<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-28774
_________________
WILLIS LEASE FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 68-0070656
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
2320 Marinship Way, Suite 300, Sausalito, CA 94965
(Address of principal executive offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (415) 331-5281
180 Harbor Drive, Suite 200, Sausalito, CA 94965
(Former Address)
_________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Title of Each Class Outstanding at July 31, 1998
- -------------------------------------- ----------------------------------
Common Stock, $0.01 Par Value 7,277,098
<PAGE>
WILLIS LEASE FINANCE CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NO.
--------
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
As of June 30, 1998 and December 31, 1997 3
Consolidated Statements of Income 4
Three and six months ended June 30, 1998 and 1997
Consolidated Statements of Shareholders' Equity 5
Year ended December 31, 1997 and
six months ended June 30, 1998
Consolidated Statements of Cash Flows 6
Six months ended June 30, 1998 and 1997
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 9
and Results of Operations
PART II OTHER INFORMATION
Item 2. Changes in Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE>
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $3,180,225 $13,095,303
Deposits 21,192,955 18,461,456
Equipment held for operating lease, less accumulated depreciation of
$12,866,029 at June 30, 1998 and $15,267,683 at December 31, 1997 225,922,086 138,535,643
Net investment in direct finance lease 9,536,640 9,821,854
Property, equipment and furnishings, less accumulated depreciation
of $345,116 at June 30, 1998 and $275,109 at December 31, 1997 1,315,268 540,856
Spare parts inventory 26,061,029 10,334,113
Maintenance billings receivable 894,777 1,547,765
Operating lease rentals receivable 718,269 520,466
Receivables from spare parts sales 3,500,643 2,908,175
Other receivables 100,008 375,878
Other assets 6,312,870 2,288,547
------------ ------------
Total assets $298,734,770 $198,430,056
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $3,490,133 $4,010,976
Salaries and commissions payable 712,649 1,070,051
Deferred income taxes 10,263,469 8,476,040
Deferred gain 170,030 183,278
Notes payable and accrued interest 192,758,266 101,433,200
Capital lease obligation 2,728,709 2,802,119
Residual share payable 2,215,282 2,092,140
Maintenance deposits 21,196,109 20,018,195
Security deposits 3,790,473 2,435,987
Unearned lease revenue 2,018,578 1,306,613
------------ ------------
Total liabilities 239,343,698 143,828,599
------------ ------------
Shareholders' equity:
Common stock, ($0.01 par value. 20,000,000 shares authorized;
7,269,598 and 7,177,320 shares issued and outstanding
as of June 30, 1998 and December 31,1997, respectively) 72,696 40,117,223
Paid-in capital in excess of par 40,936,247 -
Retained earnings 18,382,129 14,484,234
------------ ------------
Total shareholders' equity 59,391,072 54,601,457
------------ ------------
Total liabilities and shareholders' equity $298,734,770 $198,430,056
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to the consolidated financial statements
3
<PAGE>
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
Lease revenue $ 7,128,925 $ 4,428,749 $13,565,173 $ 8,543,826
Gain on sale of leased equipment 2,431,226 - 5,539,078 397,379
Spare part sales 6,583,267 3,655,983 9,599,194 5,877,663
Sale of equipment acquired for resale 4,093,641 7,600,000 4,093,641 10,147,840
Interest and other income 433,845 201,315 619,232 452,839
----------- ----------- ----------- -----------
Total revenue 20,670,904 15,886,047 33,416,318 25,419,547
----------- ----------- ----------- -----------
EXPENSES
Interest expense 3,599,700 1,673,278 6,202,050 3,137,758
Depreciation expense 1,727,826 978,969 3,145,335 1,854,429
Residual share 167,747 180,914 400,259 371,466
Cost of spare part sales 4,831,464 2,402,830 6,886,008 3,706,982
Cost of equipment acquired for resale 3,573,499 6,385,464 3,573,499 8,637,981
General and administrative 3,184,325 2,156,920 6,368,162 3,942,835
----------- ----------- ----------- -----------
Total expenses 17,084,561 13,778,375 26,575,313 21,651,451
----------- ----------- ----------- -----------
Income before income taxes and extraordinary item 3,586,343 2,107,672 6,841,005 3,768,096
Income taxes (1,437,800) (841,674) (2,742,626) (1,486,956)
----------- ----------- ----------- -----------
Income before extraordinary item 2,148,543 1,265,998 4,098,379 2,281,140
Extraordinary item less applicable income taxes - - (200,480) 2,007,929
----------- ----------- ----------- -----------
Net income $2,148,543 $1,265,998 $3,897,899 $4,289,069
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic earnings per common share:
Income before extraordinary item $0.30 $0.23 $0.57 $0.42
Extraordinary item - - (0.03) 0.37
----------- ----------- ----------- -----------
Net income $0.30 $0.23 $0.54 $0.79
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted earnings per common share:
Income before extraordinary item $0.29 $0.23 $0.55 $0.41
Extraordinary item - - (0.03) 0.36
----------- ----------- ----------- -----------
Net income $0.29 $0.23 $0.52 $0.77
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average common shares outstanding 7,263,268 5,433,498 7,227,754 5,431,490
Diluted weighted average common shares outstanding 7,488,397 5,528,898 7,465,967 5,548,010
</TABLE>
See accompanying notes to the consolidated financial statements
4
<PAGE>
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Issued and
outstanding Paid-in Total
shares of Common Capital in Retained shareholders'
common stock Stock Excess of Par earnings equity
------------ ----- ------------- -------- ------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1996 5,426,793 $16,055,689 $ - $7,146,563 $23,202,252
Shares issued 25,527 221,244 - - 221,244
Common stock issued and
proceeds from secondary offering, net 1,725,000 23,840,290 - - 23,840,290
Net income - - - 7,337,667 7,337,667
--------- ------------ ----------- ----------- -----------
Balances at December 31, 1997 7,177,320 40,117,223 - 14,484,230 54,601,453
Shares issued 92,278 586,328 - - 586,328
Tax benefit from disqualified
dispositions of qualified shares - - 305,392 - 305,392
Conversion to par value stock - (40,630,855) 40,630,855 - -
Net income - - - 3,897,899 3,897,899
--------- ------------ ----------- ----------- -----------
Balances at June 30, 1998 (unaudited) 7,269,598 $72,696 $40,936,247 $18,382,129 $59,391,072
--------- ------------ ----------- ----------- -----------
--------- ------------ ----------- ----------- -----------
</TABLE>
See accompanying notes to the consolidated financial statements
5
<PAGE>
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,897,899 $4,289,069
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of equipment held for lease 3,062,632 1,794,646
Depreciation of property, equipment and furnishings 82,703 59,783
(Gain) on sale of property, equipment and furnishings (1,964) (37,309)
(Gain) on sale of leased equipment (5,539,078) (397,379)
Increase in residual share payable 123,142 371,466
Changes in assets and liabilities:
Deposits (2,731,499) 2,173,816
Spare parts inventory (15,726,916) (2,802,088)
Receivables 138,587 (1,117,982)
Other assets (614,323) (347,308)
Accounts payable and accrued expenses (215,452) 1,143,188
Salaries and commission payable (357,402) 205,332
Deferred income taxes 1,787,430 2,816,367
Deferred gain (13,248) (13,248)
Accrued interest 19,715 (493,316)
Maintenance deposits 1,177,914 3,133,063
Security deposits 1,354,486 54,491
Unearned lease revenue 711,965 (2,484)
------------ -----------
Net cash (used in) provided by operating activities (12,843,409) 10,830,107
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment held for operating lease (net
of selling expenses) 16,487,299 1,000,000
Proceeds from sale of property, equipment and furnishings 16,300 80,500
Purchase of equipment held for operating lease (101,397,296) (13,291,479)
Deposits made in connection with inventory purchases (3,410,000) -
Purchase of property, equipment and furnishings (871,455) (109,530)
Principal payments received on direct finance lease 285,214 -
------------ -----------
Net cash used in investing activities (88,889,938) (12,320,509)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 109,984,205 66,888,374
Proceeds from issuance of common stock 586,328 108,257
Principal payments on notes payable (18,678,854) (57,107,899)
Principal payments on capital lease obligation (73,410) (87,897)
------------ -----------
Net cash provided by financing activities 91,818,269 9,800,835
(Decrease) increase in cash and cash equivalents (9,915,078) 8,310,433
Cash and cash equivalents at beginning of period 13,095,303 6,573,241
------------ -----------
Cash and cash equivalents at end of period $3,180,225 $14,883,674
------------ -----------
------------ -----------
SUPPLEMENTAL INFORMATION:
Net cash paid for: Interest $6,182,335 $3,631,075
------------ -----------
Income taxes $2,656,825 $156,400
------------ -----------
Non-cash financing activities: Disqualified disposition of
qualified shares resulted in a
$305,392 tax benefit.
</TABLE>
See accompanying notes to the consolidated financial statements
6
<PAGE>
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of Willis Lease
Finance Corporation and its subsidiaries (the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-Q. Pursuant to such rules and regulations, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The accompanying unaudited interim financial statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto, together with Management's Discussion and
Analysis of Financial Condition and Results of Operations, contained in the
Company's Annual Report to Shareholders incorporated by reference in the
Company's Annual Report on Forms 10-K and 10-KA for the fiscal year ended
December 31, 1997.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal and
recurring adjustments) necessary to present fairly the financial position of
the Company as of June 30, 1998, and December 31, 1997, and the results of its
operations for the three and six month periods ended June 30, 1998 and 1997 and
its cash flows for the six month periods ended June 30, 1998 and 1997. The
results of operations and cash flows for the periods ended June 30, 1998, are
not necessarily indicative of the results of operations or cash flows which may
be reported for the remainder of 1998.
2. MANAGEMENT ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
3. SHAREHOLDERS' EQUITY
The Company changed its state of incorporation from California to Delaware
through a merger of Willis Lease Finance Corporation into its wholly-owned
Delaware subsidiary. The reincorporation, approved by the Company's
shareholders at the May 12, 1998 Annual Meeting of Shareholders, results in a
change only of the Company's legal domicile. It does not result in any change
in the Company's name, operations, locations, management, reporting
obligations, NASDAQ National Market trading symbol or assets and liabilities.
In connection with this reincorporation, the Company converted no par value
common stock to $0.01 par value common stock.
The Company has a 1996 Employee Stock Purchase Plan (the "Purchase Plan")
under which 75,000 shares of common stock have been reserved for issuance.
This plan became effective in September 1996. Eligible employees may designate
not more than 10% of their cash compensation to be deducted each pay period for
the purchase of common stock under the Purchase Plan, and participants may
purchase not more than $25,000 of common stock in any one calendar year. Each
January 31 and July 31 shares of common stock are purchased with the employees'
payroll deductions over the immediately preceding six months at a price per
share of 85% of the lesser of the market price of the common stock on the
purchase date or the market price on the date of entry into an offering period.
During the six month
7
<PAGE>
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
period ended June 30, 1998, the Company issued 8,040 shares of Common Stock as
a result of employee stock purchases under the Purchase Plan.
Under the 1996 Stock Option/Stock Issuance Plan, 525,000 shares of the
Company's shares have been set aside to provide eligible persons with the
opportunity to acquire a proprietary interest in the Company. The plan
includes a Discretionary Option Grant Program, a Stock Issuance Program, and an
Automatic Option Grant Program for eligible nonemployee Board Members. During
the six month period ended June 30, 1998, 59,000 options were exercised. In
connection with the exercise of these options, the Company recognized a
$305,392 tax benefit.
In conjunction with its initial public offering, the Company sold five-year
purchase warrants for $.01 per warrant covering an aggregate of 100,000 shares
of common stock exercisable at a price equal to 130% of the initial public
offering price. The warrants are exercisable commencing 24 months after the
effective date of the initial public offering or earlier, but not earlier than
12 months after the initial public offering, if and when the Company files a
registration statement for the sale by the Company of shares of common stock or
securities exercisable for, convertible into or exchangeable for shares of
common stock (other than pursuant to a stock option or other employee benefit
or similar plan, or in connection with a merger or an acquisition). The common
stock offering in December 1997 constituted such a registration. The warrants'
exercise price and the number of shares of Common Stock are subject to
adjustment to protect the warrant holders against dilution in certain events.
In February 1998, a holder of 50,000 of the warrants exercised the warrants
under the net issuance rights of the warrants. Based on the closing price on
such date, the exercise resulted in the issuance of 25,238 shares to the holder
of the warrants.
4. FINANCING
In June 1998, the Company increased the committed amount of its revolving
credit facility to $100 million. This credit facility is available to finance
the acquisition of aircraft engines, aircraft and high-value spare parts for
sale or lease. This facility expires on September 30, 1998. The Company
anticipates extending the maturity of the facility.
In March 1998, the Company repaid a loan that had residual sharing
provisions. The repayment resulted in an extraordinary expense of $0.2
million, net of tax.
5. COMMITMENTS
In June 1998, the Company commenced lease of office space for its Sausalito
operations. The initial term of this lease is 5 years and the annual rental
commitments under the lease are approximately $0.3 million. In April 1998, the
Company commenced lease of a warehouse and office facility for Willis
Aeronautical Services, Inc. ("WASI") in San Diego, California. WASI moved its
South San Francisco operations into this facility in June 1998. The initial
term of this lease is 6 years and the annual rental commitments under the lease
are approximately $0.4 million.
The Company has committed to purchase, during 1998 and 1999, additional used
aircraft and engines for its operations. Certain deposits were made in
connection with these commitments. The Company's current commitment to such
purchases is not more than $35.1 million. A portion of these purchases will
take place in 1998 and the remainder in 1999.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company's core business is acquiring and leasing, primarily pursuant to
operating leases, commercial aircraft spare engines, aircraft and other
aircraft equipment. The Company, through WASI, also specializes in the
purchase and resale of aftermarket airframe and engine parts, engines,
modules and rotable components. In addition, the Company engages in the
selective purchase and resale of commercial aircraft engines.
The Company changed its state of incorporation from California to Delaware
through a merger of Willis Lease Finance Corporation into its wholly-owned
Delaware subsidiary. The reincorporation, approved by the Company's
shareholders at the May 12, 1998 Annual Meeting of Shareholders, results in a
change only of the Company's legal domicile. It does not result in any
change in the Company's name, operations, locations, management, reporting
obligations, NASDAQ National Market trading symbol or assets and liabilities.
Revenue consists primarily of operating lease revenue, income from the sale
of spare parts and components and income from the sale of engines and
equipment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1997:
Revenue is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------------------------
1998 1997
---- ----
Amount % Amount %
------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Lease revenue............................. $ 7,129 34% $ 4,429 28%
Gain on sale of leased equipment.......... 2,431 12 - -
Spare parts sales......................... 6,583 32 3,656 23
Sale of equipment acquired for resale..... 4,094 20 7,600 48
Interest and other income................. 434 2 201 1
------------------------------------------------------
Total..................................... $20,671 100% $15,886 100%
------------------------------------------------------
</TABLE>
LEASE PORTFOLIO. During the quarter ended June 30, 1998, eleven engines,
one aircraft and one spare parts package were added to the Company's lease
portfolio at a total cost of $54.5 million. Four engines and one spare parts
package were sold or transferred from the lease portfolio.
LEASING ACTIVITIES. Lease revenue for the quarter ended June 30, 1998
increased 61% to $7.1 million from $4.4 million for the comparable period in
1997. This increase reflects lease revenues from additional engines,
aircraft and spare parts packages.
GAIN ON SALE OF LEASED EQUIPMENT. During the quarter ended June 30, 1998,
the Company sold three engines from the lease portfolio which resulted in a
gain of $2.4 million. There were no such gains in the quarter ended June 30,
1997.
9
<PAGE>
SPARE PARTS SALES. Revenues from spare parts sales in the quarter ended
June 30, 1998 increased 80% to $6.6 million from $3.7 million in the
comparable 1997 period. The gross margin decreased to 27% in the second
quarter of 1998, from 34% in the corresponding period in 1997. The decrease
in margin was primarily the result of the Company's decision to sell, shortly
after their acquisition, certain of the engines acquired under its agreement
with United Airlines to acquire used aircraft. In doing so, the Company
avoided disassembly, inventory and financing costs that would have been
incurred had the Company disassembled, inventoried and sold, over a period of
time, the engines in a piece part manner.
SALE OF EQUIPMENT ACQUIRED FOR RESALE. During the quarter ended June 30,
1998, the Company sold one engine for $4.1 million which resulted in a gain
of $0.5 million. During the comparable 1997 period, the Company sold four
engines for $7.6 million resulting in a gain of $1.2 million.
INTEREST AND OTHER INCOME. Interest and other income for the quarter ended
June 30, 1998 was $0.4 million compared to $0.2 million for the quarter ended
June 30, 1997. The increase was primarily due to ancillary fees generated in
connection with an existing lease arrangement.
INTEREST EXPENSE AND RESIDUAL SHARING. Interest expense related to all
activities increased 115% to $3.6 million for the quarter ended June 30,
1998, from the comparable period in 1997, due to an increase in average debt
outstanding during the period. Residual sharing expense decreased 7% to
$167,747 for the quarter ended June 30, 1998 from $180,914 for the
comparable period in 1997. The decline was due to the repayment, in March
1998, of one of the Company's loans which had residual sharing provisions.
This expense is calculated by comparing the net book value of the engines
subject to such agreements to their related debt balances and adjusting the
residual share payable to the appropriate amount representing the sharing
percentage of any excess of the net book value over the corresponding debt
balance for such engines.
DEPRECIATION EXPENSE. Depreciation expense increased 76% to $1.7 million
for the quarter ended June 30, 1998, from the comparable period in 1997, due
to the larger average asset base in the second quarter of 1998.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 48% to $3.2 million for the quarter ended June 30, 1998 from $2.2
million in the comparable period in 1997. This increase reflects expenses
associated with staff additions, increased rent due to the expansion of the
Company's office and warehouse facilities, as well as increases in
professional fees, insurance expense and expenses related to promotional and
marketing activities.
INCOME TAXES. Income taxes, exclusive of tax on extraordinary items, for
the quarter ended June 30, 1998, increased to $1.4 million from $0.8 million
for the comparable period in 1997. This increase reflects an increase in the
Company's pre-tax earnings.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997:
Revenue is summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------
1998 1997
---- ----
Amount % Amount %
----------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Lease revenue.............................. $13,565 41% $ 8,544 34%
Gain on sale of leased equipment........... 5,539 16 397 1
Spare parts sales.......................... 9,599 29 5,878 23
Sale of equipment acquired for resale...... 4,094 12 10,148 40
Interest and other income.................. 619 2 453 2
----------------------------------------------------
Total...................................... $33,416 100% $25,420 100%
----------------------------------------------------
</TABLE>
10
<PAGE>
LEASE PORTFOLIO. During the period ended June 30, 1998, twenty-one engines,
one spare parts package and two aircraft were added to the Company's lease
portfolio at a total cost of $101.4 million. Five engines and one spare
parts package were sold or transferred from the lease portfolio.
LEASING ACTIVITIES. Lease revenue for the period ended June 30, 1998
increased 59% to $13.6 million from $8.5 million for the comparable period in
1997. This increase reflects lease revenues from additional engines,
aircraft and spare parts packages.
GAIN ON SALE OF LEASED EQUIPMENT. During the period ended June 30, 1998,
the Company sold four engines from the lease portfolio which resulted in a
gain of $5.5 million. This compares with gains in the period ended June 30,
1997 of $0.4 million.
SPARE PARTS SALES. Revenues from spare parts sales in the period ended June
30, 1998 increased 63% to $9.6 million from $5.9 million in the comparable
1997 period. The gross margin decreased to 28% in the first six months of
1998, from 37% in the corresponding period in 1997. The decrease in margin
was primarily the result of the Company's decision to sell, shortly after
their acquisition, certain of the engines acquired under its agreement with
United Airlines to acquire used aircraft. In doing so, the Company avoided
disassembly, inventory and financing costs that would have been incurred had
the Company disassembled, inventoried and sold, over a period of time, the
engines in a piece part matter.
SALE OF EQUIPMENT ACQUIRED FOR RESALE. During the period ended June 30,
1998, the Company sold one engine for $4.1 million resulting in a gain of
$0.5 million. During the period ended June 30, 1997, the Company sold five
engines for $10.1 million which resulted in gains of $1.5 million.
INTEREST AND OTHER INCOME. Interest and other income for the period ended
June 30, 1998 was $0.6 million compared to $0.5 million for the period ended
June 30, 1997.
INTEREST EXPENSE AND RESIDUAL SHARING. Interest expense related to all
activities increased 98% to $6.2 million for the period ended June 30, 1998,
from the comparable period in 1997, due to an increase in average debt
outstanding during the period. Residual sharing expense increased 8% to
$400,259 for the period ended June 30, 1998 from the $371,466 for the
comparable period in 1997. This expense is calculated by comparing the net
book value of the engines subject to such agreements to their related debt
balances and adjusting the residual share payable to the appropriate amount
representing the sharing percentage of any excess of the net book value over
the corresponding debt balance for such engines. In March 1998, the Company
repaid one of its loans which had residual sharing provisions. (See
"Extraordinary Items" below).
DEPRECIATION EXPENSE. Depreciation expense increased 70% to $3.1 million
for the period ended June 30, 1998, from the comparable period in 1997, due
to the larger average asset base in the first six months of 1998.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 62% to $6.4 million for the period ended June 30, 1998 from $3.9
million in the comparable period in 1997. This increase reflects expenses
associated with staff additions, increased rent due to the expansion of the
Company's office and warehouse facilities, as well as increases in
professional fees, insurance expense and expenses related to promotional and
marketing activities.
INCOME TAXES. Income taxes, exclusive of tax on extraordinary items, for
the period ended June 30, 1998, increased to $2.7 million from $1.5 million
for the comparable period in 1997. This increase reflects an increase in the
Company's pre-tax earnings.
EXTRAORDINARY ITEMS. In March 1998, the Company repaid a loan that had
residual sharing provisions. The repayment resulted in an extraordinary
expense of $0.2 million, net of tax. In February 1997, the Company obtained
a new loan agreement for $41.5 million to replace an existing loan of $44.2
million. The transaction resulted in an extraordinary gain of $2.0 million,
net of tax.
11
<PAGE>
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued a new
statement: SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which establishes annual and interim reporting
standards for a public Company's operating segments and related disclosures
about its products, services, geographic areas, and major customers. This
statement is effective for the Company's fiscal year ended December 31, 1998,
with earlier application permitted. The effect of adoption of the statement
will be limited to the form and content of the Company's disclosures and will
not impact the Company's results of operations, cash flow, or financial
position.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. This statement is
effective for all quarters of fiscal years beginning after June 15, 1999. As
of June 30, 1998, the Company is reviewing the effect this standard will have
on the Company's consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its growth through borrowings
secured by its equipment lease portfolio. Cash of approximately $110.0
million and $66.9 million, in the six month periods ended June 30, 1998 and
1997, respectively, was derived from this activity. In these same time
periods $18.8 million and $57.2 million, respectively, was used to pay down
related debt or the capital lease. In December 1997, net proceeds from a
follow-on common stock offering were approximately $23.8 million. In
September 1996, net proceeds from the initial public offering were
approximately $15.9 million. Cash flow from operating activities used
approximately $12.8 million in the six month period ended June 30, 1998 and
cash flows from operating activities generated $10.8 million in the six month
period ended June 30, 1997. The deficit cash flow from operations was
primarily attributable to the acquisition of used aircraft for WASI's
inventory.
The Company's primary use of funds is for the purchase of equipment for
lease. Approximately $101.4 million and $13.3 million of funds were used for
this purpose in the six month periods ended June 30, 1998 and 1997,
respectively.
At June 30, 1998, the Company had a $100.0 million revolving credit
facility to finance the acquisition of aircraft engines, aircraft and spare
parts for sale or lease. Assuming compliance with the facility's terms,
including sufficiency of collateral, at June 30, 1998 and July 31, 1998,
$12.4 million and $11.3 million was available under this facility,
respectively. The facility expires on September 30, 1998. The Company
intends to extend and increase this facility.
The Company has an $80.0 million debt warehouse facility (the "WLFC
Funding Corp. Facility"), to a special purpose finance subsidiary of the
Company, for the financing of jet aircraft engines transferred by the Company
to such finance subsidiary. This transaction's structure facilitates future
public or private securitized note issuances by the special purpose finance
subsidiary. The facility has an eight year term and is partially guaranteed
by the Company. This facility requires the issuer to hedge 50% of the
facility against interest rate changes no later than September 30, 1998. In
May 1998, a three year $15 million interest rate swap was executed to hedge a
portion of the interest expense under this facility. Assuming compliance
with the facility's terms, including sufficiency of collateral, as of June
30, 1998 and July 31, 1998, $27.6 million was available under this facility.
Approximately $100.6 million of the Company's debt is repayable during
the remainder of 1998. The majority of such repayments consist of the
maturity of the revolving credit facility and the scheduled balloon payment
maturities on term loans. The balance of the repayments consist of scheduled
installments due under term loans. The Company anticipates that it will
extend the revolving credit facility and refinance the balloon payment
maturities during the remainder of 1998.
The Company believes that its current equity base and internally
generated funds are sufficient to fund the Company's anticipated equity
requirements and operations for the remainder of 1998, at which time
additional equity may be required to fund projected growth. The Company is
seeking to extend and expand its existing revolving credit facility as noted
above and make other borrowing arrangements to fund future growth.
12
<PAGE>
As of June 30, 1998, the Company had eight engines and four spare parts
packages which had not been financed. The Company will likely seek financing
for this equipment, although no assurance can be given that such financing
will be available on favorable terms, if at all. In addition, certain of the
Company's engines have been financed under floating rate facilities. Until
fixed rate financing for these assets is in place, the Company is subject to
interest rate risk, since the underlying lease revenue is fixed. See
"Management - Interest Rate Exposure" below.
Between June 30, 1998 and July 31, 1998, the Company and WASI purchased
engines for the lease portfolio and aircraft for the parts operation. The
total cost of these purchases was approximately $2.6 million. These
purchases were funded with cash from operations, and borrowings under the
Company's revolving line of credit.
The Company has committed to purchase, during 1998 and 1999, additional
used aircraft and engines for its operations. Certain deposits were made in
connection with these commitments. The Company's current commitment to such
purchases is not more than $35.1 million. Some of these purchases will take
place in 1998 and some in 1999.
MANAGEMENT OF INTEREST RATE EXPOSURE
At June 30, 1998, $149.0 million of the Company's borrowings were on a
variable rate basis at various interest rates tied to either LIBOR or the
prime rate. The Company's equipment leases are generally structured at fixed
rental rates for specified terms. To date, this variable rate borrowing has
resulted in lower interest expense for the Company. Increases in interest
rates could narrow or eliminate the spread, or result in a negative spread,
between the rental revenue the Company realizes under its leases and the
interest rate that the Company pays under its borrowings.
In September 1996, the Company purchased an amortizing interest rate cap
in order to limit its exposure to increases in interest rates on a portion of
its variable rate borrowings. Pursuant to this cap, the counter party will
make payments to the Company, based on the notional amount of the cap, if the
three month LIBOR rate is in excess of 7.66%. As of June 30, 1998, the
notional principal amount of the cap was $34.3 million which will decline to
$26.0 million at the end of its term. The cost of the cap is being amortized
as an expense over its remaining term. In May 1998, WLFC-Funding Corp.
purchased a three year $15 million interest rate swap. The Company will be
exposed to credit risk in the event of non-performance of the interest rate
hedge counter parties. The Company anticipates that it will hedge additional
amounts of its floating rate debt in the second half of 1998.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Except for historical information contained herein, the discussion in
this report contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The Company's actual results could differ
materially from those discussed here. Factors that could cause or contribute
to such differences include those discussed below as well as those discussed
elsewhere herein and in the Company's report on Forms 10-K and 10-KA for the
year ended December 31, 1997. The cautionary statements made in this report
should be read as being applicable to all related forward-looking statements
wherever they appear in this report or in other written or oral statements by
the Company.
The Company leases its portfolio of aircraft engines, aircraft and spare
parts packages primarily under operating leases as opposed to finance leases.
Operating leases require the Company to re-lease or sell aircraft equipment
in its portfolio in a timely manner upon termination of the lease in order to
minimize off-lease time and recover its investment in the aircraft equipment.
The Company also engages in the selective purchase and resale of commercial
aircraft engines and engine components in the aftermarket. On occasion, the
Company purchases engines or components without having a commitment for their
sale. Numerous factors, many of which are beyond the control of the Company,
may have an impact on the Company's ability to re-lease or sell aircraft
equipment on a timely basis. Among the factors are general market
conditions, regulatory changes (particularly those imposing environmental,
maintenance and other requirements on the operation of aircraft engines),
changes in the supply or cost of the aircraft equipment and technological
developments. Further, the value of a particular used aircraft engine or
aircraft varies greatly depending upon its condition, the number of hours
remaining until the next major maintenance of the aircraft equipment is
required and general conditions in the airline industry. In addition, the
success of an operating lease depends in part upon having the
13
<PAGE>
aircraft equipment returned by the lessee in marketable condition as required
by the lease. Consequently, there can be no assurance that the Company's
estimated residual value for the aircraft equipment will be realized. If the
Company is unable to lease, re-lease or sell the aircraft equipment on
favorable terms, its business, financial condition, cash flow, ability to
service debt and results of operations could be adversely affected.
A lessee may default in performance of its lease obligations and the
Company may be unable to enforce its remedies under a lease. The Company's
inability to collect receivables due under a lease or to repossess aircraft
equipment in the event of a default by a lessee could have a material adverse
effect on the Company's business, financial condition or results of
operations. A number of airlines have experienced financial difficulties,
certain airlines have filed for bankruptcy and a number of such airlines have
ceased operations. In most cases where a debtor seeks protection under
Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"),
creditors are automatically stayed from enforcing their rights. The scope of
Section 1110 has been the subject of significant litigation and there can be
no assurance that the provisions of Section 1110 will protect the Company's
investment in an aircraft, aircraft engines or parts in the event of a
lessee's bankruptcy. In addition, Section 1110 does not apply to lessees
located outside of the United States and applicable foreign laws may not
provide comparable protection.
A substantial portion of the Company's lease revenue was generated by
leases to foreign customers worldwide, including but not limited to Asian
customers. Such international leases may present greater risks to the Company
because certain foreign laws, regulations and judicial procedures may not be
as protective of lessor rights as those which apply in the United States. In
addition, many foreign countries have currency and exchange laws regulating
the international transfer of currencies. The Company has experienced some
collection problems under certain leases with foreign airlines, and there can
be no assurance that the Company will not experience such collection problems
in the future. The Company may also experience collection problems related
to the enforcement of its lease agreements under foreign local laws and the
attendant remedies in such locales. Consequently, the Company is subject to
the timing and access to courts and the remedies local laws impose in order
to collect its lease payments and recover its assets. In addition, political
instability abroad and changes in international policy also present risk of
expropriation of the Company's leased engines.
The operating lease business is a capital intensive business.
Accordingly, the Company's ability to successfully execute its business
strategy and to sustain its operations is dependent, in a large part, on the
availability of debt and equity capital. There can be no assurance that the
necessary amount of such capital will continue to be available to the Company
on favorable terms, or at all. If the Company were unable to continue to
obtain required financing on favorable terms, the Company's ability to add
new aircraft engines, aircraft and spare parts packages to its portfolio, add
inventory to support its spare parts sales or to conduct profitable
operations with its existing asset base would be impaired, which would have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, certain of the Company's debt facilities
mature, either in whole or part, during the current calendar year. Should
the Company be unable to meet the terms of repayment of these facilities,
and/or refinance or extend these facilities, it would have a material adverse
effect on the Company's financial condition and its ability to conduct
business. Factors that could cause equity or debt financing to be more
expensive or unavailable include changes in interest rates, financial
conditions of the lessee or the Company, prospects for the airline industry
or the asset type as well as general economic conditions.
The Company's equipment leases are generally structured at fixed rental
rates for specified terms while many of the Company's borrowing arrangements
are at a floating rate. Increases in interest rates could narrow or
eliminate the spread, or result in a negative spread between the rental
revenue the Company realizes under its leases and the interest rate that the
Company pays under its lines of credit or loans.
The Company, through WASI, acquires aviation equipment such as whole
aircraft engines and aircraft which can be dismantled and sold as parts.
Before parts may be installed in an aircraft, they must meet certain
standards of condition established by the Federal Aviation Administration.
Parts must also be traceable to sources deemed acceptable by the FAA. Parts
owned by the Company may not meet applicable standards or standards may
change, causing parts which are already in the Company's inventory to be
scrapped or modified. Engine manufacturers may also develop new parts to be
used in lieu of parts already contained in the Company's inventory. In all
such cases, to the extent the Company has such parts in its inventory, their
value may be reduced. In addition, if the Company does not sell airframe and
engine
14
<PAGE>
component parts that it purchases in the time frame contemplated at
acquisition, the Company may be subject to unanticipated inventory financing
costs as well as all the risks of ownership.
Certain of the Company's competitors have substantially greater
resources than the Company, including greater name recognition, larger
inventories, a broader range of material, complementary lines of business and
greater financial, marketing and other resources. In addition, original
equipment manufacturers ("OEMs"), aircraft maintenance providers, FAA
certified repair facilities and other aviation aftermarket suppliers may
vertically integrate into the aircraft engine/spare parts sales industry,
thereby significantly increasing industry competition. A variety of
potential actions by any of the Company's competitors, including a reduction
of product prices or the establishment by competitors of long-term
relationships with new or existing customers, could have a material adverse
effect on the Company's business, financial condition and results of
operations. There can be no assurance that the Company will continue to
compete effectively against present and future competitors or the competitive
pressures will not have a material adverse effect on the Company's business,
financial condition or results of operations.
The Company has recently experienced significant growth in assets and
revenues. Such growth has placed, and is expected to continue to place, a
significant strain on the Company's managerial, operational and financial
resources. There can be no assurance that the Company will be able to
effectively manage the expansion of its operations, or that the Company's
systems, procedures or controls will be adequate to support the Company's
operations. An inability to effectively manage growth could have a material
adverse effect on the Company's business, financial condition or results of
operations.
The Company's operations are not highly dependent on systems technology
and management believes the Company's exposure to loss as a result of year
2000 issues is minimal. The Company does not believe that the Year 2000
issue will have a bearing on lessees' ability to adhere to the terms of their
lease agreements with the Company. However, it has been reported in the
general press that airlines and the FAA may have material Year 2000 issues,
which could effect their operations. Such an effect could impact the ability
of lessees and other customers to meet the obligations to the Company.
The Company's leasing activities generate significant depreciation
allowances that provide the Company with substantial tax benefits on an
ongoing basis. In addition, the Company's lessees currently enjoy favorable
accounting and tax treatment by entering into operating leases. Any change
to current tax laws or accounting principles that make operating lease
financing less attractive could adversely affect the Company's business,
financial condition or results of operations
The Company may experience fluctuations in its quarterly operating
results. Such fluctuations may be due to a number of factors, including the
timing of sales of engines and spare parts, fluctuation in aircraft equipment
marketing activities, fluctuation of margins on such activities,
unanticipated early lease terminations, the timing of aircraft equipment
acquisitions or a default by a lessee. Downturns in the air transportation
industry affect the Company's business. In particular, substantial increases
in fuel costs or interest rates, increased fare competition, slower growth in
air traffic, or any significant downturn in the general economy could
adversely affect the air transportation industry and may therefore negatively
impact the Company's business, financial condition and results of operations.
As a result, the Company believes that comparisons to the results of its
operations for preceding quarters are not necessarily meaningful and that
results for any prior quarter should not be relied upon as an indication of
future performance. In the event the Company's revenues or earnings for any
quarter are less than the level expected by securities analysts or the market
in general, such shortfall could have an immediate and significant adverse
impact on the market price of the Company's common stock.
15
<PAGE>
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
Effective June 8, 1998, the Company changed its state of incorporation
from California to Delaware. The merger was accomplished through a merger
(the "Merger") of Willis Lease Finance Corporation, a California corporation
("Willis-California"), into its wholly-owned Delaware subsidiary of the same
name ("Willis-Delaware"). In connection with the reincorporation, the Company
adopted various features in its certificate of incorporation and bylaws which
are intended, among other things, to promote the stability of the Company's
shareholder base and to render more difficult certain unsolicited or hostile
attempts to take over the Company (the "Shareholder Protection Features")
including: (a) the division of the Board of Directors of the Company into
three classes to serve staggered terms of office as more fully set forth in
the Certificate of Incorporation; (b) the requirement that certain "Business
Combinations" (as defined in Article XIII of the Certificate of
Incorporation) be approved by the affirmative vote of the holders of not less
than 80% of the total voting power of all outstanding shares of voting stock
of the Company; and (c) the provision that Bylaws may be amended or repealed
only with the approval of the holders of 80% of the total voting power of the
outstanding shares of voting stock of the Company; and (d) the provision that
special meetings of shareholders of the Company may be called only by the
Board of Directors, the Chairman of the Board or the President.
The reincorporation proposal and each of the Shareholder Protection
Features were approved by the Company's shareholders at the Company's annual
meeting of shareholders on May 12, 1998. As a result of the Merger, each
outstanding share of Willis-California's common stock, no par value per
share, was converted into one share of Willis-Delaware common stock, par
value $0.01 per share. Each stock certificate representing issued and
outstanding shares of Willis-California common stock will continue to
represent the same number of shares of Willis-Delaware common stock.
Shareholders are not required to undertake a mandatory exchange of shares.
The common stock will continue to trade on the Nasdaq National Market under
the symbol WLFC.
16
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the May 12, 1998 Annual Meeting of Shareholders of Willis Lease
Finance Corporation, the following matters were voted upon:
<TABLE>
<CAPTION>
DESCRIPTION VOTES
----------- ------
<S> <C> <C>
1. Election of Directors
Charles F. Willis, IV (Class III) 6,775,584 For
7,917 Withheld
William L. McElfresh (Class I) 6,775,584 For
7,917 Withheld
Ross K. Anderson (Class II) 6,775,584 For
7,917 Withheld
William M. LeRoy (Class I) 6,775,584 For
7,917 Withheld
Willard H. Smith, Jr. (Class II) 6,775,584 For
7,917 Withheld
2. Approval of ratification of selection of KPMG Peat Marwick LLP as 6,781,851 For
independent public accountants for the Company for the fiscal year 950 Against
ended December 31, 1998 700 Abstain
3. Approval of change in the Company's state of incorporation from 4,896,744 For
California to Delaware 1,258,460 Against
1,680 Abstain
4. Approval of adoption of Classified Board Provisions in the 4,059,263 For
Certificate of Incorporation and Bylaws of the Company pursuant 2,090,841 Against
to which the Board will be classified into three classes and 6,780 Abstain
directors may only be removed for cause and only by the specified
vote of shareholders
5. Approval of adoption of a Shareholder Supermajority Vote Requirement 3,980,913 For
in the Certificate of Incorporation of the Company pursuant to which 2,167,171 Against
the affirmative vote of the holders of not less than 80% of the Company's 8,800 Abstain
outstanding Voting Stock is required to approve certain business
combinations
6. Approval of adoption of provisions in the Certificate of Incorporation 3,982,313 For
of the Company requiring an increased Shareholder Vote of 80% to amend 2,160,671 Against
any of the Bylaws and to amend certain antitakeover provisions in the 13,900 Abstain
Certificate of Incorporation of the Company
7. Approval to eliminate the right of holders of 10% or more of the 4,027,784 For
Company's Common Stock to all special shareholders' meetings 2,051,533 Against
77,567 Abstain
8. Approval of a series of amendments to the Company's 1996 Stock 4,975,342 For
Option/Stock Issuance Plan, including a 500,000 share increase in 1,168,675 Against
the number of shares of Common Stock authorized for issuance under 12,867 Abstain
the 1996 Plan
</TABLE>
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
3.1 Certificate of Incorporation, filed on March 12, 1998 together with
Certificate of Amendment of Certificate of Incorporation filed on May 6, 1998.
Incorporated by reference to Exhibits 4.01 and 4.02 of the Company's report on
Form 8-K filed on June 23, 1998.
3.2 Bylaws. Incorporated by reference to Exhibit 4.03 of the Company's report
on Form 8-K filed on June 23, 1998.
4.1 Specimen of Common Stock Certificate.
10.1 Amendment No. 5 dated April 30, 1998 to Credit Agreement.
10.2* Amendment No. 6 dated May 4, 1998 to Credit Agreement.
10.3* Amended and Restated Credit Agreement dated June 2, 1998.
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule.
</TABLE>
- -----------------------------------------
*Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
(b) Reports on Form 8-K
During the three months ended June 30, 1998, the Company filed the
following two reports on Form 8-K: (i) a Form 8-K filed on April 30, 1998
which reported on Item 5; and (ii) a Form 8-K filed on June 23, 1998 which
reported on Item 5.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: August 10, 1998
Willis Lease Finance Corporation
By: /s/ James D. McBride
----------------------------------
James D. McBride
Chief Financial Officer
19
<PAGE>
COMMON STOCK COMMON STOCK
NUMBER SHARES
[LOGO]
WLFC
WILLIS LEASE FINANCE CORPORATION
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR STATEMENTS RELATING
THE STATE OF DELAWARE TO RIGHTS, PREFERENCES,
PRIVILEGES AND RESTRICTIONS, IF ANY
CUSIP 970646 10 5
THIS CERTIFIES THAT
SPECIMEN
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $0.01 PAR VALUE, OF
WILLIS LEASE FINANCE CORPORATION
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON
OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY
ADDRESSED. THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED AND REGISTERED
BY THE TRANSFER AGENT AND REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE SIGNATURES
OF ITS DULY AUTHORIZED OFFICERS.
WILLIS LEASE FINANCE CORPORATION
CORPORATE
SEAL
MARCH 12,
1998
DELAWARE
/s/ JAMES D. McBRIDE /s/ CHARLES F. WILLIS
CHIEF FINANCIAL OFFICER PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED.
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights as established, from time to time, by the
Certificate of Incorporation of the Corporation and by any certificate of
determination, the number of shares constituting each class and series, and
the designations thereof, may be obtained by the holder hereof upon request
and without charge from the Corporate Secretary of the Corporation at the
principal office of the Corporation
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT Custodian
------- ------
(Cust) (Minor)
TEN ENT - as tenants by the under Uniform Gifts to Minors
entireties Act
JT TEN - as joint tenants with -------------------------------------
right of survivorship (State)
and not as tenants in UNIF TRF MIN ACT Custodian
common -------
(Cust)
(until age) )
--------
under Uniform Transfers to
------------
(Minor)
Minors Act
----------------
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- -----------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
---------------------------------
X
--------------------------------------
X
--------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By ___________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM). PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
[LOGO]
AMENDMENT NO. 5
TO
CREDIT AGREEMENT
Amendment No. 5, dated April 30, 1998, (the "AMENDMENT") to Credit
Agreement, dated June 12, 1997 as amended prior to this date, (the "AGREEMENT")
by and between WILLIS LEASE FINANCE CORPORATION, a California corporation
("WILLIS") and CORESTATES BANK, N.A., a national banking association
("CORESTATES BANK", "CORESTATES" or the "BANK"). All capitalized terms used
herein and not otherwise defined shall have the respective meanings ascribed to
them in the Agreement.
PRELIMINARY STATEMENT
WHEREAS, Willis has requested that CoreStates Bank agree to certain
modifications to the Agreement as set forth herein.
WHEREAS, CoreStates Bank is willing to agree to such request on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and promises hereinafter
set forth and intending to be legally bound hereby, the parties hereto agree as
follows:
1. SECTION 2.1 OF THE AGREEMENT.
(a) The first and second paragraphs of Section 2.1 of the Agreement are
hereby amended and restated in their entireties to read as follows:
"2.1 THE LOANS. Subject to the terms and conditions herein set
forth and in reliance upon the representations, warranties and
covenants contained herein, CoreStates Bank agrees to make revolving
credit loans ("REVOLVING CREDIT LOANS") to Willis upon receipt of loan
requests therefor in amounts not to exceed at any time outstanding, in
the aggregate, $65,000,000 through June 30, 1998 and $30,000,000
thereafter (such amount, as the same may be reduced pursuant to
Section 2.7 hereof being hereinafter called the "REVOLVING LOAN
COMMITMENT"). For purposes of determining the amount of Revolving
Credit Loans outstanding, the Standby Letters of Credit issued
pursuant to Section 2.2 hereof shall be deemed Revolving Credit Loans
and shall be added to the Revolving Credit Loans outstanding to
determine the aggregate Revolving
<PAGE>
Credit Loans outstanding. As provided below, Revolving Credit Loans may be
requested by Willis, and made from time to time prior to the Revolver
Termination Date. All Loans shall be made to Willis at the main office of
the Bank, Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101.
Revolving Credit Loans may be made from time to time during the
period beginning on the date hereof and ending on June 30, 1998 or on
the earlier date of termination in full, pursuant to Section 2.7 or
Section 8.1 hereof, of the obligations of the Bank under this Section
2.1 (June 30, 1998 or such earlier date of termination being herein
called the "REVOLVER TERMINATION DATE"). Revolving Credit Loans at the
occasion of each borrowing shall be in aggregate principal amounts at
least equal to $150,000 or, if less, the remaining unused amount of
the Revolving Loan Commitment. Willis shall not be entitled to any
Revolving Credit Loan if, after giving effect to such Loan, the unpaid
amount of the then outstanding Revolving Credit Loans would exceed the
then current Borrowing Base. Prior to the Revolver Termination Date
and within the limits of the Revolving Loan Commitment and the
Borrowing Base, Willis may borrow, prepay and reborrow Revolving
Credit Loans. All Revolving Credit Loans shall mature and be due and
payable as set forth in the next paragraph of this Section 2.1 unless
the maturity of said Loans is accelerated as provided in Section 2.7
or Section 8.1 hereof."
(b) The fourth paragraph of Section 2.1 of the Agreement is hereby amended
and restated in its entirety to read as follows:
"Willis may have Revolving Credit Loans outstanding at any time and
from time to time in an aggregate amount up to, but not exceeding
$25,000,000 for the acquisition of Category B Equipment. Any item of
Category B Equipment which is a Stage III jet engine shall be deducted
from Category B Equipment and become part of Category A Equipment upon
the physical removal of that engine from its airframe, provided that
such Equipment otherwise qualifies as Category A Equipment."
2. SECTION 2.2 OF THE AGREEMENT. The first paragraph of Section 2.2 of the
Agreement is hereby amended and restated in its entirety to read as follows:
"2.2 STANDBY LETTERS OF CREDIT. The Bank, under the terms and
subject to the conditions of this Agreement, agrees to provide Standby
Letters of Credit to Willis, from time to time prior to the Revolver
Termination Date, as requested by Willis, provided that (A) the
aggregate amount of Standby Letters of Credit outstanding at any one
time shall not exceed $2,000,000 or such lesser amount, if any, as
will, when added to the amount of the Revolving Credit Loans then
outstanding, aggregate more than the Revolving Loan Commitment (or
such lesser amount as Willis is entitled to borrow hereunder at such
time by reason of the limitation of the Borrowing Base or otherwise),
and (B) no Standby Letter of Credit shall be for a term longer than
one year."
3. EXHIBIT A TO THE CREDIT AGREEMENT. Exhibit A to the Agreement shall be
and is hereby amended and restated in its entirety to be as set forth in Exhibit
A attached hereto. Upon delivery of the $65,000,000 Revolving Credit Note,
dated April 30, 1998, to the Bank, the Bank shall mark the $45,000,000 Revolving
Credit Note, dated November 18, 1997, "canceled and replaced by $65,000,000
Revolving Credit Note, dated April 30, 1998."
2
<PAGE>
4. EXHIBIT B TO THE CREDIT AGREEMENT. Exhibit B to the Agreement shall be
and is hereby amended to insert in "Line 2" the maximum loans as such shall be
in effect at the date of the certificate.
5. REPRESENTATIONS AND WARRANTIES. Willis hereby restates the
representations and warranties made in the Agreement, including but not limited
to Article 3 thereof, on and as of the date hereof as if originally given on
this date.
6. COVENANTS. Willis hereby represents and warrants that it is in
compliance and has complied with each and every covenant set forth in the
Agreement, including but not limited to Articles 5 and 6 thereof, on and as of
the date hereof.
7. CORPORATE AUTHORIZATION AND DELIVERY OF DOCUMENTS. CoreStates shall
have received copies, certified as of the date hereof, of all action taken by
Willis and any other necessary Person to authorize this Amendment and such other
papers as CoreStates shall require.
8. AFFIRMATION. Willis hereby affirms its absolute and unconditional
promise to pay to CoreStates Bank the Loans and all other amounts due under the
Agreement and any other Loan Document on the maturity date(s) provided in the
Agreement or any other Loan Document, as such documents may be amended hereby.
9. EFFECT OF AMENDMENT. This Amendment amends the Agreement only to the
extent and in the manner herein set forth, and in all other respects the
Agreement is ratified and confirmed.
10. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have each caused this Amendment to
be duly executed by their duly authorized representatives as of the date first
above written.
WILLIS LEASE FINANCE CORPORATION
By: /s/ James D. McBride
-------------------------------------
Name: James D. McBride
Title: Executive Vice President
and Chief Financial Officer
CORESTATES BANK, N.A.
By: /s/ Hugh W. Connelly
-------------------------------------
Name: Hugh W. Connelly
Title: Vice President
3
<PAGE>
AMENDMENT NO. 6
TO
CREDIT AGREEMENT
Amendment No. 6, dated May 4, 1998, (the "AMENDMENT") to Credit
Agreement, dated June 12, 1997 as amended prior to this date, (the
"AGREEMENT") by and between WILLIS LEASE FINANCE CORPORATION, a California
corporation ("WILLIS") and CORESTATES BANK, N.A., a national banking
association ("CORESTATES BANK", "CORESTATES" or the "BANK"). All capitalized
terms used herein and not otherwise defined shall have the respective
meanings ascribed to them in the Agreement.
PRELIMINARY STATEMENT
WHEREAS, Willis has requested that CoreStates Bank agree to certain
modifications to the Agreement as set forth herein.
WHEREAS, CoreStates Bank is willing to agree to such request on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and promises
hereinafter set forth and intending to be legally bound hereby, the parties
hereto agree as follows:
1. SECTION 1.1 OF THE AGREEMENT.
(a) The following definitions are hereby inserted and shall read as
follows:
"ADJUSTED LIBO RATE" shall mean, for any Interest Period, the rate
per annum (rounded upwards, if necessary to the next 1/16 of 1%)
determined pursuant to the following formula:
Adjusted LIBO Rate = LIBO Rate
---------------------
1 -Reserve Percentage
"BASE RATE LOAN" shall mean a Loan, or any portion thereof, made at
the Base Rate pursuant to a request for advance made under Section 2.4
herein or as otherwise provided in Section 2.5(b)(i) or in any other
provision hereof or in any other Loan Document.
Amendment No. 6 to
Credit Agreement May 4, 1998
<PAGE>
"BASE RATE MARGIN" shall mean the percentage listed in the following
table:
LEVERAGE RATIO* BASE RATE MARGIN1 (*)
Less than ______ ________
Equal to or greater than ______ but less than ______ ________
Equal to or greater than ______ but less than ______ ________
Equal to or greater than ______ but less than ______ ________
Equal to or greater than ______ but less than ______ ________
_________________________
1 In the event that the Revolver Termination Date is not extended and
the Note is to be repaid as described in Section 2.1, the Base Rate
Margin shall be increased by _____%.*
"INTEREST PERIOD" shall mean a period commencing on the date of a
LIBO Rate Loan or with respect to a Loan being renewed, the last day of
the next preceding Interest Period and ending one, two or three months
thereafter, as requested by Willis at the time of its Request for Advance;
provided also that (i) an Interest Period which would otherwise expire on
a day which is not a London Business Day shall be extended to the next
succeeding London Business Day unless such London Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding London Business Day, (ii) any Interest Period which
begins on the last London Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to the next succeeding
clause, end on the last London Business Day of a calendar month; and (iii)
no Interest Period shall end later than the Revolver Termination Date.
"LEVERAGE RATIO" shall mean the ratio of the Debt of Willis to its
Tangible Net Worth calculated based on the most recent financial statements
furnished to the Bank in accordance herewith.
"LIBO RATE" shall mean the arithmetic average of the rates of interest
per annum (rounded upwards, if necessary to the next 1/16 of 1%) at which
the Bank is offered deposits of United States Dollars by leading banks in
the interbank eurodollar or eurocurrency market on or about eleven o'clock
(11:00) a.m. London time two London Business Days prior to the commencement
of the requested Interest Period in an amount substantially equal to the
outstanding principal amount of the LIBO Rate Loan requested for a maturity
of comparable duration to the Interest Period.
"LIBO RATE LOAN" shall mean a Loan made at Adjusted LIBO Rate plus the
LIBO Rate Margin, pursuant to a request for advance made under Section 2.4
herein.
_________________________
* This redacted material has been omitted pursuant to a request for
confidential treatment and the material has been filed separately.
Amendment No. 6 to
Credit Agreement May 4, 1998
2
<PAGE>
"LIBO RATE MARGIN" shall mean the percentage listed in the following
table.
LEVERAGE RATIO* LIBO RATE MARGIN1 (*)
Less than ______ ________
Equal to or greater than ______ but less than ______ ________
Equal to or greater than ______ but less than ______ ________
Equal to or greater than ______ but less than ______ ________
Equal to or greater than ______ but less than ______ ________
_________________________
1 In the event that the Revolver Termination Date is not extended
and the Note is to be repaid as described in Section 2.1, the LIBO
Rate Margin shall be increased by ____% during the repayment
period.*
"LONDON BUSINESS DAY" shall mean any Business Day on which the Bank
is open for business and quoting interest rates on United States Dollar
deposits in London, England.
"OPERATING LEASE" shall mean, with respect to any Person, the
aggregate amount which, in accordance with GAAP, is not required to be
reported as a liability on the balance sheet of such Person at such time in
respect of such Person's interest as lessee under an Operating Lease.
"RESERVE PERCENTAGE" shall mean, for any LIBO Rate Loan for any
Interest Period, the daily average of the stated maximum rate (expressed as
a decimal) at which reserves (including any marginal, supplemental, or
emergency reserves) are required to be maintained during such Interest
Period under Regulation D by the Bank against "Eurocurrency liabilities"
(as such term is used in Regulation D) but without benefit of credit
proration, exemptions, or offsets that might otherwise be available to the
Bank from time to time under Regulation D. Without limiting the effect of
the foregoing, the Reserve Percentage shall reflect any other reserves
required to be maintained by the Bank against (1) any category of
liabilities which includes deposits by reference to which the rate for LIBO
Rate Loans is to be determined; or (2) any category of extension of credit
or other assets which include LIBO Rate Loans. The Adjusted LIBO Rate
shall be adjusted on and as of the effective day of any change in the
Reserve Percentage.
"UNRESTRICTED SUBSIDIARY" shall mean WLFC Funding Corporation, T-5,
Inc., T-7, Inc., T-10, Inc., T-12, Inc. and any additional subsidiary named
by Willis after the date hereof with the written consent of the Bank.
_________________________
* This redacted material has been omitted pursuant to a request for
confidential treatment and the material has been filed separately.
Amendment No. 6 to
Credit Agreement May 4, 1998
3
<PAGE>
(b) The following definitions are hereby amended and restated in their
entirety to read as follows:
"BASE RATE" shall mean (i) the rate of interest for commercial loans
established and publicly announced by CoreStates from time to time as its
prime rate, or, if higher, (ii) the Federal Funds Rate plus ______% per
annum. Any change in such interest rate due to a change in the Base Rate
shall be effective on the date of such change.(*)
"DEBT" shall mean, as of any date of determination with respect to
Willis, without duplication and determined on a consolidated basis, (i) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of Willis as
of the date on which Debt is to be determined, (ii) all indebtedness of
others with respect to which Willis has become liable by way of a guarantee
or endorsement (other than for collection or deposit in the ordinary course
of business), (iii) all contingent liabilities of Willis, (iv) lease
obligations that, in conformity with GAAP, have been capitalized on Willis'
balance sheet, and (v) the present value of any outstanding Operating
Lease payments (discounted at a rate of 10%), LESS (1) maintenance reserves
and security deposits that are cash backed, and (2) liabilities of
Unrestricted Subsidiaries.
"DEFAULT RATE" on any Loan shall mean two percent (2.0%) per annum
above the rate then applicable to each Loan or portion thereof.
"LOAN" or "LOANS" shall mean LIBO Rate or Base Rate Revolving Credit
Loan or Loans.
"NET WORTH" shall mean the sum of capital stock, plus paid-in capital,
plus retained earnings, minus treasury stock and minus the net worth of any
Unrestricted Subsidiaries.
2. SECTION 2.1 OF THE AGREEMENT. The second paragraph of Section 2.1 of
the Agreement is hereby amended and restated in its entirety to read as follows:
"Revolving Credit Loans may be made from time to time during the
period beginning on the date hereof and ending on June 30, 1998 or on
the earlier date of termination in full, pursuant to Section 2.7 or
Section 8.1 hereof, of the obligations of the Bank under this Section
2.1 (June 30, 1998 or such earlier date of termination being herein
called the "REVOLVER TERMINATION DATE"). Revolving Credit Loans shall
bear interest at (i) the Base Rate plus the Base Rate Margin, (ii)
Adjusted LIBO Rate plus the LIBO Rate Margin or (iii) some combination
of the foregoing, as requested by Willis, subject to the terms and
conditions hereof including the requirements concerning minimum Loan
requests and the requirements that (i) no request may be made which
would require more than one interest rate option or more than one
Interest Period to apply to Loans made on any single date, and (ii),
in the case of LIBO Rate Loans, (a) not more than
_________________________
* This redacted material has been omitted pursuant to a request for
confidential treatment and the material has been filed separately.
Amendment No. 6 to
Credit Agreement May 4, 1998
4
<PAGE>
five such Loans may be outstanding at any one time, and (b) no LIBO Rate
Loan may have an Interest Period extending beyond the Revolver Termination
Date. Revolving Credit Loans at the occasion of each borrowing (and each
conversion of LIBO Rate Loans into Base Rate Loans) shall be in aggregate
principal amounts at least equal to $150,000 or, if less, the remaining
unused amount of the Revolving Loan Commitment. Each LIBO Rate Loan when
made (and each conversion of Base Rate Loans into LIBO Rate Loans) shall be
in an amount at least equal to $3,000,000 or, if greater, then in such
minimum amount plus $100,000 multiples. Willis shall not be entitled to
any Revolving Credit Loan if, after giving effect to such Loan, the unpaid
amount of the then outstanding Revolving Credit Loans would exceed the then
current Borrowing Base. Prior to the Revolver Termination Date and within
the limits of the Revolving Loan Commitment and the Borrowing Base, Willis
may borrow, prepay and reborrow Revolving Credit Loans. All Revolving
Credit Loans shall mature and be due and payable as set forth in the next
paragraph of this Section 2.1 unless the maturity of said Loans is
accelerated as provided in Section 2.7 or Section 8.1 hereof."
3. SECTION 2.4 OF THE AGREEMENT. Section 2.4 of the Agreement is hereby
amended and restated in its entirety to read as follows:
"2.4 FUNDING PROCEDURES.
(a) REQUESTS FOR ADVANCE. Each request for a Loan shall be made not
later than 2:00 p.m. on a Business Day by delivery to the Bank of a written
request signed by Willis or in the alternative a telephone request followed
promptly by written confirmation of the request. No request shall be
effective until actually received in writing by the Bank. Willis may not
request more than three advances per week.
A request for Revolving Credit Loans or a conversion or renewal shall
be delivered to the Bank (A) at least one Business Day, in the case of Base
Rate Loans and (B) three London Business Days, in the case of LIBO Rate
Loans, prior to the date on which such Loan is desired. The request shall
state (i) the date of such Borrowing, conversion or renewal, which shall be
a Business Day or, in the case of LIBO Rate Loans, a London Business Day,
(ii) the amount of such Borrowing, conversion or renewal, (iii) whether the
Loans comprising such Borrowing are to be Base Rate Loans or LIBO Rate
Loans and (iv) in the case of LIBO Rate Loans, the duration of the Interest
Period applicable thereto. Each request for advance shall be for Loans at
a single interest rate option.
(b) IRREVOCABILITY. Upon receipt of a request for a Loan and if the
conditions precedent provided herein shall be satisfied at the time of such
request, the request for a Loan shall not be revocable by Willis.
(c) AVAILABILITY OF FUNDS. In the case of a borrowing, the Bank will
make funds immediately available to Willis on the date of each Loan by a
credit to the account of Willis at the Bank's address set forth opposite
its name on the signature page hereof."
Amendment No. 6 to
Credit Agreement May 4, 1998
5
<PAGE>
4. SECTION 2.5 OF THE AGREEMENT. Section 2.5 of the Agreement is hereby
amended and restated in its entirety to read as follows:
"2.5 INTEREST RATES.
(a) BASE RATE LOANS. Each Base Rate Loan shall bear interest on the
unpaid principal balance thereof from day to day at a rate per annum which
at all times shall be equal to the Base Rate plus the Base Rate Margin.
Interest on Loans shall be computed on the basis of a year of 365 or 366
days, as applicable, if the Base Rate is equal to the prime rate of
CoreStates. Interest on Loans shall be computed on the basis of a year of
360 days, for the actual days elapsed, if the Base Rate is equal to the
Federal Funds Rate plus ______ annum.(*)
(b) LIBO RATE LOANS. Each LIBO Rate Loan shall bear interest from
its effective date on the unpaid principal amount thereof at Adjusted LIBO
Rate plus the LIBO Rate Margin. Interest on LIBO Rate Loans shall be
computed on the basis of a year of 360 days, for the actual days elapsed,
and shall be payable on the last day of the applicable Interest Period.
(c) CONVERSION TO BASE RATE. Unless Willis shall have elected in
accordance with the provisions of Section 2.4 or this Section 2.5 that LIBO
Rate apply to the one, two or three month period immediately succeeding a
particular Interest Period, upon the termination of such Interest Period
the applicable Loan shall bear interest at the Base Rate plus the Base Rate
Margin until such time as Willis elects to request a new LIBO Rate Loan for
a subsequent Interest Period.
(d) RENEWALS AND CONVERSIONS. Willis shall have the right to convert
Base Rate Loans into LIBO Rate Loans, and vice versa, and to renew LIBO
Rate Loans from time to time, provided that: (i) Willis shall give Bank
notice of each permitted conversion or renewal; (ii) LIBO Rate Loans may be
converted or renewed only as of the last day of the applicable Interest
Period for such Loans; (iii) without the consent of the Bank, no Base Rate
Loan may be converted into a LIBO Rate Loan, and no Interest Period may be
renewed if on the proposed date of conversion an Event of Default, or
Potential Default exists or would thereby occur. The Bank shall use its
best efforts to notify Willis of the effectiveness of such conversion or
renewal, and the new interest rate to which the converted or renewed Loan
is subject, as soon as practicable after the conversion; provided, however,
that any failure to give such notice shall not affect Willis' obligations
or the Bank's rights and remedies hereunder in any way whatsoever.
(e) INTERIM PAYMENTS AT BASE RATE. If at any time Willis requests
that Adjusted LIBO Rate plus the LIBO Rate Margin be applicable to a Loan
for a particular Interest Period and a payment of principal is due within
such period (other than on the last day of such Interest Period), only that
portion of that Loan equal to the outstanding principal amount of the Loan
less the principal installment due during such period shall bear interest
at Adjusted LIBO Rate
_________________________
* This redacted material has been omitted pursuant to a request for
confidential treatment and the material has been filed separately.
Amendment No. 6 to
Credit Agreement May 4, 1998
6
<PAGE>
plus the LIBO Rate Margin for such Interest Period. The portion of that
Loan equal to the principal installment due during such period shall bear
interest at the Base Rate plus the Base Rate Margin."
5. SECTION 2.8 OF THE AGREEMENT. Section 2.8 of the Agreement is hereby
amended and restated in its entirety to read as follows:
"2.8 VOLUNTARY PREPAYMENTS.
(a) BASE RATE LOANS. On one Business Day's notice to the Bank,
Willis may, without penalty, at its option, prepay any Base Rate Loan in
whole at any time or in part from time to time, provided that each partial
prepayment shall be in the minimum principal amount of $150,000 or, if
greater, then in multiples thereof and, if less than $150,000 shall be
outstanding, in principal amount equal to amount remaining outstanding.
Notwithstanding the foregoing, prepayments may be made in connection with
the release of collateral as provided in Section 9.3, which prepayments
shall not be subject to the requirements of the previous sentence.
(b) LIBO RATE LOANS. On three London Business Days' notice to the
Bank, Willis may, without penalty, at its option, prepay any LIBO Rate Loan
in whole at any time or in part from time to time, provided that each
partial prepayment shall be in the minimum principal amount of $1,000,000
or, if greater, then in multiples of $100,000 and, if less than $1,000,000
shall be outstanding, in principal amount equal to amount remaining
outstanding provided that if it shall prepay a LIBO Rate Loan prior to the
last day of the applicable Interest Period, or shall fail to borrow any
LIBO Rate Loan on the date such Loan is to be made, it shall pay to the
Bank, in addition to the principal and interest then to be paid in the case
of a prepayment, on such date of prepayment, the Additional Amount incurred
or sustained by the Bank as a result of such prepayment or failure to
borrow as provided in Section 2.9(e)."
6. SECTION 2.9 OF THE AGREEMENT. Section 2.9 of the Agreement is hereby
amended and restated in its entirety to read as follows:
"SECTION 2.9. PAYMENTS.
(a) ACCRUED INTEREST. Accrued interest on all Base Rate Loans shall
be due and payable on the first Business Day of each calendar month.
Interest on LIBO Rate Loans shall be payable on the last day of the
applicable Interest Period. Each Revolving Credit Loan shall mature as
provided in Section 2.1.
(b) FORM OF PAYMENTS, APPLICATION OF PAYMENTS, PAYMENT
ADMINISTRATION, ETC. All payments of principal, interest, fees, or other
amounts payable by Willis hereunder shall be applied to the Loans in such
order and to such extent as shall be specified by Willis by written notice
to the Bank at the time of such payment or prepayment. Such payments shall
be remitted to the Bank at the address set forth opposite its name on the
signature page hereof or at such office or account as the Bank shall
specify to Willis, in immediately available funds not later than 2:00 p.m.
on the day when due. Whenever any payment is stated as due on a day which
is not a Business Day, the maturity of such payment shall, except as
otherwise provided in the definition of "Interest Period," be extended to
the next succeeding Business Day and interest and commitment fees shall
continue to accrue during such extension. Willis authorizes the Bank to
deduct from any account of Willis maintained at the Bank or over which the
Bank
Amendment No. 6 to
Credit Agreement May 4, 1998
7
<PAGE>
has control any amount payable under this Agreement, the Note or any
other Loan Document which is not paid in a timely manner. The Bank's
failure to deliver any bill, statement or invoice with respect to amounts
due under this Section or under any Loan Document shall not affect Willis's
obligation to pay any installment of principal, interest or any other
amount under this Agreement when due and payable.
(c) DEMAND DEPOSIT ACCOUNT. Willis shall maintain at least one
demand deposit account with the Bank for purposes of this Agreement.
Willis authorizes the Bank to deposit into said account all amounts to be
advanced to Willis hereunder. Further, Willis authorizes the Bank (but the
Bank shall not be obligated) to deduct from said account, or any other
account maintained by Willis at the Bank, any amount payable hereunder on
or after the date upon which it is due and payable. Such authorization
shall include but not be limited to amounts payable with respect to
principal, interest, fees and expenses.
(d) NET PAYMENTS. All payments made to the Bank by Willis hereunder,
under any Note or under any other Loan Document will be made without set
off, counterclaim or other defense.
(e) PAYMENT OF ADDITIONAL AMOUNT. If any principal of a LIBO Rate
Loan shall be repaid (whether upon prepayment, reduction of the Revolving
Loan Commitment after acceleration or for any other reason) or converted to
a Base Rate Loan prior to the last day of the Interest Period applicable to
such LIBO Rate Loan or if Willis fails for any reason to borrow a LIBO Rate
Loan after giving irrevocable notice pursuant to Section 2.4, it shall pay
to the Bank, in addition to the principal and interest then to be paid,
such additional amounts as may be necessary to compensate the Bank for all
direct and indirect costs and losses (including losses resulting from
redeployment of prepaid or unborrowed funds at rates lower than the cost of
such funds to the Bank, and including lost profits incurred or sustained by
the Bank) as a result of such repayment or failure to borrow (the
"Additional Amount"). The Additional Amount (which the Bank shall take
reasonable measures to minimize) shall be specified in a written notice or
certificate delivered to Willis by the Bank in the form provided by the
Bank sustaining such costs or losses. Such notice or certificate shall
contain a calculation in reasonable detail of the Additional Amount to be
compensated and shall be conclusive as to the facts and the amounts stated
therein, absent manifest error."
7. SECTION 2.10 OF THE AGREEMENT. Section 2.10 of the Agreement is hereby
inserted to read as follows:
"SECTION 2.10. CHANGE IN CIRCUMSTANCES, YIELD PROTECTION.
(a) CERTAIN REGULATORY CHANGES. If any Regulatory Change or
compliance by the Bank with any request made after the date of this
Agreement by the Board of Governors of the Federal Reserve System or by any
Federal Reserve Bank or other central bank or fiscal, monetary or similar
authority (in each case whether or not having the force of law) shall (i)
impose, modify or make applicable any reserve, special deposit, Federal
Deposit Insurance Corporation premium or similar requirement or imposition
against assets held by, or deposits in or for the account of, or loans made
by, or any other acquisition of funds for loans or advances by, the Bank;
(ii) impose on the Bank any other condition regarding the Notes; (iii)
subject the Bank to, or cause the withdrawal or termination of any
previously granted exemption with respect to, any tax (including any
withholding tax but not including any income
Amendment No. 6 to
Credit Agreement May 4, 1998
8
<PAGE>
tax not currently causing the Bank to be subject to withholding) or any
other levy, impost, duty, charge, fee or deduction on or from any
payments due from Willis; or (iv) change the basis of taxation of
payments from Willis to the Bank (other than by reason of a change in
the method of taxation of the Bank's net income); and the result of any
of the foregoing events is to increase the cost to the Bank of making or
maintaining any Loan or to reduce the amount of principal, interest or
fees to be received by Willis hereunder in respect of any Loan, the Bank
will immediately so notify Willis. If the Bank determines in good faith
that the effects of the change resulting in such increased cost or
reduced amount cannot reasonably be avoided or the cost thereof
mitigated, then upon notice by the Bank to Willis, Willis shall pay to
the Bank on each interest payment date of the Loan, such additional
amount as shall be necessary to compensate the Bank for such increased
cost or reduced amount.
(b) CAPITAL ADEQUACY. If the Bank shall determine that any
Regulation regarding capital adequacy or the adoption of any Regulation
regarding capital adequacy, which Regulation is applicable to Banks (or
their holding companies) generally and not such Bank (or its holding
company) specifically, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank (or its holding company)
with any such request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or
comparable agency, has the effect of reducing the rate of return on the
Bank's capital as a consequence of its obligations hereunder to a level
below that which the Bank could have achieved but for such adoption, change
or compliance (taking into consideration the Bank's policies with respect
to capital adequacy) by an amount deemed by the Bank to be material, Willis
shall promptly pay to the Bank for the account of the Bank, upon the demand
of the Bank, such additional amount or amounts as will compensate the Bank
for such reduction.
(c) ABILITY TO DETERMINE LIBO RATE. If the Bank shall determine
(which determination will be, in the absence of fraud or manifest error,
conclusive and binding upon all parties hereto) that by reason of abnormal
circumstances affecting the interbank eurodollar or applicable eurocurrency
market adequate and reasonable means do not exist for ascertaining LIBO
Rate to be applicable to the requested LIBO Rate Loan or that eurodollar or
eurocurrency funds in amounts sufficient to fund all the LIBO Rate Loans
are not obtainable on reasonable terms, the Bank shall give notice of such
inability or determination by telephone to Willis at least two Business
Days prior to the date of the proposed Loan and thereupon the obligations
of the Bank to make, convert other Loans to, or renew such LIBO Rate Loan
shall be excused, subject, however, to the right of Willis at any time
thereafter to submit another request.
(d) YIELD PROTECTION. Determination by the Bank for purposes hereof
of the effect of any Regulatory Change or other change or circumstance
referred to above on its costs of making or maintaining Loans or on amounts
receivable by it in respect of the Loans and of the additional amounts
required to compensate the Bank in respect of any additional costs, shall
be made in good faith and shall be evidenced by a certificate, signed by an
officer of the Bank and delivered to Willis, as to the fact and amount of
the increased cost incurred by or the reduced amount accruing to the Bank
owing to such event or events. Such certificate shall be prepared in
reasonable detail and shall be conclusive as to the facts and amounts
stated therein, absent manifest error.
Amendment No. 6 to
Credit Agreement May 4, 1998
9
<PAGE>
(e) NOTICE OF EVENTS. The Bank will notify Willis of any event
occurring after the date of this Agreement that will entitle the Bank to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.
Said notice shall be in writing, shall specify the applicable Section or
Sections of this Agreement to which it relates and shall set forth the
amount or amounts then payable pursuant to this Section. Willis shall pay
the Bank the amount shown as due on such notice within 10 days after its
receipt of the same."
8. SECTION 2.11 OF THE AGREEMENT. Section 2.11 of the Agreement is hereby
inserted to read as follows:
"SECTION 2.11.ILLEGALITY. Notwithstanding any other provision in this
Agreement, if the adoption of any applicable Regulation, or any change
therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank, or comparable agency charged with
the interpretation or administration thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law) of
any such authority, central bank, or comparable agency shall make it
unlawful or impossible for the Bank to (1) maintain its Revolving Loan
Commitment, then upon notice to Willis by the Bank, the Revolving Loan
Commitment shall terminate; or (2) maintain or fund its LIBO Rate Loans,
then upon notice to the Willis of such event, Willis' outstanding LIBO Rate
Loans shall be converted into Base Rate Loans."
9. REPRESENTATIONS AND WARRANTIES. Willis hereby restates the
representations and warranties made in the Agreement, including but not limited
to Article 3 thereof, on and as of the date hereof as if originally given on
this date.
10. COVENANTS. Willis hereby represents and warrants that it is in
compliance and has complied with each and every covenant set forth in the
Agreement, including but not limited to Articles 5 and 6 thereof, on and as of
the date hereof.
11. CORPORATE AUTHORIZATION AND DELIVERY OF DOCUMENTS. CoreStates shall
have received copies, certified as of the date hereof, of all action taken by
Willis and any other necessary Person to authorize this Amendment and such other
papers as CoreStates shall require.
12. AFFIRMATION. Willis hereby affirms its absolute and unconditional
promise to pay to CoreStates Bank the Loans and all other amounts due under the
Agreement and any other Loan Document on the maturity date(s) provided in the
Agreement or any other Loan Document, as such documents may be amended hereby.
13. EFFECT OF AMENDMENT. This Amendment amends the Agreement only to the
extent and in the manner herein set forth, and in all other respects the
Agreement is ratified and confirmed.
14. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures hereto were upon the same instrument.
Amendment No. 6 to
Credit Agreement May 4, 1998
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Amendment to
be duly executed by their duly authorized representatives as of the date first
above written.
WILLIS LEASE FINANCE CORPORATION
By: /s/ James D. McBride
----------------------------------
Name: James D. McBride
Title: Executive Vice President
and Chief Financial Officer
CORESTATES BANK, N.A.
By: /s/ Hugh W. Connelly
----------------------------------
Name: Hugh W. Connelly
Title: Vice President
Amendment No. 6 to
Credit Agreement May 4, 1998
11
<PAGE>
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
WILLIS LEASE FINANCE CORPORATION
AND
CERTAIN BANKING INSTITUTIONS NAMED HEREIN
WITH
FIRST UNION NATIONAL BANK
(successor by merger to CoreStates Bank, N.A.)
AS AGENT
dated
JUNE 2, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . .11
2. The Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.1. The Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(a) Revolving Credit Loans; Commitment. . . . . . . . . . . .12
(b) Interest Rate Options. . . . . . . . . . . . . . . . . .12
(c) Maximum Loans Outstanding. . . . . . . . . . . . . . . .12
(d) Minimum Loan Amount . . . . . . . . . . . . . . . . . . .12
(e) Prepayment and Reborrowing. . . . . . . . . . . . . . . .12
(f) Limit for Category B Equipment. . . . . . . . . . . . . .13
(g) Revolving Loan Commitment Percentages . . . . . . . . . .13
(h) Several Obligations . . . . . . . . . . . . . . . . . . .13
(i) Payment of Additional Amount . . . . . . . . . . . . . .13
2.2. Standby Letters of Credit . . . . . . . . . . . . . . . . . . . .13
2.3. The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.4. Funding Procedures. . . . . . . . . . . . . . . . . . . . . . . .14
(a) Request for Advance . . . . . . . . . . . . . . . . . . .14
(b) Actions by Agent. . . . . . . . . . . . . . . . . . . . .15
(c) Availability of Funds . . . . . . . . . . . . . . . . . .15
(d) Funding Assumptions . . . . . . . . . . . . . . . . . . .15
(e) Proceeds of Loan Being Repaid . . . . . . . . . . . . . .16
2.5. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
(a) Base Rate Loans . . . . . . . . . . . . . . . . . . . . .16
(b) LIBO Rate Loans . . . . . . . . . . . . . . . . . . . . .16
(c) Conversion to Base Rate . . . . . . . . . . . . . . . . .16
(d) Renewals and Conversions. . . . . . . . . . . . . . . . .16
(e) Interim Payments At Base Rate . . . . . . . . . . . . . .16
(f) Reinstatements. . . . . . . . . . . . . . . . . . . . . .17
2.6. Revolving Loan Commitment Fee . . . . . . . . . . . . . . . . . .17
2.7. Reduction or Termination of Revolving Loan Commitments. . . . . .17
(a) Voluntary . . . . . . . . . . . . . . . . . . . . . . . .17
(b) Revolving Loan Commitment Termination . . . . . . . . . .17
2.8. Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . .18
(a) Base Rate Loans . . . . . . . . . . . . . . . . . . . . .18
(b) LIBO Rate Loans . . . . . . . . . . . . . . . . . . . . .18
2.9. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
(a) Accrued Interest. . . . . . . . . . . . . . . . . . . . .18
(b) Form of Payments, Application of Payments,
Payment Administration, Etc. . . . . . . . . . . . . . .18
(c) Demand Deposit Account. . . . . . . . . . . . . . . . . .18
(d) Net Payments. . . . . . . . . . . . . . . . . . . . . . .19
2.10. Change in Circumstances, Yield Protection . . . . . . . . . . . .19
(a) Certain Regulatory Changes. . . . . . . . . . . . . . . .19
i
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(b) Capital Adequacy. . . . . . . . . . . . . . . . . . . . .19
(c) Ability to Determine LIBO Rate. . . . . . . . . . . . . .19
(d) Yield Protection. . . . . . . . . . . . . . . . . . . . .20
(e) Notice of Events. . . . . . . . . . . . . . . . . . . . .20
2.11. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.12. Discretion of Each Bank as to Manner of Funding . . . . . . . . .20
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . .20
3.1. Organization, Standing. . . . . . . . . . . . . . . . . . . . . .21
3.2. Corporate Authority, Validity, Etc. . . . . . . . . . . . . . . .21
3.3. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
3.4. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
3.5. Financial Statements. . . . . . . . . . . . . . . . . . . . . . .22
3.6. Not in Default, Judgments, Etc. . . . . . . . . . . . . . . . . .22
3.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
3.8. Permits, Licenses, Etc. . . . . . . . . . . . . . . . . . . . . .22
3.9. No Materially Adverse Contracts, Etc. . . . . . . . . . . . . . .22
3.10. Compliance with Laws, Etc . . . . . . . . . . . . . . . . . . . .22
(a) Compliance Generally. . . . . . . . . . . . . . . . . . .22
(b) Hazardous Wastes, Substances and Petroleum Products . . .23
3.11. Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
3.12. Subsidiaries, Etc . . . . . . . . . . . . . . . . . . . . . . . .23
3.13. Title to Properties, Leases . . . . . . . . . . . . . . . . . . .23
3.14. Public Utility Holding Company; Investment Company. . . . . . . .23
3.15. Margin Stock. . . . . . . . . . . . . . . . . . . . . . . . . . .23
3.16. Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . . .24
3.17. Depreciation Policies . . . . . . . . . . . . . . . . . . . . . .24
3.18. Disclosure Generally. . . . . . . . . . . . . . . . . . . . . . .24
4. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.1. All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
(a) Request For Advance. . . . . . . . . . . . . . . . . . .24
(b) Borrowing Base Certificate . . . . . . . . . . . . . . .24
(c) Covenants; Representations . . . . . . . . . . . . . . .24
(d) Defaults . . . . . . . . . . . . . . . . . . . . . . . .24
(e) Material Adverse Change. . . . . . . . . . . . . . . . .24
4.2. Conditions to First Loan. . . . . . . . . . . . . . . . . . . . .24
(a) Articles, Bylaws . . . . . . . . . . . . . . . . . . . .24
(b) Evidence of Authorization. . . . . . . . . . . . . . . .25
(c) Legal Opinions . . . . . . . . . . . . . . . . . . . . .25
(d) Incumbency . . . . . . . . . . . . . . . . . . . . . . .25
(e) Notes. . . . . . . . . . . . . . . . . . . . . . . . . .25
(f) Documents. . . . . . . . . . . . . . . . . . . . . . . .25
(g) Consents . . . . . . . . . . . . . . . . . . . . . . . .25
(h) Other Agreements . . . . . . . . . . . . . . . . . . . .25
(i) Fees, Expenses . . . . . . . . . . . . . . . . . . . . .25
5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . .25
5.1. Financial Statements and Reports. . . . . . . . . . . . . . . . .25
ii
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(a) Annual Statements. . . . . . . . . . . . . . . . . . . .25
(b) Quarterly Statements . . . . . . . . . . . . . . . . . .26
(c) No Default . . . . . . . . . . . . . . . . . . . . . . .26
(d) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . .27
(e) Material Changes . . . . . . . . . . . . . . . . . . . .27
(f) Other Information. . . . . . . . . . . . . . . . . . . .27
(g) Borrowing Base Certificates. . . . . . . . . . . . . . .27
(h) Monthly Lease Portfolio and Receivables Report . . . . .27
(i) Maintenance of Current Depreciation Policies . . . . . .27
(j) Monthly Lease Receipts Report. . . . . . . . . . . . . .27
5.2. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . .27
5.3. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
5.4. Compliance with Regulations. . . . . . . . . . . . . . . . . . . .28
5.5. Conduct of Business; Permits and Approvals, Compliance
with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.6. Maintenance of Properties. . . . . . . . . . . . . . . . . . . . .28
5.7. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . .28
5.8. Payment of Debt; Payment of Taxes, Etc . . . . . . . . . . . . . .28
5.9. Notice of Events . . . . . . . . . . . . . . . . . . . . . . . . .28
5.10. Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . .29
5.11. Generally Accepted Accounting Principles. . . . . . . . . . . . .29
5.12. Compliance with Material Contracts. . . . . . . . . . . . . . . .29
5.13. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . .29
5.14. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . .29
6. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . .30
6.1. Consolidation and Merger. . . . . . . . . . . . . . . . . . . . .30
6.2. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
6.3. Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
6.4. Margin Stock. . . . . . . . . . . . . . . . . . . . . . . . . . .30
6.5. Acquisitions and Investments. . . . . . . . . . . . . . . . . . .30
6.6. Transfer of Assets; Nature of Business. . . . . . . . . . . . . .31
6.7. Accounting Change . . . . . . . . . . . . . . . . . . . . . . . .31
6.8. Transactions with Affiliates . . . . . . . . . . . . . . . . . .31
6.9. Restriction on Amendment of This Agreement . . . . . . . . . . .31
7. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . .31
7.1. No losses . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
7.3. Debt to Tangible Net Worth. . . . . . . . . . . . . . . . . . . .31
7.4. Minimum Interest Expense Coverage . . . . . . . . . . . . . . . .31
7.5. Borrowing Base. . . . . . . . . . . . . . . . . . . . . . . . . .31
8. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
8.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . .32
(a) Payments . . . . . . . . . . . . . . . . . . . . . . . .32
(b) Covenants. . . . . . . . . . . . . . . . . . . . . . . .32
(c) Representations, Warranties. . . . . . . . . . . . . . .32
(d) Bankruptcy . . . . . . . . . . . . . . . . . . . . . . .32
(e) Certain Other Defaults . . . . . . . . . . . . . . . . .32
(f) Judgments. . . . . . . . . . . . . . . . . . . . . . . .33
iii
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(g) Attachments . . . . . . . . . . . . . . . . . . . . . . .33
(h) Change in Control . . . . . . . . . . . . . . . . . . . .33
(i) Security Interests . . . . . . . . . . . . . . . . . . .33
(j) Changes in Senior Management . . . . . . . . . . . . . .33
9. Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
9.1. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
9.2. Security Agreement . . . . . . . . . . . . . . . . . . . . . . . .34
9.3. Release of Collateral. . . . . . . . . . . . . . . . . . . . . . .34
10. Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.1. Appointment and Authorization. . . . . . . . . . . . . . . . . .34
10.2. Duties and Obligations . . . . . . . . . . . . . . . . . . . . .34
10.3. First Union as a Bank. . . . . . . . . . . . . . . . . . . . . .35
10.4. Independent Credit Decisions . . . . . . . . . . . . . . . . . .35
10.5. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .35
10.6. Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . .36
10.7. Allocations Made By First Union. . . . . . . . . . . . . . . . .36
11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
11.1. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
11.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . .36
11.3. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . .36
11.4. Participations and Assignments . . . . . . . . . . . . . . . . .37
11.5. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
11.6. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
11.7. Sharing of Collections, Proceeds and Set-Offs:
Application of Payments. . . . . . . . . . . . . . . . . . . . .37
11.8. Expenses; Indemnification. . . . . . . . . . . . . . . . . . . .38
11.9. Survival of Warranties and Certain Agreements. . . . . . . . . .39
11.10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . .39
11.11. Banks' Obligations Several; Independent Nature of
Banks' Rights . . . . . . . . . . . . . . . . . . . . . . . . .39
11.12. No Fiduciary Relationship . . . . . . . . . . . . . . . . . . .39
11.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. . . . . . . . .39
11.14. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . .40
11.15. Counterparts; Effectiveness . . . . . . . . . . . . . . . . . .40
11.16. Use of Defined Terms. . . . . . . . . . . . . . . . . . . . . .40
11.17. Offsets . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
11.18. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . .41
__________________________________________________________
Exhibit A List of Banks and Commitments
Exhibit B Note
Exhibit C Borrowing Base Certificate
Exhibit D Mortgage and Security Agreement
Exhibit E Compliance Certificate
Exhibit F Depreciation Policies
Exhibit G Description of Aircraft, Engines and Propellers
Schedule 1 Miscellaneous Information
iv
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
This Amended and Restated Credit Agreement, dated June 2, 1998 (the
"AGREEMENT"), is entered into by and between WILLIS LEASE FINANCE
CORPORATION, a California corporation ("WILLIS"), the banking institutions
signatories hereto and named in Exhibit A attached hereto and such other
institutions that hereafter become a "Bank" pursuant to Section 10.4 hereof
(collectively the "BANKS" and individually a "BANK") and FIRST UNION NATIONAL
BANK, a national banking association, as agent for the Banks under this
Agreement ("FIRST UNION", which shall mean in its capacity as agent unless
specifically stated otherwise). This Agreement amends and restates in its
entirety the Credit Agreement, dated June 12, 1997, between Willis and
CoreStates Bank, N.A. (now First Union National Bank by reason of the merger
of CoreStates Bank, N.A. with and into First Union National Bank on May 15,
1998), as said Credit Agreement was amended through the date hereof.
PRELIMINARY STATEMENT
WHEREAS, Willis desires to have available to it a revolving credit
facility which will be used for the purchase or refinance of Equipment (as
defined herein) most of which will be held for sale or for lease to
unaffiliated persons, said Equipment and related leases to constitute part of
the Collateral (as defined herein) and for general working capital purposes.
WHEREAS, the Banks are willing to establish such revolving credit
facility and make loans to Willis under the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and promises
hereinafter set forth and intending to be legally bound hereby, the parties
hereto agree as follows:
1. CERTAIN DEFINITIONS
1.1. DEFINITIONS.
"ADJUSTED LIBO RATE" shall mean, for any Interest Period, the rate per
annum (rounded upwards, if necessary to the next 1/16 of 1%) determined
pursuant to the following formula:
Adjusted LIBO Rate = LIBO Rate
_____________________
1 -Reserve Percentage
"AFFILIATE" shall mean any Person: (1) which directly or indirectly
controls, or is controlled by, or is under common control with Willis; (2)
which directly or indirectly beneficially owns or holds ten percent (10%)
or more of any class of voting stock of Willis; or (3) ten percent (10%) or
more of whose voting stock of which is directly or indirectly beneficially
owned or held by Willis. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract, or otherwise.
1
<PAGE>
"AGGREGATE REVOLVING LOAN COMMITMENT" shall have the meaning set forth in
Section 2.1(a).
"AGREEMENT" shall mean this Credit Agreement, as amended, supplemented,
modified, replaced, substituted for or restated from time to time and all
exhibits and schedules attached hereto.
"BASE RATE" shall mean (i) the rate of interest for commercial loans
established and publicly announced by First Union from time to time as its
prime rate, or, if higher, (ii) the Federal Funds Rate plus __%* per annum.
Any change in such interest rate due to a change in the Base Rate shall be
effective on the date of such change.
"BASE RATE LOAN" shall mean a Loan, or any portion thereof, made at the
Base Rate pursuant to a request for advance made under Section 2.4 herein
or as otherwise provided in Section 2.5 or in any other provision hereof or
in any other Loan Document.
"BASE RATE MARGIN" shall mean the percentage listed in the following table:
LEVERAGE RATIO* BASE RATE MARGIN*
Less than ___ ___%
Equal to or greater than ___ but less than ___ ___%
Equal to or greater than ___ but less than ___ ___%
Equal to or greater than ___ but less than ___ ___%
Equal to or greater than ___ ___%
"BORROWING BASE" shall mean __% of Willis's acquisition cost of Equipment
included in the Collateral, PROVIDED, HOWEVER, that on June 30 and December
31 of each year a review of the Collateral shall be made to determine
whether the net book value of each piece of Equipment has declined by more
than __% from the acquisition cost. In each such case where the net book
value has decreased by more than __% from the acquisition cost, the
Borrowing Base shall mean __% of the net book value of such Equipment. No
item of Category A Equipment shall be included in the Borrowing Base unless
either (1) it shall be the subject of an Eligible Lease which is also
included in the Collateral or (2) it was purchased by Willis for the
purpose of sale or lease to an unaffiliated Person and the purchase date is
not later than nine months previous. No item of Category B(1) Equipment
shall be included in the Borrowing Base if it was purchased by Willis more
than nine months prior to the date of determination of the Borrowing Base.
No item of Category B(2) Equipment shall be included in the Borrowing Base
unless it shall be the subject of an Eligible Lease which is also included
in the Collateral.*
_________________________
* This redacted material has been omitted pursuant to a request for
confidential treatment and the material has been filed separately.
2
<PAGE>
"BORROWING BASE CERTIFICATE" shall mean a certificate in substantially the
form attached hereto as Exhibit C hereto which shall be signed by the chief
financial officer or chief executive officer of Willis.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or other
day on which commercial banks in Philadelphia or San Francisco are
authorized or required to close under the laws of the Commonwealth of
Pennsylvania and, if the applicable day relates to a LIBO Rate Loan, or
notice with respect to a LIBO Rate Loan, a day on which dealings in Dollar
deposits are also carried on in the London interbank market and banks are
open for business in London ("London Business Day").
"CAPITALIZED LEASE" shall mean all lease obligations of any Person for any
property (whether real, personal or mixed) which have been or should be
capitalized on the books of the lessee in accordance with Generally
Accepted Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" with respect to any Person, shall mean the
aggregate amount which, in accordance with GAAP, is required to be reported
as a liability on the balance sheet of such Person at such time in respect
of such Person's interest as lessee under a Capital Lease.
"CATEGORY A EQUIPMENT" shall mean equipment purchased by Willis from
unaffiliated Persons and which is either (1) the subject of an Eligible
Lease or (2) held for sale or lease to unaffiliated Persons. Category A
Equipment shall be composed of Stage III compliant jet engines which are
less than 15 years from the date of manufacture and are suitable for use in
major aircraft manufactured by The Boeing Co., McDonnell Douglas Corp. or
Airbus Industrie. Category A Equipment also shall include two de Havilland
Dash 8-103 turbo prop aircraft, four Pratt & Whitney Model PW121 engines
and four Hamilton Standard Model 14 SF-7 propellers, each as more fully
described in Exhibit G attached hereto which have been or will be purchased
from de Havilland Corporation and leased to Aloha Islandair, Inc.
"CATEGORY B EQUIPMENT" shall mean equipment purchased by Willis from
unaffiliated Persons which is either (1) Stage II or III engines or
aircraft acquired for the purpose of salvaging and/or retrofitting, or (2)
traceable spare parts the purchase price of which was in excess of $3,000
in each case, are the subject of Eligible Leases and have discrete serial
and part numbers or other identifying numbers acceptable to the Required
Banks.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and all rules and regulations with respect thereto in effect from
time to time.
"COLLATERAL" shall have the meaning set forth in Section 9.1.
"COMPLIANCE CERTIFICATE" shall mean a certificate in substantially the form
attached hereto as Exhibit E which shall be signed by the chief financial
officer, treasurer or controller of Willis.
"DEBT" shall mean, as of any date of determination with respect to Willis,
without duplication and determined on a consolidated basis, (i) all items
which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of Willis as
of the date on which Debt is to be determined, (ii) all indebtedness of
others with respect to which Willis has become liable by way of a guarantee
or endorsement (other than for
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collection or deposit in the ordinary course of business), (iii) all
contingent liabilities of Willis, (iv) lease obligations that, in
conformity with GAAP, have been capitalized on Willis' balance sheet,
and (v) the present value of any outstanding Operating Lease payments
(discounted at a rate of 10%), LESS (1) maintenance reserves and
security deposits that are cash backed, and (2) liabilities of
Unrestricted Subsidiaries.
"DEBT SERVICE" shall mean actual payments of principal on Debt and
Capitalized Lease Obligations (including any Debt or Capital Lease
Obligations paid from the sale of equipment during the period), plus
interest expense incurred during the period.
"DEFAULT RATE" on any Loan shall mean two percent (2.0%) per annum above
the rate then applicable to each Loan or portion thereof.
"DOLLARS" shall mean the lawful currency of the United States of America.
"EBIT" shall mean the sum of (i) Net Income, plus (ii) amounts deducted for
interest and income taxes.
"ELIGIBLE LEASE" shall mean a lease for Equipment to an unaffiliated Person
in which (i) Willis or its trustee is the sole lessor (ii) the lease arose
in the ordinary course of business of Willis, (iii) the Equipment has been
delivered to the lessee and is currently subject to the lease, (iv) neither
the lease nor the Equipment is subject to any currently outstanding
assignment, claim, lien, security interest or other limitation on the
absolute title of Willis or its trustee thereto, (v) the lease payments are
not more than 90 days past due with respect to any payment required thereby
(based on the original contractual term and not including any amendment or
modification thereof, unless the Required Banks have specifically consented
thereto in writing), (vi) the lease is freely assignable (with any notices
or consents required in connection therewith having been previously
obtained), (vii) the lease is dated and has been in effect for not more
than 45 days prior to the date the lease was assigned to First Union, as
Agent, and included in the Collateral in the case of leases entered into
subsequent to the date hereof; or the lease was assigned to First Union, as
Agent, and included in the Collateral within 45 days immediately following
the date hereof, in the case of leases existing at the date hereof without
regard to the date of the lease; or the lease was assigned to First Union,
as Agent, and included in the Collateral within 45 days immediately
following the date of acquisition of said lease by Willis, in the case of
leases purchased from unaffiliated persons, (viii) the lease has not been
included in the Collateral for a period of more than twenty-four months,
(ix) the lease and the Equipment being leased constitute Collateral, (x)
the remaining lease term at the time of assignment to First Union, as
Agent, is for a period of ten years or less in the case of Category A
Equipment and Category B(2) Equipment, (xi) the lease is a noncancellable,
triple net lease in which the lessee may not assert, as an offset, any
defenses or claims against the lessor arising from the condition or the
intended use of the subject matter, except in the case of leases with terms
of less than 6 months in which Willis may be responsible for maintenance
and (xii) the lessee is not a resident of, and the Equipment will not be
used in any foreign jurisdiction in which the ability of First Union, as
Agent, to perfect a first priority security interest in the Equipment is
unsatisfactory or the ability of First Union, as Agent, to foreclose upon
the Equipment and receive possession to or sell said Equipment is
unsatisfactory.
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"ENVIRONMENTAL CONTROL STATUTES" shall mean each and every applicable
federal, state, county or municipal environmental statute, ordinance, rule,
regulation, order, directive or requirement, together with all successor
statutes, ordinances, rules, regulations, orders, directives or
requirements, of any Governmental Authority, including without limitation
laws in any way related to Hazardous Substances.
"EQUIPMENT" shall mean Category A Equipment and Category B Equipment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as Willis within the meaning of Section
414(b) of the Code, or any trade or business which is under common control
with Willis within the meaning of Section 414(c) of the Code.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 8.1.
"FEDERAL FUNDS RATE" shall mean the daily rate of interest announced from
time to time by the Board of Governors of the Federal Reserve System in
publication H. 15 as the "Federal Funds Rate," or if such publication is
unavailable, such rate as is available to First Union on such day.
"FISCAL QUARTER" shall mean a fiscal quarter of Willis, which shall be any
quarterly period ending on March 31, June 30, September 30 or December 31
of any year.
"FISCAL YEAR" shall mean a fiscal year of Willis, which shall end on the
last day of December.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" OR "GAAP" shall mean generally
accepted accounting principles as in effect from time to time in the United
States, consistently applied.
"GOVERNMENTAL AUTHORITY" shall mean the federal, state, county or municipal
government, or any department, agency, bureau or other similar type body
obtaining authority therefrom or created pursuant to any laws, including
without limitation Environmental Control Statutes.
"HAZARDOUS SUBSTANCES" shall mean without limitation, any regulated
substance, toxic substance, hazardous substance, hazardous waste,
pollution, pollutant or contaminant, as defined or referred to in the
Resource Conservation and Recovery Act, as amended, 15 U.S.C., Section 2601
ET SEG.; the Comprehensive Environmental Response, Compensation and
Liability Act, 33 U.S.C. Section 1251 ET SEG.; the federal underground
storage tank law, Subtitle I of the Resource Conservation and Recovery Act,
as amended, P.L. 98-616, 42 U.S.C. Section 6901 ET SEG.; together with any
amendments thereto, regulations promulgated thereunder and all
substitutions thereof, as well as words of similar purport or meaning
referred to in any other federal, state, county or municipal environmental
statute, ordinance, rule or regulation.
"INDEBTEDNESS FOR BORROWED MONEY" shall mean (i) all indebtedness,
liabilities, and obligations, now existing or hereafter arising, for money
borrowed by Willis, whether or not evidenced by any note, indenture, or
agreement (including, without limitation, the Note and
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any indebtedness for money borrowed from an Affiliate) and (ii) all
indebtedness of others for money borrowed (including indebtedness of an
Affiliate) with respect to which Willis has become liable by way of a
guarantee or indemnity.
"INTANGIBLE ASSETS" shall mean all assets which would be classified as
intangible assets under GAAP consistently applied, including, without
limitation, goodwill (whether representing the excess of cost over book
value of assets acquired or otherwise), patents, trademarks, trade names,
copyrights, franchises, and deferred charges (including, without
limitation, unamortized debt discount and expense, organization costs, and
research and development costs). For purposes of this definition,
prepayments of taxes, license fees and other expenses shall not be deemed
Intangible Assets.
"INTEREST PERIOD" shall mean a period commencing on the date of a LIBO Rate
Loan or with respect to a Loan being renewed, the last day of the next
preceding Interest Period and ending one, two or three months thereafter,
as requested by Willis at the time of its Request for Advance; provided
also that (i) an Interest Period which would otherwise expire on a day
which is not a London Business Day shall be extended to the next succeeding
London Business Day unless such London Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding London Business Day, (ii) any Interest Period which begins on the
last London Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to the next succeeding clause, end on
the last London Business Day of a calendar month; and (iii) no Interest
Period shall end later than the Revolver Termination Date.
"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; (b) any deposit with, or advance, loan or other
extension of credit to, such Person (other than any such deposit, advance,
loan or extension of credit having a term not exceeding 90 days in the
case of unaffiliated Persons and 120 days in the case of Affiliates
representing the purchase price of inventory or supplies purchased in the
ordinary course of business) or guarantee or assumption of, or other
contingent obligation with respect to, Indebtedness for Borrowed Money or
other liability of such Person; and (c) (without duplication of the amounts
included in (a) and (b)) any amount that may, pursuant to the terms of such
investment, be required to be paid, deposited, advanced, lent or extended
to or guaranteed or assumed on behalf of such Person.
"LEVERAGE RATIO" shall mean the ratio of the Debt of Willis to its Tangible
Net Worth calculated based on the most recent financial statements
furnished to the Banks in accordance herewith.
"LIBO RATE" shall mean the arithmetic average of the rates of interest per
annum (rounded upwards, if necessary to the next 1/16 of 1%) at which First
Union National Bank, individually, is offered deposits of United States
Dollars by leading banks in the interbank eurodollar or eurocurrency market
on or about eleven o'clock (11:00) a.m. London time two London Business
Days prior to the commencement of the requested Interest Period in an
amount substantially equal to the outstanding principal amount of the LIBO
Rate Loan requested for a maturity of comparable duration to the Interest
Period.
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"LIBO RATE LOAN" shall mean a Loan made at Adjusted LIBO Rate plus the LIBO
Rate Margin, pursuant to a request for advance made under Section 2.4
herein.
"LIBO RATE MARGIN" shall mean the percentage listed in the following table.
LEVERAGE RATIO (*) LIBO RATE MARGIN*
Less than ___ ___%
Equal to or greater than ___ but less than 3.00 ___%
Equal to or greater than ___ but less than 4.00 ___%
Equal to or greater than ___ but less than 5.00 ___%
Equal to or greater than ___ ___%
"LIEN" shall mean any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of an Obligation, including any agreement to give any of the
foregoing, any conditional sales or other title retention agreement, any
lease in the nature thereof, and the filing of or the agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction
or similar evidence of any encumbrance, whether within or outside the
United States.
"LOAN" or "LOANS" shall mean LIBO Rate or Base Rate Revolving Credit Loan
or Loans.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Security
Agreement, and all other documents directly related or incidental to said
documents, the Loans or the Collateral.
"MATERIAL ADVERSE CHANGE" shall mean any event or condition which, in the
reasonable determination of the Required Banks, could result in a material
adverse change in the financial condition, business, properties or profits
of Willis or which gives reasonable grounds to conclude that Willis, may
not or will not be able to perform or observe (in the normal course) its
obligations under the Loan Documents to which it is a party, including but
not limited to the Notes.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect (i) on the
financial condition, business, properties, or profits of Willis, (ii) the
ability of Willis to perform its obligations under this Agreement, the
Notes and the other Loan Documents, or (iii) the legality, validity or
enforceability of this Agreement or the Notes or the rights and remedies of
the holders of the Loans.
"MONTHLY LEASE PORTFOLIO AND RECEIVABLES REPORT" shall mean a report in
summary form of the status of accounts receivable in respect of all leases
which are part of the Collateral in form and substance reasonably
satisfactory to First Union, as Agent.
_________________________
* This redacted material has been omitted pursuant to a request for
confidential treatment and the material has been filed separately.
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"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in ERISA
Section 4001(a)(3), which covers employees of Willis or any ERISA
Affiliate.
"NET INCOME" shall mean net income after income taxes as shown on the
Statement of Income.
"NET WORTH" shall mean the sum of capital stock, plus paid-in capital, plus
retained earnings, minus treasury stock and minus the net worth of any
Unrestricted Subsidiaries.
"NOTE" or "NOTES" shall have the meaning set forth in Section 2.3.
"OBLIGATIONS" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due, or payable
to the Banks or First Union, as Agent, by or from Willis arising out of
this Agreement or any other Loan Document, including, without limitation,
all obligations to repay principal of and interest on the Loans, and to pay
interest, fees, costs, charges, expenses, professional fees, and all sums
chargeable to Willis or for which Willis is liable as indemnitor under the
Loan Documents, whether or not evidenced by any note or other instrument.
"OPERATING LEASE" shall mean, with respect to any Person, the aggregate
amount which, in accordance with GAAP, is not required to be reported as a
liability on the balance sheet of such Person at such time in respect of
such Person's interest as lessee under an Operating Lease.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"PENSION PLAN" shall mean, at any time, any Plan (including a Multiemployer
Plan), the funding requirements of which (under ERISA Section 302 or Code
Section 412) are, or at any time within the six years immediately preceding
the time in question, were in whole or in part, the responsibility of
Willis or any ERISA Affiliate.
"PERMITTED LIENS" shall mean (a) any Liens for current taxes, assessments
and other governmental charges not yet due and payable or being contested
in good faith by Willis by appropriate proceedings and for which adequate
reserves have been established by Willis as reflected in Willis's financial
statements; (b) any mechanic's, materialman's, carrier's, warehousemen's or
similar Liens for sums not yet due or being contested in good faith by
Willis by appropriate proceedings and for which adequate reserves have been
established by Willis as reflected in Willis's financial statements; (c)
easements, rights-of-way, restrictions and other similar encumbrances on
the real property or fixtures of Willis incurred in the ordinary course of
business which individually or in the aggregate are not substantial in
amount and which do not in any case materially detract from the value or
marketability of the property subject thereto or interfere with the
ordinary conduct of the business of Willis; (d) Liens (other than Liens
imposed on any property of Willis pursuant to ERISA or Section 412 of the
Code) incurred or deposits made in the ordinary course of business,
including Liens in connection with workers' compensation, unemployment
insurance and other types of social security and Liens to secure
performance of tenders, statutory obligations, surety and appeal bonds (in
the case of appeal bonds such Lien shall not secure any reimbursement or
indemnity obligation in an
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amount greater than $2,500,000), bids, leases that are not Capitalized
Leases, performance bonds, sales contracts and other similar
obligations, in each case, not incurred in connection with the obtaining
of credit or the payment of a deferred purchase price, and which do not,
in the aggregate, result in a Material Adverse Effect; and (e) Liens, if
any, existing on the date hereof and listed in Schedule 1 hereto other
than Liens of the character referred to in clause (g); (f) Liens in
favor of First Union, as Agent, in the Collateral as contemplated by
this Agreement and the other Loan Documents; (g) Liens on specific
assets purchased which are not included in the Collateral and whether
such assets are purchased before or after the date hereof and any
revenue stream directly attributable thereto provided that such liens
are limited to the equipment so purchased and the revenue stream
generated therefrom.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, company, business trust or entity, or other entity of
whatever nature.
"PLAN" shall mean an employee benefit plan as defined in Section 3(3) of
ERISA, other than a Multiemployer Plan, whether formal or informal and
whether legally binding or not.
"POTENTIAL DEFAULT" shall mean an event, condition or circumstance that
with the giving of notice or lapse of time or both would become an Event of
Default.
"PRIME RATE" shall mean, for any day, the prime commercial lending rate of
First Union National Bank, as announced from time to time at its head
office, calculated on the basis of 30 day months and a year of 360 days.
"PROHIBITED TRANSACTION" shall mean a transaction that is prohibited under
Code Section 4975 or ERISA Section 406 and not exempt under Code Section
4975 or ERISA Section 408.
"REGULATION" shall mean any statute, law, ordinance, regulation, order or
rule of any United States or foreign, federal, state, local or other
government or governmental body, including, without limitation, those
covering or related to banking, financial transactions, securities, public
utilities, environmental control, energy, safety, health, transportation,
bribery, record keeping, zoning, antidiscrimination, antitrust, wages and
hours, employee benefits, and price and wage control matters.
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as it may be amended from time to time.
"REGULATORY CHANGE" shall mean any change after the date of this Agreement
in any Regulation (including Regulation D) or the adoption or making after
such date of any interpretations, directives or requests of or under any
Regulation (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof applying to a class of banks including any one of
the Banks but excluding any foreign office of any Bank.
"RELEASE" shall mean without limitation, the presence, leaking, leaching,
pouring, emptying, discharging, spilling, using, generating, manufacturing,
refining, transporting, treating, or storing of Hazardous Substances at,
into, onto, from or about the property or the threat
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thereof, regardless of whether the result of an intentional or
unintentional action or omission, and which is in violation of applicable
law.
"REPORTABLE EVENT" shall mean, with respect to a Pension Plan: (a) Any of
the events set forth in ERISA Sections 4043(b) (other than a reportable
event as to which the provision of 30 days' notice to the PBGC is waived
under applicable regulations) or 4063(a) or the regulations thereunder, (b)
an event requiring any Willis or any ERISA Affiliate to provide security to
a Pension Plan under Code Section 401(a)(29) and (c) any failure by any
Willis or any ERISA Affiliate to make payments required by Code Section
412(m).
"REQUEST FOR ADVANCE" shall have the meaning set forth in Section 2.4.
"REQUIRED BANKS" at any time shall mean Banks whose Revolving Loan
Commitments equal or exceed 66 2/3% of the total of such Revolving Loan
Commitments if no Loans are outstanding or, if Loans are outstanding, Banks
whose outstanding Loans equal or exceed 66 2/3% of the Loans.
"RESERVE PERCENTAGE" shall mean, for any LIBO Rate Loan for any Interest
Period, the daily average of the stated maximum rate (expressed as a
decimal) at which reserves (including any marginal, supplemental, or
emergency reserves) are required to be maintained during such Interest
Period under Regulation D by the Bank against "Eurocurrency liabilities"
(as such term is used in Regulation D) but without benefit of credit
proration, exemptions, or offsets that might otherwise be available to the
Bank from time to time under Regulation D. Without limiting the effect of
the foregoing, the Reserve Percentage shall reflect any other reserves
required to be maintained by the Bank against (1) any category of
liabilities which includes deposits by reference to which the rate for LIBO
Rate Loans is to be determined; or (2) any category of extension of credit
or other assets which include LIBO Rate Loans. The Adjusted LIBO Rate
shall be adjusted on and as of the effective day of any change in the
Reserve Percentage.
"REVOLVER TERMINATION DATE" shall have the meaning set forth in Section
2.1.
"REVOLVING CREDIT LOAN" shall have the meaning set forth in Section 2.1.
"REVOLVING CREDIT NOTE" shall have the meaning set for in Section 2.2.
"REVOLVING LOAN COMMITMENT" shall have the meaning set forth in Section
2.1.
"REVOLVING LOAN COMMITMENT FEE" shall have the meaning set forth in
Section 2.6.
"REVOLVING LOAN COMMITMENT PERCENTAGE" shall mean with respect to each Bank
the percentage set forth opposite its name in Exhibit A hereto.
"SECURITY AGREEMENT" shall mean the Mortgage and Security Agreement in the
form and substance attached hereto as Exhibit D.
"SOLVENT" shall mean, with respect to any Person, that the aggregate
present fair saleable value of such Person's assets is in excess of the
total amount of its probable liabilities on its existing
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debts as they become absolute and matured, such Person has not incurred
debts beyond its foreseeable ability to pay such debts as they mature, and
such Person has capital adequate to conduct the business it is presently
engaged in or is about to engage in.
"STANDBY LETTER OF CREDIT" shall mean only those standby letters of credit
issued pursuant to a completed application on the form of letter of credit
application required by First Union at the time of the request for each
Standby Letter of Credit.
"SUBSIDIARY" shall mean a corporation or other entity the shares of stock
or other equity interests of which having ordinary voting power (other than
stock or other equity interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors
or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries or both, by Willis.
"TANGIBLE NET WORTH" shall mean Net Worth, minus Intangible Assets.
"TERMINATION EVENT" shall mean, with respect to a Pension Plan: (a) a
Reportable Event, (b) the termination of a Pension Plan, or the filing of a
notice of intent to terminate a Pension Plan, or the treatment of a Pension
Plan amendment as a termination under ERISA Section 4041(c), (c) the
institution of proceedings to terminate a Pension Plan under ERISA Section
4042 or (d) the appointment of a trustee to administer any Pension Plan
under ERISA Section 4042.
"UNFUNDED PENSION LIABILITIES" shall mean, with respect to any Pension Plan
at any time, the amount determined by taking the accumulated benefit
obligation, as disclosed in accordance with Statement of Accounting
Standards No. 87, over the fair market value of Pension Plan assets.
"UNRECOGNIZED RETIREE WELFARE LIABILITY" shall mean, with respect to any
Plan that provides post-retirement benefits other than pension benefits,
the amount of the accumulated post-retirement benefit obligation, as
determined in accordance with Statement of Financial Accounting Standards
No. 106, as of the most recent valuation date. Prior to the date such
statement is applicable to any Willis, such amount of the obligation shall
be based on an estimate made in good faith.
"UNRESTRICTED SUBSIDIARY" shall mean WLFC Funding Corporation, T-5, Inc.,
T-7, Inc., T-10, Inc., T-12, Inc. and any additional subsidiary named by
Willis after the date hereof with the written consent of the Required
Banks.
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with Generally Accepted Accounting
Principles consistent with those applied in the preparation of the financial
statements referred to in Section 3.5, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such
principles.
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2. THE CREDIT
2.1. THE LOANS.
(a) REVOLVING CREDIT LOANS; COMMITMENT. Subject to the terms and
conditions herein set forth and in reliance upon the representations,
warranties and covenants contained herein, each Bank agrees, severally and
not jointly, to make revolving credit loans (collectively, the "REVOLVING
CREDIT LOANS" or the "LOANS", and individually a "REVOLVING CREDIT LOAN" or a
"LOAN") to Willis during the period beginning on the date hereof and ending
on July 31, 1998 or on the earlier date of termination in full, pursuant to
Section 2.7 or Section 8.1 hereof, of the obligations of such Bank under this
Section 2.1 (July 31, 1998 or such earlier date of termination being herein
called the "REVOLVER TERMINATION DATE") in amounts not to exceed at any time
outstanding, in the aggregate, the commitment amount set forth opposite the
name of such Bank on Exhibit A hereto (each such amount, as the same may be
reduced pursuant to Section 2.7 hereof being hereinafter called such Bank's
"REVOLVING LOAN COMMITMENT"). The Banks' collective commitment to make Loans
shall be the "AGGREGATE REVOLVING LOAN COMMITMENT". All Loans shall be made
by the Banks simultaneously and PRO RATA in accordance with their respective
Revolving Loan Commitments. All Loans shall be made to Willis at the main
office of First Union, Broad and Chestnut Streets, Philadelphia, Pennsylvania
19101.
(b) INTEREST RATE OPTIONS. Revolving Credit Loans shall bear
interest at (i) the Base Rate plus the Base Rate Margin, (ii) Adjusted LIBO
Rate plus the LIBO Rate Margin or (iii) some combination of the foregoing, as
requested by Willis, subject to the terms and conditions hereof including the
requirements concerning minimum Loan requests and the requirements that (i)
no request may be made which would require more than one interest rate option
or more than one Interest Period to apply to Loans made on any single date,
and (ii), in the case of LIBO Rate Loans, (a) not more than five such Loans
may be outstanding at any one time, and (b) no LIBO Rate Loan may have an
Interest Period extending beyond the Revolver Termination Date.
(c) MAXIMUM LOANS OUTSTANDING. Willis shall not be entitled to any
new Revolving Credit Loan if, after giving effect to such Loan, the unpaid
amount of the then outstanding Loans would exceed the lesser of (i) the
Aggregate Revolving Loan Commitment or (ii) the then current Borrowing Base,
as stated in the most recent Borrowing Base Certificate furnished to the
Banks as provided herein. For purposes of determining the amount of
Revolving Credit Loans outstanding, the Standby Letters of Credit issued
pursuant to Section 2.2 hereof shall be deemed Revolving Credit Loans and
shall be added to the Revolving Credit Loans outstanding to determine the
aggregate Revolving Credit Loans outstanding.
(d) MINIMUM LOAN AMOUNT. Except for Loans which exhaust the full
remaining amount of the Aggregate Revolving Loan Commitment and conversions
which result in the conversion of all Loans subject to a particular interest
rate option, each of which may be in lesser amounts, (i) each LIBO Rate Loan
when made (and each conversion of Base Rate Loans into LIBO Rate Loans) shall
be in an amount at least equal to $3,000,000 or, if greater, then in such
minimum amount plus $100,000 multiples, and (ii) each Base Rate Loan when
made (and each conversion of LIBO Rate Loans into Base Rate Loans) shall be
in an amount at least equal to $150,000.
(e) PREPAYMENT AND REBORROWING. Prior to the Revolver Termination
Date and within the limits of the Aggregate Revolving Loan Commitment and the
Borrowing Base, Willis may
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borrow, prepay and reborrow Revolving Credit Loans. All Revolving Credit
Loans shall mature and be due and payable on the Revolver Termination Date.
(f) LIMIT FOR CATEGORY B EQUIPMENT. Willis may have Revolving
Credit Loans outstanding at any time and from time to time in an aggregate
amount up to, but not exceeding $25,000,000 for the acquisition of Category B
Equipment. Any item of Category B Equipment which is a Stage III jet engine
shall be deducted from Category B Equipment and become part of Category A
Equipment upon the physical removal of that engine from its airframe,
provided that such Equipment otherwise qualifies as Category A Equipment.
(g) REVOLVING LOAN COMMITMENT PERCENTAGES. The obligation of
each Bank to make a Loan to Willis at any time shall be limited to its
percentage (the "REVOLVING LOAN COMMITMENT PERCENTAGE") as set forth opposite
its name on Exhibit A hereto multiplied by the aggregate principal amount of
the Loan requested. The principal amounts of the respective Loans made by
the Banks on the occasion of each Borrowing shall be pro rata in accordance
with their respective Revolving Loan Commitment Percentages. No Bank shall
be required or permitted to make any Loan if, immediately after giving effect
to such Loan, and the application of the proceeds of a Loan to the extent
applied to the repayment of the Loans, the sum of such Bank's Loans
outstanding would exceed such Bank's Revolving Loan Commitment.
(h) SEVERAL OBLIGATIONS. The failure of any one or more Banks to
make Loans in accordance with its or their obligations shall not relieve the
other Banks of their several obligations hereunder, but in no event shall the
aggregate amount at any one time outstanding which any Bank shall be required
to lend hereunder exceed its Revolving Loan Commitment.
(i) PAYMENT OF ADDITIONAL AMOUNT. If any principal of a LIBO
Rate Loan shall be repaid (whether upon prepayment, reduction of the
Aggregate Revolving Loan Commitment after acceleration or for any other
reason) or converted to a Base Rate Loan prior to the last day of the
Interest Period applicable to such LIBO Rate Loan or if Willis fails for any
reason to borrow a LIBO Rate Loan after giving irrevocable notice pursuant to
Section 2.4, it shall pay to each Bank, in addition to the principal and
interest then to be paid, such additional amounts as may be necessary to
compensate each Bank for all direct and indirect costs and losses (including
losses resulting from redeployment of prepaid or unborrowed funds at rates
lower than the cost of such funds to such Bank, and including lost profits
incurred or sustained by such Bank) as a result of such repayment or failure
to borrow (the "ADDITIONAL AMOUNT"). The Additional Amount (which each Bank
shall take reasonable measures to minimize) shall be specified in a written
notice or certificate delivered to Willis by First Union, as Agent, in the
form provided by each Bank sustaining such costs or losses. Such notice or
certificate shall contain a calculation in reasonable detail of the
Additional Amount to be compensated and shall be conclusive as to the facts
and the amounts stated therein, absent manifest error.
2.2. STANDBY LETTERS OF CREDIT. First Union, as Agent, under the
terms and subject to the conditions of this Agreement, on behalf of itself
and each other Bank in the same proportions as each Bank's Revolving Loan
Commitment bears to the Aggregate Revolving Loan Commitment, shall provide
Standby Letters of Credit to Willis, from time to time prior to the Revolver
Termination Date, as requested by Willis, provided that (A) the aggregate
amount of Standby Letters of Credit outstanding at any one time shall not
exceed $2,000,000 or such lesser amount, if any, as will, when added to the
amount of the Revolving Credit Loans then outstanding, aggregate more than
the Aggregate Revolving Loan Commitment (or such lesser amount as Willis is
entitled to borrow
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hereunder at such time by reason of the limitation of the Borrowing Base or
otherwise), and (B) no Standby Letter of Credit shall be for a term longer
than one year.
Willis shall request a Standby Letter of Credit by delivering a
completed letter of credit application to First Union on such form as may be
specified by First Union not less than three Business Days prior to the date
specified by Willis as the date the Standby Letter of Credit is to be issued.
The standard form of First Union letter of credit application as currently
in effect shall be used.
Standby Letters of Credit shall not bear interest until drawn upon but
shall each be subject to an annual charge, payable in advance, as such may
exist from time to time, PROVIDED, HOWEVER, that at no time shall the annual
charge for any Standby Letter of Credit exceed 2.75%.
If any obligation of Willis to pay money in connection with any Standby
Letter of Credit is not met when requested by First Union, as Agent, as
permitted by the applicable letter of credit application and the
reimbursement agreement contained therein, the amount due shall be funded
automatically by a Revolving Credit Loan which Loan shall be made without
regard to any minimum borrowing requirement, condition precedent herein, or
Event of Default hereunder which would otherwise entitle any Bank or the
Banks not to provide such Revolving Credit Loan, and each Bank shall make its
proportionate share of such Revolving Credit Loan. Any obligation of Willis
to pay money in connection with any Standby Letter of Credit or the
application therefor shall be deemed secured as if made as a Loan hereunder.
In the event Willis shall terminate the Aggregate Revolving Loan Commitment
as provided in Section 2.6 and shall pay the outstanding principal amount of
the Revolving Credit Loans in full and with interest or the Revolver
Termination Date shall occur at a time when one or more Standby Letters of
Credit remain outstanding, then Willis shall furnish to First Union, as
Agent, within two Business Days such amount of cash, to be held as cash
collateral and invested in certificates of deposit of First Union with
interest payable to Willis, as will pay the maximum amount which may be drawn
by beneficiaries of Standby Letters of Credit outstanding at the date of such
termination or the Revolver Termination Date, as applicable.
2.3. THE NOTES. The Revolving Credit Loans made by each Bank shall be
evidenced by a single promissory note of Willis (each such promissory note as
it may be amended, extended, modified or renewed a "REVOLVING CREDIT NOTE" or
a "NOTE" and together the "REVOLVING CREDIT NOTES" or the "NOTES") in
principal face amount equal to such Bank's Revolving Loan Commitment, payable
to the order of such Bank and otherwise in the form attached hereto as
Exhibit B. The Revolving Credit Notes shall be dated the date of issuance,
shall bear interest at the rate per annum and be payable as to principal and
interest in accordance with the terms hereof. Each outstanding Revolving
Credit Loan shall be and payable as set forth in Section 2.1 hereof unless
the maturity of said Loans is accelerated as provided in Section 2.7 or
Section 8.1 hereof. Notwithstanding the stated amount of any Revolving
Credit Note, the liability of Willis under each Revolving Credit Note shall
be limited at all times to the outstanding principal amount of the Revolving
Credit Loans by each Bank evidenced thereby, plus all interest accrued
thereon and the amount of all costs and expenses then payable hereunder, as
established by each such Bank's books and records, which books and records
shall be conclusive absent manifest error.
2.4. FUNDING PROCEDURES.
(a) REQUEST FOR ADVANCE. Each request for a Revolving Credit Loan
or the conversion or renewal of an interest rate with respect to a Loan shall
be made not later than 2:00 p.m.
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EST on a Business Day by delivery to First Union of a written request signed
by Willis or, in the alternative, a telephone request followed promptly by
written confirmation of the request (a "REQUEST FOR ADVANCE"), specifying
the date and amount of the Loan to be made, converted or renewed, selecting
the interest rate option applicable thereto, and in the case of LIBO Rate
Loans, specifying the Interest Period applicable to such Loans. The form of
request to be used in connection with the making, conversion or renewal of
Revolving Credit Loans shall be that form provided to Willis by First Union.
Each request shall be received not less than one Business Day prior to the
date of the proposed borrowing, conversion or renewal in the case of Base
Rate Loans, and three London Business Days prior to the date of the proposed
borrowing, conversion or renewal in the case of LIBO Rate Loans. No request
shall be effective until actually received in writing by First Union, as the
Agent. Willis may not request more than three advances per week. Each
request for advance shall be for Loans at a single interest rate option.
(b) ACTIONS BY AGENT Upon receipt of a Request for Advance and if
the conditions precedent provided herein shall be satisfied at the time of
such request, First Union promptly shall notify each Bank of such request and
of such Bank's ratable share of such Loan. Upon receipt by First Union of a
Request for Advance, the request shall not be revocable by Willis.
(c) AVAILABILITY OF FUNDS Not later than 1:00 p.m. EST on the
date of each Loan, each Bank shall make available (except as provided in
clause (d) below) its ratable share of such Loan, in immediately available
funds, to First Union at the address set forth opposite its name on the
signature page hereof or at such account in London as First Union shall
specify to Willis and the Banks. Unless First Union knows that any applicable
condition specified herein has not been satisfied, it will make the funds so
received from the Banks immediately available to Willis on the date of each
Loan by a credit to the account of Willis at First Union' aforesaid address.
(d) FUNDING ASSUMPTIONS Unless First Union shall have been
notified by any Bank at least one Business Day prior to the date of the
making, conversion or renewal of any LIBO Rate Loan, or by 3:00 P.M. on the
date a Base Rate Loan is requested, that such Bank does not intend to make
available to First Union, such Bank's portion of the total amount of the Loan
to be made, converted or renewed on such date, First Union may assume that
such Bank has made such amount available to First Union on the date of the
Loan and First Union may, in reliance upon such assumption, make available to
Willis a corresponding amount. If and to the extent such Bank shall not have
so made such funds available to First Union, such Bank agrees to repay First
Union forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to Willis
until the date such amount is repaid to First Union, at the Federal Funds
Rate plus 50 basis points for three Business Days, and thereafter at the Base
Rate. If such Bank shall repay to First Union such corresponding amount,
such amounts so repaid shall constitute such Bank's Loan for purposes of this
Agreement. If such Bank does not repay such corresponding amount forthwith
upon First Union's demand therefor, First Union shall promptly notify Willis,
and Willis shall immediately pay such corresponding amount to First Union,
without any prepayment penalty or premium, but with interest on the amount
repaid, for each day from the date such amount is made available to Willis
until the date such amount is repaid to First Union, at the rate of interest
applicable at the time to such Loan. Nothing herein shall be deemed to
relieve any Bank of its obligation to fulfill its Revolving Loan Commitment
hereunder or to prejudice any rights which Willis may have against any Bank
as a result of any default by such Bank hereunder.
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(e) PROCEEDS OF LOAN BEING REPAID. If the Banks make a Loan on a
day on which all or any part of an outstanding Loan from the Banks is to be
repaid, each Bank shall apply the proceeds of its new Loan to make such
repayment and only an amount equal to the difference (if any) between the
amount being borrowed and the amount being repaid shall be made available by
such Bank to First Union as provided in clause (c).
2.5. INTEREST.
(a) BASE RATE LOANS. Each Base Rate Loan shall bear interest on the
unpaid principal balance thereof from day to day at a rate per annum which at
all times shall be equal to the Base Rate plus the Base Rate Margin.
Interest on Loans shall be computed on the basis of a year of 365 or 366
days, as applicable, if the Base Rate is equal to the prime rate of First
Union. Interest on Loans shall be computed on the basis of a year of 360
days, for the actual days elapsed, if the Base Rate is equal to the Federal
Funds Rate plus __% annum.*
(b) LIBO RATE LOANS. Each LIBO Rate Loan shall bear interest from its
effective date on the unpaid principal amount thereof at Adjusted LIBO Rate
plus the LIBO Rate Margin. Interest on LIBO Rate Loans shall be computed on
the basis of a year of 360 days, for the actual days elapsed, and shall be
payable on the last day of the applicable Interest Period.
(c) CONVERSION TO BASE RATE. Unless Willis shall have elected in
accordance with the provisions of Section 2.4 or this Section 2.5 that LIBO
Rate apply to the one, two or three month period immediately succeeding a
particular Interest Period, upon the termination of such Interest Period the
applicable Loan shall bear interest at the Base Rate plus the Base Rate
Margin until such time as Willis elects to request a new LIBO Rate Loan for a
subsequent Interest Period.
(d) RENEWALS AND CONVERSIONS. Willis shall have the right to convert
Base Rate Loans into LIBO Rate Loans, and vice versa, and to renew LIBO Rate
Loans from time to time, provided that: (i) Willis shall give First Union,
as Agent, notice of each permitted conversion or renewal; (ii) LIBO Rate
Loans may be converted or renewed only as of the last day of the applicable
Interest Period for such Loans; (iii) without the consent of the Required
Banks, no Base Rate Loan may be converted into a LIBO Rate Loan, and no
Interest Period may be renewed if on the proposed date of conversion an Event
of Default, or Potential Default exists or would thereby occur. First Union,
as Agent, shall use its best efforts to notify Willis of the effectiveness of
such conversion or renewal, and the new interest rate to which the converted
or renewed Loan is subject, as soon as practicable after the conversion;
provided, however, that any failure to give such notice shall not affect
Willis' obligations or the Banks' rights and remedies hereunder in any way
whatsoever.
(e) INTERIM PAYMENTS AT BASE RATE. If at any time Willis requests that
Adjusted LIBO Rate plus the LIBO Rate Margin be applicable to a Loan for a
particular Interest Period and a payment of principal is due within such
period (other than on the last day of such Interest Period), only that
_________________________
* This redacted material has been omitted pursuant to a request for
confidential treatment and the material has been filed separately.
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portion of that Loan equal to the outstanding principal amount of the Loan
less the principal installment due during such period shall bear interest at
Adjusted LIBO Rate plus the LIBO Rate Margin for such Interest Period. The
portion of that Loan equal to the principal installment due during such
period shall bear interest at the Base Rate plus the Base Rate Margin.
(f) REINSTATEMENTS(f) The liability of Willis under this Section 2.5
shall continue to be effective or be automatically reinstated, as the case
may be, if at any time payment, in whole or in part, of any of the payments
to the Banks is rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of Willis
or any other Person, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with
respect to Willis or any other Person or any substantial part of its
property, or otherwise, all as though such payment had not been made.
2.6. REVOLVING LOAN COMMITMENT FEE. Willis agrees to pay to First
Union, as Agent, for the account of each Bank as compensation for the
Aggregate Revolving Loan Commitment, a fee (the "REVOLVING LOAN COMMITMENT
FEE") computed as follows: (1) when the average daily balance of the
aggregate Loans outstanding under the Revolving Credit Notes (measured over
the previous calendar quarter or portion thereof, as applicable) is less than
__% of the Aggregate Revolving Loan Commitment, Willis shall pay a Revolving
Loan Commitment Fee equal to __% of the unused portion of the Aggregate
Revolving Loan Commitment, and (2) when the average daily balance of the
aggregate Loans outstanding under the Revolving Credit Notes (measured over
the previous calendar quarter or portion thereof, as applicable) is at least
__% of the Aggregate Revolving Loan Commitment, Willis shall pay a Revolving
Loan Commitment Fee equal to __% of the unused portion of the Aggregate
Revolving Loan Commitment. The Revolving Loan Commitment Fee shall be
payable in arrears on the first day of each January, April, July and October,
commencing July 1, 1997 (for the three month period or portion thereof ended
on the preceding day), and on the Revolver Termination Date. The Revolving
Loan Commitment Fee shall be calculated on the basis of a 360 day year.*
2.7. REDUCTION OR TERMINATION OF REVOLVING LOAN COMMITMENTS.
(a) VOLUNTARY. Willis may at any time, on not less than one Business
Days' written notice, terminate or permanently reduce the Aggregate Revolving
Loan Commitment pro rata among the Banks, provided that any reduction shall
be in the minimum amount of $150,000 or a multiple thereof and that no such
reduction shall cause the principal amount of Loans outstanding to exceed the
reduced Aggregate Revolving Loan Commitment or the Borrowing Base, whichever
is less.
(b) REVOLVING LOAN COMMITMENT TERMINATION. In the event the
Aggregate Revolving Loan Commitment is terminated, the Revolver Termination
Date shall be accelerated to the date of such termination and Willis shall,
simultaneously with such termination, repay the Revolving Credit Loans in
accordance with Section 2.9.
_________________________
* This redacted material has been omitted pursuant to a request for
confidential treatment and the material has been filed separately.
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2.8. VOLUNTARY PREPAYMENTS.
(a) BASE RATE LOANS. On one Business Day's notice to First Union,
Willis may, without penalty, at its option, prepay any Base Rate Loan in
whole at any time or in part from time to time, provided that each partial
prepayment shall be in the minimum principal amount of $150,000 or, if
greater, then in multiples thereof and, if less than $150,000 shall be
outstanding, in principal amount equal to amount remaining outstanding.
Notwithstanding the foregoing, prepayments may be made in connection with the
release of collateral as provided in Section 9.3, which prepayments shall not
be subject to the requirements of the previous sentence.
(b) LIBO RATE LOANS. On three London Business Days' notice to First
Union, Willis may, without penalty, at its option, prepay any LIBO Rate Loan
in whole at any time or in part from time to time, provided that each partial
prepayment shall be in the minimum principal amount of $1,000,000 or, if
greater, then in multiples of $100,000 and, if less than $1,000,000 shall be
outstanding, in principal amount equal to amount remaining outstanding
provided that if it shall prepay a LIBO Rate Loan prior to the last day of
the applicable Interest Period, or shall fail to borrow any LIBO Rate Loan on
the date such Loan is to be made, it shall pay to each Bank, in addition to
the principal and interest then to be paid in the case of a prepayment, on
such date of prepayment, the Additional Amount incurred or sustained by such
Bank as a result of such prepayment or failure to borrow as provided in
Section 2.1.
2.9. PAYMENTS.
(a) ACCRUED INTEREST. Accrued interest on all Base Rate Loans shall be
due and payable on the first Business Day of each calendar month. Interest
on LIBO Rate Loans shall be payable on the last day of the applicable
Interest Period. Each Revolving Credit Loan shall mature as provided in
Section 2.1.
(b) FORM OF PAYMENTS, APPLICATION OF PAYMENTS, PAYMENT ADMINISTRATION,
ETC. All payments of principal, interest, fees, or other amounts payable by
Willis hereunder shall be applied to the Loans in such order and to such
extent as shall be specified by Willis by written notice to First Union at
the time of such payment or prepayment. Such payments shall be remitted to
First Union on behalf of the Banks at the address set forth opposite its name
on the signature page hereof or at such office or account as First Union
shall specify to Willis, in immediately available funds not later than 2:00
p.m. on the day when due. Whenever any payment is stated as due on a day
which is not a Business Day, the maturity of such payment shall, except as
otherwise provided in the definition of "Interest Period," be extended to the
next succeeding Business Day and interest and commitment fees shall continue
to accrue during such extension. Willis authorizes First Union to deduct from
any account of Willis maintained at First Union or over which First Union has
control any amount payable under this Agreement, the Notes or any other Loan
Document which is not paid in a timely manner. First Union's failure to
deliver any bill, statement or invoice with respect to amounts due under this
Section or under any Loan Document shall not affect Willis's obligation to
pay any installment of principal, interest or any other amount under this
Agreement when due and payable.
(c) DEMAND DEPOSIT ACCOUNT. Willis shall maintain at least one demand
deposit account with First Union for purposes of this Agreement. Willis
authorizes First Union to deposit into said account all amounts to be
advanced to Willis hereunder. Further, Willis authorizes First Union (but
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First Union shall not be obligated) to deduct from said account, or any other
account maintained by Willis at First Union National Bank, any amount payable
hereunder on or after the date upon which it is due and payable. Such
authorization shall include but not be limited to amounts payable with respect
to principal, interest, fees and expenses.
(d) NET PAYMENTS. All payments made to the Banks by Willis hereunder,
under any Note or under any other Loan Document will be made without set off,
counterclaim or other defense.
2.10. CHANGE IN CIRCUMSTANCES, YIELD PROTECTION.
(a) CERTAIN REGULATORY CHANGES. If any Regulatory Change or
compliance by any Bank with any request made after the date of this Agreement
by the Board of Governors of the Federal Reserve System or by any Federal
Reserve Bank or other central bank or fiscal, monetary or similar authority
(in each case whether or not having the force of law) shall (i) impose,
modify or make applicable any reserve, special deposit, Federal Deposit
Insurance Corporation premium or similar requirement or imposition against
assets held by, or deposits in or for the account of, or loans made by, or
any other acquisition of funds for loans or advances by, any Bank; (ii)
impose on any Bank any other condition regarding the Notes; (iii) subject any
Bank to, or cause the withdrawal or termination of any previously granted
exemption with respect to, any tax (including any withholding tax but not
including any income tax not currently causing any Bank to be subject to
withholding) or any other levy, impost, duty, charge, fee or deduction on or
from any payments due from Willis; or (iv) change the basis of taxation of
payments from Willis to any Bank (other than by reason of a change in the
method of taxation of any Bank's net income); and the result of any of the
foregoing events is to increase the cost to any Bank of making or maintaining
any Loan or to reduce the amount of principal, interest or fees to be
received by any Bank hereunder in respect of any Loan, First Union will
immediately so notify Willis. If any Bank determines in good faith that the
effects of the change resulting in such increased cost or reduced amount
cannot reasonably be avoided or the cost thereof mitigated, then upon notice
by First Union to Willis, Willis shall pay to such Bank on each interest
payment date of the Loan, such additional amount as shall be necessary to
compensate that Bank for such increased cost or reduced amount.
(b) CAPITAL ADEQUACY. If any Bank shall determine that any
Regulation regarding capital adequacy or the adoption of any Regulation
regarding capital adequacy, which Regulation is applicable to banks (or their
holding companies) generally and not such Bank (or its holding company)
specifically, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by such Bank (or its holding company) with any such request or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has the effect of
reducing the rate of return on such Bank's capital as a consequence of its
obligations hereunder to a level below that which such Bank could have
achieved but for such adoption, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, Willis shall promptly pay to First
Union for the account of such Bank, upon the demand of such Bank, such
additional amount or amounts as will compensate such Bank for such reduction.
(c) ABILITY TO DETERMINE LIBO RATE. If First Union shall determine
(which determination will be made after consultation with any Bank requesting
same and shall be, in the absence of fraud or manifest error, conclusive and
binding upon all parties hereto) that by reason of
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abnormal circumstances affecting the interbank eurodollar or applicable
eurocurrency market adequate and reasonable means do not exist for
ascertaining the LIBO Rate to be applicable to the requested LIBO Rate Loan
or that eurodollar or eurocurrency funds in amounts sufficient to fund all
the LIBO Rate Loans are not obtainable on reasonable terms, First Union shall
give notice of such inability or determination by telephone to Willis and to
each Bank at least two Business Days prior to the date of the proposed Loan
and thereupon the obligations of the Banks to make, convert other Loans to,
or renew such LIBO Rate Loan shall be excused, subject, however, to the right
of Willis at any time thereafter to submit another request.
(d) YIELD PROTECTION. Determination by a Bank for purposes hereof
of the effect of any Regulatory Change or other change or circumstance
referred to above on its costs of making or maintaining Loans or on amounts
receivable by it in respect of the Loans and of the additional amounts
required to compensate such Bank in respect of any additional costs, shall be
made in good faith and shall be evidenced by a certificate, signed by an
officer of such Bank and delivered to Willis, as to the fact and amount of
the increased cost incurred by or the reduced amount accruing to such Bank
owing to such event or events. Such certificate shall be prepared in
reasonable detail and shall be conclusive as to the facts and amounts stated
therein, absent manifest error.
(e) NOTICE OF EVENTS. The affected Bank will notify Willis of any
event occurring after the date of this Agreement that will entitle such Bank to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation. Said
notice shall be in writing, shall specify the applicable Section or Sections of
this Agreement to which it relates and shall set forth the amount of amounts
then payable pursuant to this Section. Willis shall pay such Bank the amount
shown as due on such notice within 10 days after its receipt of the same.
2.11. ILLEGALITY. Notwithstanding any other provision in this
Agreement, if the adoption of any applicable Regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank, or comparable agency shall make it unlawful or
impossible for any Bank to (1) maintain their Revolving Loan Commitments,
then upon notice to Willis by First Union, the Revolving Loan Commitments
shall terminate; or (2) maintain or fund their LIBO Rate Loans, then upon
notice to the Willis of such event, the Willis's outstanding LIBO Rate Loans
shall be converted into Base Rate Loans.
2.12. DISCRETION OF EACH BANK AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, each Bank
shall be entitled to fund and maintain its funding of all or any part of its
Loans in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if
each Bank had actually funded and maintained each LIBO Rate Loan during each
Interest Period for such Loan through the purchase of deposits in the
relevant interbank market having a maturity corresponding to such Interest
Period and bearing an interest rate equal to the LIBO Rate plus the LIBO Rate
Margin, for such Interest Period.
3. REPRESENTATIONS AND WARRANTIES.
Willis represents and warrants to the Banks that:
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3.1. ORGANIZATION, STANDING. It (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, (ii) has the corporate power and authority necessary to
own its assets, carry on its business and enter into and perform its
obligations hereunder, and under each Loan Document to which it is a party,
and (iii) is qualified to do business and is in good standing in each
jurisdiction where the nature of its business or the ownership of its
properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect.
3.2. CORPORATE AUTHORITY, VALIDITY, ETC. The making and performance of
the Loan Documents to which it is a party are within its power and authority
and have been duly authorized by all necessary corporate action. The making
and performance of the Loan Documents do not and under present law will not
require any consent or approval not obtained of any of Willis's shareholders,
or any other person, do not and under present law will not violate any law,
rule, regulation order, writ, judgment, injunction, decree, determination or
award, do not violate any provision of its charter or by-laws, do not and
will not result in any breach of any material agreement, lease or instrument
to which it is a party, by which it is bound or to which any of its assets
are or may be subject, and do not and will not give rise to any Lien upon any
of its assets. The number of shares and classes of the capital stock of
Willis and the ownership thereof are accurately set forth on Schedule 1
attached hereto; all such shares are validly issued, fully paid and
non-assessable, and the issuance and sale thereof are in compliance with all
applicable federal and state securities and other applicable laws. Further,
Willis is not in default under any such agreement, lease or instrument except
to the extent such default reasonably could not have a Material Adverse
Effect. No authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or agency are
necessary for the execution, delivery or performance by Willis of any Loan
Document to which it is a party or for the validity or enforceability
thereof, except any filings or registrations expressly contemplated by the
Loan Documents. Each Loan Document, when executed and delivered, will be the
legal, valid and binding obligation of Willis, enforceable against it in
accordance with its terms.
3.3. LITIGATION. Except as disclosed on Schedule 1, there are no
actions, suits or proceedings pending or, to Willis's knowledge, threatened
against or affecting Willis or any of its assets before any court, government
agency, or other tribunal which if adversely determined reasonably could have
a Material Adverse Effect or upon the ability of Willis to perform under the
Loan Documents. If there is any disclosure on Schedule 1, the status
(including the tribunal, the nature of the claim and the amount in
controversy) of each such litigation matter as of the date of this Agreement
is set forth in Schedule 1.
3.4. ERISA. (a) Willis and each ERISA Affiliate are in compliance in all
material respects with all applicable provisions of ERISA and the regulations
promulgated thereunder; and, neither Willis, nor any ERISA Affiliate maintains
or contributes to or has maintained or contributed to any multiemployer plan
(as defined in Section 4001 of ERISA) under which Willis or any ERISA Affiliate
could have any withdrawal liability; (b) neither Willis nor any ERISA Affiliate,
sponsors or maintains any Plan under which there is an accumulated funding
deficiency within the meaning of Section 412 of the Code, whether or not waived;
(c) the aggregate liability for accrued benefits and other ancillary benefits
under each Plan that is or will be sponsored or maintained by Willis or any
ERISA Affiliate (determined on the basis of the actuarial assumptions prescribed
for valuing benefits under terminating single-employer defined benefit plans
under Title IV of ERISA) does not exceed the aggregate fair market value of the
assets under each such defined benefit pension Plan; (d) the aggregate
liability of
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Willis and each ERISA Affiliate arising out of or relating to a failure of
any Plan to comply with the provisions of ERISA or the Code, will not have a
Material Adverse Effect; and (e) there does not exist any unfunded liability
(determined on the basis of actuarial assumptions utilized by the actuary for
the plan in preparing the most recent Annual Report) of Willis or any ERISA
Affiliate under any plan, program or arrangement providing post-retirement
life or health benefits.
3.5. FINANCIAL STATEMENTS. The consolidated financial statements of
Willis as of and for the Fiscal Years ending December 31, 1997 and December
31, 1996, consisting of a balance sheet, a statement of operations, a
statement of shareholders' equity, a statement of cash flows and accompanying
footnotes, and the interim consolidated and consolidating financial
statements of Willis as of March 31, 1998 furnished to the Banks in
connection herewith, present fairly, in all material respects, the financial
position, results of operations and operating statistics Willis as of the
dates and for the periods referred to, in conformity with GAAP. Except as
set forth on Schedule 1 hereto, there are no liabilities, fixed or
contingent, which are not reflected in such financial statements, other than
liabilities which are not required to be reflected in such balance sheets.
3.6. NOT IN DEFAULT, JUDGMENTS, ETC. No Event of Default or Potential
Default under any Loan Document has occurred and is continuing. Willis has
satisfied all judgments and is not 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.
3.7. TAXES. Willis has filed all federal, state, local and foreign tax
returns and reports which it is required by law to file and as to which its
failure to file would have a Material Adverse Effect, and has paid all taxes,
including wage taxes, assessments, withholdings and other governmental charges
which are presently due and payable, other than those being contested in good
faith by appropriate proceedings, if any, and disclosed on Schedule 1. The tax
charges, accruals and reserves on the books of Willis are adequate to pay all
such taxes that have accrued but are not presently due and payable.
3.8. PERMITS, LICENSES, ETC. Willis possesses all permits, licenses,
franchises, trademarks, trade names, copyrights and patents necessary to the
conduct of its business as presently conducted or as presently proposed to be
conducted, except where the failure to possess the same would not have a
Material Adverse Effect.
3.9. NO MATERIALLY ADVERSE CONTRACTS, ETC. To the best of its
knowledge, Willis is not subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of its directors or officers has or is expected in the future to
have a materially adverse effect on its operations, business, assets,
liabilities or upon its ability to perform under the Loan Documents. Willis
is not a party to any contract or agreement which in the judgment of its
directors or officers has or is expected to have any materially adverse
effect on its business, except as otherwise reflected in adequate reserves.
3.10. COMPLIANCE WITH LAWS, ETC.
(a) COMPLIANCE GENERALLY. Willis is in compliance in all material
respects with all Regulations applicable to its business (including obtaining
all authorizations, consents, approvals, orders, licenses, exemptions from,
and making all filings or registrations or qualifications with, any
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court or governmental department, public body or authority, commission,
board, bureau, agency, or instrumentality), the noncompliance with which
reasonably could have a Material Adverse Effect.
(b) HAZARDOUS WASTES, SUBSTANCES AND PETROLEUM PRODUCTS. Willis
received all permits and filed all notifications necessary to carry on its
business; and is in compliance in all respects with all Environmental Control
Statutes. Willis has not given any written or oral notice, nor has it failed
to give required notice, to the Environmental Protection Agency ("EPA") or
any state or local agency with regard to any actual or imminently threatened
Release of Hazardous Substances on properties owned, leased or operated by it
or used in connection with the conduct of its business and operations.
Willis has not received notice that it is potentially responsible for costs
of clean-up or remediation of any actual or imminently threatened Release of
Hazardous Substances pursuant to any Environmental Control Statute. No real
property owned or leased by it is in violation of any Environmental Laws and
no Hazardous Substances are present on said real property in violation of
applicable law. Willis has not been identified in any litigation,
administrative proceedings or investigation as a potentially responsible
party for any liability under any Environmental Laws.
3.11. SOLVENCY. Willis is, and after giving effect to the transactions
contemplated hereby, will be, Solvent.
3.12. SUBSIDIARIES, ETC. Willis does not have any Subsidiaries, except
as set forth In Schedule 1 hereto. Set forth in Schedule 1 hereto is a
complete and correct list, as of the date of this Agreement, of all
Investments held by Willis in any joint venture or other Person.
3.13. TITLE TO PROPERTIES, LEASES. Willis has good and marketable
title to all assets and properties reflected as being owned by it in its
financial statements as well as to all assets and properties acquired since
said date (except property disposed of since said date in the ordinary course
of business). Except for the Liens set forth in Schedule 1 hereto and any
other Permitted Liens, there are no Liens on any of such assets or
properties. It has the right to, and does, enjoy peaceful and undisturbed
possession under all material leases under which it is leasing property as a
lessee. All such leases are valid, subsisting and in full force and effect,
and none of such leases is in default, except where such default, either
individually or in the aggregate, could not have a Material Adverse Effect.
3.14. PUBLIC UTILITY HOLDING COMPANY; INVESTMENT COMPANY. Willis is not
a "public utility company" or a "holding company", or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended; or a "public utility"
within the meaning of the Federal Power Act, as amended. Further, it is not
an "investment company" or an "affiliated person" of an "investment company"
or a company "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended.
3.15. MARGIN STOCK. Willis is not and will not be engaged principally
or as one of its important activities in the business of extending credit for
the purpose of purchasing or carrying or trading in any margin stocks or
margin securities (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System as amended from time to time).
Neither will it use or permit any proceeds of the Loans to be used, either
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stocks or margin securities.
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3.16. USE OF PROCEEDS. Willis will use the proceeds of any Loan to
be made pursuant hereto for the purchase of Equipment as contemplated herein.
3.17. DEPRECIATION POLICIES. Willis's depreciation policies are as
set forth on Exhibit F. These policies have been in effect without change
since January 1, 1997.
3.18. DISCLOSURE GENERALLY. The representations and statements made
by Willis or on its behalf in connection with this credit facility and the
Loans, including representations and statements in each of the Loan
Documents, do not and will not contain any untrue statement of a material
fact or omit to state a material fact or any fact necessary to make the
representations made not materially misleading. No written information,
exhibit, report, brochure or financial statement furnished by Willis to the
Banks in connection with this credit facility, the Loans, or any Loan
Document contains or will contain any material misstatement of fact or omit
to state a material fact or any fact necessary to make the statements
contained therein not misleading.
4. CONDITIONS PRECEDENT
4.1. ALL LOANS. The obligation of each Bank to make any Loan or First
Union, as Agent, to issue any Standby Letter of Credit, is conditioned upon
the following:
(a) REQUEST FOR ADVANCE. Willis shall have delivered and First Union
shall have received a Request for Advance in such form as First Union may
request from time to time.
(b) BORROWING BASE CERTIFICATE. Willis shall have delivered and the
Banks shall have received a Borrowing Base Certificate dated the date of the
Loan requested under this Agreement.
(c) COVENANTS; REPRESENTATIONS. Willis shall be in compliance with
all covenants, agreements and conditions in each Loan Document and each
representation and warranty contained in each Loan Document shall be true
with the same effect as if such representation or warranty had been made on
the date such Loan or Standby Letter of Credit, as applicable, is made or
issued.
(d) DEFAULTS. Immediately prior to and after giving effect to such
transaction, no Event of Default or Potential Default shall exist.
(e) MATERIAL ADVERSE CHANGE. Since March 31, 1998, there shall not
have been any Material Adverse Change with respect to Willis.
4.2. CONDITIONS TO FIRST LOAN. In addition to the conditions to all
Loans and Standby Letters of Credit as provided in Section 4.1, the
obligation of each Bank to make its first Loan is conditioned upon the
following:
(a) ARTICLES, BYLAWS. Each Bank shall have received copies of the
Articles or Certificate of Incorporation and Bylaws of Willis certified by
its Secretary or Assistant Secretary; together with Certificate of Good
Standing from any jurisdiction where the nature of its business or the
ownership of its properties requires such qualification except where the
failure to be so qualified would not have a Material Adverse Effect.
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(b) EVIDENCE OF AUTHORIZATION. Each Bank shall have received copies
certified by the Secretary or Assistant Secretary of Willis or any other
appropriate official (in the case of a Person other than Willis) of all
corporate or other action taken by each Person other than the Banks who is a
party to any Loan Document to authorize its execution and delivery and
performance of the Loan Documents and to authorize the Loans, together with
such other related papers as First Union shall reasonably require.
(c) LEGAL OPINIONS. Each Bank shall have received a favorable written
opinion in form and substance satisfactory, and from counsel reasonably
acceptable, to the Banks which shall be addressed to the Banks.
(d) INCUMBENCY. First Union, as Agent, shall have received a
certificate signed by the secretary or assistant secretary of Willis,
together with the true signature of the officer or officers authorized to
execute and deliver the Loan Documents and certificates thereunder, upon
which the Banks shall be entitled to rely conclusively until it shall have
received a further certificate of the secretary or assistant secretary of
Willis amending the prior certificate and submitting the signature of the
officer or officers named in the new certificate as being authorized to
execute and deliver Loan Documents and certificates thereunder.
(e) NOTES. Each Bank shall have received its Revolving Credit Note
duly executed, completed and issued in accordance herewith.
(f) DOCUMENTS. First Union, as Agent, shall have received all
certificates, instruments and other documents then required to be delivered
pursuant to any Loan Documents, in each instance in form and substance
reasonably satisfactory to it.
(g) CONSENTS. Willis shall have provided to each Bank evidence
satisfactory to it that all governmental, shareholder and third party
consents and approvals necessary in connection with the transactions
contemplated hereby have been obtained and remain in effect.
(h) OTHER AGREEMENTS. Willis shall have executed and delivered each
other Loan Document required hereunder.
(i) FEES, EXPENSES. Willis shall simultaneously pay or shall have
paid all fees and expenses, if any, due hereunder or any other Loan Document.
5. AFFIRMATIVE COVENANTS.
Willis covenants and agrees that, without the prior written consent of
Required Banks, from and after the date hereof and so long as the Revolving
Loan Commitments are in effect or any Obligation remains unpaid or
outstanding, it will:
5.1. FINANCIAL STATEMENTS AND REPORTS. Furnish to the Banks the
following financial information:
(a) ANNUAL STATEMENTS. No later than one hundred and twenty (120)
days after the end of each Fiscal Year, the consolidated and consolidating
balance sheet of Willis as of the end of such year
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and the prior year in comparative form, and related statements of operations,
shareholders' equity, and cash flows for the Fiscal Year and the prior Fiscal
Year in comparative form. The financial statements shall be in reasonable
detail with appropriate notes and be prepared in accordance with GAAP. The
consolidated annual financial statements shall be certified (without any
qualification or exception) by KPMG Peat Marwick LLP or other independent
public accountants reasonably acceptable to the Required Banks. Such
financial statements shall be accompanied by a report of such independent
certified public accountants stating that, in the opinion of such
accountants, such financial statements present fairly, in all material
respects, the financial position, and the results of operations and the cash
flows of Willis for the period then ended in conformity with GAAP, except for
inconsistencies resulting from changes in accounting principles and methods
agreed to by such accountants and specified in such report, and that, in the
case of such financial statements, the examination by such accountants of
such financial statements has been made in accordance with generally accepted
auditing standards and accordingly included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements
and assessing the accounting principles used and significant estimates made,
as well as evaluating the overall financial statement presentation. Each
financial statement provided under this subsection (a) shall be accompanied
by a certificate signed by such accountants either stating that during the
course of their examination nothing came to their attention which would cause
them to believe that any event has occurred and is continuing which
constitutes an Event of Default or Potential Default, or describing each such
event. In addition to the annual financial statements, Willis shall, promptly
upon receipt thereof, furnish to the Banks copies of each other report
submitted to its board of directors by its independent accountants in
connection with any annual, interim or special audit made by them of the
financial records of Willis.
(b) QUARTERLY STATEMENTS. No later than forty-five (45) calendar
days after the end of each Fiscal Quarter of each Fiscal Year, the
consolidated and consolidating balance sheet and related statements of
operations, shareholders' equity and cash flows of Willis for such quarterly
period and for the period from the beginning of such fiscal year to the end
of such Fiscal Quarter and a corresponding financial statement for the same
periods in the preceding Fiscal Year certified by the chief financial officer
of Willis as having been prepared in accordance with GAAP (subject to changes
resulting from audits and year-end adjustments); provided, however, that if
the independent certified public accountants issue a review report on the
quarterly financial statements of Willis, the financial statements required
by this subsection (b) shall be accompanied by a certificate signed by such
accountants either stating that during the course of their examination
nothing came to their attention which would cause them to believe that any
event has occurred and is continuing which constitutes an Event of Default or
Potential Default, or describing each such event and the remedial steps being
taken by Willis. Such quarterly statement shall be accompanied by a
Compliance Certificate in the form attached hereto as Exhibit E or such other
form as the Required Banks shall reasonably request.
(c) NO DEFAULT. Within forty-five (45) calendar days after the end
of each of the first three Fiscal Quarters of each Fiscal Year and within one
hundred and twenty (120) calendar days after the end of each Fiscal Year, a
certificate signed by the chief financial officer of Willis certifying that,
to the best of such officer's knowledge, after due inquiry, (i) Willis each
has complied with all covenants, agreements and conditions in each Loan
Document and that each representation and warranty contained in each Loan
Document is true and correct with the same effect as though each such
representation and warranty had been made on the date of such certificate
(except to the extent such representation or warranty related to a specific
prior date), and (ii) no event has occurred and is continuing which
constitutes an Event of Default or Potential Default, or describing each such
event and the remedial steps being taken by Willis, as applicable.
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(d) ERISA. All reports and forms filed with respect to all Plans,
except as filed in the normal course of business and that would not result in
an adverse action to be taken under ERISA, and details of related information
of a Reportable Event, promptly following each filing.
(e) MATERIAL CHANGES. Notification to First Union, as Agent, and
each other Bank, of any litigation, administrative proceeding, investigation,
business development, or change in financial condition which could reasonably
have a Material Adverse Effect, promptly following its discovery.
(f) OTHER INFORMATION. Promptly, upon request by First Union, as
Agent, and each other Bank, from time to time (which may be on a monthly or
other basis), Willis shall provide such other information and reports
regarding its operations, business affairs, prospects and financial condition
as First Union, as Agent, or any Bank may reasonably request.
(g) BORROWING BASE CERTIFICATES. In the event Willis shall not have
delivered a Borrowing Base Certificate to the Banks during any calendar
month, it will deliver to the Banks, no later than 15 days after the end of
such calendar month as of the last day of the preceding calendar month, a
Borrowing Base Certificate signed by the chief financial officer, treasurer
or controller of Willis.
(h) MONTHLY LEASE PORTFOLIO AND RECEIVABLES REPORT. As soon as
practicable and in any event within 15 days after the end of each calendar
month, Willis will deliver to the Banks a lease portfolio listing and lease
receivables aging report (in form and substance reasonably satisfactory to
the Banks).
(i) MAINTENANCE OF CURRENT DEPRECIATION POLICIES. Willis shall
maintain its method of depreciating its assets substantially consistent with
past practices as set forth in Exhibit F and will promptly notify the Banks
of any deviation from such practices.
(j) MONTHLY LEASE RECEIPTS REPORT. Within 15 days after the end of
each calendar month following the Revolver Termination Date and until the
Note is paid in full, Willis shall deliver to the Banks a report setting
forth the items of Collateral on lease and amounts received with respect to
each such item of Collateral.
5.2. CORPORATE EXISTENCE. Preserve its corporate existence and all
material franchises, licenses, patents, copyrights, trademarks and trade
names consistent with good business practice; and maintain, keep, and
preserve all of its properties (tangible and intangible) necessary or useful
in the conduct of its business in good working order and condition, ordinary
wear and tear excepted.
5.3. ERISA. Comply in all material respects with the provisions of
ERISA to the extent applicable to any Plan maintained for the employees of
Willis or any ERISA Affiliate; do or cause to be done all such acts and
things that are required to maintain the qualified status of each Plan and
tax exempt status of each trust forming part of such Plan; not incur any
material accumulated funding deficiency (within the meaning of ERISA and the
regulations promulgated thereunder), or any material liability to the PBGC
(as established by ERISA); not permit any event to occur as described in
Section 4042 of ERISA or which may result in the imposition of a lien on its
properties or assets; notify the Banks in writing promptly after it has come
to the attention of senior management of Willis of the assertion or threat of
any "reportable event" or other event described in Section 4042 of ERISA
(relating to the soundness of a Plan) or the PBGC's ability to assert a
material liability against it or impose a lien on its, or any
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ERISA Affiliates', properties or assets; and refrain from engaging in any
Prohibited Transactions or actions causing possible liability under Section
5.02 of ERISA.
5.4. COMPLIANCE WITH REGULATIONS. Comply in all material respects with
all Regulations applicable to its business, the noncompliance with which
reasonably could have a Material Adverse Effect.
5.5. CONDUCT OF BUSINESS; PERMITS AND APPROVALS, COMPLIANCE WITH LAWS.
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; maintain
in full force and effect, its franchises, and all licenses, patents,
trademarks, trade names, contracts, permits, approvals and other rights
necessary to the profitable conduct of its business.
5.6. MAINTENANCE OF PROPERTIES. Willis will maintain or cause to be
maintained in good repair, working order and condition all properties used or
useful in its business and make all reasonable and necessary renewals,
replacements, additions, betterments and improvements thereof and thereto, so
that the business carried on in connection therewith may be conducted in the
ordinary course at all times.
5.7. MAINTENANCE OF INSURANCE. Maintain insurance 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.
5.8. PAYMENT OF DEBT; PAYMENT OF TAXES, ETC. Where the amount involved
exceeds $250,000 or where the non-payment or non-discharge would otherwise
have a Material Adverse Effect on Willis or any of its assets: promptly pay
and discharge (a) all of its Debt in accordance with the terms thereof; (b)
all taxes, assessments, and governmental charges or levies imposed upon it or
upon its income and profits, upon any of its property, real, personal or
mixed, or upon any part thereof, before the same shall become in default; (c)
all lawful claims for labor, materials and supplies or otherwise, which, if
unpaid, might become a lien or charge upon such property or any part thereof;
provided, however, that so long as Willis first notifies First Union, as
Agent, of its intention to do so, Willis shall not be required to pay and
discharge any such Debt, tax, assessment, charge, levy or claim so long as
the failure to so pay or discharge does not constitute or result in an Event
of Default or a Potential Default hereunder and so long as no foreclosure or
other similar proceedings shall have been commenced against such property or
any part thereof and so long as the validity thereof shall be contested in
good faith by appropriate proceedings diligently pursued and it shall have
set aside on its books adequate reserves with respect thereto.
5.9. NOTICE OF EVENTS. Promptly upon discovery of any of the following
events, Willis shall provide telephone notice to the Banks (confirmed within
three (3) calendar days by written notice), describing the event and all
action Willis proposes to take with respect thereto:
(a) an Event of Default or Potential Default under this Agreement or
any other Loan Document;
(b) any default or event of default under a contract or contracts and
the default or event of default involves payments by Willis in an aggregate
amount equal to or in excess of $250,000;
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(c) a default or event of default under or as defined in any evidence
of or agreements for Indebtedness for Borrowed Money under which Willis's
liability is equal to or in excess of $250,000, singularly or in the
aggregate, whether or not an event of default thereunder has been declared by
any party to such agreement or any event which, upon the lapse of time or the
giving of notice or both, would become an event of default under any such
agreement or instrument or would permit any party to any such instrument or
agreement to terminate or suspend any commitment to lend to Willis or to
declare or to cause any such indebtedness to be accelerated or payable before
it would otherwise be due;
(d) the institution of, any material adverse determination in, or the
entry of any default judgment or order or stipulated judgment or order in,
any suit, action, arbitration, administrative proceeding, criminal
prosecution or governmental investigation against Willis in which the amount
in controversy is in excess of $250,000, singularly or in the aggregate; or
(e) any change in any Regulation, including, without limitation,
changes in tax laws and regulations, which would have a Material Adverse
Effect.
5.10. INSPECTION RIGHTS. At any time during the existence of an Event
of Default or Potential Default, during regular business hours and then as
often as requested of Willis, permit First Union, as Agent, or any authorized
officer, employee, agent, or representative of First Union to examine and
make abstracts from the records and books of account of Willis, wherever
located, and to visit the properties of Willis; and to discuss the affairs,
finances, and accounts of Willis with its Chairman, President, any executive
vice president, it chief financial officer, treasurer, controller or
independent accountants. If no Event of Default or Potential Default shall
be in existence, First Union shall limit such examination to once each
calendar year. Willis shall reimburse First Union up to $5,000 promptly
following the completion of each such examination. If the inspection shall be
made during the continuance of a Potential Default or an Event of Default,
Willis shall reimburse First Union for its reasonable out-of-pocket expense
of such inspection. At all times, it is understood and agreed by Willis that
all expenses in connection with any such inspection which may be incurred by
Willis, any officers and employees thereof and the attorneys and independent
certified public accountants therefor shall be expenses payable by Willis and
shall not be expenses of the Banks or any of them.
5.11. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Maintain books and
records at all times in accordance with Generally Accepted Accounting
Principles.
5.12. COMPLIANCE WITH MATERIAL CONTRACTS. Willis will comply in all
material respects with all obligations, terms, conditions and covenants, as
applicable, in all Debt applicable to it and all instruments and agreements
related thereto, and all other instruments and agreements to which it is a
party or by which it is bound or any of its properties is affected and in
respect of which the failure to comply reasonably could have a Material
Adverse Effect.
5.13. USE OF PROCEEDS. Willis will use the proceeds of each Loan made
pursuant hereto for the purchase or refinance of Equipment as provided herein
or general working capital purposes.
5.14. FURTHER ASSURANCES. Do such further acts and things and execute
and deliver to the Banks such additional assignments, agreements, powers and
instruments, as any Bank may reasonably require or reasonably deem advisable
to carry into effect the purposes of this Agreement or to better
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assure and confirm unto each Bank its rights, powers and remedies hereunder.
6. NEGATIVE COVENANTS.
Willis covenants and agrees that, without the prior written consent of
the Required Banks, from and after the date hereof and so long as the
Revolving Loan Commitments are in effect or any Obligation remains unpaid or
outstanding, it will not:
6.1. CONSOLIDATION AND MERGER. Merge or consolidate with or into any
corporation except, if (1) no Potential Default or Event of Default shall
have occurred and be continuing either immediately prior to or upon the
consummation of such transaction, and (2) Willis is the surviving entity.
6.2. LIENS. Create, assume or permit to exist any Lien on any of its
property or assets, whether now owned or hereafter acquired, or upon any
income or profits therefrom, except Permitted Liens.
6.3. GUARANTEES. Guarantee or otherwise in any way become or be
responsible for indebtedness or obligations (including working capital
maintenance, take-or-pay contracts) of any unconsolidated Person,
contingently or otherwise. Notwithstanding the preceding sentence, Willis
may guarantee indebtedness or obligations of unconsolidated Affiliates in
amounts not to exceed $15,000,000 in the aggregate, in the ordinary course of
business with the prior written consent of the Required Banks, which consent
not to be unreasonably withheld.
6.4. MARGIN STOCK. Use or permit any proceeds of the Loans to be used,
either directly or indirectly, for the purpose, whether immediate, incidental
or ultimate, of buying or carrying margin stock within the meaning of
Regulation U of The Board of Governors of the Federal Reserve System, as
amended from time to time.
6.5. ACQUISITIONS AND INVESTMENTS. If an Event of Default or a
Potential Default exists or would exist immediately thereafter: purchase or
otherwise acquire (including without limitation by way of share exchange) any
part or amount of the capital stock or assets of, or make any Investments in
any other Person; or enter into any new business activities or ventures not
directly related to its present business; or create any Subsidiary, except
(a) it may acquire and hold stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing to it,
and (b) it may make and own (i) Investments in certificates of deposit or
time deposits having maturities in each case not exceeding one year from the
date of issuance thereof and issued by any Bank, or any FDIC-insured
commercial bank incorporated in the United States or any state thereof having
a combined capital and surplus of not less than $150,000,000, (ii)
Investments in marketable direct obligations issued or unconditionally
guaranteed by the United States of America, any agency thereof, or backed by
the full faith and credit of the United States of America, in each case
maturing within one year from the date of issuance or acquisition thereof,
(iii) Investments in commercial paper issued by a corporation incorporated in
the United States or any State thereof maturing no more than one year from
the date of issuance thereof and, at the time of acquisition, having a rating
of A-1 (or better) by Standard & Poor's Corporation or P-1 (or better) by
Moody's Investors Service, Inc., and (iv) Investments in money market mutual
funds all of the assets of which are invested in cash or investments
described in the immediately preceding clauses (i), (ii) and (iii).
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6.6. TRANSFER OF ASSETS; NATURE OF BUSINESS. Willis may not sell,
transfer, lease or dispose of assets constituting more than twenty percent
(20%) of its assets during any twelve month period without the written
consent of the Required Banks, such consent not to be unreasonably withheld.
Notwithstanding the above, (1) Willis may sell, transfer, pledge, assign,
re-lease or otherwise dispose of any equipment coming off lease if such sale
or disposition is in the ordinary course of its business, (2) Willis may sell
individual or small groups of leases and related equipment from time to time
and sell groups of leases and related equipment in securitization
transactions and (3) Willis may engage in the nonrecourse or partial recourse
financing of leases. Willis may not discontinue, liquidate or change in any
material respect any substantial part of its operations or business.
6.7. ACCOUNTING CHANGE. Without the prior written approval of the
Required Banks, make or permit any material change in financial accounting
policies or financial reporting practices, except as required by Generally
Accepted Accounting Principles or regulations of the Securities and Exchange
Commission, if applicable.
6.8. TRANSACTIONS WITH AFFILIATES. Enter into any material transaction
(including, without limitation, the purchase, sale or exchange of property,
the rendering of any services or the payment of management fees) with any
Affiliate, except transactions in the ordinary course of, and pursuant to the
reasonable requirements of, its business, and in good faith and upon
commercially reasonable terms.
6.9. RESTRICTION ON AMENDMENT OF THIS AGREEMENT. Enter into or
otherwise become subject to or suffer to exist any agreement which would
require it to obtain the consent of any other person as a condition to the
ability of the Banks and Willis to amend or otherwise modify this Agreement.
7. FINANCIAL COVENANTS.
Willis covenants and agrees that, without the prior written consent of
the Required Banks, from and after the date hereof and so long as the
Revolving Loan Commitments are in effect or any Obligation remains unpaid or
outstanding, that:
7.1. NO LOSSES. From and after April 1, 1997, Willis shall not at any
time suffer a net loss for the four (4) most recently ended consecutive
Fiscal Quarters.
7.2. MINIMUM TANGIBLE NET WORTH. Tangible Net Worth will not at any
time be less than $40,000,000.
7.3. DEBT TO TANGIBLE NET WORTH. From and after April 1, 1997, the
ratio of Debt (including, without limitation, Debt represented by the Note)
to Tangible Net Worth will not exceed 6.00:1 as at the end of any fiscal
quarter.
7.4. MINIMUM INTEREST EXPENSE COVERAGE. From and after April 1, 1997,
the ratio of EBIT to interest for the four (4) most recently ended
consecutive Fiscal Quarters will not be less than 1.25:1.
7.5. BORROWING BASE. The aggregate principal amount of Loans
outstanding shall not at any time exceed the Borrowing Base or the Aggregate
Revolving Loan Commitment, whichever is less; provided, however, that this
covenant shall not be deemed breached if, at the time such aggregate amount
exceeds said level, within four Business Days after the earlier of the date
Willis first has
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knowledge of such excess or the date of the next Borrowing Base Certificate
disclosing the existence of such excess, a prepayment of Loans shall be made
in an amount sufficient to assure continued compliance with this covenant in
the future.
8. DEFAULT.
8.1. EVENTS OF DEFAULT. Willis shall be in default if any one or more of
the following events (each an "EVENT OF DEFAULT") occurs:
(a) PAYMENTS. Willis fails to pay the principal due on any Revolving
Credit Note when due and payable (whether at maturity, by notice of
intention to prepay, or otherwise); or Willis fails to pay interest or any
other amount payable hereunder or under any other Loan Document within
three Business Days after the date such interest or other amount is due
and payable.
(b) COVENANTS. Willis fails to observe or perform (1) within fifteen days
after receiving written notice from the Bank, any term, condition or
covenant set forth in Sections 5.1(a), 5.1(b), 5.1(c), 5.1(g), 5.1(h) or
5.1(i) herein, (2) any term, condition or covenant set forth in Section
5.2 , Sections 6.1 through 6.9 or Section 8.1(a) herein, as and when
required or (3) any term, condition or covenant contained in this
Agreement or any other Loan Document other than as set forth in (1) and
(2) above, as and when required and such failure shall continue for a
period of 10 Business Days or more.
(c) REPRESENTATIONS, WARRANTIES. Any representation or warranty made or
deemed to be made by Willis, as applicable, herein or in any Loan Document
or in any exhibit, schedule, report or certificate delivered pursuant
hereto or thereto shall prove to have been false, misleading or incorrect
in any material respect when made or deemed to have been made.
(d) BANKRUPTCY. Willis is dissolved or liquidated, makes an assignment
for the benefit of creditors, files a petition in bankruptcy, is
adjudicated insolvent or bankrupt, petitions or applies to any tribunal for
any receiver or trustee, commences any proceeding relating to itself under
any bankruptcy, reorganization, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, has commenced against it
any such proceeding which remains undismissed for a period of thirty (60)
days, or indicates its consent to, approval of or acquiescence in any such
proceeding, or any receiver of or trustee for Willis or any substantial
part of the property of Willis is appointed, or if any such receivership
or trusteeship to continues undischarged for a period of thirty (60) days.
(e) CERTAIN OTHER DEFAULTS. Willis shall fail to pay when due any
Indebtedness for Borrowed Money which singularly or in the aggregate
exceeds $5,000,000, and such failure shall continue beyond any applicable
cure period, or Willis shall suffer to exist any default or event of
default in the performance or observance, subject to any applicable grace
period, of any agreement, term, condition or covenant with respect to any
agreement or document relating to Indebtedness for Borrowed Money if the
effect of such default is to permit, with the giving of notice or passage
of time or both, the holders thereof, or any trustee or agent for said
holders, to terminate or suspend any commitment (which is equal to or in
excess of $5,000,000) to lend money or to cause or declare any portion of
any borrowings thereunder to become due and payable prior to the date on
which it would otherwise be due and payable, provided that during
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any applicable cure period the Bank's obligations hereunder to make further
Loans shall be suspended.
(f) JUDGMENTS. Any judgments against Willis or against its assets or
property for amounts in excess of $5,000,000 in the aggregate remain
unpaid, unstayed on appeal, undischarged, unbonded and undismissed for a
period of thirty (30) days.
(g) ATTACHMENTS. Any assets of Willis shall be subject to attachments,
levies, or garnishments for amounts in excess of $250,000 in the aggregate
which have not been dissolved or satisfied within twenty (20) days after
service of notice thereof to Willis.
(h) CHANGE IN CONTROL. Charles F. Willis or the CFW Partners, L.P.
limited partnership, shall cease to be the record and beneficial owner of
at least 34% of the issued and outstanding voting and capital stock of
Willis.
(i) SECURITY INTERESTS. Any security interest created pursuant to any
Loan Document shall cease to be in full force and effect, or shall cease in
any material respect to give First Union, as Agent, the Liens, rights,
powers and privileges purported to be created thereby (including, without
limitation, a perfected security interest in, and Lien on, all of the
Collateral), superior to and prior to the rights of all third Persons, and
subject to no other Liens (except as permitted by Section 6.2).
(j) CHANGES IN SENIOR MANAGEMENT. Charles F. Willis shall cease to be a
member of senior management or both Donald A. Nunemaker and James McBride
shall cease to be members of senior management within any period of twelve
consecutive months.
THEN and in every such event other than that specified in Section 8.1.(d),
First Union, as Agent, may, or at the written request of the Required Banks
shall immediately terminate the Aggregate Revolving Loan Commitment by notice
in writing to Willis and immediately declare the Revolving Credit Notes,
including without limitation accrued interest, to be, and they shall
thereupon forthwith become due and payable without presentment, demand, or
notice of any kind, all of which are hereby expressly waived by Willis. Upon
the occurrence of any event specified in Section 8.1.(d), the Aggregate
Revolving Loan Commitment shall automatically terminate and the Revolving
Credit Notes, including without limitation accrued interest, shall
immediately be due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by Willis. Any
date on which the Notes and such other Obligations are declared due and
payable pursuant to this Section 8.1, shall be the Revolver Termination Date
for purposes of this Agreement. From and after the date an Event of Default
shall have occurred and for so long as an Event of Default shall be
continuing, the Loans shall bear interest at the Default Rate.
9. COLLATERAL.
9.1. COLLATERAL. Except as otherwise specifically set forth herein or in
any other Loan Document, any Loans made and outstanding and their repayment at
all times shall (i) in the case of Collateral (as defined in the Security
Agreement, hereinafter referred to as the "COLLATERAL") located in the United
States, be secured by a first priority perfected security interest and (ii) in
the case of Collateral located in jurisdictions outside the United States, be
secured by a security interest which adequately protects the first priority
security interest in favor of First Union, as Agent.
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9.2. SECURITY AGREEMENT. As security for the punctual payment in full
of all Notes (including all payments of principal, and interest and other
costs contemplated hereby), Willis shall execute and deliver to First Union,
as Agent, the Security Agreement and such other documents as may be necessary
to constitute and evidence a security interest in the Collateral.
9.3. RELEASE OF COLLATERAL. Willis shall be entitled to remove any item of
Collateral at any time, PROVIDED, however, that at the time of such removal and
release (a) there is not then existing an Event of Default or Potential Default,
and (b) no Event of Default or Potential Default would exist immediately
following removal and release.
10. AGENT.
10.1. APPOINTMENT AND AUTHORIZATION. Each Bank hereby irrevocably
appoints and authorizes First Union, as Agent, to take such action on its
behalf and to exercise such powers under this Agreement and the Loan
Documents as are specifically delegated to it as Agent by the terms hereof or
thereof, together with such other powers as are reasonably incidental
thereto. The relationship between First Union and each Bank has no fiduciary
aspects, and First Union' duties as Agent hereunder are acknowledged to be
only ministerial and not involving the exercise of discretion on its part.
Nothing in this Agreement or any Loan Document shall be construed to impose
on First Union any duties or responsibilities other than those for which
express provision is made herein or therein. In performing its duties and
functions under this Article 10, First Union does not assume and shall not be
deemed to have assumed, and hereby expressly disclaims, any obligation with
or for Willis. As to matters not expressly provided for in this Agreement or
any Loan Document, First Union shall not be required to exercise any
discretion or to take any action or communicate any notice, but shall be
fully protected in so acting or refraining from acting upon the instructions
of the Required Banks and their respective successors and assigns; provided,
however, that in no event shall First Union be required to take any action
which exposes it to personal liability or which is contrary to this
Agreement, any Loan Document or applicable law, and First Union shall be
fully justified in failing or refusing to take any action hereunder unless it
shall first be specifically indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by
reason of taking or omitting to take any such action. If an indemnity
furnished to First Union for any purpose shall, in its reasonable opinion, be
insufficient or become impaired, First Union may call for additional
indemnity from the Banks and not commence or cease to do the acts for which
such indemity is requested until such additional indemnity is furnished.
10.2. DUTIES AND OBLIGATIONS. In performing its functions and duties
hereunder on behalf of the Banks, First Union shall exercise the same care
and skill as it would exercise in dealing with loans for its own account.
Neither First Union nor any of its directors, officers, employees or other
agents shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement or any Loan Document except
for its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, First Union (a) may consult with
legal counsel and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith and in accordance
with the advice of such experts; (b) makes no representation or warranty to
any Bank as to, and shall not be responsible to any Bank for, any recital,
statement, representation or warranty made in or in connection with this
Agreement, any Loan Document or in any written or oral statement (including a
financial or other such statement), instrument or other document delivered
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in connection herewith or therewith or furnished to any Bank by or on behalf
of Willis; (c) shall have no duty to ascertain or inquire into Willis's
performance or observance of any of the covenants or conditions contained
herein or to inspect any of the property (including the books and records) of
Willis or inquire into the use of the proceeds of the Revolving Credit Loans
or (unless the officers of First Union active in their capacity as officers
of First Union on Willis's account have actual knowledge thereof or have been
notified in writing thereof) to inquire into the existence or possible
existence of any Event of Default or Potential Default; (d) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, effectiveness, genuineness, sufficiency, collectability or
value of this Agreement or any other Loan Document or any instrument or
document executed or issued pursuant hereto or in connection herwith, except
to the extent that such may be dependent on the due authorization and
execution by First Union itself; (e) except as expressly provided herein in
respect of information and data furnished to First Union for distribution to
the Banks, shall have no duty or responsibility, either initially or on a
continuing basis, to provide to any Bank any credit or other information with
respect to Willis, whether coming into its possession before the making of
the Loans or at any time or times thereafter; and (f) shall incur no
liability under or in respect of this Agreement or any other Loan Document
for, and shall be entitled to rely and act upon, any notice, consent,
certificate or other instrument or writing (which may be by facsimile
(telecopier), telegram, cable, or other electronic means) believed by it to
be genuine and correct and to have been signed or sent by the proper party or
parties.
10.3. FIRST UNION AS A BANK. With respect to its Revolving Loan
Commitment and the Loans made and to be made by it, First Union shall have
the same rights and powers under this Agreement and all other Loan Documents
as the other Banks and may exercise the same as if it were not the Agent.
The terms "Bank" and "Banks" as used herein shall, unless otherwise expressly
indicated, include First Union in its individual capacity. First Union and
any successor Agent which is a commercial bank, and their respective
affiliates, may accept deposits from, lend money to, act as trustee under
indentures of and generally engage in any kind of business with, Willis and
its affiliates from time to time, all as if such entity were not the Agent
hereunder and without any duty to account therefor to any Bank.
10.4. INDEPENDENT CREDIT DECISIONS. Each Bank acknowledges to First
Union that it has, independently and without reliance upon First Union or any
other Bank, and based upon such documents and information as it has deemed
appropriate, made its own independent credit analysis and decision to enter
into this Agreement. Each Bank also acknowledges that it will, independently
or through other advisers and representatives but without reliance upon First
Union or any other Bank, and based upon such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or refraining from taking any action under this Agreement or any
Loan Document.
10.5. INDEMNIFICATION. The Banks agree to indemnify First Union (to
the extent not previously reimbursed by Willis), ratably in proportion to
each Bank's Commitment Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against First Union in its capacity as
Agent in any way relating to or arising out of this Agreement or any Loan
Document or any action taken or omitted to be taken by First Union in its
capacity as Agent hereunder or under any Loan Document; provided that none of
the Banks shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from First Union' gross negligence or willful
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misconduct. Without limiting the generality of the foregoing, each Bank
agrees to reimburse First Union, promptly on demand, for such Bank's ratable
share (based upon the aforesaid apportionment) of any out-of-pocket expenses
(including counsel fees and disbursements) incurred by First Union in
connection with the preparation, execution, administration or enforcement of,
or the preservation of any rights under, this Agreement and the Loan
Documents to the extent that First Union is not reimbursed for such expenses
by Willis.
10.6. SUCCESSOR AGENT. First Union may resign at any time by giving
written notice of such resignation to the Banks and Willis, such resignation
to be effective only upon the appointment of a successor Agent as hereinafter
provided. Upon any such notice of resignation, the Banks shall jointly
appoint a successor Agent upon written notice to Willis and First Union. If
no successor Agent shall have been jointly appointed by such Banks and shall
have accepted such appointment within thirty (30) days after First Union
shall have given notice of resignation, First Union may, upon notice to
Willis and the Banks, appoint a successor Agent. Upon its acceptance of any
appointment as Agent hereunder, the successor Agent shall succeed to and
become vested with all the rights, powers, privileges and duties of First
Union, and First Union shall be discharged from its duties and obligations as
Agent under this Agreement and the Loan Documents. After First Union'
resignation hereunder, the provisions hereof shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was the Agent under
this Agreement and the Loan Documents.
10.7. ALLOCATIONS MADE BY FIRST UNION. As between First Union, as
Agent, and the Banks, unless a Bank objecting to a determination or
allocation made by First Union pursuant to this Agreement delivers to First
Union written notice of such objection within one hundred twenty (120) days
after the date any distribution was made by First Union, such determination
or allocation shall be conclusive on such one hundred twentieth day and only
those items expressly objected to in such notice shall be deemed disputed by
such Bank. First Union shall not have any duty to inquire as to the
application by the Banks of any amounts distributed to them.
11. MISCELLANEOUS.
11.1. WAIVER. No failure or delay on the part of First Union or any
Bank or any holder of any Note in exercising any right, power or remedy under
any Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under any Loan Document. The remedies provided under the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
11.2. AMENDMENTS. No amendment, modification, termination or waiver of
any Loan Document or any provision thereof nor any consent to any departure
by Willis therefrom shall be effective unless the same shall have been
approved by the Required Banks, be in writing and be signed by First Union,
as Agent, and then any such waiver or consent shall be effective only in the
instance and for the specific purpose for which given. No notice to or
demand on the Willis shall entitle Willis to any other or further notice or
demand in similar or other circumstances.
11.3. GOVERNING LAW. The Loan Documents and all rights and obligations
of the parties thereunder shall be governed by and be construed and enforced
in accordance with the laws of the
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Commonwealth of Pennsylvania without regard to Pennsylvania or federal
principles of conflict of laws.
11.4. PARTICIPATIONS AND ASSIGNMENTS. Willis hereby acknowledges and
agrees that any Bank may at any time, with the consent of Willis (which
consent shall not be unreasonably withheld): (a) grant participations in all
or any portion of its Revolving Loan Commitment or any portion of its Note or
of its right, title and interest therein or in or to this Agreement
(collectively, "PARTICIPATIONS") to any other lending office of such Bank or
to any other bank, lending institution or other entity which has the
requisite sophistication to evaluate the merits and risks of investments in
Participations ("PARTICIPANTS"); provided, however, that: (i) all amounts
payable by Willis hereunder shall be determined as if such Bank had not
granted such Participation; (ii) such Bank shall act as agent for all
Participants; and (iii) any agreement pursuant to which such Bank may grant a
Participation: (x) shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of Willis hereunder including,
without limitation, the right to approve any amendment, modification or
waiver of any provisions of this Agreement; (y) such participation agreement
may provide that such Bank will not agree to any modification, amendment or
waiver of this Agreement without the consent of the Participant if such
modification, amendment or waiver would reduce the principal of or rate of
interest on any Loan or postpone the date fixed for any payment of principal
of or interest on any Loan; and (z) shall not relieve such Bank from its
obligations, which shall remain absolute, to make Loans hereunder; and (b)
assign any of its Loans and its Revolving Loan Commitment. Upon execution and
delivery by the assignee to Willis of an instrument in writing pursuant to
which such assignee agrees to become a "Bank" hereunder having the Revolving
Loan Commitment and Loans specified in such instrument, and upon consent
thereto by Willis, to the extent required above, the assignee shall have, to
the extent of such assignment (unless otherwise provided in such assignment
with the consent of the Willis), the obligations, rights and benefits of a
Bank hereunder holding the Revolving Loan Commitment and Loans (or portions
thereof) assigned to it, and such Bank shall, to the extent of such
assignment, be released from the Commitment (or portion(s) thereof) so
assigned.
11.5. CAPTIONS. Captions in the Loan Documents are included for
convenience of reference only and shall not constitute a part of any Loan
Document for any other purpose.
11.6. NOTICES. All notices, requests, demands, directions,
declarations and other communications between the Banks and the Willis
provided for in any Loan Document shall, except as otherwise expressly
provided, be mailed by registered or certified mail, return receipt
requested, or telegraphed, or faxed, or delivered in hand to the applicable
party at its address indicated opposite its name on the signature pages
hereto. The foregoing shall be effective and deemed received three days
after being deposited in the mails, postage prepaid, addressed as aforesaid
and shall whenever sent by telegram, telegraph or fax or delivered in hand be
effective when received. Any party may change its address by a communication
in accordance herewith.
11.7. SHARING OF COLLECTIONS, PROCEEDS AND SET-OFFS: APPLICATION OF
PAYMENTS.
(a) If any Bank, by exercising any right of set-off, counterclaim or
foreclosure against trade collateral or otherwise, receives payment of principal
or interest or other amount due on any Note which is greater than the percentage
share of such Bank (determined as set forth below), the Bank receiving such
proportionately greater payment shall purchase such participations in the Loans
held by the other Banks, and such other adjustments shall be made as may be
required, so that all such payments shall be shared by the Banks on the basis of
their percentage shares; provided that if all or
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any portion of such proportionately greater payment of such indebtedness is
thereafter recovered from, or must otherwise be restored by, such purchasing
Bank, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest being paid by such purchasing
Bank. The percentage share of each Bank shall be based on the portion of the
outstanding Loans of such Bank (prior to receiving any payment for which an
adjustment must be made under this Section in relation to the aggregate
outstanding Loans of all the Banks. Willis agrees, to the fullest extent it
may effectively do so under applicable law, that any holder of a
participation in a Loan or reimbursement obligation, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such participation as fully as
if such holder of a participation were a direct creditor of Willis in the
amount of such participation. If under any applicable bankruptcy, insolvency
or other similar law, any Bank receives a secured claim in lieu of a set-off
to which this Section would apply, such Bank shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this Section to share
in the benefits of any recovery on such secured claim.
(b) If an Event of Default or Potential Default shall have occurred
and be continuing First Union, as Agent, and each Bank and Willis agree that
all payments on account of the Loans shall be applied by First Union, as
Agent, and the Banks as follows:
FIRST, to First Union, as Agent, for any Agent fees then due and payable
under this Agreement until such fees are paid in full;
SECOND, to First Union, as Agent, for any fees, costs or expenses
(including expenses described in Section 11.8) incurred by First Union, as
Agent, under any of the Loan Documents or this Agreement, then due and
payable and not reimbursed by Willis or the Banks until such fees, costs
and expenses are paid in full;
THIRD, to the Banks for their percentage shares of the Commitment Fee then
due and payable under this Agreement until such fee is paid in full;
FOURTH, to the Banks for their respective shares of all costs, expenses and
fees then due and payable from Willis until such costs, expenses and fees
are paid in full;
FIFTH, to the Banks for their percentage shares of all interest then due
and payable from Willis until such interest is paid in full, which
percentage shares shall be calculated by determining each Bank's percentage
share of the amounts allocated in (a) above determined as set forth in said
clause (a); and
SIXTH, to the Banks for their percentage shares of the principal amount of
the Loans then due and payable from Willis until such principal is paid in
full, which percentage shares shall be calculated by determining each
Bank's percentage share of the amounts allocated in (a) above determined as
set forth in said clause (a).
11.8. EXPENSES; INDEMNIFICATION. Willis will from time to time
reimburse First Union, as Agent, promptly following demand for all reasonable
out-of-pocket expenses (including the reasonable fees and expenses of its
legal counsel) in connection with (i) the preparation of the Loan Documents,
(ii) the making of any Loans, and (iii) the administration of the Loan
Documents. Willis also will from to time reimburse First Union, as Agent,
and each Bank for all out-of-pocket expenses (including
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reasonable fees and expenses of legal counsel) in connection with the
enforcement of the Loan Documents. In addition to the payment of the
foregoing expenses, Willis hereby agrees to indemnify, protect and hold First
Union, as Agent, each Bank and any holder of any Note and the officers,
directors, employees, agents, affiliates and attorneys of First Union, as
Agent, each Bank and such holder (collectively, the "INDEMNITEES") harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of
any kind or nature, including reasonable fees and expenses of legal counsel,
which may be imposed on, incurred by, or asserted against such Indemnitee by
Willis or other third parties and arise out of or relate to this Agreement or
the other Loan Documents or any other matter whatsoever related to the
transactions contemplated by or referred to in this Agreement or the other
Loan Documents; provided, however, that Willis shall have no obligation to an
Indemnitee hereunder to the extent that the liability incurred by such
Indemnitee has been determined by a court of competent jurisdiction to be the
result of gross negligence or willful misconduct of such Indemnitee.
11.9. SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties expressly made herein shall survive the
execution and delivery of this Agreement, the making of the Loans hereunder
and the execution and delivery of the Note. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of Willis set
forth in Section 11.8 shall survive the payment of the Loans and the
termination of this Agreement. This Agreement shall remain in full force and
effect until the repayment in full of all amounts owed by Willis under the
Notes or any other Loan Document.
11.10. SEVERABILITY. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement, the
Note or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this
Agreement, the Notes or other Loan Documents or of such provision or obligation
in any other jurisdiction.
11.11. BANKS' OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF BANKS' RIGHTS.
The obligation of each Bank hereunder is several and not joint and no Bank
shall be the agent of any other (except to the extent the Agent is authorized
to act as such hereunder). No Bank shall be responsible for the obligation
or commitment of any other Bank hereunder. In the event that any Bank at any
time should fail to make a Loan as herein provided, the other Banks, or any
of them as may then be agreed upon, at their sole option, may make the Loan
that was to have been made by the Bank so failing to make such Loan. Nothing
contained in any Loan Document and no action taken by Agent or any Bank
pursuant hereto or thereto shall be deemed to constitute the Banks to be a
partnership, an association, a joint venture or any other kind of entity.
The amounts payable at any time hereunder to each Bank shall be a separate
and independent debt, and, subject to the terms of this Agreement, each Bank
shall be entitled to protect and enforce its rights arising out of this
Agreement and it shall not be necessary for any other Bank to be joined as an
additional party in any proceeding for such purpose.
11.12. NO FIDUCIARY RELATIONSHIP. No provision in this Agreement or in
any of the other Loan Documents and no course of dealing between the parties
shall be deemed to create any fiduciary duty by any Bank to Willis.
11.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. WILLIS, FIRST
UNION AS AGENT AND THE BANKS, EACH HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE EASTERN DISTRICT OF
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PENNSYLVANIA AND IRREVOCABLY AGREES THAT, ANY ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
MAY BE LITIGATED IN SUCH COURTS. EACH PARTY TO THIS AGREEMENT ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE
OF FORUM NON CONVENIENT, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, ANY NOTE, OR SUCH OTHER
LOAN DOCUMENT.
11.14. WAIVER OF JURY TRIAL. WILLIS, FIRST UNION AS AGENT AND THE
BANKS, EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE
LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
OF THIS AGREEMENT AND THE LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY.
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER
OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
WILLIS, FIRST UNION AS AGENT AND THE BANKS, EACH ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO THE TRANSACTION, THAT EACH HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. WILLIS,
FIRST UNION AS AGENT AND THE BANKS, EACH FURTHER WARRANTS AND REPRESENTS THAT
EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, MODIFICATIONS, REPLACEMENTS OR
RESTATEMENTS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.15. COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendment
hereto or waiver hereof may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement and any amendments
hereto or waivers hereof shall become effective when First Union, as Agent,
shall have received signed counterparts or notice by fax of the signature
page that the counterpart has been signed and is being delivered to it or
facsimile that such counterparts have been signed by all the parties hereto
or thereto.
11.16. USE OF DEFINED TERMS. All words used herein in the singular or
plural shall be deemed to have been used in the plural or singular where the
context or construction so requires. Any defined term used in the singular
preceded by "any" shall be taken to indicate any number of the members of the
relevant class.
40
<PAGE>
11.17. OFFSETS. Nothing in this Agreement shall be deemed a waiver or
prohibition of any Bank's right of banker's lien or offset.
11.18. ENTIRE AGREEMENT. This Agreement, the Notes issued hereunder
and the other Loan Documents constitute the entire understanding of the
parties hereto as of the date hereof with respect to the subject matter
hereof and thereof and supersede any prior agreements, written or oral, with
respect hereto or thereto.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed by their duly authorized representatives as of the date
first above written.
WILLIS LEASE FINANCE CORPORATION
By /s/ James D. McBride
______________________________________
Name: James D. McBride
Title: Executive Vice President and
Chief Financial Officer
Notices To:
2320 Marinship Way
Suite 300
Sausalito, CA. 94965.
FAX No. (415) 331-5167
ATT: General Counsel
FIRST UNION NATIONAL BANK
By /s/ Hugh W. Connelly
______________________________________
Name: Hugh W. Connelly
Title: Vice President
Notices To:
Hugh W. Connelly
Vice President
First Union National Bank
Transportation and Leasing Division
FC 1-8-11-24
1339 Chestnut Street
Philadelphia, PA 19107
FAX No. (215) 786-7704
NATIONSBANK, N.A.
By /s/ Charles A. McDonell
______________________________________
Name: Charles A. McDonell
Title: Vice President
Notices To:
Charles A. McDonell
Vice President
NationsBank, N.A.
444 South Flower Street
Suite 4100
Los Angeles, CA 90071
FAX No. (213) 624-5815
42
<PAGE>
REFERENCE TABLE OF DEFINITIONS
DEFINITION PAGE DEFINED
Additional Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Aggregate Revolving Loan Commitment. . . . . . . . . . . . . . . . . . . . . .12
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Borrowing Base Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Capitalized Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Capitalized Lease Obligations. . . . . . . . . . . . . . . . . . . . . . . . . 3
Category A Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Category B Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Eligible Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Environmental Control Statutes . . . . . . . . . . . . . . . . . . . . . . . . 5
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ERISA Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Federal Funds Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
First Union. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Fiscal Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Generally Accepted Accounting Principles . . . . . . . . . . . . . . . . . . . 5
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indebtedness for Borrowed Money. . . . . . . . . . . . . . . . . . . . . . . . 5
Indemnitees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Intangible Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
London Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
43
<PAGE>
Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Monthly Lease Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Potential Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Prohibited Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Receivables Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Regulation D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Regulatory Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Reportable Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Request for Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Required Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Revolver Termination Date. . . . . . . . . . . . . . . . . . . . . . . . . . .10
Revolving Credit Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Revolving Credit Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Revolving Loan Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . .11
Revolving Loan Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . .10
Revolving Loan Commitment Percentage . . . . . . . . . . . . . . . . . . . . .13
Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Solvent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Standby Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Termination Event. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Unfunded Pension Liabilities . . . . . . . . . . . . . . . . . . . . . . . . .11
Unrecognized Retiree Welfare Liability . . . . . . . . . . . . . . . . . . . .11
Willis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
44
<PAGE>
EX-11.1
Computation of Earnings EXHIBIT XI
WILLIS LEASE FINANCE CORPORATION
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
Income before extraordinary item 1998 1997 1998 1997
------- ----- -------- -------
Basic (in thousands, except (in thousands, except
per share data) per share data)
<S> <C> <C> <C> <C>
Earnings:
Income before extraordinary item $2,149 $1,266 $4,098 $2,281
Shares:
Weighted average number of common shares outstanding 7,263 5,433 7,228 5,431
------- ------ ------ ------
Basic earnings per common share before extraordinary item $0.30 $0.23 $0.57 $0.42
Assuming Full Dilution
Earnings:
Income before extraordinary item $2,149 $1,266 $4,098 $2,281
------- ------ ------ ------
Shares:
Weighted average number of common shares
outstanding and common stock equivalents 7,488 5,529 7,466 5,548
------- ------ ------ ------
Earnings per common share assuming full dilution, $0.29 $0.23 $0.55 $0.41
before extraordinary item
Net income
Basic
Earnings:
Net income $2,149 $1,266 $3,898 $4,289
------- ------ ------ ------
Shares:
Weighted average number of common shares outstanding 7,263 5,433 7,228 5,431
------- ------ ------ ------
Basic earnings per common share $0.30 $0.23 $0.54 $0.79
Assuming Full Dilution
Earnings:
Net income $2,149 $1,266 $3,898 $4,289
------- ------ ------ ------
Shares:
Weighted average number of common shares
outstanding and common stock equivalents 7,488 5,529 7,466 5,548
------- ------ ------ ------
Earnings per common share assuming full dilution $0.29 $0.23 $0.52 $0.77
------- ------ ------ ------
</TABLE>
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 24,373,180
<SECURITIES> 0
<RECEIVABLES> 5,213,697
<ALLOWANCES> 0
<INVENTORY> 26,061,029
<CURRENT-ASSETS> 0
<PP&E> 227,237,354
<DEPRECIATION> 13,211,145
<TOTAL-ASSETS> 298,734,770
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 72,696
<OTHER-SE> 59,318,376
<TOTAL-LIABILITY-AND-EQUITY> 298,734,770
<SALES> 6,583,267
<TOTAL-REVENUES> 20,670,904
<CGS> 4,831,464
<TOTAL-COSTS> 13,900,236
<OTHER-EXPENSES> 3,184,325
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,586,343
<INCOME-TAX> 1,437,800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,148,543
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.29
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 APR-01-1997 JUL-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<CASH> 21,021,413 26,310,062 20,825,448 31,556,759
<SECURITIES> 0 0 0 0
<RECEIVABLES> 4,101,088 4,314,954 14,572,582 5,352,284
<ALLOWANCES> 0 0 0 0
<INVENTORY> 4,571,288 6,859,736 9,569,416 10,334,113
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 102,391,049 117,546,977 126,432,420 139,076,499
<DEPRECIATION> 16,916,370 17,889,517 17,328,284 15,542,792
<TOTAL-ASSETS> 133,453,652 156,332,456 173,018,456 198,430,056
<CURRENT-LIABILITIES> 0 0 0 0
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 16,103,946 16,163,946 16,276,933 40,117,223
<OTHER-SE> 10,169,633 11,435,632 12,886,567 14,484,234
<TOTAL-LIABILITY-AND-EQUITY> 133,453,652 156,332,456 173,018,456 198,430,056
<SALES> 4,796,520 11,255,983 8,181,648 26,857,942
<TOTAL-REVENUES> 9,533,501 15,886,047 14,368,507 51,206,744
<CGS> 3,556,669 8,788,294 6,077,883 20,146,669
<TOTAL-COSTS> 6,087,161 11,621,455 9,514,231 33,060,262
<OTHER-EXPENSES> 1,785,915 2,156,920 2,434,013 9,331,972
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> 1,660,284 2,107,672 2,420,263 8,814,510
<INCOME-TAX> 645,284 841,674 969,327 3,484,768
<INCOME-CONTINUING> 0 0 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 2,007,929 0 0 2,007,929
<CHANGES> 0 0 0 0
<NET-INCOME> 3,023,070 1,265,998 1,450,936 7,337,671
<EPS-PRIMARY> .56 .23 .27 1.33
<EPS-DILUTED> .54 .23 .26 1.29
</TABLE>
