Document:

Exhibit 10.11

 

 

 

AIRCRAFT
MORTGAGE AND SECURITY AGREEMENT

 

This AIRCRAFT MORTGAGE AND SECURITY AGREEMENT (as amended, modified or
supplemented from time to time, the “Mortgage”), dated as of
October 23, 2001, between NORTHWEST AIRLINES, INC., a Minnesota corporation
(together with its successors and permitted assigns, the “Company”), and
THE CHASE MANHATTAN BANK, as Collateral Agent (the “Collateral Agent”),
for the benefit of the Lenders and the Agents under, and any other lender from
time to time party to, the Credit Agreement hereinafter referred to (such
Lenders, Agents and the other lenders, if any, are hereinafter called the “Secured
Creditors”).

 

W I  T  N  E  S  S  E
T  H :

 

WHEREAS, subject to and upon the terms and conditions set forth in the
Credit Agreement, the Lenders have agreed to make available the Loans to the
Company provided for therein;

 

WHEREAS, the Company has requested certain amendments to the terms and
conditions set forth in the Credit Agreement;

 

WHEREAS, it is a condition precedent to the above-described
amendments that the Company shall have executed and delivered to the Collateral
Agent this Mortgage; and

 

WHEREAS, the Company desires to execute the Mortgage to satisfy the
condition described in the preceding paragraph.

 

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 1

 

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 2

 

SECURITY

 

SECTION 2.1.   Grant of Security
Interest.

 

The Company, in order to secure (i) the prompt payment when due of all
the Obligations and (ii) the performance and observance by the Company and the
Guarantors of all agreements, covenants and provisions contained herein 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 Secured Creditors, 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
Airframes described in Schedule I hereto and the Engines described in Schedule
II hereto, each of which Engines is a 750 or more rated take-off
horsepower or the equivalent of such horsepower, and in the case of such
Engines, whether or not such Engines shall be installed in or attached to the
Airframes, described in this clause or any other airframes, together with all
accessories, equipment, parts and appurtenances appertaining or attached to the
Airframes (other than jet aircraft engines not constituting Engines) or the
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;

 

(c)   all
proceeds with respect to the requisition of title to or use of the Aircraft, or
any part thereof, all insurance proceeds with respect to the Aircraft or any
part thereof, and any other proceeds of any kind resulting from an Event of
Loss, 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; and

 

(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 and (ii) the Collateral Agent, acting on
behalf of the Secured Creditors, (A) shall not, through it own actions or
inactions, interfere with, or suffer to exist with respect to any 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, (B) shall not suffer to exist a default in any of its obligations
pursuant to this Mortgage that does not correspond to or result from an Event
of Default or Default and (C) neither the Collateral Agent nor any Secured
Creditor shall assign this Mortgage for security purposes without the prior
written consent of the Company, which may be granted or withheld in its sole
discretion (such consent, if granted, to be conveyed by the Company in writing).

 

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 Secured Creditors,
without any priority of any one Secured Creditor 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 and the Guarantors shall remain liable under each
of the Loan Documents to which they are party to perform all of the obligations
assumed by them thereunder, all in accordance with and pursuant to the terms
and provisions thereof, 

 

 

 

 

and neither the Administrative Agent, the Collateral
Agent nor the Lenders shall have any obligation or liability under any of the
Loan Documents to which the Company or the Guarantors is a party by reason of
or arising out of the assignment hereunder, nor shall the Administrative Agent,
the Collateral Agent or the Lenders be required or obligated in any manner to
perform or fulfill any obligations of the Company or the Guarantors under any
of the Loan Documents to which the Company or the Guarantors 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.

 

ARTICLE 3

 

GENERAL
REPRESENTATIONS, WARRANTIES AND COVENANTS

 

SECTION 3.1.   General.

 

The Company represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Mortgage,
as follows:

 

(a)   Necessary
Filings.

 

All filings, registrations and recordings necessary to create, preserve,
protect and perfect the security interest granted by the Company to the
Collateral Agent hereby in respect of the Collateral have been accomplished and
the security interest granted to the Collateral Agent pursuant to this Mortgage
in and to the Collateral constitutes a perfected security interest therein
prior to the rights of all other Persons therein and subject to no other Liens
(other than Permitted Liens) and is entitled to all the rights, priorities and
benefits afforded by the Federal Aviation Act and other relevant law as enacted
in any relevant jurisdiction to perfected security interests.

 

(b)   No
Liens.

 

The Company is, and as to Collateral acquired by it from time to time
after the date hereof the Company will be, the owner of all Collateral free
from any Lien, security interest, encumbrance or other right, title or interest
of any Person (other than Permitted Liens), and the Company shall defend the
Collateral against all claims and demands of all Persons (other than Persons
claiming by, through or under the Collateral Agent) at any time claiming the
same or any interest therein adverse to the Collateral Agent.

 

 

 

(c)   Other
Financing Statements.

 

There is no financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) covering or purporting to cover
any interest of any kind in the Collateral (other than Permitted Liens), and so
long as the Commitments have not been terminated or any Letter of Credit
remains outstanding or any of the Reimbursement Obligations or the other
Obligations remain unpaid, the Company will not execute or authorize to be
filed in any public office any financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) or statements
relating to the Collateral, except financing statements filed or to be filed in
respect of and covering the security interests granted hereby by the Company.

 

(d)   Chief
Executive Office; State of Incorporation.

 

The chief executive office of the Company is located at 2700 Lone Oak
Parkway, Eagan, Minnesota 55121 and the Company is incorporated in the state of
Minnesota. The Company will not move its chief executive office or change its
jurisdiction of incorporation until it shall have given the Collateral Agent 30
days’ prior written notice of its intention to do so and the Company will provide
such other information in connection therewith as the Collateral Agent may
reasonably request.

 

(e)   Name.

 

The name of the Company is Northwest Airlines, Inc.  The Company will not change its name until
(i) it shall have given to the Collateral Agent not less than 30 days’
prior written notice of its intention to do so, (ii) with respect to such
new name, it shall have taken all action, satisfactory to the Collateral Agent,
to maintain the security interest of the Collateral Agent in the Collateral intended
to be granted hereby at all times fully perfected and in full force and effect,
(iii) at the request of the Collateral Agent, it shall have furnished an
opinion of counsel acceptable to the Collateral Agent to the effect that all
financing or continuation statements and amendments or supplements thereto have
been filed in the appropriate filing office or offices, and (iv) the
Collateral Agent shall have received evidence that all other actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.

 

(f)   Recourse.

 

This Mortgage is made with full recourse to the Company and pursuant to
and upon all the warranties, representations, covenants and agreements on the
part of the Company contained herein, in the other Loan Documents and otherwise
in writing in connection herewith or therewith.

 

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 any Airframe, Engine or Part, install or permit any
Engine to be installed in any airframe other than the Airframes or enter into
any Wet Lease; provided
that so long as no Default of the type referred to in Sections 8(a) or (f) of
the Credit Agreement 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 (subject to Permitted
Liens) of this Mortgage on the Collateral 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 any Airframe or Engine or
engines installed on an Airframe 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
any 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
Airframes may be subject shall be with a U.S. Air Carrier or a Foreign Air
Carrier;

 

(ii)           deliver possession of any Airframe or
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 such 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 any 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 any 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 any 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,
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 any 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 any Airframe or Engine to any pooling arrangement
referred to in such Section;

 

(vii)         subject (or permit any Lessee to
subject) any Airframe or Engine to the Civil Reserve Air Fleet Program and
transfer (or permit any Lessee to transfer) possession of any Airframe or
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 such
Airframe or 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 any Airframe
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 any Airframe
or 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)            enter, any time, into any lease of
any Airframe or Engine with (A) a U.S. Air Carrier, (B) any Person approved in
writing by the Collateral Agent (with the approval of the Required Lenders),
(C) any Permitted Lessee, or (D) any 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 Effective Date) 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
any Airframe or 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) 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 Airframes; 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 Airframes) 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 (subject to Permitted Liens) 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, in any area excluded from coverage by any insurance
required by the terms of Section 3.6 hereof, 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.

 

(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 Federal Aviation Act, except when all Aircraft
powered by engines of the same type as those with which such Aircraft 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 an Aircraft is registered in the United
States), or the applicable laws of any other jurisdiction in which an 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.

 

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

 

“SUBJECT TO AN AIRCRAFT MORTGAGE AND SECURITY AGREEMENT IN FAVOR OF THE
CHASE MANHATTAN BANK, 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 Airframes or the Engines 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 Airframes
or the Engines.

 

(c)   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 Federal Aviation Act, provided, however, that the Company may elect to effect a change in the
registration of the Aircraft, at the Company’s expense, with the prior written
consent of the Collateral Agent (which shall not be unreasonably withheld).

 

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 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 any Airframe or 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 such Airframe or 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 any Airframe or any 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 any Airframe or 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 any 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 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 any Airframe or 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 any
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 any Airframe or 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 any
Airframe or 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 such Airframe or
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 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 any Airframe or Engine may be reduced by the value of Obsolete
Parts which have been removed so long as the aggregate original value of all
Obsolete Parts that shall have been removed and not replaced with respect to
any Aircraft shall not exceed an amount equal to 1.5% of the Appraised Value of
such Aircraft. All Parts incorporated or installed in or attached or added to
the Airframes or the Engines 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
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 not be deemed a Part hereunder.

 

(e)   Substitution
of Engines.

 

The Company shall have the right at its option at any time, on at least
twenty (20) 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 to which such Engine is
attached with respect to which the Company reduces the Total Revolving
Commitments as required by Section 7.5(a)(iii) of the Credit Agreement or makes
the substitution permitted by Section 3.5(a) hereof), shall within thirty (30)
days after the occurrence of such Event of Loss substitute, a Replacement
Engine 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 relevant 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 (except that any
financing statements under the UCC shall only be executed if so required by the
UCC):

 

(A)  a Mortgage Supplement covering the Replacement
Engine (filed for recording pursuant to the Federal Aviation Act, or the
applicable laws, rules and regulations of any other jurisdiction in which the relevant
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;

 

(C)   such UCC 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 such documents
reasonably requested by the Collateral Agent are sufficient to cause such
Replacement Engine to be subject to the Lien of this Mortgage, (B) upon recordation,
an opinion of qualified FAA counsel, or if applicable, qualified counsel in the
jurisdiction of the relevant 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(b) 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.

 

(f)   Substitution of Aircraft.

 

(I)            The Company shall have the right at
its option at any time, on at least five (5) Business Days’ prior written
notice to the Collateral Agent, to substitute for one or more Aircraft one or
more Replacement Aircraft so long as on the date of such replacement no Event
of Default shall have occurred and be continuing, such Replacement Aircraft are
free and clear of all Liens except Permitted Liens and the aggregate appraised
value (as determined by an appraisal, dated not more than ten Business Days
prior to the date of such substitution, by an independent appraisal firm satisfactory,
at the time of such appraisal, to the Collateral Agent setting forth the fair
market value, as determined in accordance with the definition of “fair market
value” promulgated by the International Society of Transport Aircraft Trading,
as of the date of such appraisal, of the Replacement Aircraft) of the
Replacement Aircraft shall be not less than the aggregate Appraised Value of
the Aircraft for which the Replacement Aircraft are being substituted.

 

(II)           Upon the Company having provided
Replacement Aircraft as provided for in Section 3.4(f)(I) above, the Lien of
the Mortgage shall continue with respect to such Replacement Aircraft as though
no substitution had occurred; the Collateral Agent shall, at the cost and
expense of the Company, release from the Lien of this Mortgage the replaced
Aircraft upon the occurrence of the substitution 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.

 

(III)         Conditions to Aircraft Substitution.

 

(i)            The Company’s right to make a substitution under Section 3.4(f)(I) 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 3.4(f)(I), of the
following conditions precedent:

 

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

 

(B)   an
appraisal for the Replacement
Aircraft satisfying the requirements of Section 3.4(f)(I) above;

 

(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 Aircraft; and

 

(ii)           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 3.4(f), evidence of taking of all necessary corporate action in
connection therewith and compliance with the conditions set forth in this
Section 3.4(f), in each case in form and substance reasonably satisfactory to
the Collateral Agent;

 

(iii)          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);

 

(iv)          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 Aircraft to be replaced 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 to be replaced
had been so registered immediately prior to such substitution) 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 to be replaced;

 

(v)           the Collateral Agent shall have received evidence satisfactory to it with
respect to the matters covered by subparagraphs (iii) and (iv) above;

 

(vi)          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 or other counsel selected by the Company and reasonably satisfactory to
the Collateral Agent to the effect that (x) the Replacement Aircraft has or
have been made subject to the Lien of this Mortgage and (y) 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 (B) an opinion of qualified FAA counsel or, if
applicable, qualified local counsel in the jurisdiction where the Aircraft to
be replaced 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);

 

(vii)         the
Company shall have delivered to the Collateral Agent (A) a copy of the original
bill of sale respecting such Replacement Aircraft, 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 Aircraft;

 

(viii)        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; and

 

(ix)           the following statement shall be true and the Collateral Agent shall have
received an Officer’s Certificate of the Company, dated the date of such
substitution, stating that each of the conditions specified in this paragraph
(III) with respect to such Replacement Aircraft, and any comparable provisions
of any lease permitted hereby to which such Aircraft is subject, have been
satisfied.

 

SECTION 3.5.   Loss, Destruction or
Requisition.

 

(a)   Event of Loss With Respect to
Airframes.

 

Upon the occurrence of an Event of Loss with respect to an Airframe or an
Engine, the Company shall forthwith (and in any event within ten (10) days
after such occurrence) give the Collateral Agent written notice of such Event
of Loss. The Company shall, within twenty (20) days after the occurrence of an
Event of Loss with respect to such 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 20 day period, the Company
shall be required to reduce the Total Revolving Commitments pursuant to Section
7.5(a)(iii) of the Credit Agreement). The Company may elect either to
(i) reduce the Total Revolving Commitments pursuant to Section 7.5(a)(iii)
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 30th 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 such 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, and to be of a comparable or improved
model as, such Airframe and Engines, if any, so replaced, as of the date of the
Event of Loss (assuming such Airframes 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 reduce the Total Revolving Commitments pursuant to
Section 7.5(a)(iii) of the Credit Agreement on the Business Day next succeeding
the 30th 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 Engines or engines, if
any, attached to such 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.

 

(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 30th 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 (except that any
financing statements under the UCC shall only be executed if so required by the
UCC):

 

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

 

(B)           such UCC 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 the
same model as the Airframe to be replaced (or an improved model, as the case
may be) and has 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;

 

(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 to be replaced 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 to be replaced 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 to be replaced 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 or
other counsel selected by the Company and reasonably satisfactory to the
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 and (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 (B) an opinion of
qualified FAA counsel or, if applicable, qualified local counsel in the
jurisdiction where the Aircraft to be replaced 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 and/or Replacement Engine.

 

 

 

(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 any Airframe, Engine or 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 any Aircraft, and the relevant Airframe or
the relevant Airframe and 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 an 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 an Aircraft, if the relevant Airframe or the
relevant Airframe and 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 required pursuant to Section 3.2(b)
of the Credit Agreement and the payment of any other Obligations then due and
payable and thereafter, 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 any Airframe and the Engines or
engines installed on such Airframe so long as any Airframe or 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
an 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.

 

(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 amounts of the Loans shall be declared to be due and payable pursuant
to the Credit Agreement, 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
7.12, such amount, and any interest realized thereon pursuant to Section 6.1
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) insurance and property damage insurance (exclusive
of manufacturer’s product liability insurance) with respect to each of the
Aircraft, in an amount not less than the greater of (x) with respect to
each Aircraft of any type, the 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 and (y) the amount of public liability and
property damage maintained by the Company for such Aircraft on the Effective
Date and (ii) cargo liability insurance, in the case of both clause (i)
and clause (ii), (A) with respect to Aircraft of any type, 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 Secured Creditors (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 additional
insureds as their interest may appear, (B) shall provide that in respect
of the interest of the Secured Creditors (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 Secured Creditors (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 if the insurers cancel such insurance for any
reason whatever or if any material change is made in such insurance which
adversely affects the interest of the Secured Creditors (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 Secured Creditors (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 Secured Creditors (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 Secured Creditors
(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 Secured Creditors (or,
if any Lease shall be in effect, the Company in its capacity as lessor under
the Lease).

 

(II)  During any period that an
Aircraft is on the ground and not in operation, the Company may, in relation to
such Aircraft, 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 such 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 relevant
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 of the
same type 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 relevant Aircraft) and hijacking insurance if the Aircraft
are operated on routes where the custom is for major international air carriers
flying comparable routes to carry such insurance) 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 are subject to this Mortgage be
for an amount (subject to self-insurance to the extent permitted by Section
3.6(d)) not less than the amount of insurance of the same type maintained by
the Company on the Effective Date with respect to the Aircraft. 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 a loss payee, 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 an amount equal to 13.5% of the
Appraised Value of the Aircraft subject to such event of loss, the proceeds in
respect of such loss up to an amount equal to the amount of the reduction in
the Total Revolving Commitments as required by Section 7.5(a)(iii) of the
Credit Agreement with respect to such loss (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 an 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 equal to the amount set forth in clause (A) above 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 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 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 Secured Creditors
(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 Secured Creditors (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 Secured
Creditors or the Company (or any Lessee) to the extent of any moneys due to the
Collateral Agent. In the case of a loss with respect to an engine (other than
an Engine) installed on an 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 an
Airframe (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
an 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 in accordance with Section 3.2(a) of the Credit Agreement, 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.

 

As between the Collateral Agent and the Company, the insurance payments
for any property damage or loss to any Airframe or 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 an
Aircraft is on the ground and not in operation, the Company may, in relation to
such Aircraft, carry or cause to be carried, in lieu of the insurance required
by clause (b)(I) above, insurance otherwise conforming with the provisions of
said clause (b)(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 such Aircraft in an amount at least equal to the amount of
insurance of such type maintained by the Company on the Effective Date with
respect to such Aircraft during such period that such 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 Effective Date and on or before July 1, in each
year thereafter commencing July 1, 2002 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 all information contained in the foregoing report
shall not be made available by the Secured Creditors to anyone except (A) to
permitted transferees of the interest of the Secured Creditors who agree to
hold such information confidential, (B) to the Secured Creditors’ counsels 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 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 war risk and allied perils coverage) prior to the 

 

 

 

expiration or termination date of any 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 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 Effective Date. In the event that the
Company or any 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 maximum amounts which are
less than the amounts required by such Section) in the insurance covering the
risks required to be insured against pursuant to this Section 3.6 under a
program applicable to all the aircraft in the Company’s fleet, but in no case
shall the aggregate amount of self-insurance in regard to 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) 50% of the largest replacement value of any single aircraft
in the Company’s fleet or (b) 1-1/2% 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 an 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
such 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 due and payable pursuant to the Credit Agreement, 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 7.12, such amount, and any interest
realized thereon pursuant to Section 6.1 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 in the office of the Federal Aviation
Administration, pursuant to the Federal Aviation Act, and in such other places
as may be required under any applicable law or regulation, each Mortgage Supple­ment
and any financing statements or other instruments as are necessary, or
reasonably requested by the Collateral Agent and appropriate, to maintain, so
long as this Mortgage is in effect, the per­fection and preservation of any
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.

 

ARTICLE 4

 

REMEDIES OF THE
COLLATERAL AGENT

UPON AN EVENT OF DEFAULT

 

SECTION 4.1.   Event of Default.

 

It shall be an Event of Default hereunder if under the Credit Agreement
an “Event of Default” (as such term is defined in the Credit Agreement) shall
occur; provided that if the Company shall have undertaken to cure any
failure which arises under Section 3.2(c) hereof, or under the first sentence
of Section 3.2(b) hereof 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 30 days but is curable with future due diligence, there
shall exist no Event of Default 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 notice from the
Collateral Agent of such failure; and provided  further that 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 (i) the occurrence and continuance of any Event of Default, the
Collateral Agent (in accordance with the provisions of Article 5 hereof) may,
and upon the written instructions of the Required Lenders, the Collateral Agent
shall, do one or more of the following; provided, however, that during any period that an 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 relation to such
Aircraft in such manner as to limit the Company’s control under this Mortgage
of the relevant 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 any Lessee) relating
to such 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 Airframes, the
Engines 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 Airframes, the Engines 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 an Airframe, subject to all of the
rights of the owner, lessor, lien or secured party of such engine; provided that an Airframe with an engine 

 

 

 

 

 

(which is not an Engine) installed thereon may be
flown or 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 Airframes, Engines 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 Airframes, the Engines 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; or

 

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

 

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 Collateral Agent’s remedies with respect thereto,
including all costs and expenses incurred in con­nection with the retaking or
return of any Airframe or Engines in accordance with the terms hereof or under
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 the Loans shall have been accelerated, 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 Secured Creditor
to receive all payments of principal of, and interest on, the Obligations held
by such Secured Creditor and all other amounts owing to such Secured Creditor
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 any Airframe or
Engine or 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 Obligations 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 Secured Creditor 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 or other Obligations in lieu of cash in
the amount which shall be payable thereon as principal or interest. Said Notes
and other Obligations, 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.   APPLICATION OF PROCEEDS.

 

(a)   All moneys
collected by the Collateral Agent upon any sale or other disposition of the
Collateral shall be applied as follows:

 

(i)            first, to the payment of all
Obligations owing the Collateral Agent of the type provided in
clauses (ii) and (iii) of the definition of Obligations;

 

(ii)           second, to the extent proceeds remain
after the application pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured Creditors, with each
Secured Creditor receiving an amount equal to its outstanding Obligations or,
if the proceeds are insufficient to pay in full all such Obligations, its Pro
Rata Share of the amount remaining to be distributed;

 

 

 

(iii)          third, to the extent proceeds remain
after the application pursuant to the pre­ceding clauses (i) and (ii) and
following the termination of this Mortgage pursuant to Section 7.12 hereof, to
the Company or as required by applicable law.

 

(b)   For
purposes of this Mortgage “Pro Rata Share” shall mean, when calculating a
Secured Creditor’s portion of any distribution or amount, that amount
(expressed as a percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Secured Creditor’s Obligations and the denominator
of which is the then outstanding amount of all Obligations.

 

(c)   If any
payment to any Secured Creditor of its Pro Rata Share of any distribution would
result in overpayment to such Secured Creditor, such excess amount shall
instead be distributed in respect of the unpaid Obligations of the other
Secured Creditors, with each Secured Creditor whose Obligations have not been
paid in full to receive an amount equal to such excess amount multiplied by a
fraction the numerator of which is the unpaid Obligations of such Secured
Creditor and the denominator of which is the unpaid Obligations of all Secured
Creditors entitled to such distribution.

 

(d)   It is
understood that the Company shall remain liable to the extent of any deficiency
between the amount of the proceeds of the Collateral and the aggregate amount
of the sums referred to in clauses (i) and (ii) of Section 4.4(a).

 

SECTION
4.5.   Remedies Cumulative.

 

Each and every
right, power and remedy hereby 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 specifically given under this Mortgage or
the other Loan Documents 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 or
simultaneously and as often and in such order as may be deemed expedient by the
Collateral Agent. All such rights, powers and remedies shall be cumulative and
the exercise or the beginning of the exercise of one shall not be deemed a
waiver of the right to exercise any other or others. No delay or omission of
the Collateral Agent in the exercise of any such right, power or remedy and no
renewal or extension of any of the Obligations shall impair any such right,
power or remedy or shall be construed to be a waiver of any Default or Event of
Default or an acquiescence therein. No notice to or demand on the Company in
any case shall entitle it to any other or further notice or demand in similar
or other circumstances or constitute a waiver of any of the rights of the
Collateral Agent to any other or further action in any circumstances. In the
event that the Collateral Agent shall bring any suit to enforce any of its
rights hereunder and shall be entitled to judgment, then in such suit the
Collateral Agent may recover reasonable expenses, including attorneys’ fees,
and the amounts thereof shall be included in such judgment.

 

SECTION
4.6.   Discontinuance of Proceedings.

 

In case the Collateral Agent shall have instituted any proceeding to
enforce any right, power or remedy under this Mortgage by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the
Collateral Agent, then and in every such case the Company, the Collateral Agent
and each holder of any of the Obligations shall be restored to their former positions
and rights hereunder with respect to the Collateral subject to the security
interest created under this Mortgage, and all rights, remedies and powers of
the Collateral Agent shall continue as if no such proceeding had been
instituted (but otherwise without prejudice).

 

ARTICLE 5

 

INDEMNITY

 

SECTION
5.1.   Indemnity.

 

 

 

(a)   The Company
agrees to indemnify, reimburse and hold the Collateral Agent, each Secured
Creditor and their successors, permitted assigns, employees, agents and
servants (hereinafter in this Section 5.1 referred to as “Indemnitees”)
harmless from any and all liabilities, obligations, damages, injuries,
penalties, claims, demands, actions, suits, judgments and any and all
reasonable costs, expenses or disbursements (including reasonable attorneys’
fees and expenses) (for the purposes of this Section 5.1 the foregoing are
collectively called “expenses”) of whatsoever kind and nature imposed
on, asserted against or incurred by any of the Indemnitees in any way relating
to or arising out of this Mortgage, any other Loan Document or any other
document executed in connection herewith or therewith or in any other way
connected with the administration of the transactions contemplated hereby or
thereby or the enforcement of any of the terms of, or the preservation of any
rights under any thereof, or in any way relating to or aris­ing out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other disposition,
or use of the Collateral (including, without limitation, latent or other
defects, whether or not discoverable), the violation of the laws of any
country, state or other governmental body or unit, any tort (including, without
limitation, claims arising or imposed under the doctrine of strict liability,
or for or on account of injury to or the death of any Person (including any
Indemnitee), or property damage); provided that no Indemnitee shall be
indemnified pursuant to this Section 5.1(a) for losses, damages or liabilities
to the extent caused by the gross negligence or willful misconduct of such
Indemnitee. The Company agrees that upon written notice by any Indemnitee of
the assertion of such a liability, obligation, damage, injury, penalty, claim, demand,
action, suit or judgment, the Company shall assume full responsibility for the
defense thereof. Indemnitees agree to use their best efforts to promptly notify
the Company of any such assertion of which such Indemnitees have knowledge.

 

(b)   Without limiting
the application of Section 5.1(a), the Company agrees to pay, or reimburse the
Collateral Agent for any and all reasonable fees, costs and expenses of
whatever kind or nature incurred in connection with the creation, preservation
or protection of the Collateral Agent’s Liens on, and security interest in, the
Collateral, including, without limitation, all fees and taxes in connection
with the recording or filing of instruments and documents in public offices,
payment or discharge of any taxes or Liens upon or in respect of the
Collateral, premiums for insurance with respect to the Collateral and all other
reasonable fees, costs and expenses in connection with protecting, maintaining
or preserving the Collateral and the Collateral Agent’s interest therein,
whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.

 

(c)   Without
limiting the application of Section 5.1(a) or (b), the Company agrees to pay,
indemnify and hold the Indemnitees harmless from and against any loss, costs,
damages and expenses which the Indemnitees may suffer, expend or incur in
consequence of or growing out of any misrepresentation by the Company in this
Mortgage, or any other Loan Document or in any writing contemplated by or made
or delivered pursuant to or in connection with this Mortgage, or any other Loan
Document.

 

(d)   If and to
the extent that the obligations of the Company under this Section 5.1 are
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.

 

SECTION
5.2.   Indemnity Obligations Secured by Collateral; Survival.

 

Any amounts paid by any Indemnitee as to which such Indemnitee has the
right to reimbursement shall constitute Obligations secured by the Collateral
until the Termination Date. The indemnity obligations of the Company contained
in this Section 5 shall continue in full force and effect notwithstanding that
the Loans, the Reimbursement Obligations and the other Obligations under the
Loan Documents shall have been paid in full, the Commitments have been
terminated and no Letters of Credit shall be outstanding.

 

ARTICLE 6

 

INVESTMENT OF SECURITY
FUNDS

 

SECTION
6.1.   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 6.
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 7

 

MISCELLANEOUS

 

SECTION
7.1.   No Legal Title to Collateral.

 

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

 

SECTION
7.2.   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 Secured Creditors and the Company, and shall be
effective to transfer or convey all right, title and interest of the Collateral
Agent, the Company, and the Secured Creditors 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
7.3.   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
Secured Creditors any legal or equitable right, remedy or claim under or in
respect of this Mortgage.

 

SECTION
7.4.   Notices.

 

Except as
otherwise specified herein, all notices, requests, demands or other
communications to or upon the respective parties hereto shall be in writing
(including telegraphic, telex,
facsimile transmission or cable communication) and shall be delivered, mailed,
telegraphed, telexed, facsimile transmitted or cabled, addressed:

 

(a)   if to the Company, at its office at:

 

2700 Lone Oak Parkway

Eagan, MN 55121

Telecopy: (612) 726-0665

Attention: Senior Vice President—Finance and Treasurer

 

 

 

(b)   if to the
Collateral Agent:

 

One Chase Manhattan Plaza

Loan and Agency Services Group

8th Floor

New York, New York 10081

Telecopy (212) 552-5650

Attention: Jesus Sang

 

with a copy to:

 

Matthew Massie

Aerospace Group

270 Park Avenue

38th Floor

New York, New York 10017

Telecopy (212) 270-5100

 

(c)   if to any
Secured Creditor, either (x) to the Administrative Agent, at the address of the
Administrative Agent specified in the Credit Agreement or (y) at such address
as such Secured Creditor shall have specified in the Credit Agreement;

 

or at such other
address as shall have been furnished in writing by any Person described above
to the party required to give notice hereunder. All such notices and
communications shall, when mailed, telegraphed, telexed, facsimile transmitted
or cabled or sent by overnight courier, be effec­tive on the third Business Day
following deposit in the U.S. mails, certified, return receipt re­quested, when
delivered to the telegraph company, cable company or on the day following deliv­ery
to an overnight courier, as the case may be, or when sent by telex or facsimile
device, except that notices and communications to the Collateral Agent shall
not be effective until received by the Collateral Agent.

 

SECTION
7.5.   Waiver; Amendment.

 

None of the terms
and conditions of this Mortgage may be changed, waived, modi­fied or varied in
any manner whatsoever unless in writing duly signed by the Company and the
Collateral Agent (with the consent of the Required Lenders or, to the extent
required by Section 11.1 of the Credit Agreement, all of the Lenders).

 

SECTION
7.6.   Obligations Absolute.

 

The obligations of the Company hereunder shall remain in full force and
effect without regard to, and shall not be impaired by, (a) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or the like of the Company, except to the extent that the enforceability
thereof may be limited by any such event; (b) any exercise or non-exercise, or
any waiver of, any right, remedy, power or privilege under or in respect of
this Mortgage or any other Loan Document, except as specifically set forth in a
waiver granted pursuant to Section 7.5; or (c) any amendment to or modification
of any Loan Document or any security for any of the Obligations; whether or not
the Company shall have notice or knowledge of any of the foregoing, except as
specifically set forth in an amendment or modification executed pursuant to
Section 7.5.

 

SECTION
7.7.   Successors and Assigns.

 

This Mortgage shall be binding upon each Assignor and its successors and
assigns and shall inure to the benefit of the Collateral Agent and each Secured
Creditor and their respective successors and assigns; provided, that the Company may not transfer or assign any or all of
its rights or obligations hereunder without the prior written consent of the
Collateral Agent. All agreements, statements, representations and warranties
made by the Company herein or in any certificate or other instrument delivered
by the Company or on its behalf under this Mortgage shall be considered to have
been relied upon by the Secured Creditors and shall survive the execution and 

 

 

 

delivery of this Mortgage and the other Loan
Documents regardless of any investigation made by the Secured Creditors or on
their behalf

 

SECTION
7.8.   Headings Descriptive.

 

The headings of the several sections of this Mortgage are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Mortgage.

 

SECTION
7.9.   Severability.

 

Any provision of this Mortgage which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

SECTION
7.10.   Governing Law.

 

THIS
MORTGAGE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE
GOVERNED BY, AND BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THAT WOULD DICTATE THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION.

 

SECTION
7.11.   Company’s Duties.

 

It is expressly agreed, anything herein contained to the contrary
notwithstanding, that the Company shall remain liable to perform all of the
obligations, if any, assumed by it with respect to the Collateral and the
Collateral Agent shall not have any obligations or liabilities with respect to
any Collateral by reason of or arising out of this Mortgage, nor shall the
Collateral Agent be required or obligated in any manner to perform or fulfill
any of the obligations of the Company under or with respect to any Collateral.

 

SECTION
7.12.   Termination; Release.

 

(a)   After the
Termination Date, this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 5.1 hereof shall
survive such termination) and the Collateral Agent, at the request and expense
of the Company, will promptly execute and deliver to the Company a proper
instrument or instruments acknowledging the satisfac­tion and termination of
this Mortgage, and will duly assign, transfer and deliver to the Company
(without recourse and without any representation or warranty) such of its
Collateral as may be in the possession of the Collateral Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Mortgage. As used in this Mortgage, “Termination Date” shall mean the date upon
which the Loans, the Reimbursement Obligations and the other Obligations shall
have been paid in full, the Commitments have been terminated and no Letters of
Credit are outstanding.

 

(b)   In the
event that any part of the Collateral is sold in connection with a sale
permitted by the Credit Agreement or is otherwise released at the direction of
the Required Lenders (or all the Lenders if required by Section 11.1 of the
Credit Agreement) and the proceeds of such sale or sales or from such release
are applied in accordance with the terms of the Credit Agreement, such
Collateral will be sold free and clear of the Liens created by this Mortgage
and the Collateral Agent, at the request and expense of the Company, will duly
assign, transfer and deliver to the Company (without recourse and without any
representation or warranty) such of the Collateral of the Company as is then
being (or has been) so sold or released and as may be in the possession of the
Collateral Agent and has not theretofore been released pursuant to this
Mortgage.

 

(c)   At any time
that the Company desires that Collateral be released as provided in the
foregoing 

 

 

 

Section
7.12(a) or (b), it shall deliver to the Collateral Agent a certificate signed
by its chief financial officer or another authorized senior officer stating
that the release of the respective Collateral is permitted pursuant to Section
7.12(a) or (b). If requested by the Collateral Agent (although the Collateral
Agent shall have no obligation to make any such request), the Company shall
furnish appropriate legal opinions (from counsel, which may be in-house
counsel, acceptable to the Collateral Agent) to the effect set forth in the
immediately preceding sentence. The Collateral Agent shall have no liability
whatsoever to any Secured Creditor as the result of any release of Collateral
by it as permitted by this Section 7.

 

SECTION
713.   Counterparts.

 

This Mortgage may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Company and the Collateral Agent.

 

SECTION
7.14.   The Collateral Agent.

 

The Collateral Agent will hold in accordance with this Mortgage all items
of the Collateral at any time received under this Mortgage. It is expressly
understood and agreed by the parties hereto and each Secured Creditor, by
accepting the benefits of this Mortgage, acknowl­edges and agrees that the
obligations of the Collateral Agent as holder of the Collateral and interests
therein and with respect to the disposition thereof, and otherwise under this
Mortgage, are only those expressly set forth in this Mortgage. The Collateral
Agent shall act hereunder on the terms and conditions set forth in Section 10
of the Credit Agreement.

 

SECTION
7.15.   Limited Obligations.

 

It is the desire and intent of the Company, the Collateral Agent and the
Secured Creditors that this Mortgage shall be enforced against the Company to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. If and to the extent that the
obligations of the Company under this Mortgage shall be adjudicated to be
invalid or unenforceable for any reason (including, without limitation, because
of any applicable state or federal law relating to fraudulent conveyances or
transfers, which laws would determine the solvency of the Company by reference
to the full amount of the Obligations at the time of the execution and delivery
of this Mortgage), then the amount of the Obligations of the Company shall be
deemed to be reduced and the Company shall pay the maximum amount of the
Obligations which would be permissible under the applicable law.

 

 

 

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: 

  	
  /s/ Rolf S. Andreson

  	
   

  
	
  Name:

  	
  Rolf S. Andreson

  
	
  Title:

  	
  Vice President -Finance
  and Chief

  
	
   

  	
  Accounting Officer

  
	
   

  	
   

  
	
  THE CHASE MANHATTAN BANK,
  as Collateral Agent

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Mathew Massie

  	
   

  
	
  Name:

  	
  Mathew Massie

  
	
  Title:

  	
  Managing Director

  
	
   

  	
   

  

 

 

 

Appendix A

 

DEFINITIONS
RELATING TO THE

AIRCRAFT MORTGAGE AND SECURITY AGREEMENT

 

Unless otherwise defined herein, terms used in the Mortgage shall have
the meaning provided thereto in the “Credit Agreement” as defined herein. The
definitions stated herein shall apply equally to both the singular and plural
forms of the terms defined.

 

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

 

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

 

“Aircraft” means each of the Airframes (or any airframes which are
part of any Replacement Aircraft substituted therefor pursuant to Section 3.4
or 3.5 of the Mortgage) together with the Engines (if any) installed thereon
(or any Replacement Engines substituted for 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.

 

“Airframes” means each of the airframes described in Section
2.1(a) of the Mortgage, and any airframes which are part of any Replacement
Aircraft that may from time to time be substituted pursuant to Section 3.4 or
3.5 of the Mortgage, together with any and all Parts (other than Engines or
engines) so long as the same shall be incorporated or installed therein or
attached thereto.

 

“Balance Due” has the meaning given such term in Section 3.6(b) of
the Mortgage.

 

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

 

 “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 to such term
in Section 2.1 of the Mortgage.

 

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

 

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

 

“Contract Rights”
mean all of the Company’s right, title and interest in and to any purchase
agreement, modification agreement and buyer-furnished equipment
agreement, as and to the extent that the same relates to any Aircraft and the
operation thereof, including, without limitation, (a) all claims for damages in
respect of any Aircraft arising as a result of any default by the manufacturer
or the seller under any purchase agreement, modification agreement and buyer-furnished
equipment agreement, in respect of such Aircraft, including, without
limitation, all warranty, service life policy, aircraft performance guarantee
and indemnity provisions in such agreements in respect of any Aircraft and all
claims thereunder and (b) any and all rights of the Company to compel 

 

 

 

performance of the terms of any purchase agreement,
modification agreement and buyer-furnished equipment agreement, in respect of
any Aircraft.

 

“Credit Agreement”
shall mean the Credit and Guarantee Agreement, dated as of October 24,
2000, among Northwest Airlines Corporation, Northwest Airlines Holdings
Corporation, NWA Inc., Northwest Airlines, Inc., the lenders and agents from
time to time party thereto and The Chase Manhattan Bank, as administrative
agent, as amended, modified and/or supplemented 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 “$” mean the lawful currency of
the United States of America.

 

“Effective Date”
means October 23, 2001.

 

“Engines” means each of the engines described in Section 2.1(a) of
the Mortgage whether or not from time to time installed on any Airframe or on
any other aircraft, and 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, the Airframes, or the Engines 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 an 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 an 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; 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 an Aircraft shall be deemed to have occurred if an Event of
Loss occurs with respect to the relevant Airframe.

 

“Federal Aviation Act” means that portion 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.

 

“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 an Aircraft, an Airframe, the Parts and/or the related Engines
or engines to standards which are approved by, or which are substantially
equivalent to those required by, the Federal Aviation Administration, the Civil
Aviation Authority of the 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).

 

“Guarantor” or “Guarantors” has the meaning provided in the
Credit Agreement.

 

“Indemnitees” has the meaning given by such term in Section 5.1 of
the Mortgage.

 

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

 

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

 

“Lien” shall mean
any mortgage, pledge, hypothecation, assignment, security deposit arrangement,
encumbrance, lien (statutory or other) or other security agreement or lien of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing or similar statement or
notice filed under the UCC or any other similar recording or notice statute,
and any capital lease having substantially the same economic effect as any of
the foregoing).

 

“Mortgage” means the Aircraft Mortgage and Security Agreement
covering the Collateral, dated as of October 23, 2001, between the Company
and the Collateral Agent, as the same may be amended, modified or supplemented
from time to time.

 

“Mortgage Supplement” means any Mortgage and Security Agreement Supplement
substantially in the form of Exhibit A to the Mortgage, and any other
supplement to the Mortgage, from time to time executed and delivered.

 

“Obligations” means the unpaid principal of and interest on (including
interest accruing after the maturity of the Loans and Reimbursement Obligations
and interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Company, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Loans and all other obligations and
liabilities of the Company to any Agent or Lender, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which arise under, out of, or in connection with, the Credit
Agreement, any other Loan Document, the Letters of Credit or any other document
made, delivered or given in connection herewith or therewith, whether on
account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including all fees, charges and disbursements of counsel to
any Agent or Lender that are required to be paid by the Company pursuant
hereto) or otherwise; (ii) any and all
sums advanced by the Collateral Agent in order to preserve the Collateral or
preserve its security interest in the Collateral and (iii) in the event of any
proceeding for the collection or enforcement of any indebtedness, obligations,
or liabilities referred to in clauses (i) and (ii) above, after an Event of
Default shall have occurred and be continuing, the reasonable expenses of
re-taking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Collateral Agent
of its rights hereunder, together with reasonable attorneys’ fees and court
costs.

 

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

 

“Officer’s Certificate” means, as to any Person, 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 Person.

 

 

 

“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) items leased by the Company from a third party and
(c) cargo containers) which may from time to time be incorporated or
installed in or attached to any 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 Ratings Services (“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 III to 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.

 

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

 

“Replacement Airframe” means an 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 3.4 or 3.5 thereof.

 

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

 

“Replacement Engine” means an aircraft engine suitable for
installation and use on the relevant Airframe and 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.

 

“Secured Creditors” has the meaning given such term in the
preamble to the Mortgage.

 

“Termination Date” has the meaning given to such term in Section
7.12 of the Mortgage.

 

 “UCC” or “Uniform
Commercial Code” shall mean the Uniform Commercial Code as from time to
time in effect in the relevant jurisdiction.

 

“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 Federal Aviation Act, 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 any Airframe
and the 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 Federal Aviation Act 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.

 

 

Exhibit A

 

FORM OF AIRCRAFT MORTGAGE AND SECURITY

AGREEMENT SUPPLEMENT NO.

 

Aircraft 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 Aircraft and Security Mortgage Agreement, dated as of
October 23, 2001, (the “Mortgage”), between the Company and The
Chase Manhattan Bank, 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 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

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

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 Airframes and Engines described in Annex A attached
hereto, whether or not such Engines shall be installed in or attached to the
Airframes or any other aircraft, to the Collateral Agent, its successors and
assigns, for the benefit and security of the Secured Creditors;

 

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 Secured Creditors 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
CONFLICTS OF LAW PRINCIPLES THAT WOULD, DICTATE THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION.

 

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

 

 

 

SCHEDULE
I

 

SCHEDULE
OF AIRFRAMES AS PART OF COLLATERAL

 

 

	
  Manufacturer

  	
   

  	
  Model

  	
   

  	
  Serial
  Number

  	
   

  	
  United
  States Nationality and Registration Marks

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47280

  	
   

  	
  N1334U

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47369

  	
   

  	
  N1798U

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-10-30

  	
   

  	
  46581

  	
   

  	
  N224NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-10-30

  	
   

  	
  46912

  	
   

  	
  N234NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-10-30

  	
   

  	
  46915

  	
   

  	
  N235NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-10-30

  	
   

  	
  47031

  	
   

  	
  N3322L

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47103

  	
   

  	
  N3324L

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47038

  	
   

  	
  N601NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47046

  	
   

  	
  N602NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47101

  	
   

  	
  N603NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47222

  	
   

  	
  N604NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47223

  	
   

  	
  N605NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47225

  	
   

  	
  N606NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47232

  	
   

  	
  N607NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47233

  	
   

  	
  N608NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47234

  	
   

  	
  N609NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47432

  	
   

  	
  N610NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47435

  	
   

  	
  N611NA

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47436

  	
   

  	
  N612NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47438

  	
   

  	
  N613NW

  

 

 

 

	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47128

  	
   

  	
  N614NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47129

  	
   

  	
  N615NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47229

  	
   

  	
  N616NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47235

  	
   

  	
  N617NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  21121

  	
   

  	
  N617US

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Boeing

  	
   

  	
  747-251F

  	
   

  	
  47433

  	
   

  	
  N618NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  21122

  	
   

  	
  N618US

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Boeing

  	
   

  	
  747-251F

  	
   

  	
  47518

  	
   

  	
  N619NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  21321

  	
   

  	
  N619US

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Boeing

  	
   

  	
  747-251F

  	
   

  	
  47533

  	
   

  	
  N620NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47544

  	
   

  	
  N621NW

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Boeing

  	
   

  	
  747-251B

  	
   

  	
  21705

  	
   

  	
  N623US

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Boeing

  	
   

  	
  747-251B

  	
   

  	
  21706

  	
   

  	
  N624US

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Boeing

  	
   

  	
  747-251B

  	
   

  	
  21707

  	
   

  	
  N625US

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-51

  	
   

  	
  47717

  	
   

  	
  N764NC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-51

  	
   

  	
  47739

  	
   

  	
  N766NC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-51

  	
   

  	
  47785

  	
   

  	
  N775NC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-51

  	
   

  	
  48100

  	
   

  	
  N778NC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  45836

  	
   

  	
  N8921E

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  45838

  	
   

  	
  N8923E

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  45840

  	
   

  	
  N8925E

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  45863

  	
   

  	
  N8926E

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47517

  	
   

  	
  N908H

  

 

 

 

	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47469

  	
   

  	
  N927RC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47376

  	
   

  	
  N9346

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-32

  	
   

  	
  47459

  	
   

  	
  N942N

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47073

  	
   

  	
  N952N

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47083

  	
   

  	
  N953N

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47252

  	
   

  	
  N956N

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47253

  	
   

  	
  N957N

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47254

  	
   

  	
  N958N

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47255

  	
   

  	
  N959N

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  McDonnell Douglas

  	
   

  	
  DC-9-31

  	
   

  	
  47256

  	
   

  	
  N960N

  

 

 

 

SCHEDULE
II

SCHEDULE OF
ENGINES AS PART OF COLLATERAL

 

 

	
  Manufacturer

  	
   

  	
  Model

  	
   

  	
  Serial
  Number

  
	
  General Electric

  	
   

  	
  CF6-50C

  	
   

  	
  455755

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric

  	
   

  	
  CF6-50C

  	
   

  	
  455930

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric

  	
   

  	
  CF6-50C

  	
   

  	
  517700

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric

  	
   

  	
  CF6-50C

  	
   

  	
  517844

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric

  	
   

  	
  CF6-50C

  	
   

  	
  528148

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric

  	
   

  	
  CF6-50C

  	
   

  	
  528156

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric

  	
   

  	
  CF6-50C

  	
   

  	
  528167

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric

  	
   

  	
  CF6-50C

  	
   

  	
  528259

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric

  	
   

  	
  CF6-50C

  	
   

  	
  528362

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-17

  	
   

  	
  649188

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  653753

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  653883

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  654012

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  654648

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  656091

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  656842

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  656937

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9

  	
   

  	
  656946

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  656955

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  656968

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  656985

  

 

 

 

	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  656987

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  656998

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657013

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657027

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657069

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657074

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657081

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657133

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657139

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657147

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657152

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657219

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657251

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657252

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657259

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657277

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657282

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657284

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657294

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657313

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657330

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657496

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657515

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657568

  

 

 

 

	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657582

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657609

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657681

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657741

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657746

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657754

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  657761

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662280

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662401

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662485

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662502

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662608

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662629

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662633

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662643

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662648

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662706

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662707

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7J

  	
   

  	
  662710

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  665250

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  665265

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  665266

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  665287

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  665293

  

 

 

 

	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  665496

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  665544

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666017

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666072

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666089

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666150

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666163

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666167

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666293

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666304

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666307

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666308

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666315

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666323

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666365

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666387

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666676

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666681

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666705

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666706

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666707

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666708

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666717

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666719

  

 

 

 

	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666725

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666752

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666756

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666757

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666763

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666783

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666789

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666790

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-9A

  	
   

  	
  666797

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-17

  	
   

  	
  688206

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-17

  	
   

  	
  688218

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-17

  	
   

  	
  688230

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-17

  	
   

  	
  688231

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-17

  	
   

  	
  688294

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-17

  	
   

  	
  688299

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT8D-17

  	
   

  	
  688716

  
	
  i

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702026

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702047

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702048

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702051

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702055

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702056

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702074

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702085

  

 

 

 

	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702095

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702123

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702145

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pratt & Whitney

  	
   

  	
  JT9D-7Q

  	
   

  	
  702147Exhibit 10.32

 

 

 

 

NORTHWEST AIRLINES CORPORATION

 

KEY EMPLOYEE ANNUAL CASH INCENTIVE PROGRAM

 

PLAN
DOCUMENT

 

 

 

1.              Program
Objective

 

Northwest Airlines
Corporation (“Northwest”) has adopted this Key Employee Annual Cash Incentive
Program (“Program”) to retain key employees at its subsidiary companies, to
encourage teamwork and individual performance, and to support a diverse work
force.

 

2.              Definitions

 

A.           “Base Salary”
is a Participant’s annual salary exclusive of any bonus, incentive plan
payment, pension or other employer-paid benefit and all other items of
extraordinary compensation, but shall include for purposes of the Program, 1)
the amount of any reduction in Base Salary to which a Participant has agreed as
part of any deferred arrangement under Internal Revenue Code Section 401(k);
and 2) payments made to a Participant for absence from work due to illness,
injury, or approved medical leaves of absence.

 

B.             “Committee” is
the Compensation and Stock Option Committee of the Board of Directors.

 

C.             “Participant”
is a full time salaried employee of a Participating Employer designated to
participate in the Program.

 

D.            “Participating
Employer” is Northwest Airlines, Inc. and any other subsidiary of Northwest
that has elected to be a Participating Employer with approval of such
subsidiaries’ Board of Directors and the President and CEO of Northwest.

 

E.              “Performance
Formula” is the equation or table used to establish a relationship between
specific levels of achievement of the Performance Goals established under
paragraph (a) of section 4 of this Program and specified levels of payment,
expressed as a percentage of the Target Incentive Level.

 

F.              “Program Year”
is the fiscal year of Northwest.

 

G.             “Target
Incentive Level” is that amount approved by the Committee as the percentage of
salary paid to Participants for completion of the Performance Goals established
under paragraph (a) of section 4 of this Program.

 

H.            “Total and
Permanent Disability” of a Participant is the cessation of employment of such
Participant under circumstances where the Participant is eligible to receive a
monthly disability benefit pursuant to the long-term group disability insurance
program sponsored by his/her Participating Employer; or would be eligible to
receive such a benefit if he/she was a Participant in said program.

 

3.              Participation

 

a)                                     Eligibility; Participation

A Participant is a key
employee of a Participating Employer who is compensated by salary and who has
been approved by the Participating Employer as a participant in the Program for
the Program Year.  Participation in one
Program Year shall not be determinative of an employee’s eligibility to
participate in subsequent Program Years.

 

b)                                     Key Employee Groups

Upon the recommendation of
the President & CEO of Northwest, the Committee may designate one or more
employee groups as participants in the Program.

 

 

4.              Program
Performance Terms

 

Subject
to the terms hereof, Participants shall receive awards within three months
after the conclusion of a Program Year. 
Awards, if any, shall be based on eligibility and performance against
goals established under paragraph (a) of this section.

 

a)                                     Performance Measures

Performance Goals shall be
established for each Participant at the commencement of each Program Year.  Annual Performance Goals shall be established
for each Participant, for each of the following Performance Measures:

 

(1)        Subsidiary
Financial Performance

The financial performance
goal for each subsidiary shall be established at the discretion of the
President & CEO of Northwest and approved by the Committee.

 

(2)        Individual
Objective Performance

Individual eligible
Participants shall, in conjunction with the appropriate supervisor, establish
individual performance objectives (MBOs). 
Such MBOs shall be approved at the discretion of the appropriate
supervisor.

 

(3)        Diversity
Goal Performance

Hiring, promotion, and
affirmative action goals with respect to protected classes of workers shall be
established by individual eligible Participants, in conjunction with the
appropriate supervisor, and approved by the appropriate Human Resources unit.

 

b)                                     Performance Measure Weightings

Each Participant in the
Program shall be assigned weightings for each of the three Performance Measures
established under paragraph (a) of this section.  The sum of these three weightings shall equal
100%.

 

c)                                      Target Incentive Level

Each Participant in the
Program shall be assigned a Target Incentive Level at the discretion of the
President & CEO of Northwest and approved by the Committee.

 

d)                                     Performance Formula

A Performance Formula shall
be established at the discretion of the President & CEO of Northwest and
approved by the Committee at the commencement of each Program Year.  Such Performance Formula shall establish the
relationship between specific levels of achievement of the Performance Goals
established under paragraph (a) of this section and specified levels of
payment.

 

e)                                      Award Determination

Individual Objective
Performance and Diversity Goal Performance against goals established under
paragraph (a) of this section shall be evaluated by the appropriate supervisor
of each Participant within three months after the end of the Program Year in
question.  Subsidiary Financial
Performance against goals established under paragraph (a) of this section shall
be approved by the Committee.  Based on
such evaluations, a cash award shall be calculated for each Participant.  All award evaluations and calculations shall
be subject to review by the President & CEO of Northwest and approval by
the Committee.

 

5.              Termination
and Change of Status

 

a)                                     Termination Rule

Except as otherwise provided
herein, in order for a Participant to receive an award for Program Year, the
eligible Participant must be an active, full-time employee of a Participating
employer at the time awards are distributed. 
Employees who resign, terminate, or, otherwise discontinue employment
during the Program Year or prior to actual distribution of any award shall be
ineligible 

 

 

to receive an award.  Employees who are subject to a reduction in
force shall not receive an award, nor shall any employee who receives a
severance package as a part of termination of employment.

 

b)                                     Exceptions

(1)                    Retirement —
If, during a Program Year, a Participant retires in accordance with the
Participating Employer’s retirement policies, the Participant may, nonetheless,
be eligible to receive an award for the Program Year provided the Participant
receives Executive Vice President approval (for Directors and Managing
Directors) or President & CEO approval (for Vice Presidents, Sr. Vice
Presidents and Executive Vice Presidents). 
Such awards shall be based on the Base Salary paid to such Participant.

 

(2)                    Death or Total
and Permanent Disability — If, during a Program Year, a Participant dies or
becomes permanently disabled, the Participant shall be eligible to receive an
award for the Program Year, which shall be prorated based on the Base Salary
paid to such Participant.

 

6.              Payment of
Cash Awards

 

a)                                     Payment Date

Within three months after
awards have been calculated for the Program Year and the calculations have been
approved by the Committee or the President & CEO of Northwest,
Participating Employers shall pay cash awards to eligible Participants.

 

b)                                     Payment Upon Death

In the event of a
Participant’s death, payment of any awards to which the Participant may be
entitled pursuant to Section 5 shall be made to the legal representative of the
decedent’s estate.

 

7.              Administration
and Miscellaneous

 

a)                                     Amendment; Termination

The committee shall have the
sole discretion and authority to amend or terminate the Program at any
time.  Amendment or termination shall
extinguish the rights of Participants or beneficiaries to receive payment
attributable to the Program.

 

b)                                     Status of Participants’ Claims

All payments under this Program
are made from the general assets of the Participating Employer.  All Awards under this Program are unfunded,
unsecured, general contractual obligations of the Participating Employer.  The Program does not create any lien on, or
security in, any property of Northwest or its subsidiaries.

 

c)                                      Not an Employment Contract

Neither this Program nor
participation in this Program shall be construed as creating any agreement as
to continued employment with Northwest. 
All Participants herein are “at will employees” subject to the rules and
regulations of the Participating Employers.

 

d)                                     Withholding of Taxes

There shall be deducted from
all distributions under the Program the amount of any taxes or other deductions
that the Participating Employer may be required to withhold by any federal,
state, or local government.  Participants
shall be responsible for payment of any and all federal, state, local, foreign
or other taxes imposed on amounts paid under the Program.  Participating Employers assume no
responsibility for the tax consequences to the Participant for his/her
participation in the Program.

 

 

e)                                      Effective Date of Program

 

This Program shall be
effective as of January 1, 1993 and shall continue until terminated by the
President & CEO of Northwest or the Committee, with or without prior
notice.

 

 

 

NORTHWEST AIRLINES

 

KEY EMPLOYEE ANNUAL CASH

 

INCENTIVE PROGRAM

 

SUMMARY

 

 

NORTHWEST AIRLINES CORPORATION

KEY EMPLOYEE ANNUAL CASH
INCENTIVE PROGRAM

SUMMARY

 

A.            PROGRAM
OBJECTIVES

 

The Key Employee Annual Cash Incentive Program has the
following corporate objectives:

 

•                  To
retain and reward key employees by delivering competitive total annual cash
compensation.

 

•                  To
encourage teamwork and drive individual performance by providing rewards for
achievement of corporate performance goals as well as individual performance
objectives.

 

B.            ELIGIBILITY FOR PARTICIPATION

 

Participation in the Key Employee Annual Cash
Incentive Program (the “Program”) is restricted to employees who regularly and
directly make or influence decisions which significantly influence the
financial and operating performance of the company.  Participation in the plan is subject to
review and approval on an annual basis by the Compensation Committee of the
Board of Directors (the “Committee”).

 

C.            TARGET INCENTIVE LEVELS

 

The size of the potential cash incentive
awards varies by employee group.  Each
employee group has a Target Incentive Level, which is the percentage of salary
paid to participants for completion of established financial and individual
goals.  Target Incentive Levels are
established by the Committee from time to time and are expressed as a
percentage of base salary.

 

D.            PERFORMANCE MEASURES

 

The Program includes the following two
performance measures, with the weightings on each measure dependent upon the
employee group involved.

 

Airline Financial Performance

 

As measured by Northwest Airlines
Corporation’s income contribution (an indicator of profitability excluding the
cost of ownership).  Performance below
the threshold set for the plan year results in no cash incentive award being
distributed, including the Individual Goal Performance portion of the award.  

 

Individual
Performance

 

As measured under the Company’s Performance
Management System.  Participants who
achieve a rating lower than 3.0 on either the MBO or Competency component of
the Individual Performance Rating will receive no payout from the incentive
program unless otherwise approved by the Compensation Committee.  Performance on this component is driven by
individual performance against goals that are in alignment with Northwest’s
corporate and strategic objectives.

 

E.             PERFORMANCE MEASURE WEIGHTINGS

 

The relative weighting of the components vary
by employee level.  For employees at the
officer level, 75% of the individual target will be weighted on Airline
Financial Performance and 25% weighted on individual performance.  For employees below the officer level, 50%
will be weighted on Airline Financial Performance, and the remaining 50% will
be weighted on individual performance.

 

 

F.             AWARD DETERMINATION

 

Incentive awards are determined for each
participant based on actual performance against goals established for each of
the performance measures.  Award pay-outs
are made in cash.

 

(1)           Airline
Financial Performance

 

The Airline Financial portion of the cash
incentive award is based on the degree to which Northwest Airlines Corporation
meets its income contribution target for the year.  A Performance Formula is established
annually, which specifies levels of payment for specific levels of income
contribution, expressed as a percentage of the Target Incentive Level amount.

 

Income contribution that falls below the
threshold for a given year results in no cash incentive awards being
distributed (including the Individual Goal Performance portion of the
award).  Payouts above target require
that a Net Profitability Threshold
be met.  The Net Profitability Threshold is established by the
Compensation Committee annually.

 

(2)           Individual
Performance

 

The Individual Performance portion of the
award is based on an assessment of each participant’s individual performance
using the Company’s Performance Management System.  The Overall Performance Rating, which is a
combination of the Goal Rating and the Competency Rating, determines a participant’s
payout for the Individual Performance factor relative to the target
payout.  Participants who receive less
than 3.0 on either the MBO or Competency components of the Overall Performance
Rating are not eligible for any payment under the Program unless approved by
the Compensation Committee.  The maximum
payout percentage a participant could achieve would be 200% of the target
payout.  A participant’s actual payout
percentage is based on his or her performance relative to other participants in
the respective Division, the Division’s overall performance and the Division’s
total pool of incentive dollars available for distribution.

 

G.            CASH INCENTIVE APPROVAL

 

Preliminary awards are determined by the
senior management of each division and are submitted to Human Resources for
evaluation and reporting to the CEO. 
Payouts under the Plan must be approved by the Compensation Committee of
the Board of Directors.

 

H.            DISTRIBUTION OF AWARDS

 

Incentive awards are generally calculated in
January, following the completion of individual performance reviews and the
determination of airline financial results, and checks are distributed to
eligible participants in mid-February in the year following the incentive
year, with the appropriate amount of tax and other deductions withheld.  To be eligible to receive an award, a
participant must be actively employed in an incentive-eligible position at the
time awards are distributed. 
Participants who are hired or promoted into incentive-eligible positions
during the plan year are eligible for participation on a prorated basis
providing they are in their position for a minimum of 90 days.

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