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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): DECEMBER 3, 1997
WESTERN PACIFIC AIRLINES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-27238 86-0758778
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File number) Identification No.)
2864 South Circle Drive
COLORADO SPRINGS, CO 80906
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 579-7737
-----------------------------------------------------
Former name or former address, if changed since last report
Item 5. OTHER EVENTS.
On December 3, 1997, the United States Bankruptcy Court for the District
of Colorado (the "Court") issued an Order Authorizing Debtor to Obtain
Post-Petition Financing (the "Order") that authorized Western Pacific Airlines,
Inc., a Delaware corporation (the "Registrant") to enter into a Credit
Agreement, dated as of December 3, 1997 (the "Credit Agreement"), by and among
the Registrant, Energy Management Corporation ("Energy") and Sundance Venture
Partners, L.P. II ("Sundance," and together with Energy, the "Lender"). The
Credit Agreement provides for up to $30.0 million in post-petition financing to
the Registrant as debtor and debtor-in-possession, the first $10.0 million of
which was advanced to the Registrant on December 4, 1997. The obligations of the
Registrant under the Credit Agreement are secured pursuant to a Security and
Pledge Agreement, dated as of December 3, 1997 (the "Security and Pledge
Agreement"), by and among the Registrant and the Lender, whereby the Registrant
(i) granted the Lender a security interest in its assets and (ii) pledged to the
Lender all the Registrant's capital stock in its subsidiaries. Pursuant to the
Credit Agreement, the additional $20.0 million of financing will become
available to the Registrant pursuant to a multiple draw credit facility no later
than December 20, 1997 provided that certain conditions are met by such date,
including, without limitation, the filing with the Court of a plan of
reorganization for the Registrant that is acceptable to the Lender in all
material respects.
A copy of the Order, the Credit Agreement and the Security and Pledge
Agreement are attached as Exhibits 10.1, 10.2 and 10.3 hereto respectively, and
are hereby incorporated by reference.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(c) Exhibits
10.1 Order Authorizing Debtor to Obtain Post-Petition Financing
Pursuant To 11 U.S.C. Section 364(c), (d) as filed with the
United States Bankruptcy Court for the District of Colorado.
10.2 Credit Agreement, dated December 3, 1997, by and among
Western Pacific Airlines, Inc., Energy Management
Corporation and Sundance Venture Partners, L.P. II.
10.3 Security and Pledge Agreement, dated December 3, 1997, by
and among Western Pacific Airlines, Inc., Energy Management
Corporation and Sundance Venture Partners, L.P. II.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December __, 1997 WESTERN PACIFIC AIRLINES, INC.
By: /S/ROBERT A. PEISER____
Name: Robert A. Peiser
Title: President and Chief
Executive Officer
INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
10.1 Order Authorizing Debtor to Obtain Post-Petition Financing Pursuant
To 11 U.S.C. Section 364(c), (d) as filed with the United States
Bankruptcy Court for the District of Colorado.
10.2 Credit Agreement, dated December 3, 1997, by and among Western
Pacific Airlines, Inc., Energy Management Corporation and
Sundance Venture Partners, L.P. II.
10.3 Security and Pledge Agreement, dated December 3, 1997, by and
among Western Pacific Airlines, Inc., Energy Management
Corporation and Sundance Venture Partners, L.P. II.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF COLORADO
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In re
Case No. 97-24701 SBB
WESTERN PACIFIC AIRLINES, INC., a Chapter 11
Delaware corporation,
MC No. FB-25
Employer ID No. 86-0758778
Debtor
- --------------------------------------------------------------------------------
ORDER AUTHORIZING DEBTOR TO OBTAIN
POSTPETITION FINANCING PURSUANT TO
SECTIONS 364(C)(1) AND 364 (D) OF THE BANKRUPTCY CODE
Upon the Motion (the "Motion") dated November 18, 1997 filed by Western
Pacific Airlines, Inc. debtor and debtor in possession (the "Debtor"), seeking
an order of this Court pursuant to Sections 364(c)(1) and 364(d) of title 11 of
the United States Code, 11 U.S.C. Sections 101, ET SEQ. (the "Bankruptcy Code"),
and Rule 4001 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy
Rules"), (1) authorizing the execution, delivery and performance by the Debtor
of a Credit Agreement, dated December 3, 1997 (the "Credit Agreement;"
capitalized terms used herein and not otherwise defined herein shall have the
meanings given to such terms in the Credit Agreement), entered into between the
Debtor and Energy Management Corporation ("Energy") and Sundance Venture
Partners, L.P. II (collectively, the "Lenders"), and (2) authorizing the Debtor
to obtain post-petition financing (the "Financing") pursuant to the Credit
Agreement up to the principal amount of $30,000,000 (a) with priority subject to
the Carve-Out (as defined below) over any and all administrative expenses of the
kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code pursuant to
1
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Section 364(c)(1) of the Bankruptcy Code,and (b) to be secured pursuant to
Sections 364(d)(1) of the Bankruptcy Code by a valid and perfected first
priority senior security interest in and to the Collateral (as that term is
defined in the Security and Pledge Agreement), including all of the property,
assets or interest in property or assets of the Debtor of any kind or nature
whatsoever, real or personal, now existing or hereafter acquired or created,
including, without limitation, all property of the estate (within the meaning of
the Bankruptcy Code) of the Debtor, including proceeds of any Avoidance Actions
and Aircraft Leaseholds (as defined in the Security and Pledge Agreement) and
all proceeds, rent, products and profits of the foregoing, prior to all other
liens and interests, other than Permitted Liens; and pursuant to Bankruptcy Rule
4001(c)(1), due notice of the Motion having been given to the parties on the
Limited Service List pursuant to this Court's Case Management Order and to those
entities who have or claim a lien against any of the Debtor's assets; and upon
the record of the hearing held on December 3, 1997 and upon all of the pleadings
filed with the Court and all of the proceedings had before the Court, and after
due deliberation and consideration and sufficient cause appearing therefor;
It is FOUND, DETERMINED, ORDERED AND ADJUDGED, that:
1. This Court has core jurisdiction over these proceedings and the
parties and property affected hereby pursuant to 28 U.S.C. Sections 157(b) and
1334.
2. The Motion (as amended, with such amendments reflected in the Credit
Agreement) shall be, and hereby is, granted in all respects and all objections
have either been resolved or are overruled.
2
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3. The Debtor has an immediate need to obtain financing (i) to permit the
orderly continuation of its business so the Debtor may reorganize and maximize
the benefit to the creditors and the estate and (ii) to satisfy other working
capital needs.
4. The Debtor is unable to obtain adequate unsecured credit allowable
under Section 503(b)(1) of the Bankruptcy Code as an administrative expense. The
Debtor is also unable to obtain credit secured only by security interests or
liens junior to the existing security interests or secured by liens on
unencumbered property of the estate pursuant to SEctions 364(c)(2) or (3) of the
Bankruptcy Code. A facility in the amount provided by the Credit Agreement is
unavailable to the Debtor without the Debtor granting to the Lenders (i)
pursuant to Section 364(c)(1) of the Bankruptcy Code, allowed claims,with
respect to all indebtedness and obligations of the Debtor under the Credit
Agreement, having priority over any and all administrative expenses of the kind
specified in Sectons 503(b) and 507(b) of the Bankruptcy Code other than the
Carve-Outs (defined below), and (ii) pursuant to Section 364(d)(1) of
theBankruptcy Code, security for such obligations by the granting of a first
priority valid and perfected senior security interest in and to the Collateral
(as that term is defined in the Security and Pledge Agreement), including all of
the property, assets or interest in property or assets of the Debtor of any kind
or nature whatsoever, real or personal, now existing or hereafter acquired or
created, including, without limitation, all property of the estate (within the
meaning of the Bankruptcy Code) of the Debtor, including proceeds of any
Avoidance Actions and Aircraft Leaseholds (as defined in the Security and Pledge
Agreement) and all proceeds, rent, products and profits of the foregoing, prior
to all other liens and interests, other than Permitted Liens. The ability of the
Debtor to obtain sufficient working capital and liquidity through the incurrence
of indebtedness for borrowed money and other financial accommodations is vital
to the Debtor. The preservation and maintenance of the going concern value of
the Debtor is integral to a successful reorganization of the Debtor pursuant to
the provisions of Chapter 11 of the Bankruptcy Code.
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5. The Credit Agreement, the Pledge and Security Agreement, and all
exhibits and other documents ancillary thereto have been negotiated in good
faith and at arm's length between the Debtor and the Lenders and any credit
extended and Loans made to the Debtor by the Lenders pursuant to the Credit
Agreement shall be deemed to have been extended by the Lenders in good faith, as
that term is used in Section 364(e) of the Bankruptcy Code.
6. The Debtor is immediately authorized to borrow pursuant to the Credit
Agreement up to an aggregate of $30,000,000 for the purposes, and upon the terms
and conditions, provided for by the Credit Agreement.
7. The Debtor is expressly authorized and empowered to execute and
deliver, among other documents, the Credit Agreement, the Security Agreement and
the Note in the form submitted to the Court (collectively, the "Loan
Documents"). The terms and conditions of the Loan Documents are approved and the
Debtor is authorized to execute, deliver and perform and do all acts that may be
required in connection with the Loan Documents. Upon execution and delivery of
the Loan Documents, the Loan Documents shall constitute valid and binding
obligations of the Debtor, enforceable against the Debtor in accordance with
their terms.
8. The obligations of the Lenders to extend Loans under the Credit
Agreement are expressly subject to the conditions provided for in the Credit
Agreement.
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9. Subject only to the exceptions expressly set forth in the Credit
Agreement for all of the Debtor's obligations and indebtedness arising under the
Credit Agreement and the other Loan Documents, the Lenders hereby are granted
pursuant to Section 364(c)(1) of the Bankruptcy Code an allowed claim having
priority over any and all administrative expenses of the kind specified in
Sections 503(b) and 507(b) of the Bankruptcy Code; from which claim a Carve-Out
shall and hereby is made for the payment of (a) amounts payable pursuant to 28
U.S.C. Section 1930 (a)(6); (b) accrued and unpaid and future professional fees
and expenses incurred by the Unsecured Creditors Committee and Committee member
expense reimbursements in an aggregate amount not to exceed $350,000, and (c)
accrued and unpaid and future professional fees and disbursements incurred by
the Debtor in an aggregate amount not to exceed $600,000 (the "Carve-Outs").
Other than the Carve-Outs, no other claim, having a priority superior or PARI
PASSU to that granted by this Order to the Lenders shall be granted while any
amount under the Credit Agreement is unpaid or the commitment to extend further
financing thereunder remains outstanding.
10. No costs or expenses of administration of the Debtor's Chapter 11
case or any future proceeding or case which may result therefrom (including in
any superseding chapter 7 case) shall be charged against the Collateral,
pursuant to Section 506(c) of the Bankruptcy Code or otherwise, without the
prior written consent of the Lenders and no such consent shall be implied from
any action, inaction, or acquiescence by the Lenders.
11. Subject only to the exceptions expressly set forth in the Credit
Agreement as security for all of the Debtor's obligations and indebtedness
arising under the Credit Agreement and the other Loan Documents, the Lenders
5
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hereby are granted (effective immediately and without the necessity of the
execution by the Debtor of security agreements of otherwise), pursuant to
Section 364(d)(1) of the Bankruptcy Code, (a) a first priority senior security
interest in and lien upon all of the Collateral including, without limitation,
the Pledged Stock; the proceeds of any kind resulting from any disposition of
any Aircraft Leasehold, including proceeds in respect of any assumption and
assignment of any Aircraft Leasehold, and including but not limited to any
consideration payable by assignees to the Borrower for the right to obtain the
assignment or any reimbursement to the Borrower of security deposits or
maintenance reserves resulting from the assignee's assumption and performance of
the obligation to pay such deposits or reserves; together with the proceeds
thereof and the earnings thereon, such security interests and liens described in
this paragraph being senior in all respects to any and all future liens, if any,
which may encumber such Collateral and (b) a lien and security interest in all
encumbered Collateral junior in priority only to valid encumbrances existing on
the date of this Order, but excluding in all events the Excluded Property as
defined in the Security and Pledge Agreement. The security interests and liens
granted to the Lenders hereunder (i) shall not be (a) subject to any lien or
security interest which is avoided and preserved for the benefit of the Debtor's
estate under Section 551 of the Bankruptcy Code or otherwise or (b) subordinated
to or made PARI PASSU with any other lien or security interest under Section
364(d) of the Bankruptcy Code or otherwise and (ii) are deemed valid, perfected
and enforceable liens at all times from and after the date of entry of this
Order, without regard to whether such liens and security interests are perfected
under applicable non-bankruptcy law. Notwithstanding anything to the contrary,
proceeds of the Collateral shall be applied in accordance with the priorities
set forth in Section 5.8 of the Security and Pledge Agreement.
6
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12. If an Event of Default has occurred and is continuing, the Lenders
shall have the following rights, among others:
(i) to direct the Debtor to assume and assign pursuant to Section
365(f) of the Bankruptcy Code any Aircraft Leasehold to an assignee designated
by the Lenders;
(ii) to direct the Debtor to seek any consent (other than the
consent of the lessor) necessary to the assumption and assignment or the
assignment of any Aircraft Leasehold;
(iii) to collect any proceeds payable to the Debtor as a result of
any disposition of the Aircraft Leasehold, including but not limited to any
consideration payable by the assignees to the Debtor for the right to obtain the
assignment or any reimbursement to the Debtor of security deposits or
maintenance reserves resulting from the assignee's assumption and performance of
the obligation to pay such deposits or reserves.
13. The Debtor shall use the amounts borrowed under the Credit Agreement
only for the purposes permitted thereunder.
14. The Lenders shall not be required to file or record financing
statements, notices of lien or similar instruments in any jurisdiction or to
take any other action to validate and perfect the security interests and liens
granted to it pursuant to this Order. The automatic stay is hereby modified
solely for the purpose of authorizing Lenders to record financing statements,
notices of liens or similar statements as the Lenders deem reasonably necessary.
7
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15. In making decisions to make Loans to the Debtor under the Credit
Agreement or to collect the indebtedness and obligations of the Debtor arising
thereunder, the Lenders shall not be deemed to be in control of the operations
of the Debtor or to be acting as a "responsible person" or "owner or operator"
with respect to the operation or management of the Debtor (as such terms, or any
similar terms, are used in the United States Comprehensive Environmental
Response, Compensation, and Liability Act, as amended, or in any similar federal
or state statute).
16. Upon request of the Lenders, the Debtor is directed to take, execute
and deliver such instruments and do all things necessary to perfect, preserve
and enforce the security interests and liens granted to the Lenders by the Loan
Documents and this Order.
17. The Debtor is authorized and directed to do and perform all acts, to
make, execute and deliver all instruments and documents to consummate the
transactions described in the Credit Agreement (including, without limitation,
the Loan Documents and related security documents and financing statements).
18. The Debtor is authorized and, as provided in the Credit Agreement,
directed to pay the following fees under the Credit Agreement: (i) the remaining
nonrefundable portion of the Facility Fee in the amount of $125,000; (ii) the
second enumerated Termination Fee of $150,000 (which fee shall be in accordance
with Section 2.4(d) of the Credit Agreement); (ii) the third enumerated
Termination Fee of $1,000,000 upon the occurrence of the Effective Date, and 10
percent of each class of equity of the reorganized Debtor upon the occurrence of
the Subsequent Advance Date; (iii) the Extension Fee in the amount of $500,000
payable on March 16, 1998 unless the Financing has been repaid in full and
terminated prior to such date; (iv) the Commitment Fee of 0.5 percent per annum
on the unused amount of the Financing; (v) the Expense Reimbursement referred to
in the Credit Agreement; and (vi) such other costs and expenses as may be due
from time to time including, without limitation, reasonable attorneys' fees and
disbursements as provided in the Loan Documents.
8
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19. Upon either (a) the occurrence of an Event of Default (as defined in
the Credit Agreement) or (b) termination of the Financing thereunder, the
automatic stay granted by Section 362 of the Code shall be lifted to permit
foreclosure on the Collateral upon five business days' notice of the Event of
Default or termination event by the Lenders to the Borrower, the Unsecured
Creditors' Committee and Hunt Petroleum/GFI. During such five-day period after
such notice, the Borrower and the Unsecured Creditors' Committee shall have the
right to prevent such lifting of the automatic stay on the sole basis that such
Event of Default or termination event has not occurred. If the stay is lifted
and the Lenders initiate any foreclosure on Collateral in which Hunt/GFI claims
an interest, then Hunt/GFI shall have relief from the stay also to foreclose
only such Collateral.
20. The Loan Documents and the provisions of this Order shall be binding
upon the Lenders and the Debtor and their respective successors and assigns
(including any trustee hereinafter appointed or elected for the estate of the
Debtor) and shall inure to the benefit of the Lenders and the Debtor and (except
with respect to any trustee hereinafter appointed or elected for the estate of
the Debtor) their respective successors and assigns.
21. If any or all of the provisions of this Order are hereafter reversed,
modified, vacated or stayed, such reversal, stay, modification or vacation shall
not affect (a) the validity of any obligation, indebtedness or liability
incurred by the Debtor to the Lenders prior to written notice to the Lenders of
the effective date of such reversal, stay, modification or vacation, or (b) the
validity and enforceability of any lien or priority authorized or created hereby
or pursuant to the Loan Documents. Notwithstanding any such reversal, stay,
modification or vacation, any indebtedness, obligation or liability incurred by
the Debtor to the Lenders prior to written notice to the Lenders of the
effective date of such reversal, stay, modification or vacation shall be
governed in all respects by the Loan Documents and the original provisions of
this Order, and the Lenders shall be entitled to all the rights, remedies,
privileges and benefits, granted herein and pursuant to the Loan Documents with
respect to all such indebtedness, obligation or liability.
22. The provisions of this Order shall be effective upon entry of this
Order. All actions taken pursuant to this Order and the terms of this Order
shall survive the entry of, and shall govern with respect to any conflict with,
any order that may be entered confirming a plan of reorganization of the Debtor
or that may be entered converting the Chapter 11 case of the Debtor to a Chapter
7 case. No order confirming a plan will alter or impair the rights of the
Lenders under this Order without the prior written consent of the Lenders. The
terms and provisions of this Order as well as the liens and security interests
and all rights of the Lenders and all obligations of the Debtor created or
arising pursuant to this Order shall continue in this Chapter 11 case and any
superseding proceedings under the Bankruptcy Code, and such liens and security
interests shall maintain their priority as provided by this Order until all
Loans are satisfied by payment in full and are thereby discharged.
23. To the extent any of the terms and conditions of the Credit Agreement
are in conflict with the terms of this Order, the provisions of this Order shall
control.
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24. The notice given by the Debtor of the Motion constitutes due and
sufficient notice of the Motion.
25. Notwithstanding anything to the contrary, the Lenders shall have no
rights to recoupment or any other rights with respect to: (1) any payments made
in respect of fees and expenses of professionals under Sections 330, 331 and
1103 of the Bankruptcy Code, including the out-of-pocket costs and expenses of
individual members of the Creditors' Committee, accrued, but unpaid, as of
December 1, 1997 (nothing contained herein shall prevent the Lender from
objecting to the allowance of any fees and expenses of such professionals); (ii)
any Carve-Out Expenses; (iii) court-approved adequate protection payments in the
nature of prepayments or substantially contemporaneous payments for goods and
services provided to the Borrower; and (iv) any other administrative expenses
paid or incurred by the Borrower in the ordinary course of business during the
Chapter 11 Case. Dated: December ____, 1997
------------------------------------
UNITED STATES BANKRUPTCY JUDGE
10
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CREDIT AGREEMENT
dated as of December 3, 1997
among
WESTERN PACIFIC AIRLINES, INC., as
Debtor and Debtor-in Possession
and
ENERGY MANAGEMENT CORPORATION
and
SUNDANCE VENTURE PARTNERS, L.P. II,
as Lenders
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS; ACCOUNTING TERMS.....................................5
Section 1.1 DEFINITIONS...................................................5
Section 1.2 ACCOUNTING PRINCIPLES........................................12
ARTICLE II THE CREDITS.....................................................12
Section 2.1 THE COMMITMENTS..............................................13
Section 2.2 BORROWINGS...................................................13
Section 2.3 CHANGES OF COMMITMENTS.......................................13
Section 2.4 FEES.........................................................13
Section 2.5 USE OF PROCEEDS..............................................14
Section 2.6 NOTES........................................................14
Section 2.7 OPTIONAL PREPAYMENTS.........................................15
Section 2.8 MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS..........15
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST.............................15
Section 3.1 AMORTIZATION.................................................16
Section 3.2 INTEREST.....................................................16
ARTICLE IV PAYMENTS; COMPUTATIONS; ETC.....................................16
Section 4.1 PAYMENTS.....................................................16
Section 4.2 COMPUTATIONS.................................................16
Section 4.3 MINIMUM AMOUNTS..............................................16
Section 4.4 CERTAIN NOTICES..............................................16
ARTICLE V SECURITY: ADMINISTRATION PRIORITY...............................17
Section 5.1 GRANT OF LIEN AND SECURITY INTEREST..........................17
Section 5.2 ADMINISTRATIVE PRIORITY......................................17
Section 5.3 GRANTS, RIGHTS AND REMEDIES CUMULATIVE.......................18
Section 5.4 NO FILINGS REQUIRED..........................................18
Section 5.5 SURVIVAL.....................................................18
ARTICLE VI CONDITIONS PRECEDENT............................................19
Section 6.1 CONDITIONS PRECEDENT.........................................19
Section 6.2 ADDITIONAL CONDITIONS PRECEDENT..............................22
Section 6.3 CERTIFICATION................................................22
ARTICLE VII REPRESENTATIONS AND WARRANTIES.................................22
Section 7.1 INCORPORATION, GOOD STANDING AND DUE QUALIFICATION...........23
Section 7.2 CORPORATE POWER AND AUTHORITY; NO CONFLICTS..................23
Section 7.3 LEGALLY ENFORCEABLE AGREEMENTS...............................23
Section 7.4 LITIGATION...................................................23
Section 7.5 TRUE AND COMPLETE DISCLOSURE.................................24
Section 7.6 OWNERSHIP AND LIENS..........................................24
Section 7.7 TAXES........................................................24
Section 7.8 ERISA........................................................24
Section 7.9 SUBSIDIARIES.................................................25
Section 7.10 CREDIT ARRANGEMENTS.........................................25
Section 7.11 LICENSES AND PERMITS........................................25
Section 7.12 NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS...............25
Section 7.13 LABOR DISPUTES AND ACTS OF GOD..............................25
Section 7.14 INSURANCE...................................................26
Section 7.15 GOVERNMENTAL REGULATION.....................................26
Section 7.16 ADMINISTRATIVE PRIORITY; LIEN PRIORITY......................26
Section 7.17 BANKRUPTCY COURT ORDER......................................26
<PAGE>
ARTICLE VIII AFFIRMATIVE COVENANTS.........................................26
Section 8.1 MAINTENANCE OF EXISTENCE.....................................27
Section 8.2 CONDUCT OF BUSINESS..........................................27
Section 8.3 MAINTENANCE OF PROPERTIES AND EXECUTORY CONTRACTS AND LEASES.27
Section 8.4 MAINTENANCE OF RECORDS.......................................27
Section 8.5 MAINTENANCE OF INSURANCE.....................................27
Section 8.6 COMPLIANCE WITH LAWS.........................................27
Section 8.7 RIGHT OF INSPECTION..........................................28
Section 8.8 REPORTING REQUIREMENTS.......................................28
Section 8.9 FURTHER ASSURANCES...........................................29
Section 8.10 BOARD REPRESENTATION........................................30
ARTICLE IX NEGATIVE COVENANTS..............................................30
Section 9.1 DEBT.........................................................30
Section 9.2 LIENS........................................................30
Section 9.3 FINAL BANKRUPTCY COURT ORDER; ADMINISTRATIVE PRIORITY; LIEN
PRIORITY; PAYMENT OF CLAIMS...............................................31
Section 9.4 DIVIDENDS....................................................32
Section 9.5 MERGERS, ETC.................................................32
Section 9.6 SALE OF ASSETS...............................................32
Section 9.7 LOCATION OF PROPERTIES.......................................33
Section 9.8 INVESTMENTS AND ACQUISITIONS.................................33
Section 9.9 OTHER PAYMENTS...............................................33
Section 9.10 FISCAL YEAR.................................................33
ARTICLE X EVENTS OF DEFAULT................................................33
Section 10.1 EVENTS OF DEFAULT...........................................33
Section 10.2 CONSEQUENCES OF AN EVENT OF DEFAULT.........................35
Section 10.3 CERTAIN REMEDIES............................................36
ARTICLE XI MISCELLANEOUS...................................................37
Section 11.1 AMENDMENTS AND WAIVERS......................................37
Section 11.2 BINDING EFFECT..............................................37
Section 11.3 THE LENDER AS PARTY IN INTEREST.............................38
Section 11.4 EXPENSES AND INDEMNITIES....................................38
Section 11.5 ASSIGNMENT: PARTICIPATION...................................39
Section 11.6 NOTICES.....................................................39
Section 11.7 TABLE OF CONTENTS; HEADINGS.................................39
Section 11.8 SEVERABILITY.................................................39
Section 11.9 COUNTERPARTS................................................40
Section 11.10 INTEGRATION................................................40
Section 11.11 GOVERNING LAW..............................................40
Section 11.12 WAIVER OF JURY TRIAL.......................................40
EXHIBITS
Exhibit A-1.- Tranche A Notes
Exhibit A-2.- Tranche B Note
Exhibit B...- Security and Pledge Agreement
Exhibit C...- Budget [INTENTIONALLY DELETED]
Exhibit D...- Bankruptcy Order
Exhibit E-1.- Opinion of Borrower's General Counsel
Exhibit E-2.- Opinion of Borrower's Bankruptcy Counsel
Exhibit F...- Term Sheet [INTENTIONALLY DELETED]
<PAGE>
SCHEDULES
Schedule I- Subsidiaries and Investments
Schedule II- Credit Arrangements
Schedule III- Licenses and Consents
Schedule IV- Insurance
Schedule V- Taxes
Schedule VI- Liens
<PAGE>
CREDIT AGREEMENT dated as of December 3, 1997 by and among WESTERN
PACIFIC AIRLINES, INC., a corporation organized under the laws of Delaware and a
debtor and debtor-in-possession (the "BORROWER"), ENERGY MANAGEMENT CORPORATION,
("Energy "), a Colorado corporation, and SUNDANCE VENTURE PARTNERS, L.P., II,
("Sundance") a Delaware limited partnership (each a "LENDER " and collectively,
the "LENDERS" or their assigns as set forth in Section 11.5 hereof).
The Borrower filed a voluntary petition for relief under chapter 11 of
title 11 of the United States Code on October 5, 1997 (the "PETITION DATE"). The
Borrower has requested the Lenders to provide the Borrower with a $30,000,000
multiple draw term loan facility available in two tranches and, subject to the
terms and conditions set forth herein, the Lenders have agreed to provide such
facility.
NOW THEREFORE, the parties hereto hereby agree, effective upon the
Effective Date (as hereinafter defined), as follows:
ARTICLE I
DEFINITIONS; ACCOUNTING TERMS
Section 1. 1 DEFINITIONS. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and VICE VERSA):
"ACQUISITION" shall mean any transaction, or any series of related
transactions, consummated after the date of this Agreement, by which the
Borrower and/or any of its Subsidiaries (in one transaction or as the most
recent transaction in a series of transactions) directly or indirectly acquires
(a) the business of, or all or substantially all of the assets of, any firm,
corporation or division thereof, whether through purchase of assets, merger or
otherwise, or (b) ownership or control of any corporation, partnership, joint
venture or joint adventure.
"AGREEMENT" means this Credit Agreement, as amended or supplemented
from time to time. References to Articles, Sections, Exhibits, Schedules and the
like refer to the Articles, Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise indicated.
"AVOIDANCE ACTION PROCEEDS" shall mean recoveries received by the
Borrower from claims arising under Sections 544, 545, 547, 548, 550 or 553 of
the Bankruptcy Code.
"BANKING DAY" means any day other than a Saturday or Sunday or a day
on which commercial banks are authorized or required to close in either New York
City or Denver, Colorado.
"BANKRUPTCY CODE" shall mean title 11 of the United States Code, as
amended.
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"BANKRUPTCY COURT" shall mean the United States Bankruptcy Court for
the District of Colorado or such other court having original jurisdiction over
the Chapter 11 Case.
"BANKRUPTCY ORDER" shall mean an order of the Bankruptcy Court
approving this Agreement and the extensions of credit made and to be made to the
Borrower in accordance with this Agreement in a form reasonably acceptable to
the Majority Lenders.
"BAR DATE" shall mean the date by which creditors of, and holders of
equity interest in, the Borrower must file proofs of claim or interests, as the
case may be, in respect of claims or interests arising prior to the Petition
Date.
"BORROWER" shall have the meaning assigned to such term in the
preamble hereto.
"BORROWING" means a borrowing hereunder of a Loan.
"BUDGET" shall mean a budget for the Borrower in form and substance
reasonably satisfactory to the Majority Lenders for the period commencing on or
about the Subsequent Advance Date and ending on or about the Termination Date,
as the same may be amended, modified or supplemented from time to time with
Majority Lenders' consent, which shall not be unreasonably withheld.
"CAPITAL EXPENDITURES" means, for any period, the Dollar amount of
gross expenditures (including Capital Lease Obligations) made for fixed assets,
real property, plant and equipment, and all renewals, improvements and
replacements thereto (but not repairs thereof) incurred during such period.
"CAPITAL LEASE OBLIGATIONS" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"CARVE-OUT EXPENSES" shall mean (i) amounts payable pursuant to 28
U.S.C. Section 1930(a)(6); (ii) with respect to fees and expenses incurred prior
to the occurrence and continuation of a Default or Event of Default, which
Default or Event of Default is neither cured by the Borrower nor waived by the
Lenders (a) allowed fees and expenses of professionals retained pursuant to
Section 327 of the Bankruptcy Code up to, but not exceeding [$1,000,000] in the
aggregate (inclusive of any holdbacks); and (b) allowed fees and expenses of
professionals retained pursuant to Section 1103 of the Bankruptcy Code and the
out-of-pocket costs and expenses of the individual members of the Creditors
Committee up to, but not exceeding $350,000 in the aggregate (inclusive of any
holdbacks); and (iii) allowed fees and expenses of professionals retained
pursuant to Section 327 of the Bankruptcy Code to the extent incurred in the
liquidation of the Collateral with the consent of the Lenders; PROVIDED,
HOWEVER, that no fees and expenses incurred in connection with actions adversely
affecting the rights and interests of the Lenders under this Credit Agreement or
otherwise shall be deemed "Carve-Out Expenses."
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"CHAPTER 11 CASE" shall mean the Borrower's reorganization case
under chapter 11 of the Bankruptcy Code pending in the Bankruptcy Court.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERAL" shall have the meaning assigned to such term in the
Security and Pledge Agreement.
"COMMITMENTS" shall mean the Tranche A Commitment and the Tranche
B Commitment.
"CONSOLIDATED SUBSIDIARY" means any Subsidiary, including Mountain
Air, whose accounts are or are required to be consolidated with the accounts of
the Borrower in accordance with GAAP.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414(b) or 414(c) of the Code.
"COS TERMINAL" shall have the meaning assigned to such term in
Section 2.8(a) hereof.
"CREDITORS' COMMITTEE" shall mean the official committee of
unsecured creditors appointed in the Chapter 11 Case pursuant to Section 1102 of
the Bankruptcy Code.
"DEBT" of any Person shall mean, at any date (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
debentures, notes or other similar instruments; (b) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable or other administrative expenses arising in the ordinary course
of business of such Person (or during the chapter 11 proceedings of such
Person), provided the same are not overdue in a material amount or are being
contested in good faith; (c) all Capital Lease Obligations of such Person; (d)
all Debt of others secured by a Lien on any asset of such Person, whether or not
such Debt is assumed by such Persons; (e) all Debt of others Guaranteed by such
person; (f) all obligations of such Person in respect of letters of credit,
acceptances or surety or other similar bonds, whether contingent or otherwise;
and (g) obligations in respect of any Interest Rate Protection Agreement.
"DEFAULT" means any event which with the giving of notice or lapse
of time, or both, would become an Event of Default.
"DISCLOSURE STATEMENT" shall mean a disclosure statement in respect
of the Plan of Reorganization within the meaning of Section 1125 of the
Bankruptcy Code in form and substance reasonably satisfactory to the Majority
Lenders, as the same may be amended, modified and supplemented from time to time
with the express written joinder or consent of the Majority Lenders, which shall
not be unreasonably withheld.
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"DISPOSITION" means any sale, assignment, lease, transfer or other
disposition of any property (whether now owned or hereafter acquired) by the
Borrower or any of its Subsidiaries to any Person.
"DOLLARS" and the sign "$" mean lawful money of the United States
of America.
"EFFECTIVE DATE" shall have the meaning attributed thereto in
Section 6.1(a) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA AFFILIATE" means any corporation or trade or business which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"EVENT OF DEFAULT" has the meaning given such term in Section
10.1 hereof.
"EXTENSION FEE" shall have the meaning assigned to such term in
Section 2.4(c) hereof.
"FACILITY DOCUMENTS" means this Agreement, the Notes and the
Security Documents.
"FINAL ORDER" shall mean an order of a court the implementation or
operation or effect of which has not been stayed and as to which the time to
appeal or seek review or rehearing or writ of certiorari has expired and as to
which no appeal or petition for review or rehearing or certiorari has been taken
or is pending.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"INTERIM ORDER" shall mean an order of the Bankruptcy Court, if any,
in form and substance satisfactory to the Majority Lenders approving this
Agreement and all or a portion of the extension of credit to be made by the
Lenders in accordance with this Agreement on an interim basis, as the same may
be amended, modified or supplemented from time to time with the express written
joinder or consent of the Majority Lenders, which shall not be unreasonably
withheld.
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"INVESTMENT" in any Person shall mean: (a) the acquisition (whether
for cash, property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of such Person; and (b) any deposit with, or advance, loan or other
extension of credit to, such Person (but excluding any advance, loan or
extension of credit having a term not exceeding 90 days representing the
purchase price of inventory or supplies sold by such Person in the ordinary
course of business).
"LENDER" shall have the meaning assigned to such term in the
preamble hereto.
"LIEN" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"LOANS" means the Tranche A Loans and the Tranche B Loans.
"MAJORITY LENDERS" shall mean Lenders having at least 51% of the
sums of (a) aggregate amount of the unused Commitments and (b) the aggregate
outstanding principal amount of the Loans, in each case, on the date of
determination.
"MOUNTAIN AIR" shall mean Mountain Air Express, Inc., a Delaware
corporation and a debtor and debtor-in-possession.
"MULTIEMPLOYER PLAN" means a Plan defined as such in Section 3(37)
of ERISA to which contributions have been made by the Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"NET AFTER-TAX PROCEEDS" means, with respect to any Disposition, the
gross proceeds received by the Borrower or any Subsidiary from such Disposition
less all reasonable legal, title, recording, sales and transfer tax expenses,
commissions and income taxes, if any, in connection therewith and any amounts
applied to the repayment of Permitted Debt secured by a Permitted Lien on the
assets or property disposed of.
"NOTES" shall mean, collectively, the Tranche A Notes and the
Tranche B Note.
"OBLIGATIONS" shall mean all indebtedness, obligations and
liabilities of the Borrower to any Lender incurred under or related to this
Agreement, the Notes or any other Facility Document, whether such indebtedness,
obligations or liabilities are direct or indirect, secured or unsecured, joint
or several, absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising, including the principal amount
of Loans outstanding, together with interest thereon, and all expenses, fees and
indemnities hereunder or under any other Facility Document, including amounts
due under Section 11.4 hereof and similar agreements contained in the other
Facility Documents, from time to time arising under or in connection with or
evidenced or secured by this Agreement, the Notes, or any other Facility
Document.
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"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED DEBT" shall mean the Debt described in clause (b) of
Section 9.1 hereof.
"PERMITTED INVESTMENTS" of any Person shall mean: (a) direct
obligations of the United States of America, or of any agency thereof, or
obligations guaranteed as to principal and interest by the United States of
America or any agency thereof, in either case maturing not more than 90 days
from the date of acquisition thereof; (b) certificates of deposit issued by any
Lender or trust company organized under the laws of the United States of America
or any state and having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 90 days from the date of acquisition
thereof; (c) commercial paper rated A-1 or better or P-1 by Standard & Poor's
Corporation or Moody's Investors Services, Inc., respectively, maturing not more
than 90 days from the date of acquisition thereof; and (d) Investments
outstanding on the Petition Date and listed on Schedule I hereto.
"PERMITTED LIENS" shall mean the Liens described in clause (b) of
Section 9.2 hereof.
"PERSON" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"PETITION DATE" shall have the meaning assigned to such term in the
preamble hereto.
"PLAN" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA or to which Section
412 of the Code applies.
"PLAN OF REORGANIZATION" shall mean a plan of reorganization for the
Borrower incorporating the terms and provisions acceptable to the Majority
Lenders in all material respects, in its sole discretion, as the same may be
amended, modified and supplemented from time to time with the express written
consent or joinder of the Majority Lenders, which shall not be unreasonably
withheld.
"PLEDGED STOCK" shall have the meaning assigned to such term in the
Security and Pledge Agreement.
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"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Obligation or any other amount under this Agreement or any Note that is not paid
when due (whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and including
the due date to but excluding the date on which such amount is paid in full
equal to 16%.
"PRIME RATE" means, for any day, that rate of interest from time to
time publicly announced by The Chase Manhattan Bank in New York, New York or its
successor as its "prime" commercial lending rate as in effect for such day.
"SECURITY AND PLEDGE AGREEMENT" shall mean a Security and Pledge
Agreement executed by the Borrower in favor of the Lenders, substantially in the
form of Exhibit B hereto and covering the collateral identified therein, as the
same shall be amended, modified and supplemented and in effect from time to
time.
"SECURITY DOCUMENTS" shall mean, collectively, the Security and
Pledge Agreement, all Uniform Commercial Code financing statements required by
this Agreement or the Security and Pledge Agreement which have been or will be
filed with respect to the security interests in personal property and fixtures
created pursuant thereto, and all additional security agreements, mortgages or
Uniform Commercial Code financing statements heretofore or hereafter delivered
or filed, as the case may be, by the Borrower pursuant to the terms of this
Agreement or the Security and Pledge Agreement.
"SUBSEQUENT ADVANCE DATE" shall have the meaning assigned to such
term in section 6.1(b) hereof.
"SUBSIDIARY" means, as to any Person, any corporation or other
entity of which at least a majority of the securities or other ownership
interests having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by such Person. Notwithstanding the foregoing,
except as otherwise provided herein, all references herein to any Subsidiary of
the Borrower shall not include Mountain Air.
"TERMINATION DATE" shall mean the earlier of (a) March 16, 1998
unless the Borrower shall have paid to the Lender the Extension Fee, in which
case April 16, 1998 and (b) consummation of the Plan of Reorganization.
"TERMINATION EVENT" shall mean (a) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
"Reportable Event" not subject to the provision for 30-day notice to the PBGC
under such regulations), or (b) the withdrawal of the Borrower or any member of
the Controlled Group from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, or (d) the institution
of proceedings to terminate a Plan by the PBGC, or (e) any other event or
condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
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"TRANCHE A COMMITMENT" shall mean the obligation of any Lender to
make Tranche A Loans in an aggregate principal amount not to exceed the amount
as follows: Sundance in the amount of $4,000,000 and Energy in the amount of
$6,000,000. The aggregate principal amount on the date hereof of the Tranche A
Commitments is $10,000,000.
"TRANCHE A LOANS" shall mean the Loans provided for in Section
2.1(a) hereof.
"TRANCHE A NOTES" shall mean the promissory notes provided for by
Section 2.6(a) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case, as the same shall be modified and supplemented
and in effect from time to time.
"TRANCHE B COMMITMENT" shall mean the obligation of Tranche B Lender
to make Tranche B Loans to the Borrower in the aggregate principal amount not to
exceed $20,000,000.
"TRANCHE B LENDER" shall mean (a) on the date hereof, Energy and (b)
any Lender from time to time holding Tranche B Loans and/or Tranche B
Commitments after giving effect to any assignments thereof permitted under
Section 11.5 hereof.
"TRANCHE B LOANS" shall mean the Loans provided for in Section
2.1(b) hereof.
"TRANCHE B NOTE" shall mean the promissory note provided for in
Section 2.6(b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case, as the same shall be modified and supplemented
and in effect from time to time.
"UNFUNDED VESTED LIABILITIES" means, with respect to any Plan, the
amount (if any) by which the present value of all vested benefits under the Plan
exceeds the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrower
or any ERISA Affiliate to the PBGC or the Plan under Title IV of ERISA.
Section 1. 2 ACCOUNTING PRINCIPLES. Except as otherwise provided in
this Agreement, all computations and determinations as to accounting or
financial matters and all financial statements to be delivered hereunder shall
be made and prepared in accordance with GAAP and all accounting and financial
terms shall have the meanings ascribed to such terms by GAAP.
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ARTICLE II
THE CREDITS
Section 2. 1 THE COMMITMENTS.
( a) Subject to the terms and conditions set forth herein,
each Lender agrees to make a single Tranche A Loan to the Borrower on December
4, 1997 in an amount not to exceed $6,000,000 for Energy and $4,000,000 for
Sundance. Tranche A Loans once repaid or prepaid may not be reborrowed.
( b) Subject to the terms and conditions set forth herein,
Tranche B Lender agrees to make one or more multiple draw Tranche B Loans to the
Borrower from time to time during the period from the Subsequent Advance Date
through the Termination Date in an aggregate principal amount not to exceed the
Tranche B Commitment. Tranche B Loans once repaid or prepaid may not be
reborrowed.
( c) Notwithstanding anything herein to the contrary, the
Lenders shall have no obligation to make Loans hereunder in excess of the
amounts authorized in the Chapter 11 Case and any reference herein to the amount
of any Commitments shall be automatically reduced to the amounts so authorized.
Section 2. 2 BORROWINGS. The Borrower shall give the Lenders notice
of each Borrowing of Loans hereunder as provided in Section 4.4 hereof. On the
date specified for each Borrowing hereunder, the Lenders shall, subject to the
terms and conditions of this Agreement, make available the amount of such
Borrowing to the Borrower by depositing the same, in immediately available
funds, in an account of the Borrower designated for such purpose from time to
time by the Borrower.
Section 2. 3 CHANGES OF COMMITMENTS.
( a) The Commitments shall be automatically reduced to
zero on the Termination Date.
( b) The Borrower shall have the right at any time or from
time to time (i) so long as no Loans are outstanding, to terminate the
Commitments and (ii) to reduce the unused amount of the Commitments; PROVIDED
that (x) the Borrower shall give notice of each such termination or reduction as
provided in Section 4.4 hereof and (y) each partial reduction shall be in an
amount at least equal to $500,000 or in multiples of $100,000 in excess thereof.
( c) The Commitments once terminated or reduced may not be
reinstated.
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Section 2. 4 FEES.
( a) COMMITMENT FEES. The Borrower shall pay to each Lender a
commitment fee on the daily average unused amount of such Lender's Commitments,
for the period from and including the date of this Agreement but not including
the earlier of the date such Commitments are terminated and the Termination
Date, at a rate per annum equal to 1/2 of 1%. Accrued commitment fees shall be
payable on the last day of each month and on the earlier of the date the
Commitments are terminated and the Termination Date.
( b) FACILITY FEE. The Borrower shall pay to the Lenders (pro
rata in accordance with each Lender's percentage interest in the Commitments) a
facility fee of $250,000, $125,000 of which was previously approved in the
Chapter 11 Case and paid on November 24, 1997, the remaining portion to be paid
on or before the Effective Date.
( c) EXTENSION FEE. If the Loans are not repaid in full
on or before March 16, 1998, then the Borrower shall pay to the Lenders (pro
rata in accordance with their Commitments) as an extension fee the sum of
$500,000 (the "EXTENSION FEE").
( d) TERMINATION FEE. The Borrower shall pay to the Lenders
(pro rata in accordance with their Commitments) a termination fee in the amount
of $150,000 if the Bankruptcy Court enters an order approving
debtor-in-possession financing for the Borrower instead of or in addition to the
Loans provided for herein.
( e) OTHER. If on or after the Effective Date (i) the
Bankruptcy Court enters an order approving a plan of reorganization for the
Borrower, other than the Plan of Reorganization, (ii) the Borrower supports or
fails to contest a plan of reorganization filed by a Person other than the
Borrower, (iii) the Borrower files a plan of reorganization, other than the Plan
of Reorganization, or a modification to, or another version of, the Plan of
Reorganization, in each case, that is not reasonably acceptable to the Lender or
(iv) the Borrower is liquidated or all or substantially all of its material
assets transferred under either chapter 7 or chapter 11 of the Bankruptcy Code,
then (x) the Borrower shall pay to the Lenders (pro rata in accordance with
their Commitments) in cash the sum of $1,000,000, and (y) upon the occurrence of
the Subsequent Advance Date, the Lenders shall be entitled, on a pro rata basis,
to 10% of all equity interests of the Borrower, as reorganized, issued pursuant
to a plan of reorganization other than the Plan of Reorganization for the
Borrower.
Section 2. 5 USE OF PROCEEDS. The Borrower hereby covenants,
represents and warrants that the proceeds of the Loans made to it will be used
solely as follows: (i) up to $6,000,000 of the Tranche A Commitment (or such
additional amounts as to which the Lenders may agree) and amounts available
under the Tranche B Commitment may be used by the Borrower to satisfy its
obligations under Section 1110 of the Bankruptcy Code as set forth in the
Budget; (ii) for the payment of professional fees and expenses under Sections
330, 331 and 1103 of the Bankruptcy Code, including the out-of-pocket costs and
expenses of individual members of the Creditors' Committee, accrued, but unpaid,
as of December 1, 1997 and any Carve-Out Expenses; and (iii) the balance to fund
the Borrower's working capital needs in the ordinary course of the Borrower's
businesses and for other general corporate purposes of the Borrower, in each
case, on and after the Subsequent Advance Date, solely in accordance with the
Budget. The Borrower may not disburse the proceeds of any Loan to any subsidiary
or affiliate or use the same to make Acquisitions or Investments.
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Section 2. 6 NOTES.
( a) The Tranche A Loans made by the Lenders hereunder shall
be evidenced by two promissory notes of the Borrower in substantially the form
of Exhibit A-1 hereto, dated as of the date hereof, payable to the respective
Lender in a principal amount equal to such Lender's Tranche A Commitment as
originally in effect and otherwise duly completed. The date and amount of the
Tranche A Loan made by each Lender to the Borrower, and each payment or
prepayment made on account of the principal thereof, shall be recorded by the
respective Lender on its books and, prior to any transfer of such Tranche A
Note, endorsed by such Lender on the schedule attached to such Tranche A Note or
any continuation thereof; PROVIDED, HOWEVER, that any failure by such Lender to
make any such notation shall not affect the obligations of the Borrower
hereunder or under such Tranche A Note in respect of such obligations.
( b) The Tranche B Loans made by Tranche B Lender hereunder
shall be evidenced by a single promissory note of the Borrower in substantially
the form of Exhibit A-2 hereto, dated as of the date hereof, payable to Tranche
B Lender in a principal amount equal to the amount of the Tranche B Commitment
as originally in effect and otherwise duly completed. The date and amount of
each Tranche B Loan made by Tranche B Lender to the Borrower, and all payments
and prepayments made on account of the principal thereof, shall be recorded by
Tranche B Lender on its books and, prior to any transfer of the Tranche B Note,
endorsed by Tranche B Lender on the schedule attached to such Tranche B Note or
any continuation thereof; PROVIDED, however, that any failure by Tranche B
Lender to make any such notation shall not affect the obligations of the
Borrower hereunder or under such Tranche B Note in respect of such obligations.
Section 2. 7 OPTIONAL PREPAYMENTS. Subject to Section 4.3 hereof,
the Borrower shall have the right to prepay the Obligations, at any time or from
time to time, PROVIDED the Borrower shall give the Lenders notice of each such
prepayment as provided in Section 4.4 hereof (and, upon the date specified in
any such notice of prepayment, the amount to be prepaid shall become due and
payable hereunder).
Section 2. 8 MANDATORY PREPAYMENTS AND REDUCTIONS OF
COMMITMENTS.
( a) SALE OF ASSETS. Without limiting the obligation of the
Borrower to obtain the consent of the Majority Lenders pursuant to Section 9.6
hereof to any Disposition not otherwise permitted hereunder, no later than 5
Banking Days prior to the occurrence of any such Disposition, the Borrower will
deliver to the Majority Lenders a statement, certified by a senior officer of
the Borrower, in form and detail satisfactory to the Majority Lenders, of the
estimated amount of the Net After-Tax Proceeds to be received in respect of such
Disposition and, to the extent such Net After-Tax Proceeds (when taken together
with the Net After-Tax Proceeds of all prior Dispositions as to which a
prepayment has not yet been made under this Section 2.8(a)) shall exceed
$500,000, the Borrower will prepay the principal of any Loans then outstanding,
on a pro rata basis, in an aggregate amount equal to 100% of the Net After-Tax
Proceeds of such Disposition (together with 100% of the Net After-Tax Proceeds
of all prior Dispositions as to which a prepayment has not yet been made under
this Section 2.8(a); provided, however, that the provisions of this Section
2.8(a) will not apply to the sale by Borrower of that certain property commonly
known as the "Western Pacific Satellite Terminal" and located at Colorado
Springs Airport (the "COS TERMINAL").
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( b) EXCEEDING COMMITMENTS. If at any time the Loans
outstanding hereunder exceed the Commitments then available, then the
Borrower shall immediately repay the Loans in the amount of such excess.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3. 1 AMORTIZATION.
( a) To the extent not due and payable earlier pursuant to the
term of this Agreement, the entire unpaid principal amount of each of the Loans
shall be due and payable on the Termination Date.
Section 3. 2 INTEREST.
( a) The Borrower hereby promises to pay to each Lender
interest on the unpaid principal amount of each Loan made by such Lender, for
the period from and including the date of such Loan to but excluding the date
such Loan shall be paid in full, at the Prime Rate (as in effect from time to
time) plus 2 1/2%.
( b) Notwithstanding the foregoing, the Borrower hereby
promises to pay to each Lender interest on the Loans at the Post-Default Rate
(i) upon the occurrence and during the continuance of an Event of Default
hereunder and (ii) on any principal of any Loan and on any other amount payable
by the Borrower hereunder or under the Notes which shall not be paid in full
when due (whether at stated maturity, by acceleration, by mandatory prepayment
or otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full.
( c) Accrued interest on the Loans shall be payable
monthly on last Banking Day of each calendar month.
( d) Notwithstanding anything herein to the contrary, interest
payable at the Post-Default Rate shall be payable in cash from time to time on
demand.
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ARTICLE IV
PAYMENTS; COMPUTATIONS; ETC.
Section 4. 1 PAYMENTS.
( a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Borrower to
the Lenders under this Agreement, the Notes and the other Facility Documents
shall be made in Dollars, in immediately available funds, without deduction,
set-off or counterclaim, into an account designated by the Majority Lenders from
time to time not later than 1:00 p.m. New York time on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Banking Day).
( b) The Borrower shall, at the time of making any payment or
prepayment under this Agreement or any Note, specify to the Lenders the
Obligations or other amounts payable by the Borrower hereunder to which such
payment is to be applied (and in the event that the Borrower fails to so
specify, then the Lenders shall apply such amounts to reduce pro rata the
principal amount of the Loans then outstanding or if an Event of Default has
occurred and is continuing, the Lenders shall apply the amount of such payment
in the manner provided in Section 5.8 of the Security and Pledge Agreement.
( c) If the due date of any payment under this Agreement or
any Note would otherwise fall on a day that is not a Banking Day, such date
shall be extended to the next succeeding Banking Day, and interest shall be
payable for any principal so extended for the period of such extension.
Section 4. 2 COMPUTATIONS. Interest hereunder shall be computed on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable.
Section 4. 3 MINIMUM AMOUNTS. Each Borrowing hereunder or
optional partial prepayment of principal of the Loans shall be in an amount
at least equal to $500,000 or in multiples of $100,000 in excess thereof.
Section 4. 4 CERTAIN NOTICES. Notices by the Borrower to the Lenders
of terminations or reductions of the Commitments, of Borrowings and of optional
prepayments of the Obligations shall be irrevocable and shall be effective only
if received by the Lender not later than 12:00 noon New York time (or, in the
case of the Tranche A Loan, 5:00 p.m. New York time) on the number of Banking
Days prior to the date of the relevant termination, reduction, borrowing or
prepayment specified below:
Notice Number of
Banking Days
Prior
--------------------------------- ---------------
Termination or reduction of 2
Commitments
Borrowing or prepayment of Loans 1
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Each such notice of termination or reduction shall specify the amount and
type of the Commitment to be terminated or reduced. Each notice of optional
prepayment shall specify the amount and type of Loan to be prepaid, and each
such notice of Borrowing shall specify the type of Loan to be borrowed
(subject to Section 4.3 hereof) and the date of borrowing or optional
prepayment (which shall be a Banking Day).
ARTICLE V
SECURITY: ADMINISTRATION PRIORITY
Section 5. 1 GRANT OF LIEN AND SECURITY INTEREST.
( a) Pursuant to this Agreement and the Security Documents,
but subject to the proviso in Section 2.1 of the Security Agreement, the
Borrower hereby assigns, pledges, transfers, grants, confirms and sets over unto
the Lenders, and hereby grants and creates in favor of the Lenders a security
interest in and to, the Collateral, including all of the property, assets or
interests in property or assets of the Borrower of any kind or nature
whatsoever, real or personal, now existing or hereafter acquired or created,
including without limitation all property of the estates (within the meaning of
the Bankruptcy Code) of the Borrower, including proceeds of any Avoidance Action
and proceeds of any kind resulting from any disposition of any Aircraft
Leasehold (as defined in the Security and Pledge Agreement), including proceeds
in respect of any assumption and assignment of any Aircraft Leasehold, and
including but not limited to any consideration payable by assignees to the
Borrower for the right to obtain the assignment or any reimbursement to the
Borrower of security deposits or maintenance reserves resulting from the
assignee's assumption and performance of the obligation to pay such deposits or
reserves and all proceeds, rents, products and profits of any of the foregoing.
( b) The liens and security interests in favor of the Lenders
referred to in Section 5.1(a) and under the Security Documents hereof shall be
valid and perfected liens and security interests, prior to all other liens and
interests, other than Permitted Liens. Except as provided in Section 5.5(a)
hereof and in Section 11.4 hereof, such liens and security interests and their
priority shall remain in effect until the Commitments have been terminated and
all Obligations have been repaid in cash in full.
Section 5. 2 ADMINISTRATIVE PRIORITY. The Borrower hereby agrees
that the Obligations of the Borrower shall constitute allowed administrative
expenses in the Chapter 11 Case having super-priority status under Section
364(c)(1) of the Bankruptcy Code over all other administrative expenses and
unsecured claims against the Borrower now existing or hereafter arising of any
kind or nature whatsoever, including without limitation all administrative
expenses of the kind specified in Sections 503(b), 506(c), 726(b) and 507(b) of
the Bankruptcy Code, subject, as to priority, only to Carve-Out Expenses.
Notwithstanding the foregoing, the Lenders shall have no right of recoupment or
other right of recovery with respect to (i) any payments made in respect of fees
and expenses of professionals under Sections 330, 331 and 1103 of the Bankruptcy
Code, including the out-of-pocket costs and expenses of individual members of
the Creditors' Committee, accrued, but unpaid, as of December 1, 1997 (nothing
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contained herein shall prevent the Lender from objecting to the allowance of any
fees and expenses of such professionals); (ii) any Carve-Out Expenses; (iii)
court-approved adequate protection payments in the nature of prepayments or
substantially contemporaneous payments for goods and services provided to the
Borrower; and (iv) any other administrative expenses paid or incurred by the
Borrower in the ordinary course of business during the Chapter 11 Case.
Section 5. 3 GRANTS, RIGHTS AND REMEDIES CUMULATIVE. The liens and
security interests granted pursuant to Section 5.1(a) hereof and the Security
Documents and the administrative priority granted pursuant to Section 5.2 hereof
may be independently granted by the Facility Documents, the Interim Order, the
Bankruptcy Order and by other agreements hereafter entered into. This Agreement,
the other Facility Documents, the Interim Order, the Bankruptcy Order and such
other agreements hereinafter entered into supplement each other, and the grants,
priorities, rights and remedies of the Lenders hereunder and thereunder are
cumulative. If there is any conflict between the Security Documents on the one
hand and the Interim Order or Final Order on the other hand, the Interim Order
or Final Order shall be controlling.
Section 5. 4 NO FILINGS REQUIRED. The liens and security interests
referred to in Section 5.1(a) hereof and in the other Facility Documents shall
be deemed valid and perfected by entry of the Interim Order or the Bankruptcy
Order, as the case may be, whichever occurs first. The Lenders shall not be
required to file any financing statements, notices of lien, mortgages or similar
instruments in any jurisdiction or filing office, or to take possession of any
Collateral or to take any other action in order to validate or perfect the Liens
and security interests granted by or pursuant to this Agreement, the Interim
Order or the Bankruptcy Order, as the case may be, or any other Facility
Document. If any Lender shall, in its sole discretion, from time to time choose
to file such financing statements, notices of lien, mortgages or similar
instruments, take possession of any Collateral, or take any other action to
validate or perfect any such security interests or liens, all such documents
shall be deemed to have been filed or recorded at the time and on the date of
entry of the Interim Order or, if no Interim Order is obtained, the Bankruptcy
Order.
Section 5. 5 SURVIVAL. The liens, security interests, lien
priorities, administrative priorities and other rights and remedies granted to
the Lenders pursuant to this Agreement and the other Facility Documents
(specifically including but not limited to the existence, perfection and
priority of the Liens and security interests provided herein and therein, and
the administrative priority provided herein and therein) shall not be modified,
altered or impaired in any manner by any other financing or extension of credit
or incurrence of Debt by the Borrower (pursuant to Section 364 of the Bankruptcy
Code or otherwise), or by any dismissal or conversion of the Chapter 11 Case, or
the appointment of a chapter 11 or chapter 7 trustee, or, with respect to any
Loans then outstanding, any modification, amendment or reversal or stay of the
Interim Order or the Bankruptcy Order, as the case may be, or by any other act
or omission whatsoever. Without limitation, notwithstanding any such order,
financing, extension, incurrence, dismissal, conversion, act of omission:
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( a) except for the Carve-Out Expenses which shall have
priority over the Obligations, no costs or expenses of administration which have
been or may be incurred in the Chapter 11 Case or any conversion of the same or
in any other proceedings related thereto, and no priority claims, are or will be
prior to or on a parity with any claim of any Lender against the Borrower in
respect of any Obligation;
( b) the Liens and security interests in favor of the Lenders
set forth in Section 5.1(a) hereof and in the Facility Documents shall
constitute valid and perfected first priority Liens and security interests,
subject only to the Permitted Liens to which such Liens and security interests
hereunder shall be subordinate and junior, and shall be prior to all other Liens
and security interests, now existing or hereafter arising, in favor of any other
creditor or any other Person whatsoever; and
( c) the Liens and security interests in favor of the Lenders
set forth in Section 5.1(a) hereof and in the Facility Documents shall be valid
and perfected without the necessity that the Lender file financing statements,
notices of lien, mortgages or otherwise perfect its Liens and security interests
under applicable nonbankruptcy law except for such Collateral as is or may
hereafter be located outside of the territorial limits of the United States of
America to the extent that the same may not be subject to the jurisdiction of
the Bankruptcy Court.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6. 1 CONDITIONS PRECEDENT.
( a) TRANCHE A LOANS. The obligation of each Lender to make
Tranche A Loans available hereunder shall occur on the date (the "EFFECTIVE
DATE") on or before December 4, 1997 that each Lender shall have received each
of the following, in form and substance satisfactory to such Lender and its
counsel:
( i) the Notes duly executed by the Borrower;
( ii) the Security and Pledge Agreement duly executed by the Borrower together
with such financing statements executed by the Borrower which in the opinion of
any Lender are desirable to perfect the liens and security interest created
hereby and by the Security and Pledge Agreement;
( iii) the stock certificates evidencing the Pledged Stock, accompanied
by undated stock powers duly executed in blank;
( iv) evidence that either the Interim Order or the Bankruptcy Order, as the
case may be, shall have been entered by the Bankruptcy Court approving the
Commitments (or such lesser amount as shall be acceptable to the Lenders in
their sole discretion), and such order shall be in full force and effect and
shall not have been reversed, stayed, modified or amended;
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( v) a copy of the charter, as amended and in effect, of the Borrower certified
as of recent date by the Secretary of State of the State of Delaware, and a
certificate from such Secretary of State dated as of recent date as to the good
standing of and charter documents filed by the Borrower;
( vi) a certificate from the Secretary of the Borrower, dated the Effective
Date, certifying (A) that the attached are true and complete copies of the
by-laws of the Borrower as amended and in effect at all times from the date on
which the resolutions referred to in clause (B) were adopted to and including
the date of such certificate, (B) that attached thereto is a true and complete
copy of resolutions duly adopted by the Board of Directors of the Borrower
authorizing the execution, delivery and performance of this Agreement and the
other Facility Documents to which the Borrower is a party and the extensions of
credit hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that the charter of the Borrower
has not been amended since the date of the certification thereto furnished
pursuant to clause (v) above, and (D) as to the incumbency and specimen
signature of each officer of the Borrower executing the Facility Documents;
( vii) a certificate of another officer of the Borrower as to the
incumbency and specimen signature of the Secretary of the Borrower;
( viii) a certificate of a duly authorized officer of the Borrower, dated the
Effective Date, stating that (A) the representations and warranties in Article 7
of this Agreement and in the other Facility Documents are true and correct on
such date as though made on and as of such date, (B) no event has occurred and
is continuing which constitutes a Default or an Event of Default hereunder and
(C) no material adverse change in the assets, business, operations or financial
condition of the Borrower has occurred or become known since the Petition Date,
except as disclosed in writing by the Borrower to the Lender prior to the
Effective Date;
( ix) upon the entry of an Order, the liens and security interests in favor of
the Lender pursuant hereto and the Security and Pledge Agreement shall be valid
and perfected first priority Liens prior (except for Permitted Liens to which
such Liens and security interests are subordinate and junior) to all other Liens
in or on the collateral intended to be subject thereto;
( x) copies of all property insurance policies of the Borrower;
( xi) an opinion of Faegre & Benson LLP, as counsel to the Borrower, dated the
Effective Date, substantially in the form attached hereto as Exhibit E-1;
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( xii) an opinion of Nina A. Ortega, Assistant General Counsel of the
Borrower, dated the Effective Date, substantially in the form attached hereto
as Exhibit E-2;
( xiii) evidence that all fees, retainers and expenses required by this
Agreement to be paid on or before the Effective Date shall have been paid in
full (or will be upon the making of the Tranche A Loan hereunder); and
( xiv) such other approvals, opinions or documents as the Lender may
reasonably request.
( b) TRANCHE B LOANS. The obligation of Energy to make Tranche
B Loans available hereunder shall occur on the date on or after December 20,
1997 (or such earlier date as Energy in its sole discretion may determine by
waiving in writing all then-unsatisfied condition(s) contained in this Credit
Agreement) (the "SUBSEQUENT ADVANCE DATE") that Energy shall have received each
of the following, in form and substance satisfactory to Energy and its counsel:
( i) evidence that the Effective Date shall have occurred;
( ii) evidence that the Bankruptcy Order shall have become a Final Order;
( iii) evidence that the Plan of Reorganization and Disclosure Statement have
been filed with the Bankruptcy Court and made available to creditors of the
Borrower and [the Disclosure Statement submitted to the U.S. Trustee for
review];
( iv) evidence satisfactory to Tranche B Lender that the Borrower has made
significant progress with the Creditor's Committee and lessors of aircraft in
respect of support for the Plan of Reorganization;
( v) certificates from a duly authorized officer of the Borrower of the type
referred to in clause (a)(viii) above, dated the Subsequent Advance Date; and
( vi) the Budget;
( vii) Tranche B Lender shall otherwise be satisfied in all material respects
(in its sole discretion) with the results of its due diligence in respect of the
Borrower.
( viii) The Borrower shall have filed a motion requesting that the Bankruptcy
Court establish a Bar Date not later than January 16, 1998.
( ix) Evidence that the two vacancies on the Borrower's Board of Directors in
respect of Classes I and III of the Borrower's Board of Directors have been
filled by two persons designated to act as such by the Majority Lenders, if the
Majority Lenders so avail themselves of such right.
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Section 6. 2 ADDITIONAL CONDITIONS PRECEDENT. The obligation of
any Lender to make any Loan hereunder is subject to the further conditions
precedent that on the date of any Borrowing of a Loan the following statements
shall be true:
( a) the representations and warranties made by the Borrower
in Article 7 hereunder and in each of the other Facility Documents are true and
correct in all material respects on and as of the date of such Borrowing as
though made on and as of such date;
( b) No Default or Event of Default has occurred and is
continuing, or would result from such Borrowing;
( c) On the date of such Borrowing, the Interim Order or the
Bankruptcy Order, as the case may be, shall be in full force and effect and
shall not have been reversed, stayed, modified or amended. Unless the Lenders
shall have joined in or expressly consented in writing to the same, there shall
be no motion of the Borrower pending: (i) to reverse, modify or amend the
Interim Order or the Bankruptcy Order, as the case may be, or (ii) to permit any
administrative expense or unsecured claim against the Borrower, now existing or
hereafter arising, of any kind or nature whatsoever, to have administrative
priority equal or superior to the priority of the Lender in respect of the
Obligations, except for Carve-Out Expenses, or (iii) to grant or permit the
granting of a Lien on any property or assets of the Borrower;
( d) The aggregate unpaid principal amount of the Loans
shall not exceed, and after giving effect to the requested Borrowing will not
exceed, the Commitments then available; and
( e) The amount of the requested Borrowing shall not exceed
the amount by which the Borrower's anticipated expenses as set forth in the
Budget for the ten day period following the date of such notice exceeds the
Borrower's anticipated cash flow for such period, which, on and after the
Subsequent Advance Date, shall be in accordance with the Budget.
Section 6. 3 CERTIFICATION. Each notice of a Borrowing shall be
accompanied by a certificate of a duly authorized officer of the Borrower
certifying that the statements contained in Section 6.2 are true and correct
both on the date of such notice and, unless the Borrower otherwise notifies the
Lenders prior to such Borrowing, as of the date of such Borrowing.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that upon the occurrence
of the Effective Date:
Section 7. 1 INCORPORATION, GOOD STANDING AND DUE QUALIFICATION.
Each of the Borrower and its Subsidiaries (a) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization; (b) has the requisite corporate power and, except as disclosed in
Schedule III hereto, has all material governmental licenses, authorizations,
consents and approval necessary to own its assets and carry on the business in
which it is now engaged or proposed to be engaged; and (c) is duly qualified to
do business in all jurisdictions in which the nature of the business conducted
by the Borrower and its Subsidiaries makes such qualification necessary and
where failure to so qualify would have a material adverse effect on its
business, financial condition or operations.
Section 7. 2 CORPORATE POWER AND AUTHORITY; NO CONFLICTS. The
execution, delivery and performance by the Borrower of the Facility Documents to
which it is a party, the grant by the Borrower and the perfection of the
security interests purported to be granted in favor of the Lenders hereunder and
under the Security Documents, and the exercise by the Lenders of any rights and
remedies hereunder or under the other Facility Documents have been duly
authorized by all necessary corporate action and do not and will not: (a)
contravene any provision of its charter or bylaws; (b) violate any provision of,
or require any filing, registration, consent or approval under, any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Borrower or any of its
Subsidiaries or affiliates (other than entry of the Interim Order or the
Bankruptcy Order, as the case may be, and as otherwise provided under Section
10.3 hereof); (c) result in a breach of or constitute a default or require any
consent under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected which would not be cured by entry of the
Interim Order or Bankruptcy Order; (d) result in, or require, the creation or
imposition of any Lien (other than as provided hereunder and under the Security
Documents), upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower; or (e) cause the Borrower (or any Subsidiary or
affiliate, as the case may be, of the Borrower) to be in default under any such
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award or any such indenture, agreement, lease or instrument which would not
be cured by entry of the Interim Order and Bankruptcy Order.
Section 7. 3 LEGALLY ENFORCEABLE AGREEMENTS. Each Facility
Document to which the Borrower is a party is, or when delivered under this
Agreement will be, a legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms.
Section 7. 4 LITIGATION. Other than the Chapter 11 Case and the
chapter 11 case of Mountain Air, there are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened, against or affecting
the Borrower or any of its Subsidiaries or any of their respective properties
before any court, governmental agency or arbitrator, which may, in any one case
or in the aggregate, materially adversely affect the financial condition,
operations, properties or business of the Borrower or any such Subsidiary or the
ability of the Borrower to perform its obligations under the Facility Documents
to which it is a party.
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Section 7. 5 TRUE AND COMPLETE DISCLOSURE. No financial
statement, information, exhibit or report furnished by the Borrower to the
Lenders in connection with this Agreement, including the audited financial
statements of the Borrower for the fiscal year ended December 31, 1996,
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not materially
misleading. All written information furnished heretofore or hereafter by the
Borrower to the Lenders in connection with this Agreement or the other Facility
Documents and the transactions contemplated hereby and thereby were or will be
true, complete and accurate in every material respect, shall or will be prepared
in accordance with GAAP and do or will present fairly the financial condition of
the entities covered thereby and the results of operations ended thereby, or (in
the case of projections or pro forma financial information) based on reasonable
estimates, on the date as of which such information is stated or certified.
Since the Petition Date, there has been no material adverse change in the
condition (financial or otherwise), business, operations or prospects of the
Borrower or any of its Subsidiaries, except as disclosed in writing to the
Lenders prior to the date hereof.
Section 7. 6 OWNERSHIP AND LIENS. Each of the Borrower and its
Subsidiaries has title to, or valid leasehold interests in, all of its
properties and assets, real and personal, including the properties, assets and
leasehold interests reflected in the financial statements referred to in Section
7.5 hereof (other than any properties or assets disposed of in the ordinary
course of business), and none of the properties and assets owned by the Borrower
or any of its Subsidiaries and none of its leasehold interests is subject to any
Lien except as permitted under Section 9.2 of this Agreement.
Section 7. 7 TAXES. Except as disclosed in Schedule V hereto,
each of the Borrower and its Subsidiaries has filed all tax returns (federal,
state and local) required to be filed and has paid all taxes, assessments and
governmental charges and levies thereon to be due, including interest and
penalties.
Section 7. 8 ERISA. Neither the Borrower nor any ERISA
Affiliate maintains or has an obligation to contribute to any Plan or any
Multiemployer Plan. Neither Borrower nor any ERISA Affiliate nor any fiduciary
of any Plan which is not a Multiemployer Plan (i) has engaged in a nonexempt
prohibited transaction described in section 406 of ERISA or 4975 of the Code or
(ii) has taken or failed to take any action which would constitute or result in
a Termination Event which in each case would have a material adverse effect on
the condition (financial or otherwise), business, operation or prospects of the
Borrower or any of its Subsidiaries. Neither the Borrower nor any ERISA
Affiliate has engaged in a transaction within the meaning of Section 4069 of
ERISA which would have a material adverse effect on the condition (financial or
otherwise), business, operation or prospects of the Borrower or any of its
Subsidiaries. Neither the Borrower nor ERISA Affiliate has incurred any
liability to the PBGC which remains outstanding other than the payments of
premiums, and there are no premium payments which have become due which are
unpaid. Neither the Borrower nor any ERISA Affiliate has made a complete or
partial withdrawal under Section 4203 or 4205 of ERISA from a Multiemployer Plan
in either case which would have a material adverse effect on the condition
(financial or otherwise), business, operation or prospects of the Borrower or
any of its Subsidiaries. There are no pending, or to the knowledge of the
Borrower or any ERISA Affiliate, threatened claims, actions, proceedings or
lawsuits (other than claims for benefits in the normal course) asserted or
instituted against (i) any Plan or its assets, (ii) any fiduciary with respect
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to any Plan, or (iii) the Borrower or any ERISA Affiliate with respect to any
Plan.
Section 7. 9 SUBSIDIARIES. Schedule I hereto is a complete and
correct description of the name, jurisdiction of incorporation and ownership of
the outstanding capital stock of each Subsidiary of the Borrower or any of its
Subsidiaries and any Investments of the Borrower or any of its Subsidiaries in
existence on the date hereof. All shares of such stock owned by the Borrower or
one or more of its Subsidiaries, as indicated in such Schedule, are owned free
and clear of all liens, security interests and other charges and encumbrances.
Section 7. 10 CREDIT ARRANGEMENTS. Schedule II hereto contains a
complete and correct list of all material credit agreements, indentures,
purchase agreements, guaranties, Capital Lease Obligations and other
investments, agreements and arrangements providing for or relating to extensions
of credit (including agreements and arrangements for the issuance of letters of
credit or for acceptance financing) in respect of which the Borrower or any of
its Subsidiaries is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, and the amount
outstanding thereunder, are correctly stated, and all Liens of any nature given
or agreed to be given as security therefor are correctly described or indicated
in such Schedule.
Section 7. 11 LICENSES AND PERMITS. Except as disclosed in
Schedule III hereto, the Borrower and each of its Subsidiaries has obtained all
material licenses, permits, authorizations or other forms of permission which
under federal, state and local laws are necessary or advisable to operate its
businesses (including, without limitation, copyrights, trademarks, patents and
licenses to use tangible or intangible property and similar rights) in the
manner contemplated by the Borrower or such Subsidiary as of the date of this
Agreement, and neither the Borrower nor any of its Subsidiaries is in violation
of any valid rights of others with respect to any of the foregoing, other than
as of a result of the Chapter 11 Case and the chapter 11 case of Mountain Air.
Section 7. 12 NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS. The
Borrower has satisfied all judgments against it and neither the Borrower nor any
of its Subsidiaries is in default with respect to any judgment, writ,
injunction, decree, rule or regulation of any court, arbitrator or federal,
state, municipal or other governmental authority, commission, board, bureau,
agency or instrumentality, domestic or foreign, other than as of a result of the
Chapter 11 Case.
Section 7. 13 LABOR DISPUTES AND ACTS OF GOD. Neither the
business nor the properties of the Borrower or of any of its Subsidiaries have
been affected by any fire, explosion, accident, strike, lockout or other labor
dispute, storm, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), which has had or could have a
material adverse affect on the business, properties or operations of the
Borrower or any such Subsidiary.
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Section 7. 14 INSURANCE. The Borrower maintains with financially
sound and reputable insurers adequate insurance with respect to its property and
business and those of its Subsidiaries. Schedule IV hereto sets forth a list of
all insurance currently maintained by the Borrower and its Subsidiaries.
Section 7. 15 GOVERNMENTAL REGULATION. Neither the Borrower nor
any of its Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, the Investment Company Act of 1940, the Federal
Power Act or any statute or regulation limiting its ability to incur
indebtedness for money borrowed as contemplated hereby.
Section 7. 16 ADMINISTRATIVE PRIORITY; LIEN PRIORITY.
( a) The Obligations of the Borrower will constitute allowed
administrative expenses in the Chapter 11 Case having priority over all other
administrative expenses and unsecured claims against the Borrower, now existing
or hereafter arising, of any kind or nature whatsoever, including without
limitation all other administrative expenses of the kind specified in Sections
503(b), 506(c), 507(b) and 726(b) of the Bankruptcy Code, subject, as to
priority, only to Carve-Out Expenses.
( b) The Obligations of the Borrower will be secured by a
valid and perfected first Lien on and security interest in all of the
Collateral, subject only to the Permitted Liens to which such Liens and security
interests shall be junior and subordinate and, notwithstanding anything to the
contrary, further subject to and junior to the Carve-Out Expenses which shall be
paid from the proceeds of the Collateral in accordance with Section 5.8 of the
Security and Pledge Agreement.
Section 7. 17 BANKRUPTCY COURT ORDER. The Interim Order or the
Bankruptcy Order, as the case may be, is in full force and effect, and has not
been reversed, stayed, modified or amended.
Section 7. 18 LIENS ON AIRCRAFT LEASEHOLDS. The Liens set forth
on Schedule VI hereto in respect of Aircraft Leaseholds or the aircraft related
thereto are solely in the nature of protective filings, and do not secure any
obligations of the Borrower other than the Borrower's obligations under the
respective Aircraft Leasehold.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
So long as any Note shall remain unpaid, the Borrower shall:
Section 8. 1 MAINTENANCE OF EXISTENCE. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its corporate
existence and good standing in the jurisdiction of its organization, and qualify
and remain qualified, and cause each of its Subsidiaries to qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is required.
Section 8. 2 CONDUCT OF BUSINESS. (a) Continue, and cause each
of its Subsidiaries to continue, to engage in an efficient and economical manner
in a business of the same general type as conducted by it on the date of this
Agreement and (b) obtain, and cause each of its Subsidiaries to obtain, from
time to time all licenses, permits, authorizations or other forms of permission
which under federal, state and local laws are necessary or advisable for
operating and maintaining the conduct of the business of the Borrower and its
Subsidiaries (including, without limitation, copyrights, trademarks, patents and
licenses to use tangible or intangible property and similar rights.
Section 8. 3 MAINTENANCE OF PROPERTIES AND EXECUTORY CONTRACTS
AND LEASES. Maintain, keep and preserve, and cause each of its Subsidiaries to
maintain, keep and preserve, all of its properties (tangible and intangible)
including leased property, necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and all leases and executory contracts necessary or useful in the Borrower's or
any of such Subsidiaries' business or operations shall remain in full force and
effect, except to the extent otherwise consented to by the Majority Lenders.
Section 8. 4 MAINTENANCE OF RECORDS. Keep, and cause each of
its Subsidiaries to keep, adequate records and books of account, in which
complete entries will be made in accordance with GAAP, reflecting all financial
transactions of the Borrower and its Subsidiaries.
Section 8. 5 MAINTENANCE OF INSURANCE. Maintain, and cause each
of its Subsidiaries to maintain, insurance including insurance against bodily
injury and property damage with respect to the Collateral with financially sound
and reputable insurance companies or associations in such amounts and covering
such risks as are usually carried by companies engaged in the same or a similar
business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof. As soon as practicable following the
Effective Date and from time to time thereafter, the Borrower shall cause the
Lenders to be named as loss payee as their interests may appear under any such
insurance policies in effect from time to time.
Section 8. 6 COMPLIANCE WITH LAWS. Comply, and cause each of
its Subsidiaries to comply, in all respects with all applicable laws, rules,
regulations and orders, including and subject to the Bankruptcy Code, such
compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments and governmental charges imposed upon it or
upon its property.
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Section 8. 7 RIGHT OF INSPECTION. At any reasonable time and
from time to time, permit each Lender or any agent or representative thereof, to
examine and make copies and abstracts from the records and books of account of,
and visit the properties of, the Borrower and any of its Subsidiaries, and to
discuss the affairs, finances and accounts of the Borrower and any such
Subsidiary with any of their respective officers and directors and the
Borrower's independent accountants.
Section 8. 8 REPORTING REQUIREMENTS. Furnish to each Lender:
( a) (i) as soon as available and in any event within 60 days
after the end of each fiscal year of the Borrower, the following financial
statements and (ii) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, the following financial statements
accompanied by an opinion thereon acceptable to the Lender by an independent
accountant of national standing selected by the Borrower and acceptable to the
Lender: a consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such fiscal year and a consolidated income
statement and statement of cash flow and statement of changes in stockholders'
equity of the Borrower and its Consolidated Subsidiaries for such fiscal year,
all in reasonable detail and stating in comparative form the respective
consolidated figures for the corresponding date and period in the prior fiscal
year and all prepared in accordance with GAAP;
( b) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year of the
Borrower, a consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such quarter and a consolidated income statement
and statement of cash flow and statement of changes in stockholders' equity, of
the Borrower and its Consolidated Subsidiaries for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and stating in comparative form the respective consolidated
figures for the corresponding date and period in the previous fiscal year and
all prepared in accordance with GAAP and certified by a duly authorized officer
of the Borrower (subject to year-end adjustments);
( c) as soon as available and in any event within 30 days
after the end of each month of each fiscal year of the Borrower, a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such month and a consolidated income statement and statement of cash flow and
statement of changes in stockholders' equity, of the Borrower and its
Consolidated Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such month, all in reasonable detail and
stating in comparative form the respective consolidated figures for the
corresponding date and period in the previous fiscal year and all prepared in
accordance with GAAP and certified by a duly authorized officer of the Borrower
(subject to year-end adjustments);
( d) upon the reasonable request of the Lender, copies of all
consultants' reports, investment bankers' reports, accountants' management
letters, business plans and similar documents. The Borrower shall not be
obligated to provide copies of any documents which are subject to an evidentiary
privilege and as to which disclosure to any Lender would cause such privilege to
be waived, but if the Borrower claims that any document is so privileged, it
shall promptly provide the Lender with a letter describing the document and
stating the basis for such claim of privilege;
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( e) copies of all pleadings, motions, applications,
financial information and other papers and documents filed or received by the
Borrower in the Chapter 11 Case;
( f) promptly upon their becoming available, copies of all (i)
reports, financial statements or other information delivered by the Borrower to
its shareholders generally or to the members of any creditors' committee
appointed in the Chapter 11 Case, (ii) reports, proxy statements, financial
statements and other information generally distributed by the Borrower to its
creditors or the financial community in general and (iii) audit or other reports
submitted to the Borrower by independent accountants in connection with any
annual, interim or special audit of the Borrower;
( g) three days prior to the date to be filed with the
Bankruptcy Court, copies of any plan or plans of reorganization for the Borrower
(or amendments or modifications thereto) intended by the Borrower to be filed
with the Bankruptcy Court (other than the Plan of Reorganization); or
( h) promptly upon becoming aware of any Event of Default or
Default, notice thereof, together with a written statement of a senior officer
of the Borrower setting forth the details thereof and any action with respect
thereto taken or contemplated to be taken by the Borrower;
( i) promptly upon becoming aware thereof, notice of any event
which the Borrower believes in good faith is reasonably likely to have, or
actually has had, a material adverse effect on the condition (financial or
otherwise), business, operation or prospects of the Borrower or any of its
Subsidiaries;
( j) notice of all legal and arbitral proceedings, and of all
proceedings by or before any governmental or regulatory authority or agency, and
any material development in respect of such legal or other proceedings, against
or affecting the Borrower or any of its Subsidiaries, except proceedings in
which there is no reasonable likelihood that an adverse decision could occur
that might have a material adverse effect on the operations, business or
financial or other condition of the Borrower or any of its Subsidiaries; and
( k) such other information and in such form as any Lender
may reasonably request.
Section 8. 9 FURTHER ASSURANCES. Execute, acknowledge, deliver,
record, file, register, perform and do any and all such further acts, deeds,
conveyances, security agreements, assignments, estoppel certificates, financing
statements, assurances and other instruments as the Lender may reasonably
request from time to time in order (a) to carry out more effectively the
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purposes of this Agreement or any other Facility Document, (b) to subject to
valid and perfected first priority liens and security interests all Collateral
(subject, as to priority, to the Permitted Liens), (c) to perfect and maintain
the validity, effectiveness and priority of any of the Facility Documents and
the Liens and security interests intended to be created thereby, and (d) to
better assure, convey, grant, assign, transfer, preserve, protect and confirm
unto the Lender the rights granted or now or hereafter intended to be granted to
the Lender under any Facility Document. The assurances contemplated by this
Section 8.9 shall be given under applicable nonbankruptcy law as well as the
Bankruptcy Code, it being the intention of the parties that the Lender may
request assurances under applicable nonbankruptcy law, and such request shall be
complied with (if otherwise made in good faith by the Lender) whether or not the
Interim Order or the Bankruptcy Order is in force and whether or not dismissal
of the Chapter 11 Case or any other action by the Bankruptcy Court is imminent,
likely or threatened.
Section 8. 10 BOARD REPRESENTATION. (a) upon the Subsequent
Advance Date, at the Majority Lenders' request, cause its Board of Directors to
nominate two Persons designated by the Lenders to fill vacancies currently in
existence (or any future vacancy caused by any such nominated director ceasing
to be a director) as directors on the Borrower's Board of Directors in respect
of Classes I and III of the Borrower's outstanding capital stock and (b) on and
after the Subsequent Advance Date, to expand the Board of Directors by up to an
additional two seats in respect of Classes I and II of the Borrower's capital
stock to be filled, at the Majority Lenders option, by such persons designated
to act as such by the Majority Lenders.
ARTICLE IX
NEGATIVE COVENANTS
So long as any Note shall remain unpaid, the Borrower shall not:
Section 9. 1 DEBT. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist any
Debt, except (a) Debt of the Borrower under this Agreement and the Notes; and
(b) Debt of the Borrower existing as of the Petition Date.
Section 9. 2 LIENS. Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Lien, upon or with respect to any of its properties, now owned or hereafter
acquired, except:
( a) Liens provided for under the Security Documents;
( b) Liens existing on the Petition Date and identified on
Schedule VI hereto and any replacement liens related thereto granted in
accordance with an adequate protection order;
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( c) Liens for taxes or assessments or other government
charges or levies if not yet due and payable or if due and payable if they
are being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
( d) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than 30 days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
( e) Liens under workmen's compensation, unemployment
insurance, social security or similar legislation (other than ERISA);
( f) Liens or deposits, or pledges or liens granted to secure
the Borrower's obligations under letters of credit issued, to secure the
performance of bids, tenders, contracts (other than contracts for the payment of
money), leases (permitted under the terms of this Agreement), public or
statutory obligations, surety, stay, appeal, indemnity, performance or other
similar bonds, or other similar obligations arising in the ordinary course of
business;
( g) judgment and other similar Liens arising in connection
with court proceedings; PROVIDED that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings and for which appropriate
reserves have been established; and
( h) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use and enjoyment by the Borrower or any such Subsidiary of the
property or assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto.
Section 9. 3 FINAL BANKRUPTCY COURT ORDER; ADMINISTRATIVE
PRIORITY; LIEN PRIORITY; PAYMENT OF CLAIMS.
( a) Seek, consent to or suffer to exist any modification,
stay, vacation or amendment of the Interim Order or the Bankruptcy Order, as the
case may be, except for modifications and amendments agreed to by the Majority
Lenders, which shall not be unreasonably withheld.
( b) Seek, consent to or suffer to exist a priority for any
administrative expense or unsecured claim against the Borrower (now existing or
hereafter arising of any kind or nature whatsoever, including without limitation
any administrative expenses of the kind specified in Sections 503(b), 506(c),
507(b) and 726(b) of the Bankruptcy Code) equal or superior to the priority of
the Lender in respect of the Obligations, except for Carve-Out Expenses.
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( c) Suffer to exist any Lien on the Collateral having a
priority equal or superior to the Liens and security interests in favor of the
Lenders in respect of the Obligations, except for Permitted Liens.
( d) Prior to the date on which the Obligations have been paid
in full and the Commitments terminated, pay any administrative expense claims
except (i) administrative expense claims in respect of the fees and expenses of
professionals under Sections 330, 331 and 1103 of the Bankruptcy Code, including
without limitation the out-of-pocket costs and expenses of individual members of
the Creditors' Committee, accrued, but unpaid, as of December 1, 1997; (ii) any
Carve-Out Expenses; (iii) on or before the occurrence and continuation of a
Default or Event of Default hereunder, court-approved adequate protection
payments in the nature of prepayments or substantially contemporaneous payments
for goods and services provided to the Borrower; and (iv) any other
administrative expenses incurred in the ordinary course of business during the
Chapter 11 Case and, on or after the Subsequent Advance Date, in accordance with
the Budget. The Lenders' rights of recoupment or other rights of recovery, if
any, with respect to such payments shall be limited by Section 5.2 hereof.
Section 9. 4 DIVIDENDS. Declare or pay any dividends, purchase,
redeem, retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding, or make any distribution of assets to its stockholders as
such whether in cash, assets or in obligations of the Borrower, or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of any shares of its capital
stock, or make any other distribution by reduction of capital or otherwise in
respect of any of its shares of its capital stock or permit any of its
Subsidiaries to purchase or otherwise acquire for value any shares of its
capital stock or stock of the Borrower or another such Subsidiary.
Section 9. 5 MERGERS, ETC. Except for the sale of the COS
Terminal, merge or consolidate with, or sell, assign, lease or otherwise dispose
of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to,
any Person, or acquire all or substantially all of the assets or the business of
any Person (or enter into any agreement to do any of the foregoing), or permit
any of its Subsidiaries to do so, except that: (a) any such Subsidiary may merge
into or transfer assets to the Borrower and (b) any Subsidiary may merge into or
consolidate with or transfer assets to any other Subsidiary.
Section 9. 6 SALE OF ASSETS. Except for the sale of the COS
Terminal, convey, sell, lease, transfer or otherwise dispose of, or permit any
of its Subsidiaries to do the foregoing (other than to the Borrower), in one
transaction or a series of transactions, whether voluntarily or involuntarily,
any part of its business or property, whether now owned or hereafter acquired
except (a) property disposed of in the ordinary course of business and on
ordinary business terms, (b) (so long as no Default or Event of Default has
occurred and is continuing) the Disposition of assets or property no longer used
or useful in the conduct of its business, and (c) property disposed of in
accordance with, and as contemplated by, the Budget.
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Section 9. 7 LOCATION OF PROPERTIES. Acquire or maintain any
property constituting part of the Collateral outside the counties specified in
Annex 4 to the Security and Pledge Agreement, unless financing statements have
been previously filed under the Uniform Commercial Code in effect in the
jurisdiction wherein such property is located in all appropriate public offices
in such jurisdiction, naming the Borrower as debtor and the Lender as secured
party.
Section 9. 8 INVESTMENTS AND ACQUISITIONS. Make any Acquisition
or make or permit to remain outstanding any Investments, or permit any of its
Subsidiaries to do the foregoing, other than Permitted Investments.
Section 9. 9 OTHER PAYMENTS. Make any payment of principal or
interest or otherwise on account of any Debt or trade payable incurred by it
prior to the Petition Date, PROVIDED that such payments may be made: (i) to the
holders of, or in respect of, wage and employee benefit obligations (including
expense reimbursements) which arose prior to the Petition Date; (ii) for
ticket/baggage claims of the Borrower's customers; (iii) for fees and
commissions payable to travel agencies; (iv) for court-ordered adequate
protection payments; and (v) to lessors and non-debtor parties to executory
contracts in connection with the assumption of such leases and contracts under
Section 365 of the Bankruptcy Code or under Section 1110 of the Bankruptcy Code,
in each case, after the prior consent of such payment has been given by the
Majority Lender and, if necessary, approved by the Bankruptcy Court.
Section 9. 10 FISCAL YEAR. Permit its fiscal year to end on a
day other than December 31 (or if such day is not a Banking Day, the next
preceding Banking Day) or apply to the Bankruptcy Court for authority to do so.
Section 9. 11 PRESS RELEASES. Without the Majority Lenders prior
approval, (not to be in unreasonably withheld) issue any press release or
similar public announcement in which any Lender or any affiliate of such Lender
is mentioned, except as required by law or regulation or pursuant to an order of
any court, governmental authority or official.
ARTICLE X
EVENTS OF DEFAULT
Section 10. 1 EVENTS OF DEFAULT. Any of the following events
shall be an "Event of Default":
( a) the Borrower shall: (i) fail to pay the principal of
any Note as and when due and payable; or (ii) fail to pay interest on the Notes
or any fee or other amount due hereunder as and when due and payable and such
failure shall continue unremedied for three Banking Days; or
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( b) any representation or warranty made or deemed made by the
Borrower in this Agreement or in any other Facility Document to which it is a
party or which is contained in any certificate, document, opinion, financial or
other statement furnished at any time under or in connection with any Facility
Document shall prove to have been incorrect in any material respect on or as of
the date made or deemed made; or
( c) an order with respect to the Chapter 11 Case shall be
entered by the Bankruptcy Court, or the Borrower shall file an application for
an order with respect to the Chapter 11 Case (i) appointing a trustee in any
such Chapter 11 Case or (ii) appointing an examiner in the Chapter 11 Case with
the authority to perform the duties of a trustee (other than the duties solely
of an examiner) in respect of the estate of the Borrower or the operation of the
business of the Borrower; or
( d) an order with respect to the Chapter 11 Case shall be
entered by the Bankruptcy Court converting such Chapter 11 Case to a chapter 7
case; or
( e) an order shall be entered by the Bankruptcy Court
confirming a plan of reorganization in the Chapter 11 Case, or a plan of
reorganization shall be filed, which does not contain a provision for
termination of the Commitments and payment in full in cash of all Obligations of
the Borrower hereunder and under the other Facility Documents on or before the
effective date of such plan or which is not otherwise reasonably satisfactory in
all material respects to the Lender; or
( f) an order with respect to the Chapter 11 Case shall be
entered by the Bankruptcy Court without the express prior written consent of the
Lenders as provided herein, (i) to revoke, reverse, stay, modify, supplement or
amend the Interim Order or the Bankruptcy Order or any of the Facility
Documents, (ii) approving the incurrence by the Borrower of any Debt not
contemplated hereunder, (iii) to permit any administrative expense or any claim
(now existing or hereafter arising, of any kind or nature whatsoever) to have
administrative priority equal or superior to the priority of the Lender in
respect of the Obligations, except for Carve-Out Expenses, (iv) to grant or
permit the grant of a Lien other than Liens permitted by Section 9.2(b) on the
Collateral or (v) which terminates or results in the rejection of any material
lease, including any Aircraft Leasehold, or executory contract used or useful in
the operation of the Borrower's business or operations; or
( g) an order shall be entered by the Bankruptcy Court that
is not stayed pending appeal granting relief from the automatic stay to any
creditor of the Borrower with respect to any claim secured by any asset or
assets of the Borrower having book value equal to or exceeding $100,000 in the
aggregate (other than the order granting relief to KG Leasing, Inc., dated
November 21, 1997); PROVIDED, HOWEVER, that it shall not be an Event of Default
if relief from the automatic stay is lifted solely for the purpose of allowing
such creditor to determine the liquidated amount of its claim against the
Borrower; or
( h) an application for any of the orders described in
clauses (c), (d), (e), (f) or (g) above shall be made (x) by a Person other than
the Borrower and such application is not contested by the Borrower in good faith
or the relief requested is granted in an order that is not stayed pending appeal
or (y) by the Borrower; or
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( i) any judgment or order shall be entered against the
Borrower or any of its Subsidiaries or any other event shall occur or condition
exist which does or could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), business, operation or
prospects of the Borrower or any of its Subsidiaries, and there shall be a
period of ten consecutive days during which a stay or enforcement of such
judgment or order shall not be in effect.
( j) the Security Documents shall at any time after its
execution and delivery and for any reason cease: (A) to create a valid and
perfected security interest and Lien in and to the property purported to be
subject thereto having the priority specified in the Security Documents; or (B)
to be in full force and effect or shall be declared null and void, or the
validity or enforceability thereof shall be contested by the Borrower, or the
Borrower shall deny it has any further liability or obligation under any such
agreement, or the Borrower shall fail to perform any of its obligations
thereunder; or
( k) any material license, permit or other authorization by
any federal, state or local government or any lease relating to the Collateral
which, in each case, is necessary for the use or operation (whether or not
leased or owned by the Borrower or any of its Subsidiaries on the date hereof)
in the conduct of the businesses engaged in by the Borrower or any Subsidiary on
the date hereof shall be revoked or canceled or otherwise terminated; or
( l) a party-in-interest shall file a competing plan of
reorganization; or
( m) any Termination Event with respect to a Plan shall have
occurred, and, 30 days after notice thereof shall have been given to the
Borrower by the Lender, (i) such Termination Event (if correctable) shall not
have been corrected and (ii) the then Unfunded Vested Liabilities of such Plan
exceed $100,000 (or in the case of a Termination Event involving the withdrawal
of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the
withdrawing employer's proportionate share of such excess shall exceed such
amount), or the Borrower or any member of the Controlled Group as employer under
a Multiemployer Plan shall have made a complete or partial withdrawal from such
Multiemployer Plan and the Plan sponsor of such Multiemployer Plan shall have
notified such withdrawing employer that such employer has incurred a withdrawal
liability in an amount exceeding $100,000; or
( n) the Borrower shall: (i) fail to perform or observe in
any material respect any other term, covenant or agreement on its part to be
performed or observed in any business Facility Document and such failure shall
continue unremedied for 5 Banking Days after notice thereof; or (ii) fail to
comply in any material respect with any of the terms or provisions of the
Interim Order or the Bankruptcy Order.
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Section 10. 2 CONSEQUENCES OF AN EVENT OF DEFAULT. If an Event of
Default shall occur and so long as it shall continue, the Majority Lenders may
give five days' written notice to the Borrower of such Event of Default, if
after five business days the Borrower does not cure such default, Majority
Lenders may,
( a) declare the Commitments terminated, whereupon the
Commitments will terminate immediately and any fees hereunder shall be
immediately due and payable without further order of or application to the
Bankruptcy Court, presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived, and an action therefor shall
immediately accrue; or
( b) declare the unpaid principal amount of the Notes,
interest accrued thereon, and all other amounts owing by the Borrower hereunder
or under the Notes to be immediately due and payable without further order of or
application to the Bankruptcy Court, presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue.
Section 10. 3 CERTAIN REMEDIES.
( a) If an Event of Default has occurred and is continuing,
the Majority Lenders may, on five Banking Days' prior written notice to the
Borrower and any creditors' committee appointed in the Chapter 11 Case, exercise
all rights and remedies which the Lenders may have hereunder or under any other
Facility Document, the Interim Order, the Bankruptcy Order or at law (including
but not limited to the Bankruptcy Code and the Uniform Commercial Code) or in
equity or otherwise, without regard to the automatic stay provided for in
Section 362 of the Bankruptcy Code with respect to the Borrower or any of its
property. Within such five Banking Days, the Borrower or any other
party-in-interest may seek a hearing before the Bankruptcy Court on the sole
issue of whether an Event of Default has, in fact, occurred, and the Lender
shall refrain from enforcing any of its remedies hereunder until the Bankruptcy
Court has ruled in respect thereof or an agreement has otherwise been reached.
Unless the Bankruptcy Court shall order that no Event of Default has occurred,
the automatic stay under Section 362 of the Bankruptcy Code shall be vacated
with respect to the Collateral, and the Lenders shall be free to exercise all of
their rights with respect to the Collateral, subject to the rights of the
holders of Permitted Liens, without further approval of the Bankruptcy Court.
All proceeds in respect thereof shall be applied by the Lender in accordance
with Section 5.8 of the Security and Pledge Agreement, and the Borrower shall
remain liable for any deficiencies.
( b) If an Event of Default has occurred and is continuing,
the Lenders shall have the following rights:
( i) to direct the Borrower to assume and assign any Aircraft Leasehold to an
assignee designated by the Lenders pursuant to Section 365(f) of the Bankruptcy
Code;
( ii) to direct the Borrower to seek any consent (other than the consent of the
lessor) necessary to the assumption and assignment or the of any Aircraft
Leasehold; and
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( iii) to collect any proceeds payable to the Borrower as a result of any
disposition of the Aircraft Leasehold, including but not limited to any
consideration payable by the assignees to the Borrower for the right to obtain
the assignment or any reimbursement to the Borrower of security deposits or
maintenance reserves resulting from the assignee's assumption and performance of
the obligation to pay such deposits or reserves.
( c) Notwithstanding anything herein to the contrary, neither
the Borrower nor any of its successors and assigns, including any chapter 11 or
chapter 7 trustee for the Borrower, and regardless of whether an Event of
Default has occurred and is continuing shall have the right to reject or
terminate any Aircraft Leasehold under Section 365(d) of the Bankruptcy Code or
otherwise without the express written consent of the Majority Lenders.
( d) All proceeds received in connection with the assumption
and assignment of any executory contract or lease, including any Aircraft
Leasehold, shall be proceeds of the Collateral and immediately remitted to the
Lenders to be applied to reduce the principal of the Loans then outstanding, or
if an Event of Default shall have occurred and be continuing, in accordance with
Section 5.8 of the Security and Pledge Agreement.
( e) All such remedies shall be cumulative and not exclusive
and shall not be effected by the appointment of a chapter 7 or chapter 11
trustee of the Borrower. No failure on the part of any Lender to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof or
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
ARTICLE XI
MISCELLANEOUS
Section 11. 1 AMENDMENTS AND WAIVERS. Subject to Court approval,
the Borrower and the Majority Lenders may from time to time enter into
agreements amending, modifying or supplementing this Agreement, the Notes or any
other Facility Documents, and the Majority Lenders may from time to time grant
waivers or consents to a departure from the due performance of the obligations
of the Borrower hereunder or thereunder. Any such agreement, waiver or consent
must be in writing and shall be effective only to the extent specifically set
forth in such writing. In the case of any such waiver or consent relating to any
provision hereof, any Event of Default so waived or consented to shall be deemed
to be cured and not continuing, but no such waiver or consent shall extend to
any other or subsequent Event of Default or impair any right consequent thereto.
Section 11. 2 BINDING EFFECT. This Agreement shall be binding
upon and inure to the benefit of the Lenders, the Borrower and their respective
successors and assigns (including, except for the right to request Loans, any
trustee succeeding to the rights of the Borrower or pursuant to any conversion
to a case under chapter 7 of the Bankruptcy Code).
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Section 11. 3 THE LENDER AS PARTY IN INTEREST. The Borrower
hereby stipulates and agrees that each Lender is and shall remain a party in
interest in the Chapter 11 Case and shall have the right to participate, object
and be heard in any motion or proceeding relating to this Agreement and the
other Facility Documents, the transaction contemplated hereby and thereby and
the rights and remedies afforded the Lenders' hereunder (including but not
limited to objections to use of proceeds of the Loans, to the payment of
professional fees and expenses or the amount thereof, to sales or other
transactions outside the ordinary course of business or to assumption or
rejection of any executory contract or lease).
Section 11. 4 EXPENSES AND INDEMNITIES.
( a) The Borrower shall reimburse each Lender on demand for
all reasonable costs, expenses, and charges (including, without limitation, fees
and charges of external legal counsel for such Lender) incurred by such Lender
in connection with (i) the negotiation, preparation, performance or enforcement
of this Agreement, any term sheet or commitment letter related thereto, the
Notes and the other Facility Documents, (ii) the Plan of Reorganization, or any
other plan of reorganization for the Borrower, and any exit financing
contemplated to be provided by the Lenders thereunder or (iii) the Chapter 11
Case generally. On or before the Effective Date, the Borrower shall deliver to
the Lenders a "stay-ahead" retainer in the amount of $100,000 to be applied
toward the fees and expenses incurred by the Lenders in accordance with the
preceding sentence. The Lenders shall provide the Bankruptcy Court, the
Borrower, the United States Trustee and the Creditors' Committee with periodic
statements (as frequently as monthly) showing the nature, amount and any balance
due in respect of any such fees and expenses incurred by the Lenders in
accordance herewith. The balance of any such fees and expenses shall be paid by
the Borrower within thirty days after receipt unless a party in interest shall
have filed a formal objection thereto with the Bankruptcy Court within such
thirty day period. Thereafter, if the parties are unable to reach agreement in
respect thereof, a hearing before the Bankruptcy Court solely on the issue of
the reasonableness of such fees and expenses will be held.
( b) The Borrower agrees to indemnify each Lender and its
directors, officers, employees, representatives, attorneys and agents from, and
hold each of them harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to any actual or
proposed use by the Borrower or any Subsidiary of the proceeds of the Loans, or
its role in the Chapter 11 Case, including without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation or litigation or other proceedings (but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).
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( c) The obligations of the Borrower under this Section 11.4
shall survive the repayment of the Obligations and the termination of the
Commitments.
Section 11. 5 ASSIGNMENT: PARTICIPATION. This Agreement shall be
binding upon, and shall inure to the benefit of, the Borrower and the Lenders
and their respective successors and assigns including any chapter 11 or chapter
7 trustee for the Borrower, except that the Borrower may not assign or transfer
its rights or obligations hereunder. Each Lender may assign to an entity
reasonably capable of fulfilling Lenders' obligation hereunder, or sell
participations in, all or any part of the Obligations (including all or a
portion of its Commitment) owing to such Lender to another Lender, an affiliate
of either Lender or another financially sound entity, in which event (a) in the
case of an assignment, upon notice thereof by the relevant Lender to the
Borrower, the assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights, benefits and obligations as it
would have if it were the relevant Lender hereunder; and (b) in the case of a
participation, the participant shall have no rights under the Facility
Documents. The agreement executed by the relevant Lender in favor of the
participant shall not give the participant the right to require such Lender to
take or omit to take any action hereunder except action directly relating to (i)
the extension of a payment date with respect to any portion of the principal of
or interest on any amount outstanding hereunder allocated to such participant,
(ii) the reduction of the principal amount outstanding hereunder or (iii) the
reduction of the rate of interest payable on such amount or any amount of fees
payable hereunder to a rate or amount, as the case may be, below that which the
participant is entitled to receive under its agreement with the relevant Lender.
Each Lender may furnish any information concerning the Borrower in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); PROVIDED that such Lender
shall require any such prospective assignee or such participant (prospective or
otherwise) to agree in writing to maintain the confidentiality of such
information.
Section 11. 6 NOTICES. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, and except as
otherwise provided in this Agreement, notices shall be given to the Lenders and
to the Borrower by telex or telecopier or by overnight courier or by personal
delivery addressed to such party at its address on the signature page of this
Agreement. Except as otherwise provided in this Agreement, all such
communication shall be deemed to have been given when transmitted by telex or
telecopy or personally delivered or, in the case of overnight courier, upon
receipt.
Section 11. 7 TABLE OF CONTENTS; HEADINGS. Any table of contents
and the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.
Section 11. 8 SEVERABILITY. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
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Section 11. 9 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any party hereto may execute this Agreement by signing
any such counterpart.
Section 11. 10 INTEGRATION. The Facility Documents set forth the
entire agreement between the parties hereto relating to the transactions
contemplated thereby and supersede any prior oral or written statements or
agreements with respect to such transactions.
Section 11. 11 GOVERNING LAW.This Agreement shall be governed by,
and interpreted and construed in accordance with, the internal laws of the State
of New York, except to the extent governed by the Bankruptcy Code.
Section 11. 12 WAIVER OF JURY TRIAL. BY ITS EXECUTION AND DELIVERY
OF THIS AGREEMENT THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY,
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
AGAINST ANY LENDER, ANY PARTICIPANT, ASSIGNEE OR INDEMNIFIED PARTY, BASED HEREON
OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY
OTHER FACILITY DOCUMENT, ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY LENDER OR THE BORROWER IN CONNECTION HEREWITH OR
THEREWITH. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH LENDER TO ENTER INTO
THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WESTERN PACIFIC AIRLINES, INC.
By: ___________________________________
Title: ___________________________________
Address for Notices:
2863 S. Circle Drive, Suite 1100
Colorado Springs, CO 80906
ATTN: Greg Buhler
Telephone: (719) 527-7106
Telecopy No.: (719) 527-7481
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ENERGY MANAGEMENT CORPORATION
By: ___________________________________
Title: ___________________________________
Address for Notices:
c/o Smith Management Company
885 Third Avenue
New York, NY 10022
ATTN: David Persing
Telephone: (212) 888-5500
Telecopy No.: (212) 751-9502
SUNDANCE VENTURE PARTNERS, L.P. II.
By: ANDERSON & WELLS COMPANY,
as general partner
By: ___________________________________
Title: ___________________________________
Address for Notices:
c/o Anderson & Wells Company
1 Arizona Center
400 E. Van Buren, Suite 750
Pheonix, AZ 85004
ATTN: Gregory S. Anderson
Telephone: (602) 252-3441
Telecopy No.: (602) 252-1450
38
<PAGE>
SECURITY AND PLEDGE AGREEMENT
dated as of December 3, 1997
among
WESTERN PACIFIC AIRLINES, INC., as
Debtor and Debtor-in Possession
and
ENERGY MANAGEMENT CORPORATION
and
SUNDANCE VENTURE PARTNERS, L.P. II,
as Lenders
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.......................................................3
Section 1.1 DEFINITIONS...................................................3
ARTICLE II COLLATERAL.......................................................6
Section 2.1 SECURITY INTEREST IN THE COLLATERAL...........................6
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................9
Section 3.1 REPRESENTATIONS AND WARRANTIES................................9
ARTICLE IV CASH PROCEEDS OF COLLATERAL.....................................11
Section 4.1 COLLATERAL ACCOUNT...........................................11
Section 4.2 PROCEEDS OF ACCOUNTS.........................................11
ARTICLE V FURTHER ASSURANCES; REMEDIES.....................................11
Section 5.1 FURTHER ASSURANCES; REMEDIES.................................11
Section 5.2 DELIVERY AND OTHER PERFECTION................................11
Section 5.3 PRESERVATION OF RIGHTS.......................................12
Section 5.4 SPECIAL PROVISIONS RELATING TO CERTAIN COLLATERAL............12
Section 5.5 EVENTS OF DEFAULT, ETC.......................................13
Section 5.6 DEFICIENCY...................................................15
Section 5.7 REMOVALS, ETC................................................15
Section 5.8 APPLICATION OF PROCEEDS......................................15
Section 5.9 ATTORNEY-IN-FACT.............................................16
Section 5.10 PERFECTION..................................................16
Section 5.11 TERMINATION.................................................16
Section 5.12 EXPENSES AND INDEMNITIES....................................16
Section 5.13 FURTHER ASSURANCES..........................................17
Section 5.14 RELEASES.....................................................17
Section 5.15 OTHER FINANCING STATEMENTS AND LIENS.........................17
ARTICLE VI MISCELLANEOUS...................................................17
Section 6.1 NO WAIVER....................................................17
Section 6.2 NOTICES......................................................17
Section 6.3 AMENDMENTS, ETC..............................................18
Section 6.4 SUCCESSORS AND ASSIGNS.......................................18
Section 6.5 CAPTIONS.....................................................18
Section 6.6 COUNTERPARTS.................................................18
Section 6.7 GOVERNING LAW................................................18
Section 6.8 SEVERABILITY.................................................18
ANNEXES
Annex 1.....Pledged Stock
Annex 2.....Aircraft Leasehold Interests
Annex 3.....Aircraft Order Positions
Annex 4.....Locations
Annex 5.....List of Copyrights
Annex 6.....List of Patents
Annex 7.....List of Trade Names
<PAGE>
SECURITY AND PLEDGE AGREEMENT
SECURITY AND PLEDGE AGREEMENT, dated as of December 3, 1997 by and
among WESTERN PACIFIC AIRLINES, INC., (the "BORROWER"), a Delaware corporation
and a debtor and debtor-in-possession, ENERGY MANAGEMENT CORPORATION, a Colorado
corporation, and SUNDANCE VENTURE PARTNERS, L.P. II, a Delaware limited
partnership (each, a "LENDER" and collectively, the "LENDERS").
W I T N E S S E T H :
WHEREAS, the Borrower and the Lenders have entered into a Credit
Agreement (as amended and in effect from time to time, the "Credit Agreement"),
dated as of December 3, 1997, pursuant to which the Lenders have agreed to
provide the Borrower with a $30,000,000 multiple draw term loan facility, and
upon the terms and subject to the conditions set forth therein, the Lenders have
agreed to provide such facility;
WHEREAS, it is a condition precedent to the effectiveness of the
Credit Agreement that the Borrower shall have executed and delivered to the
Lenders a Security and Pledge Agreement in substantially the form hereof;
NOW THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make the Loans, the Borrower hereby
agrees as follows:
ARTICLE I
DEFINITIONS
Section 1. 1 DEFINITIONS. All terms used in this Agreement that are
not otherwise defined shall have the meanings assigned to such terms in the
Credit Agreement. As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of the terms defined:
"ACCOUNTS" shall have the meaning assigned to that term in Section
2.1(h) hereof.
"AGREEMENT" shall mean this Security and Pledge Agreement, as the same
may be modified, supplemented or amended from time to time in accordance with
its terms.
"AIRCRAFT LEASEHOLDS" shall mean all leases or other agreements under
which the Borrower holds a leasehold interest in aircraft.
"AIRCRAFT ORDER POSITION" shall mean any firm commitment or option
entered into by the Borrower to purchase Flight Equipment from one or more
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manufacturers, including the position the Borrower holds for delivery of such
Flight Equipment VIS A VIS other Persons that also hold delivery positions for
Flight Equipment of the same type.
"COLLATERAL" shall have the meaning assigned to that term under
Section 2.1 hereof.
"COLLATERAL ACCOUNT" shall have the meaning assigned to that term in
Section 4.1 hereof.
"CONTRACTS" shall mean all contracts and leases between the Borrower
and one or more additional parties including, but not limited to, Aircraft Order
Positions and contracts, if any, for the sale, lease or other disposition by the
Borrower or of any of its property.
"CONTRACT RIGHTS" shall mean all rights of the Borrower under each
Contract (including, without limitation, (i) all right to receive moneys due or
to become due under or pursuant to all Contracts, (ii) all rights to terminate,
and to perform under, all Contracts, compel performance and otherwise exercise
all remedies under all Contracts, including, but not limited to, rights to
indemnification, and (iii) all rights to any payments, distributions or proceeds
the Borrower from time to time in connection with, or with respect to, the
Borrower's interest in any Person or any partnership or joint venture agreement
to which the Borrower is or may hereafter be a party).
"COPYRIGHTS" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation, all
renewals and extensions thereof, the right to recover for all past, present and
future infringements thereof, and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto.
"DOCUMENTS" shall have the meaning assigned to that term in Section
2.1(n) hereof.
"EQUIPMENT" shall have the meaning assigned to that term under Section
2.1(l) hereof.
"FLIGHT EQUIPMENT" shall mean any aircraft, aircraft engine, aircraft
simulator or Spare Parts for the foregoing.
"GATES" shall mean all of the rights, title, interests and privileges
of the Borrower in all airline passenger ground facilities at airports,
including, without limitation, gates, associated passenger loading bridges,
baggage handling and sortation equipment, baggage conveyors, ticket and service
counters and associated back office space.
"GOVERNMENTAL AUTHORITY" shall mean (i) any government or political
subdivision thereof, whether foreign or domestic, national, state, county,
municipal or regional or any other government authority, (ii) any agency or
other instrumentality of any such government, political subdivision or other
governmental entity (including any central bank or comparable agency), (iii) any
court, arbitral tribunal or arbitrator and (iv) any non-governmental regulating
body, to the extent that the rules, regulations or orders of such body have the
force of law.
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<PAGE>
"INTELLECTUAL PROPERTY" shall mean, collectively, all Copyrights, all
Patents and all Trademarks, together with (a) all inventions, processes,
production methods, proprietary information, know-how and trade secrets; (b) all
licenses or user or other agreements granted to the Borrower with respect to any
of the foregoing, in each case whether now or hereafter owned or used; (c) all
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, computer and automatic machinery
software and programs; (e) all accounting information and all media in which or
on which any information or knowledge or data or records may be recorded or
stored and all computer programs used for the compilation or printout of such
information, knowledge, records or data; (f) all licenses, consents, permits,
variances, certifications and approvals of governmental agencies now or
hereafter held by the Borrower; and (g) all causes of action, claims and
warranties now or hereafter owned or acquired by the Borrower in respect of any
of the items listed above.
"ISSUERS" shall mean, collectively, the Subsidiaries of the Borrower
identified on Annex 1 hereto under the caption "ISSUER" and any other
corporation that is or becomes a Subsidiary of the Borrower at any time on or
after the date of this Agreement.
"INSTRUMENTS" shall have the meaning assigned to that term in Section
2.1(i) hereof.
"INVENTORY" shall have the meaning assigned to such term in Section
2.1(j) hereof.
"MOTOR VEHICLES" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership, having a fair market value in excess of
[$40,000].
"PATENTS" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties, damages and
payments now or hereafter due and/or payable under and with respect thereto,
including, without limitation, damages and payments for past or future
infringements thereof, the right to sue for past, present and future
infringements thereof, and all rights corresponding thereto throughout the
world.
"PLEDGED STOCK" shall have the meaning assigned to such term in
Section 2.1(a) hereof.
"ROUTES" shall mean all of the rights, title, interests and privileges
held by the Borrower or its Subsidiaries in the international route authorities
issued to the Borrower or any of its Subsidiaries by the United States
Department of Transportation, a similar regulatory authority established in
replacement thereof, or a predecessor agency.
"SPARE PARTS" shall mean all "spare parts," as defined in the Federal
Aviation Act of 1958.
"STOCK COLLATERAL" shall have the meaning assigned to such term in
Section 2.1(a) hereof.
"TRADEMARKS" shall mean all trade names, trademarks and service marks,
logos, trademark and service mark registrations, and applications for trademark
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<PAGE>
and service mark registrations, including, without limitation, all renewals of
trademark and service mark registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service mark.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the State of New York.
ARTICLE II
COLLATERAL
Section 2. 1 SECURITY INTEREST IN THE COLLATERAL. As collateral
security for the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations, the Borrower hereby pledges,
grants and assigns to the Lenders a lien and security interest in all right,
title and interest of the Borrower in the following property, whether now owned
by the Borrower or hereafter acquired, and whether now existing or hereafter
coming into existence (all being collectively referred to herein as
"COLLATERAL"):
( a) the shares of capital stock of each Issuer represented by
the certificates identified in Annex 1 hereto and all other shares of capital
stock of whatever class of each Issuer, now or hereafter owned by the Borrower,
in each case, together with the certificates representing the same
(collectively, the "Pledged Stock");
( b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or return
of capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the Pledged Stock
or otherwise received in exchange therefor, and any subscription warrants,
rights or options issued to the holders of, or otherwise in respect of, the
Pledged Stock;
4
<PAGE>
( c) without affecting the obligations of the Borrower under any
provision prohibiting such action hereunder or under the Credit Agreement, in
the event of any consolidation or merger in which an Issuer is not the surviving
business entity, all shares of each class of the capital stock of the successor
business entity (unless such successor business entity is the Borrower) formed
by or resulting from such consolidation or merger (the Pledged Stock, together
with all other certificates, shares, securities, properties or moneys as may
from time to time be pledged hereunder pursuant to clause (a) or (b) above and
this clause (c) being herein collectively called the "Stock Collateral");
( d) proceeds of any kind resulting from any disposition of any
Aircraft Leasehold, including proceeds in respect of any assumption and
assignment of any Aircraft Leasehold, and including but not limited to any
consideration payable by assignees to the Borrower for the right to obtain the
assignment or any reimbursement to the Borrower of security deposits or
maintenance reserves resulting from the assignee's assumption and performance of
the obligation to pay such deposits or reserves;
( e) all Routes;
( f) all Gates;
( g) all Aircraft Order Positions;
( h) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Borrower constituting any right to the payment
of money, including (but not limited to) all moneys due and to become due to the
Borrower in respect of any loans or advances or for Inventory or Equipment or
other goods sold or leased or for services rendered, all moneys due and to
become due to the Borrower under any guarantee (including a letter of credit) of
the purchase price of Inventory or Equipment sold by the Borrower and all tax
refunds (such accounts, general intangibles and moneys due and to become due
being herein called collectively "Accounts");
( i) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Borrower evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances
(herein collectively called "INSTRUMENTS");
( j) all inventory (as defined in the Uniform Commercial Code) of
the Borrower, including Motor Vehicles held by the Borrower for lease (including
lease to Subsidiaries of the Borrower), fuel, tires and other spare parts,
including Spare Parts, all goods obtained by the Borrower in exchange for such
inventory, and any products made or processed from such inventory including all
substances, if any, commingled therewith or added thereto (herein collectively
called "INVENTORY");
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( k) all other accounts or general intangibles of the Borrower
not constituting Accounts;
( l) all equipment (as defined in the Uniform Commercial Code) of
the Borrower, including all Flight Equipment and all Motor Vehicles (herein
collectively called "EQUIPMENT");
( m) each contract and other agreement of the Borrower relating
to the sale or other disposition of Inventory or Equipment;
( n) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of the Borrower covering, evidencing or representing
Inventory or Equipment (herein collectively called "DOCUMENTS");
( o) all rights, claims and benefits of the Borrower against any
Person arising out of, relating to or in connection with Inventory or Equipment
purchased by the Borrower, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such Inventory or
Equipment;
( p) all Contracts, together with all Contract Rights;
( q) the balance from time to time in the Collateral Account;
( r) all Intellectual Property, other than non-assignable rights
owned by the Borrower or any of its Subsidiaries under licenses whose ownership
is solely incidental to the commercial activities of the Borrower and its
Subsidiaries;
( s) any Avoidance Actions;
( t) all other property of the Borrower's estate (within the
meaning of the Bankruptcy Code), including all rights of payment arising
pursuant to the provisions of the Bankruptcy Code; and
( u) all other tangible and intangible personal property and
fixtures of the Borrower, including, without limitation, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of the Borrower described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by the Borrower in respect of any of the items listed above) and,
to the extent related to any property described in said clauses or such
proceeds, products and accessions, all books, correspondence, credit files,
records, invoices and other papers, including without limitation all tapes,
cards, computer runs and other papers and documents in the possession or under
the control of the Borrower or any computer bureau or service company from time
6
<PAGE>
to time acting for the Borrower; but excluding any right, title and interest of
the Borrower in, to or under any Collateral (the "EXCLUDED PROPERTY") to the
extent the security interest created hereby or an assignment as security of all
or part of the Borrower's right, title or interest in, to or under such Excluded
Property would breach, violate or cause a default (which would not be excused or
permissible under the relevant provisions of the Bankruptcy Code or by entry of
the Final Order or Interim Order, as the case may be) under any Contract,
Instrument or Aircraft Leasehold to which the Borrower is a party or by which it
is bound relating to such Excluded Property (it being understood, however, that
the proceeds of Excluded Property shall not be excluded from the Collateral).
Without limiting the Borrower's obligations under the Credit Agreement with
respect to such matters, the foregoing grant of a security interest in and of
itself shall not be deemed (i) to constitute, require or prevent the assumption
of any obligation in the Chapter 11 Case or (ii) to prohibit the rejection of
any obligation in the Chapter 11 Case. Anything herein contained to the contrary
notwithstanding, the Borrower shall remain liable under any agreements,
Contracts, Instruments or Aircraft Leaseholds referred to in this Section 2 and
to perform all of its respective obligations thereunder, all in accordance with
the respective terms and provisions thereof, but subject to the relevant
provisions of the Bankruptcy Code, and the Lenders shall have no obligation or
liability under any of the aforementioned agreement by reason of or arising out
of the foregoing grant, nor shall any Lender be required or obligated in any
manner to perform or fulfill any obligation of the Borrower pursuant thereto, or
to make any payment, or to present or file any claim, or to take any action to
collect or enforce the payment of any amounts which may have been assigned to
Lender or to which it may be entitled at any time. However, the Majority Lenders
shall, at their option, have the right, but not the obligation, to cure any
defaults under any such agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3. 1 REPRESENTATIONS AND WARRANTIES. The Borrower represents
and warrants to the Lenders as of the date hereof as follows:
( a) The Borrower is (or will be at the time the Lien created
hereby attaches) and will continue to be until all of the Obligations have been
satisfied in full the sole legal, beneficial and record owner of the Collateral
in which it purports to grant a security interest pursuant to Section 2 hereof
and no Lien exists or will exist upon such Collateral at any time (and no right
or option to acquire the same exists in favor of any other Person), except for
the Liens and security interests in favor of the Lender created or provided for
herein, and in the Credit Agreement and the Liens permitted under Section 9.2 of
the Credit Agreement, which Liens and security interests constitute first
priority perfected Liens and security interests in and to all of such
Collateral, except for the Permitted Liens to which the Lenders' security
interest herein is junior and subordinate. There is no financing statement
naming the Borrower as debtor (or similar documents or instrument of
registration under the law of any jurisdiction) now on file or registered in any
public office covering any interest of the Borrower in any Collateral, except as
permitted under Section 9.2 of the Credit Agreement.
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<PAGE>
( b) This Agreement creates a valid first priority security
interest in favor of the Lenders in the Collateral, as security for the
Obligations, except for Permitted Liens to which the Lender's security interest
herein is junior and subordinate. Upon entry of the Interim Order or Final
Order, as the case may be, such security interest is, or in the case of
Collateral in which the Borrower obtains rights after the date hereof, will be,
a perfected first priority security interest, subject to Permitted Liens. Upon
entry of the Interim Order or Final Order, as the case may be, all action
necessary or desirable to perfect and protect such security interest has been
duly taken.
( c) The Pledged Stock represented by the certificates identified
in Annex 1 hereto is, and all other Stock Collateral in which the Borrower shall
hereafter grant a security interest pursuant to Section 2 hereof will be, duly
authorized, validly issued, fully paid and non-assessable and none of such
Pledged Stock is or will be subject to any contractual restriction, or any
restriction under the charter or by-laws of the Issuer, including any
restrictions upon the transfer of such Pledged Stock.
( d) Annex 1 hereto correctly identifies, as at the date hereof,
the Issuers of such Pledged Stock, the respective class and par value of the
shares comprising such Pledged Stock, the respective number of shares (and
registered owners thereof) represented by each such certificate and the
percentage represented thereby of the total issued and outstanding shares of
capital stock of such class of stock of the Issuers.
( e) Annex 2 hereto sets forth all material Contracts, Aircraft
Leaseholds and other material agreements under which the Borrower holds, as of
the date of this Agreement, a leasehold or proprietary interest, which Annex
shall be updated from time to time promptly after the disposition or acquisition
of any such leasehold or proprietary interests.
( f) Annex 3 hereto sets forth all agreements creating Aircraft
Order Positions in existence as of the date of this Agreement, which Annex shall
be updated from time to time promptly after the creation or termination of any
agreements creating Aircraft Order Position.
( g) Annexes 5, 6 and 7 hereto set forth a complete and correct
list of all Copyrights, Patents and Trademarks (other than immaterial rights
arising under common law) owned by the Borrower on the date hereof; the Borrower
owns and possesses the right to use, and has done nothing to authorize or enable
any other Person to use, any Copyright, Patent or Trademark listed in said
Annexes 5, 6 and 7, and all registrations listed in said Annexes 5, 6 and 7 are
valid and in full force and effect; the Borrower owns and possesses the right to
use all Copyrights, Patents and Trademarks.
( h) The chief executive office of the Borrower is located at
2863 S. Circle Drive, Colorado Springs, Colorado 80906.
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ARTICLE IV
CASH PROCEEDS OF COLLATERAL
Section 4. 1 COLLATERAL ACCOUNT. At the Majority Lenders' option,
there may be established a cash collateral account (the "COLLATERAL ACCOUNT") in
the name and under the control of the Lenders into which there may be deposited
from time to time the cash proceeds of any of the Collateral (including proceeds
of insurance thereon) and any additional amounts deposited by the Borrower from
time to time as collateral security for the Obligations. The balance from time
to time in the Collateral Account shall constitute part of the Collateral
hereunder and shall not constitute payment of the Obligations until applied in
accordance with the terms of the Credit Agreement.
Section 4. 2 PROCEEDS OF ACCOUNTS. At any time after the occurrence
and during the continuance of an Event of Default, the Borrower shall, upon the
request of the Majority Lenders, instruct all account debtors and other Persons
obligated in respect of all Accounts to make all payments in respect of the
Accounts directly to the Lenders (by instructing that such payments be remitted
to a post office box which shall be in the name and under the control of the
Lenders). In addition to the foregoing, the Borrower agrees that, at any time
after the occurrence and during the continuance of an Event of Default, if the
proceeds of any Collateral hereunder (including the payments made in respect of
Accounts) shall be received by it, the Borrower shall, upon the request of the
Majority Lenders, as promptly as possible deposit such proceeds into the
Collateral Account. Until so deposited, all such proceeds shall be held in trust
by the Borrower for and as the property of the Lenders and shall not be
commingled with any other funds or property of the Borrower.
ARTICLE V
FURTHER ASSURANCES; REMEDIES
Section 5. 1 FURTHER ASSURANCES; REMEDIES. In furtherance of the grant
of the security and pledge interest pursuant to Section 2 hereof, the Borrower
hereby agrees with each Lender as follows:
Section 5. 2 DELIVERY AND OTHER PERFECTION. The Borrower shall:
( a) if any of the shares, securities, moneys or property
required to be pledged by the Borrower under Section 2.1 hereof are received by
the Borrower, forthwith either (i) transfer and deliver to either Lender such
shares or securities so received by the Borrower (together with the certificates
for any such shares and securities duly endorsed in blank or accompanied by
undated stock powers duly executed in blank), all of which thereafter shall be
held by the Lenders, pursuant to the terms of this Agreement, as part of the
Collateral or (ii) take such other action as either Lender shall deem necessary
or reasonably appropriate to duly record the Lien created hereunder in such
shares, securities, moneys or property in said clauses (a) and (b) of Section
2.1 herein;
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( b) deliver and pledge to the Lenders any and all Instruments,
endorsed and/or accompanied by such instruments of assignment and transfer in
such form and substance as the Majority Lender may request PROVIDED that so long
as no Default shall have occurred and be continuing, the Borrower may retain for
collection in the ordinary course any Instruments received by the Borrower in
the ordinary course of business and the Lenders shall, promptly upon request of
the Borrower make appropriate arrangements for making any other Instrument
pledged by the Borrower available to the Borrower for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent deemed
appropriate by the Lenders, against trust receipt or like document);
( c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may be
necessary or desirable (in the reasonable judgment of any Lender) to create,
preserve, perfect or validate the security interest granted pursuant hereto or
to enable the Lenders to exercise and enforce its rights hereunder with respect
to such security and pledge interest, including, without limitation, causing any
or all of the Stock Collateral to be transferred into the name of the Lenders or
their respective nominees;
( d) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such manner as
the Lenders may reasonably require in order to reflect the security interests
granted by this Agreement; and
( e) permit representatives of either Lender, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, and permit
representatives of either Lender to be present at the Borrower's place of
business to receive copies of all communications and remittances relating to the
Collateral, and forward copies of any notices or communications received by the
Borrower with respect to the Collateral, all in such manner as the Lender may
reasonably require.
Section 5. 3 PRESERVATION OF RIGHTS. Neither Lender shall be required
to take steps necessary to preserve any rights against prior parties to any of
the Collateral.
Section 5. 4 SPECIAL PROVISIONS RELATING TO CERTAIN COLLATERAL.
( a) Stock Collateral.
( i) The Borrower will cause the Stock Collateral to include all of the capital
stock in each Issuer, other than in respect of Mountain Air.
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<PAGE>
( ii) So long as no Event of Default shall have occurred and be continuing, the
Borrower shall have the right to exercise all voting, consensual and other
powers of ownership pertaining to the Stock Collateral for all purposes not
inconsistent with the terms of this Agreement and the other Facility Documents,
PROVIDED that the Borrower agrees that it will not vote the Stock Collateral in
any manner that is inconsistent with the terms of this Agreement or any other
Facility Document, and each Lender shall execute and deliver to the Borrower or
cause to be executed and delivered to the Borrower all such proxies, powers of
attorney, dividend and other orders, and all such instruments, without recourse,
as the Borrower may reasonably request for the purpose of enabling the Borrower
to exercise the rights and powers which they are entitled to exercise pursuant
to this Section 5.4.
( b) Intellectual Property.
( i) For the purpose of enabling the Lenders to exercise
rights and remedies under Section 5.5 hereof at such time as the Lenders shall
be lawfully entitled to exercise such rights and remedies, and for no other
purpose, the Borrower hereby grants to the Lenders, to the extent assignable
without any consent not theretofore obtained, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to the
Borrower) to use, assign, license or sublicense any of the Intellectual Property
now owned or hereafter acquired by the Borrower, wherever the same may be
located.
( ii) Notwithstanding anything contained herein to the
contrary, but subject to the provisions of Section 9.6 of the Credit Agreement
which limit the right of the Borrower to dispose of its property, so long as no
Event of Default shall have occurred and be continuing, the Borrower will be
permitted to exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Intellectual Property. The
exercise of rights and remedies under Section 5.4(b) hereof by the Lender shall
not terminate the rights of the holders of any licenses or sublicenses
theretofore granted by the Borrower in accordance with the first sentence of
this clause (2).
( c) EQUIPMENT. The Borrower shall, upon the request of any
Lender, deliver to the Lenders originals of the certificates of title or
ownership for all Equipment, including Motor Vehicles, covered by a certificate
of title owned by the Borrower with the Lenders listed as lienholder, and take
such other action as any Lender shall deem appropriate to perfect the security
interest created hereunder in all such Equipment.
Section 5. 5 EVENTS OF DEFAULT, ETC. During any period during which an
Event of Default shall have occurred and be continuing, but subject to the
relevant provisions of Section 10.3 of the Credit Agreement:
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( a) the Borrower shall, at the request of any Lender, assemble
the Collateral owned by it at such place or places, reasonably convenient to
both the Lenders and the Borrower, designated in such Lender's request;
( b) the Majority Lenders may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, any of the Collateral;
( c) each Lender shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights and
remedies are asserted) and such additional rights and remedies to which a
secured party is entitled under the laws in effect in any jurisdiction where any
rights and remedies hereunder may be asserted, including, without limitation,
the right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral as
directed by the Majority Lenders as if the Lenders were the sole and absolute
owner thereof (and the Borrower agrees to take all such action as may be
appropriate to give effect to such right);
( d) the Majority Lenders in their discretion may, in their name
or in the name of the Borrower or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to do so;
( e) foreclose on this agreement and the security interests
created thereby, and sell, lease, assign or otherwise dispose of all or any part
of the Collateral or any part thereof which shall then be or shall thereafter
come into the possession, custody or control of either Lender or any of its
agents in a public or private sale; and/or
( f) provided that an Event of Default has occurred and is
continuing, the Majority Lender shall have the following rights:
( i) to direct the Borrower pursuant to Section 365(f) of
the Bankruptcy Code to assume and assign any Aircraft Leasehold;
( ii) to direct the Borrower to seek any other consent
(other than the consent of the lessor) necessary to the assumption and
assignment or the assignment of any Aircraft Leasehold;
( iii) to collect and retain any proceeds payable to the
Borrower as a result of such disposition of the Aircraft Leasehold, including
but not limited to any consideration payable by the assignees to the Borrower
for the right to obtain the assignment or any reimbursement to the Borrower of
security deposits or maintenance reserves resulting from the assignee's
assumption and performance of the obligation to pay such deposits or reserves.
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( g) Notwithstanding anything herein to the contrary, neither the
Borrower nor any of its successors and assigns, including any chapter 11 or
chapter 7 trustee for the Borrower, and regardless of whether an Event of
Default has occurred and is continuing, shall have the right to reject or
terminate any Aircraft Leasehold under Section 365(d) of the Bankruptcy Code or
otherwise without the express written consent of the Majority Lenders.
Section 5. 6 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.5 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Obligations, the Borrower shall remain liable for any deficiency.
Section 5. 7 REMOVALS, ETC. Without at least 30 days' prior written
notice to the Lenders, the Borrower shall not maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any Inventory or Equipment to be
located anywhere, other than at one of the locations identified in Annex 4
hereto under its name or in transit from one of such locations to another or
(ii) change its name, or the name under which it does business, from the name
shown on the signature pages hereto.
Section 5. 8 APPLICATION OF PROCEEDS. Except as otherwise herein
expressly provided, the proceeds of any collection, sale or other realization of
all or any part of the Collateral of the Borrower under Section 5.5 hereof, and
any other cash of the Borrower at the time held by the Lender under and in
accordance with Section 4 hereof or this Section 5, shall be applied as follows:
FIRST, to the payment of the costs and expenses of such collection,
sale or other realization, including the reasonable out-of-pocket costs and
expenses of each Lender and the fees and expenses of its agents and counsel, and
all expenses incurred and advances made by either Lenders in connection
therewith;
SECOND, to the payment of the Carve-Out Expenses, in each case
equally and ratably in accordance with the respective amounts thereof then due
and owing;
THIRD, to the payment of all other costs and expenses incurred by,
or payable to, the Lenders hereunder or under Section 11.4 of the Credit
Agreement;
FOURTH, to the payment in full of all other Obligations, in each
case equally and ratably in accordance with the respective amounts thereof then
due and owing; and
FINALLY, to the Borrower, or its successors and assigns, or as the
Bankruptcy Court or another court of competent jurisdiction may direct.
13
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As used in this Section 5, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Borrower or any Issuer of any of the
Collateral.
Section 5. 9 ATTORNEY-IN-FACT. Without limiting any rights or powers
granted by this Agreement to any Lender while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default, each Lender is hereby appointed the attorney-in-fact of the Borrower
for the purpose of carrying out the provisions of this Section 5 and subject to
Section 10.3(a) of the Credit Agreement may take any action and execute any
instruments which the Majority Lenders may deem necessary or reasonably
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.
Section 5. 10 PERFECTION. Prior to or concurrently with the execution
and delivery of this Agreement (or such later date as the Majority Lenders shall
request), the Borrower shall (a) file such financing statements and other
documents in such offices as any Lender may request to perfect the security
interests granted by Section 2.1 hereof and (b) deliver to either Lender all
certificates identified in Annex 1 hereto, accompanied by undated stock powers
duly executed in blank.
Section 5. 11 TERMINATION. When all the Obligations shall have been
paid in full and the Commitments of the Lenders under the Credit Agreement shall
have expired or been terminated, this Agreement shall terminate, and the Lenders
shall forthwith cause to be assigned, transferred and delivered, against receipt
but without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of the
Borrower and to be released and canceled all licenses and rights referred to in
Section 5.4(b) hereof. Each Lender shall also execute and deliver to the
Borrower upon such termination such Uniform Commercial Code termination
statements, certificates for terminating the Liens on the Motor Vehicles and
such other documentation as shall be reasonably requested by the Borrower to
effect the termination and release of the Lien of this Agreement on the
Collateral.
Section 5. 12 EXPENSES AND INDEMNITIES.
( a) The Borrower agrees to reimburse the Lender for all
reasonable out-of-pocket expenses of each Lender (including, without limitation,
the reasonable fees and expenses of legal counsel) of, or incident to (i) any
Event of Default and any enforcement or collection proceeding resulting
therefrom, including, without limitation, (ii) performance by either Lender of
any obligations of the Borrower in respect of the Collateral that the Borrower
have failed or refused to perform, (iii) any actual or attempted sale, or any
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<PAGE>
exchange, enforcement, collection, compromise or settlement in respect of any of
the Collateral, and for the care of the Collateral and defending or asserting
rights and claims of the Lenders in respect thereof, by litigation or otherwise,
including expenses of insurance, (iv) judicial or regulatory proceedings and (v)
the enforcement of this Section 5, and all such expenses shall be Obligations to
the Lenders secured under Section 2 hereof.
( b) The Borrower agrees to indemnify each Lender from and
against any and all claims, losses and liabilities (including, without
limitation, the reasonable fees, client charges and other expenses of the
Lender's counsel) growing out of or resulting from this Agreement or the
enforcement of any of the terms hereof (including, without limitation, the sale
of Collateral pursuant to a public or private offering and each and every
document produced in furtherance thereof), except claims, losses or liabilities
resulting primarily from any Lender's gross negligence or willful misconduct.
Section 5. 13 FURTHER ASSURANCES. The Borrower agrees that, from time
to time upon the written request of any Lender, the Borrower will execute and
deliver such further documents and do such other acts and things as the Lender
may reasonably request in order fully to effect the purposes of this Agreement.
Section 5. 14 RELEASES. Without limiting the obligations of the
Borrower hereunder and under the Credit Agreement, upon the sale, assignment,
transfer or other disposition of any property effected in accordance with the
Credit Agreement, the Lenders shall, at the Borrower's expense, execute and
deliver to the Borrower such Uniform Commercial Code termination statements and
such other documentation as shall be reasonably requested by the Borrower to
effect the termination and release of the Lien of this Agreement on such
property.
Section 5. 15 OTHER FINANCING STATEMENTS AND LIENS. Except as
otherwise permitted under Section 9.2 of the Credit Agreement and except for
precautionary financing statements filed with respect to operating leases (as
defined in accordance with GAAP) entered into by the Borrower, the Borrower
shall not file or suffer to be on file, or authorize or permit to be filed or to
be on file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Lenders are not named as the sole secured
parties.
ARTICLE VI
MISCELLANEOUS
Section 6. 1 NO WAIVER. No failure on the part of any Lender or any
agent of such Lender to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by any Lender or any
agent of such Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
Section 6. 2 NOTICES. All notices, requests, consents and demands
hereunder shall be made in the manner and at the addresses set forth in Section
11.6 of the Credit Agreement.
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Section 6. 3 AMENDMENTS, ETC. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by the
Borrower and the Lenders. Any such amendment or waiver shall be binding upon the
Lender and the Borrower.
Section 6. 4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Borrower, including any chapter 11 or chapter 7 trustee for the Borrower, and
each Lender (PROVIDED that the Borrower shall not assign or transfer its rights
hereunder without the prior written consent of the Lenders).
Section 6. 5 CAPTIONS. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
Section 6. 6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 6. 7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal law of the State of New York, without
regard to choice of law provisions thereof.
Section 6. 8 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Lenders order to
carry out the intentions of the parties hereto as nearly as may be possible and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused
this Security and Pledge Agreement to be duly executed and delivered as of the
day and year first above written.
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WESTERN PACIFIC AIRLINES, INC.
By:
Title:
ENERGY MANAGEMENT CORPORATION
By:
Title:
SUNDANCE VENTURE PARTNERS, L.P. II
By: ANDERSON & WELLS COMPANY,
As General Partner
By:
Title:
17
<PAGE>
ANNEX 1
PLEDGED STOCK
A. PLEDGED STOCK
CERTIFICATE REGISTERED
ISSUER NOS. OWNER NUMBER OF SHARES
- ------ ---- ----- ----------------
[Issuer #1] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #2] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #3] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #4] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #5] _______ ____________ _____ shares of
[common/preferred]
stock, [no] par
value [$________]
<PAGE>
ANNEX 2
AIRCRAFT LEASEHOLD INTERESTS AND OTHER MATERIAL CONTRACTS
[Agreement] [Aircraft Leasehold Interest(s)]
<PAGE>
ANNEX 3
AIRCRAFT ORDER POSITIONS
[Agreement] [Aircraft Order Position(s)]
<PAGE>
ANNEX 4
LIST OF LOCATIONS
[See Section 5.7]
<PAGE>
ANNEX 5
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
[Complete for each Obligor:]
[NAME OF OBLIGOR]
APPLICATION (A) OR REGISTRATION OR
TITLE REGISTRATION (R) NO. FILING DATE
- ----- -------------------- -----------
<PAGE>
ANNEX 6
LIST OF PATENTS AND PATENT APPLICATIONS
[Complete for each Obligor:]
[NAME OF OBLIGOR]
APPLICATION (A) OR ISSUE EXPIRATION
TITLE REGISTRATION (R) NO. COUNTRY DATE DATE
----- -------------------- ------- ---- ----
<PAGE>
ANNEX 7
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
U.S. TRADEMARKS
[Complete for each Obligor:]
[NAME OF OBLIGOR]
APPLICATION (A)
REGISTRATION (R) REGISTRATION
MARK OR SERIES NO. (S) OR FILING DATE
- ---- ----------------- --------------
<PAGE>
