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Subsidiary Guarantee

This is an actual contract between World Air Holdings, and American Airlines.

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Sectors: Transportation
Governing Law: New York, View New York State Laws
Effective Date: April 27, 2005
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EXHIBIT 10.7


EXECUTION
COPY


SUBSIDIARY GUARANTEE


SUBSIDIARY GUARANTEE, dated as of April 27, 2005 (as the same may be amended, restated, supplemented or otherwise modified from time to time, this "Subsidiary Guarantee"), made by North American Airlines, Inc., a Delaware corporation (the "Subsidiary Guarantor"), in favor of the Guaranteed Parties (as defined below).


All capitalized terms used herein and not otherwise defined herein shall have the meanings provided for such terms in the Loan Agreement, dated as of December 30, 2003 (the "Original Loan Agreement"), as amended by that certain Amendment No. 1 and Waiver to Loan Agreement (the "Amendment") (and together with the Original Loan Agreement, the "Loan Agreement", as the same may be amended, restated, supplemented or otherwise modified from time to time) among World Airways, Inc., a Delaware corporation, as Borrower; World Air Holdings, Inc.; World Airways Parts Company, LLC; the Subsidiary Guarantor; Govco Incorporated, a Delaware corporation, as Primary Tranche A Lender; Citibank, N.A. as Alternate Tranche A Lender, Collateral Agent and Agent; Citicorp USA, Inc. as Tranche B Lender; Citicorp North America, Inc. as Govco Administrative Agent; Phoenix American Financial Services, Inc., as Loan Administrator; and Air Transportation Stabilization Board, created pursuant to Section 102 of the Act (as defined therein) (the "Board").


WITNESSETH:


WHEREAS, Section 5.15 of the Loan Agreement provides that, among other things, within thirty (30) days following the acquisition of a Subsidiary, other than with respect to (a) a Subsidiary which is a "controlled foreign corporation" under Section 957 of the Internal Revenue Code or (b) an Unrestricted Subsidiary, such Subsidiary shall execute and deliver to the Agent and the Board a Subsidiary Guarantee in the form of Exhibit I to the Loan Agreement dated no later than thirty (30) days following such acquisition;


WHEREAS, pursuant to that certain Stock Purchase Agreement dated as of April 27, 2005 among Parent, the Subsidiary Guarantor and Dan McKinnon, individually and as trustee of the Dan and Janice McKinnon Family Trust dated January 15, 2005, Parent has acquired all of the outstanding shares of common stock of the Subsidiary Guarantor;


WHEREAS, it is a condition precedent to the Amendment that the Subsidiary Guarantor shall have executed and delivered this Subsidiary Guarantee; and


WHEREAS, the Subsidiary Guarantor is entering into this Subsidiary Guarantee to satisfy the condition described in the preceding paragraph and in order to comply with Section 5.15 of the Loan Agreement.


NOW, THEREFORE, in consideration of the premises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Subsidiary Guarantor hereby agrees as follows:


SECTION 1. Guarantee. (a) The Subsidiary Guarantor hereby absolutely, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all (i) Obligations of the Borrower to the Agent, the Lenders, the Supplemental Guarantor, the Govco Administrative Agent, the Loan Administrator or the Board (together with their respective permitted successors and assigns, each individually, a "Guaranteed Party" and collectively, the "Guaranteed Parties") arising under or in respect of the Loan Documents or the Notes (collectively, the "Agreements") now or hereafter existing or arising, whether for principal, interest, fees, expenses or otherwise, including for amounts owed to the Board or any of its permitted successors and assigns as a result of a payment under the Board Guarantee, and (ii) any and all expenses (including reasonable counsel fees and expenses) actually incurred by any Guaranteed Party in enforcing any rights under this Subsidiary Guarantee (all of the foregoing, collectively, the "Guaranteed Obligations"). It is the intention of the parties hereto that in no event shall the Subsidiary Guarantor's obligations under this Subsidiary Guarantee constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction. Therefore, in the event that this Subsidiary Guarantee would, but for the preceding sentence, constitute or result in such violation, then the liability of the Subsidiary Guarantor under this Subsidiary Guarantee shall be reduced to the maximum amount permissible under the applicable fraudulent conveyance or similar laws. The Subsidiary Guarantor agrees that in the event that any payment shall be required to be made by it under this Subsidiary Guarantee and by the Parent pursuant to the Parent Guarantee or any other Subsidiary pursuant to other Subsidiary Guarantees (as applicable), it will contribute, to the maximum extent permitted by applicable fraudulent conveyance or similar laws, in order that such contribution will not result in a fraudulent transfer or conveyance, such amount to the Parent and/or such other Subsidiaries so as to maximize the aggregate amount paid to the Agent, the Lenders and the Board under this Subsidiary Guarantee, the Parent Guarantee and the Notes. Any and all payments by the Subsidiary Guarantor hereunder shall be made free and clear of and without deduction for any set-off or counterclaim, or Taxes as and to the extent provided in Section 2.12 of the Loan Agreement as if each reference to the "Borrower" therein were a reference to the Subsidiary Guarantor.


(b) The Subsidiary Guarantor unconditionally and irrevocably guarantees the payment of any and all of the Guaranteed Obligations to the Agent as agent for the Guaranteed Parties whether or not due or payable by the Borrower upon the occurrence of any of the events specified in Section 7.1 of the Loan Agreement or otherwise, and unconditionally and irrevocably promises to pay such Guaranteed Obligations to the Agent as agent for the Guaranteed Parties, or to its order, on demand, in lawful money of the United States.


SECTION 2. Guarantee Continuing and Absolute, (a) The Subsidiary Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Agreements, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the obligations of the Borrower or the rights of the Agent or any Guaranteed Party with respect thereto. This is a continuing guarantee of payment and not of collection, and the liability of the Subsidiary Guarantor under this Subsidiary Guarantee shall be absolute and unconditional, in accordance with the terms hereof and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever


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(whether taking place or occurring with or without notice to or the consent of the Subsidiary Guarantor which notice is hereby waived by the Subsidiary Guarantor), including, without limitation: (i) any lack of validity or enforceability of the Agreements or any other agreement or instrument relating to the Agreements; (ii) any change in the time, place or manner of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to, or any departure from, the Agreements, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower; (iii) any taking, any exchange, release or non-perfection of any collateral, or any taking, release, or amendment or waiver of, or consent to, departure from any other guarantee, for all or any of the Guaranteed Obligations or any failure by the Agent or any of the Guaranteed Parties to take any steps to preserve or perfect its rights to or in any collateral securing the obligations of the Borrower under the Agreements or the Subsidiary Guarantor hereunder; (iv) any manner of application of collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any part of the Guaranteed Obligations or any other assets of the Obligors, or any of their Subsidiaries; (v) any change, restructuring or termination of the corporate structure or existence of the Subsidiary Guarantor, the Obligors, or any of their respective Subsidiaries; (vi) the voluntary or involuntary liquidation, sale or other disposition of all or any portion of the assets of the Obligors, or the receivership, insolvency, bankruptcy, reorganization or similar proceeding affecting the Obligors or any of their assets; (vii) any termination of or change in any relationship between the Subsidiary Guarantor and the Borrower or Parent; (viii) any change of circumstances, whether or not foreseeable and whether or not such change does or might vary the risk of the Subsidiary Guarantor hereunder; (ix) any exercise, delay in the exercise or waiver of, forbearance or other indulgence with respect to, or any election not to, or fail
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