of an Event of Default), (ii) payment of
all sums payable by the Company under the Mortgage, (iii) payment of all other
sums payable by the Company to the Noteholders under Sections 2.9, 2.12, 2.17,
2.18 and 8.4 of, or elsewhere under, the Credit Agreement and the other Loan
Documents.


 


“Obsolete Parts” has the meaning given such
term in Section 3.4(d) of the Mortgage.


 


“Officer’s Certificate” means, as to any
company, a certificate signed by the Chairman, the Vice Chairman, the
President, any Executive Vice President, any Director, any Senior Vice
President, any Vice President, any Assistant Vice President, the Treasurer or
any Assistant Treasurer, the Secretary, or any Assistant Secretary of such
company.


 


“Parts” means any and all appliances, parts,
instruments, appurtenances, accessories, furnishings, seats, buyer furnished
equipment, and other equipment of whatever nature (other than (a) complete
Engines or engines, (b) any items leased by the Company from a


 


5





















 


third party and (c) cargo containers) which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine.


 


“Permitted Investments” means (i) direct
obligations of the United States of America and agencies guaranteed by the
United States government having a final maturity of 90 days or less from date
of purchase thereof; (ii) certificates of deposit issued by, bankers’
acceptances of, or time deposits with, any bank, trust company or national
banking association incorporated under the laws of the United States of America
or one of the states thereof having combined capital and surplus and retained
earnings as of its last report of condition of at least $500,000,000 and having
a rating of Aa or better by Moody’s Investors Service, Inc. (“Moody’s”)
or AA or better by Standard & Poor’s Corporation (“S&P”) and
having a final maturity of 90 days or less from date of purchase thereof; and
(iii) commercial paper of any holding company of a bank, trust company or
national banking association described in (ii) and commercial paper of any
corporation or finance company incorporated or doing business under the laws of
the United States of America or any state thereof having a rating assigned to
such commercial paper of Al by S&P or P1 by Moody’s and having a final
maturity of 90 days or less from the date of purchase thereof; provided that
the aggregate amount at any one time so invested in certificates of deposit
issued by any one bank shall not be in excess of 5% of such bank’s capital and
surplus.


 


“Permitted Lessee” means any air carrier
domiciled in a country listed in Schedule I to the Mortgage.


 


“Permitted Liens” has the meaning given such
term in Section 3.1 of the Mortgage.


 


“Person” means an individual, partnership,
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.


 


“***”  has the meaning specified in the preamble to
the Mortgage.


 


“Purchase Agreement” means the Airbus A330
Purchase Agreement, dated as of December 21, 2000, between AVSA and the
Company, relating to the purchase by the Company of the Aircraft as originally
executed or as modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the Aircraft.


 


“Replacement Aircraft” means any Aircraft of
which a Replacement Airframe is part.


 


“Replacement Airframe” means an Airbus A330
aircraft (except Engines or engines from time to time installed thereon), which
shall have been made subject to the Lien of the Mortgage pursuant to Section 3.5
thereof.


 


“Replacement Closing Date” has the meaning
given such term in Section 3.5(c) of the Mortgage.


 


6





















 


“Replacement Engine” means a Pratt &
Whitney PW4168A engine (or engine of the same or another manufacturer of a
comparable or an improved model and suitable for installation and use on the
Airframe) which has a value, utility and remaining useful life (except for
maintenance cycle condition) at least equal to the Engine which it is
replacing, assuming such Engine was of the value, utility and remaining useful
life (except for maintenance cycle condition) required by the terms of the
Mortgage, and which shall have been made subject to the Lien of the Mortgage
pursuant to Section 3.4 or 3.5 of the Mortgage.


 


“Taxes” has the meaning specified in the
Credit Agreement.


 


“Transportation Code” means Title 49 of the
United States Code, comprising those provisions formerly referred to as the
Federal Aviation Act of 1958, as amended, or any subsequent legislation that
amends, supplements or supersedes such provisions.


 


“U.S. Air Carrier” means any Certificated Air Carrier
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the regulations under the Transportation Code, or which
may operate as an air carrier by certification or otherwise under any successor
or substitute provisions therefor or in the absence thereof.


 


“Wet Lease” means any arrangement whereby the
Company (or any Lessee) agrees to furnish the Airframe and Engines or engines
installed thereon to a third party pursuant to which such Airframe and Engines
or engines (i) shall be operated solely by regular employees of the Company (or
any Lessee) possessing all current certificates and licenses that would be
required under the Transportation Code or, if the Aircraft is not registered in
the United States, all certificates and licenses required by the laws of the
jurisdiction of registry, for the performance by such employees of similar
functions within the United States of America or such other jurisdiction of
registry (it is understood that cabin attendants need not be regular employees
of the Company (or any Lessee)) and (ii) shall be maintained by the Company (or
any Lessee) in accordance with its normal maintenance practices.


 


7





















 


	
   

  	
  Exhibit A

  
	
   

  	
  To

  
	
   

  	
  Mortgage

  



 


MORTGAGE AND SECURITY

AGREEMENT SUPPLEMENT NO.   


 


Mortgage and
Security Agreement Supplement No.    dated         ,
(“Mortgage Supplement”) of NORTHWEST AIRLINES, INC. (the “Company”).


 


W I T N E S S
E T H:


 


WHEREAS, the
Mortgage and Security Agreement, dated as of November 16, 2004, (the “Mortgage”),
between the Company and ***, as Collateral Agent (the “Collateral Agent”),
provides for the execution and delivery of supplements thereto substantially in
the form hereof which shall particularly describe the Aircraft (such term and
other defined terms in the Mortgage being used herein with the same meanings),
and shall specifically grant a security interest in the Aircraft to the
Collateral Agent; and


 


[WHEREAS, the
Mortgage relates to the Airframe and Engines described in Annex A attached
hereto and made a part hereof, and a counterpart of the Mortgage is attached to
and, made a part of this Mortgage Supplement;](1)


 


[WHEREAS, the
Company has, as provided in the Mortgage, heretofore executed and delivered to
the Collateral Agent   Mortgage Supplement(s) for the purpose of
specifically subjecting to the Lien of the Mortgage certain airframes and/or
engines therein described, which Mortgage Supplement(s) is/are dated and
has/have been duly recorded with the FAA as set forth below, to wit:


 


	
  Date

  	
   

  	
  Recordation Date

  	
   

  	
  FAA Document Number](2)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 


NOW,
THEREFORE, in order to secure the prompt payment of the Obligations, subject to
the terms and conditions of the Mortgage, and in consideration of the premises and
of the covenants contained in the Mortgage, and of other good and valuable
consideration given to the Company at or before the delivery hereof, the
receipt whereof is hereby acknowledged, the Company has mortgaged, assigned,
pledged, hypothecated and granted, and does hereby mortgage, assign, pledge,
hypothecate and grant, a continuing security interest in, and mortgage lien on,
the property comprising all its right, title and interest in and to the
Airframe and Engines described in Annex A attached hereto, whether or not such
Engines shall be installed in or


 










(1)                                  Use
for Mortgage Supplement No. 1 only.


 


(2)                                  Use
for all Mortgage Supplements other than Mortgage Supplement No. 1.


 





















 


attached to
the Airframe or any other aircraft, to the Collateral Agent, its successors and
assigns, for the benefit and security of the Agents and Noteholders;


 


To have and to
hold all and singular the aforesaid property unto the Collateral Agent, its
successors and assigns, for the benefit and security of the Agents and Noteholders
and for the uses and purposes and subject to the terms and provisions set forth
in the Mortgage.


 


This Mortgage
Supplement shall be construed as supplemental to the Mortgage and shall form a
part thereof, and the Mortgage is hereby incorporated by reference herein and
is hereby ratified, approved and confirmed and terms not otherwise defined
herein shall have the meaning provided in the Mortgage.


 


THIS MORTGAGE
SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO ANY CHOICE OF LAW PRINCIPLE THAT WOULD DICTATE THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION.


 


2





















 


IN WITNESS
WHEREOF, the Company has caused this Supplement No.   to be duly executed
by one of its duly authorized officers, as of the day and year first above
written.


 


	
   

  	
  NORTHWEST AIRLINES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  



 





















 


Annex A


to Mortgage


Supplement No.   


 


DESCRIPTION OF AIRFRAME AND ENGINES


 


AIRFRAME


 


	
  Manufacturer

  	
   

  	
  Model

  	
   

  	
  FAA

  Registration

  No.

  	
   

  	
  Manufacturer’s

  Serial

  No.

  
	
  Airbus S.A.S.

  	
   

  	
  A330-223

  	
   

  	
  N *** 7NW

  	
   

  	
  0633

  



 


ENGINES


 


	
  Manufacturer

  	
   

  	
  Model

  	
   

  	
  Manufacturer’s

  Serial

  No.

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  PW4168A

  	
   

  	
  P733572

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  PW4168A

  	
   

  	
  P733573

  	
   

  	
   

  



 


Each Engine
horsepower is of 750 or more “rated take-off horsepower” or the equivalent of
such horsepower.


 





















 


Schedule I

to Mortgage


SCHEDULE OF
COUNTRIES FOR PERMITTED LESSEES


 


Argentina


Australia


Austria


Bahamas


Belgium


Brazil


Canada


Chile


Denmark


Egypt


Finland


France


Germany


Greece


Hungary


Iceland


India


Indonesia


Ireland


Italy


Japan


Luxembourg


Malaysia


Malta


Mexico


Morocco


Netherlands


New Zealand


Norway


Paraguay


People’s Republic of China


Philippines


Portugal


Republic of China (Taiwan)


Singapore


South Africa


South Korea


Spain


Sweden


Switzerland


Thailand


Tobago


 





















 


Trinidad


United Kingdom


Uruguay


Venezuela