<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT
------------------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________________ TO ______________________
COMMISSION FILE NUMBER 0-11350
INTERNATIONAL LEASE FINANCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 22-3059110
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1999 AVENUE OF THE STARS, LOS ANGELES, 90067
CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 788-1999
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(TITLE OF CLASS)
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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K (SEC. 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN,
AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE
PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X]
AS OF MARCH 15, 1999, THERE WERE 35,818,122 SHARES OF COMMON STOCK, NO PAR
VALUE, OUTSTANDING.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(a)
AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
================================================================================
<PAGE> 2
INTERNATIONAL LEASE FINANCE CORPORATION
1998 FORM 10-K ANNUAL REPORT
------------------------
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 8
Item 6. Selected Financial Data..................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 9
Item 7A. Quantitive and Qualitative Disclosures About Market Risk.... 13
Item 8. Financial Statements and Supplementary Data................. 13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 13
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 13
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
International Lease Finance Corporation (the "Company") is primarily
engaged in the acquisition of new and used commercial jet aircraft and the
leasing and sale of such aircraft to domestic and foreign airlines. The Company,
in terms of the number and value of transactions concluded, is a major
owner-lessor of commercial jet aircraft. In addition, the Company is engaged in
the remarketing of commercial jets for its own account, for airlines and for
financial institutions. As well, the Company provides fleet management services
for third party operating lessors.
As of December 31, 1998, the Company's lease portfolio consisted of 349
aircraft under operating
lease and three aircraft under finance lease. Additionally, the Company managed
60 aircraft. See "Item 2. Properties -- Flight Equipment." At December 31, 1998,
the Company had committed to purchase 303 aircraft deliverable through 2006 at
an estimated aggregate purchase price of $17.4 billion. See "Item 2.
Properties -- Commitments."
The Company maintains the mix of flight equipment to meet its customers'
needs by purchasing those models of new and used aircraft which it believes will
have the greatest airline demand and operational longevity and minimize the time
that its aircraft are not leased to customers.
The Company purchases, and finances the purchase of, aircraft on terms
intended to permit the Company to lease or resell such aircraft at a profit. The
Company typically finances the purchase of aircraft with borrowed funds and
internally generated cash flow. The Company accesses the capital markets for
such funds at times and on terms and conditions it considers appropriate. The
Company may, but does not necessarily, engage in financing transactions for
specific aircraft. The Company relies significantly on short- and medium-term
financing, and thereby attempts to manage interest rate exposure. To date, the
Company has been able to purchase aircraft on terms which have permitted it to
lease the aircraft at a profit and has not experienced any difficulty in
obtaining financing.
The Company's aircraft are usually leased on terms under which the Company
does not fully recover the acquisition cost of such aircraft. Thus, at the
termination of a lease, the Company bears the risk of selling or re-leasing the
aircraft on terms which will cover its remaining cost.
The airline industry is cyclical, economically sensitive and highly
competitive. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations." The Company's revenue and income may be
affected by political or economic instability abroad, changes in national
policy, competitive pressures on certain air carriers, fuel shortages, labor
stoppages, recessions, and other political or economic events adversely
affecting world or regional trading markets or impacting a particular customer.
The Company's continued success is partly dependent on management's ability in
the future to develop customer relationships for leasing, sales, remarketing and
management services with those airlines and other customers best able to
maintain their economic viability and survive in a deregulated environment.
The Company is incorporated in the State of California and its principal
executive offices are located at 1999 Avenue of the Stars, Los Angeles,
California 90067. The Company's telephone, telecopier and telex numbers are
(310) 788-1999, (310) 788-1990 and 69-1400, respectively. The Company is an
indirect wholly owned subsidiary of American International Group, Inc. ("AIG").
AIG is a holding company which through its subsidiaries is primarily engaged in
a broad range of insurance and insurance-related activities and financial
services in the United States and abroad. The Common Stock of AIG is listed on,
among others, the New York Stock Exchange.
AIRCRAFT LEASING
The initial term of the Company's current leases range in length from one
year to 15 years. See "Item 2. Properties -- Flight Equipment" for information
regarding scheduled lease terminations. Most of the Company's leases are
operating leases under which the Company does not fully recover its aircraft
cost and retains the benefit and assumes the risk of the residual value of the
aircraft. The Company on occasion also
1
<PAGE> 4
enters into finance and sales-type leases where the full cost of the aircraft is
substantially recovered over the term of the lease. At December 31, 1998, three
of the Company's leases were accounted for as finance leases. The aircraft under
operating leases are included as assets on the Company's balance sheet and
depreciation is charged to income over the estimated useful lives of the
aircraft. In accordance with generally accepted accounting principles, rentals
are reported ratably as revenue over the lease term as they become due and are
earned. The Company attempts to maintain a mix of short- and medium-term leases
to balance the benefits and risks associated with different lease terms. Varying
lease terms mitigate the effects of changes in prevailing market conditions at
the time aircraft become eligible for re-lease or sale and the uncertainty
associated with estimating residual value of the aircraft at the termination of
the lease.
All leases are on a "net" basis with the lessee responsible for all
operating expenses, which customarily include fuel, crews, airport and
navigation charges, taxes, licenses, registration and insurance. Normal
maintenance and repairs; airframe and engine overhauls; and compliance with
return conditions of flight equipment on lease are provided by and paid for by
the lessee. Under the provisions of most leases, for certain airframe and engine
overhauls, the lessee is reimbursed by the Company for costs incurred up to but
not exceeding related contingent rentals paid to the Company by the lessee. Such
rentals are included in the caption Rental of flight equipment. The Company
provides a charge to operations for such reimbursements based on the estimated
reimbursements expected during the life of the lease, which amount is included
in overhaul reserves. The lessee is responsible for compliance with all
applicable laws and regulations with respect to the aircraft. The Company
requires its lessees to comply with the most restrictive standards of either the
Federal Aviation Administration (the "FAA") or its foreign equivalent. The
Company makes periodic inspections of the condition of its leased aircraft.
Generally, the Company requires a deposit which is security for the condition of
aircraft upon return to the Company, the rental payments by the lessee and the
performance of other obligations by the lessee under the lease. In addition, the
leases contain extensive provisions regarding the remedies and rights of the
Company in the event of a default thereunder by the lessee and specific
provisions regarding the condition of the aircraft upon redelivery to the
Company. The lessee is required to continue lease payments under all
circumstances, including periods during which the aircraft is not in operation
for maintenance, grounding or any other reason whatsoever.
The Company obtains and reviews relevant business materials from all
prospective lessees and purchasers before entering into a lease or extending
credit. Under certain circumstances, the Company may require the lessee to
obtain guarantees or other financial support from an acceptable financial
institution or other third party.
FLIGHT EQUIPMENT MARKETING
The Company also regularly disposes of its leased aircraft at or before the
expiration of their leases. The buyers include the aircraft's lessee, another
airline or a third party lessor. Any gain or loss on disposition of leased
aircraft is reflected as revenues from flight equipment marketing.
From time to time, the Company also engages in transactions to buy aircraft
for resale. In some cases, the Company assists its customers in acquiring or
disposing of aircraft through consulting services and procurement of financing
from third parties.
In addition to its leasing and sales operations, the Company is engaged,
from time to time, as an agent for airlines in the disposition of their surplus
aircraft. The Company generally acts as an agent under an exclusive remarketing
contract whereby it agrees to sell aircraft on a "best efforts" basis within a
fixed time period. These activities generally augment the Company's primary
activities and also serve to promote relationships with prospective sellers and
buyers of aircraft.
The Company plans to continue its remarketing services on a selective basis
involving specific situations where these activities will not conflict or
compete with, but rather will be complementary to, its leasing and selling
activities.
The Company has guaranteed certain obligations for entities in which it has
an investment, which aggregate approximately $57,088,000. Additionally, the
Company guaranteed a customer's $3,300,000 loan, collateralized by flight
equipment. See Note K of Notes to Consolidated Financial Statements.
2
<PAGE> 5
FLEET MANAGEMENT SERVICES
The Company provides fleet management services to third party operating
lessors who are unable or unwilling to perform this service as part of their own
operation. The Company typically provides the same services that it performs for
its own fleet. Specifically, the Company provides leasing, re-leasing and sales
services on behalf of the lessor for which the Company receives a fee.
FINANCING/SOURCE OF FUNDS
The Company purchases new aircraft directly from manufacturers and used
aircraft from airlines for lease or sale to other airlines. The Company finances
the purchase price of flight equipment from internally generated funds, secured
and unsecured commercial bank financings and the issuance of commercial paper,
public and private debt and preferred stock. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
CUSTOMERS
At December 31, 1998, lessees of the Company included: (domestic) Alaska
Airlines, American Trans Air, Continental Airlines, Frontier Airlines, North
American Airlines, Southwest Airlines, Trans World Airlines (TWA) and World
Airways; (foreign) Aer Lingus, Aeroflot, Aero Lloyd Flugreisen, Aeromexico,
Aeroperu, Air 2000, Air Afrique, Air Alfa, Air Canada, Air Europa (Air Espana
SPA), Air Europe SpA, Air France, Air Jamaica, Air Macau, Air Madagascar, Air
Mauritius, Air New Zealand, Air Seychelles, Air Transat, Air Vanuatu, Air World,
Alitalia, Ansett, Asiana Airlines, Avianca, Braathens S.A.F.E., Britannia
Airways, British Airways, British Midland Airways, Caledonian, Canada 3000,
Canadian Airlines, Cathay Pacific, China Airlines, China Hainan Airlines, China
Southern Airlines, China Southwest Airlines, China Xinjiang, Color Air,
Constellation, El Al Israel Airlines, Emirates, Estonian Air, Far Eastern Air
Transport, Finnair, Flying Colours, Garuda Indonesia, GB Airways, Hapag-Lloyd
Flug, Hong Kong Dragon Airlines (Dragonair), Icelandair, Kenya Airways, KLM
Royal Dutch Airlines, L'Aeropostale, LACSA, Lineas Aereas Privadas Argentinas,
S.A. (LAPA), Lithuanian, Lloyd Aero Boliviano (LAB), LAN Chile, Lotus Air, LTU
Luftransport-Unternehmen, Lufthansa, Malaysian Airline System, Martinair
Holland, Mexicana, Middle East Airlines Airliban, Monarch Airlines, Olympic
Airways, ONUR Air, Passaredo, Pegasus, Polynesian Airlines, QANTAS Airways, Rio
Sul, Royal Jordanian, Sabre Airways, SAETA, Sahara India Airlines, Shanghai,
Sichuan Airlines, Skymark, Skyservice Airlines, Sterling European, Surinam,
Swissair, TACV Cabo Verde, TAP Air Portugal, TEA Basel, Turk Hava Yollari (THY),
TransAer, Transaero Airlines, Transavia, Transbrasil, Varig, Virgin Atlantic
Airways, VIVA Airways, Wuhan Airlines and Xiamen Airlines. No single customer
accounted for more than 10% of total revenues in any of the last three years.
Revenues include rentals of flight equipment to foreign airlines of
$1,623,891,000 (1998), $1,472,075,000 (1997) and $1,202,651,000 (1996)
comprising 87.6%, 85.0% and 83.3%, respectively, of total rentals of flight
equipment. See Note J of Notes to Consolidated Financial Statements.
The following table sets forth the dollar amount and percentage of total
rental revenues attributable to the indicated geographic areas for the years
indicated:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ ------------------
AMOUNT % AMOUNT % AMOUNT %
---------- ----- ---------- ----- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Europe............................. $ 798,773 43.1% $ 705,128 40.7% $ 551,703 38.2%
Asia/Pacific....................... 410,600 22.1 358,687 20.7 332,159 23.0
United States and Canada........... 333,472 18.0 345,143 19.9 304,801 21.1
Central, South America and
Mexico........................... 190,572 10.3 211,152 12.2 165,819 11.5
Africa and the Middle East......... 120,566 6.5 112,557 6.5 89,957 6.2
---------- ----- ---------- ----- ---------- -----
$1,853,983 100.0% $1,732,667 100.0% $1,444,439 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
3
<PAGE> 6
Many foreign countries have currency and exchange laws regulating the
international transfer of currencies. The Company attempts to minimize its
currency and exchange risks by negotiating substantially all of its aircraft
lease and sales transactions in U.S. dollars and all guarantees obtained to
support various lease agreements are denominated for payment in U.S. dollars.
The Company requires, as a condition to any foreign transaction, that the lessee
or purchaser in a foreign country first obtain, if required, written approval of
the appropriate government agency, finance ministry or central bank for the
remittance of all funds contractually owed to the Company in U.S. dollars. As a
result, foreign currency risk is immaterial to the Company.
The Company has restructured leases with both foreign and domestic lessees.
Such restructurings have involved the voluntary termination of leases prior to
lease expiration, the replacement of leased aircraft with smaller, less
expensive leased aircraft, the arrangement of subleases from the primary lessee
to another airline and the rescheduling of lease payments. In 1996, the Company
repossessed one aircraft that was promptly re-leased. In addition, the Company
terminated early the leases of four aircraft. In this case, two of the aircraft
were sold and two were promptly re-leased. No aircraft were repossessed in 1997.
In 1998, the Company repossessed three owned and two managed aircraft, all from
one airline, subsequent to the airline's bankruptcy proceeding. All of the
aircraft were promptly re-leased.
In some situations where the Company repossesses an aircraft, it may decide
to export the aircraft from the lessee's jurisdiction. To date, the Company has
been able to export all repossessed aircraft which it desired to export. In
addition, in connection with the repossession of an aircraft, the Company may be
required to pay outstanding mechanic's, airport and other operating liens on the
repossessed aircraft, which could include charges relating to other aircraft
operated by the lessee.
The Company's revenues and income may be affected by political or economic
instability abroad, changes in national policy, competitive pressures on certain
air carriers, fuel shortages, labor stoppages, recessions and other political or
economic events adversely affecting world or regional trading markets or
impacting a particular customer.
COMPETITION
The leasing and sale of jet aircraft is highly competitive. Aircraft
manufacturers and the airlines sell new and used jet aircraft. Furthermore, the
Company faces competition in leasing aircraft from aircraft manufacturers,
banks, other financial institutions and leasing companies. There is also
competition with respect to its remarketing activities from many sources,
including, but not limited to, aircraft brokers.
GOVERNMENT REGULATION
The FAA and the U.S. Departments of Transportation and State exercise
regulatory authority over the air transportation in the United States.
The U.S. Departments of Transportation and State, in general, have
jurisdiction over the economic regulation of air transportation, including the
negotiation with foreign governments of the rights of U.S. carriers to fly to
other countries and the rights of foreign carriers to fly to and within the
United States.
The FAA has regulatory jurisdiction over the maintenance and operation of
U.S. air carriers, the operation of aircraft in the United States by foreign
carriers and the registration of aircraft in the United States. The FAA can
suspend or revoke the authority of U.S. air carriers or their licensed personnel
and can similarly revoke the authority of foreign air carriers to operate within
the United States for failure to comply with FAA regulations. The FAA can also
ground aircraft if their airworthiness is in question.
In every foreign country, similar government agencies regulate such
country's air carriers, the operations of foreign airlines in such country and
the registration of aircraft. Like the FAA, the civil aviation authority in a
foreign country can suspend or revoke the operating authority of an airline and
ground aircraft for safety reasons.
4
<PAGE> 7
Since the Company does not itself operate its aircraft for public
transportation of passengers and property, the Company is not directly subject
to the regulatory jurisdiction of the U.S. Departments of Transportation and
State or their counterpart organizations in foreign countries.
The Company's interface with the FAA consists of the registration with the
FAA of those aircraft which are leased by the Company to U.S. carriers and to a
number of foreign carriers where, by agreement, the aircraft are to be
registered in the United States. In limited circumstances, the Company also
obtains from the FAA or its designated representatives a U.S. Certificate of
Airworthiness for a particular aircraft or a ferry flight permit.
The Company's involvement with the civil aviation authorities of foreign
jurisdictions consists largely of requests to register and deregister Company
aircraft on lease to carriers in those countries.
The Company also works with U.S. Customs with respect to the import and
export of Company aircraft into and from the United States for maintenance or
lease.
EMPLOYEES
The Company is in a capital intensive rather than a labor intensive
business. As of December 31, 1998, the Company had 92 full-time employees, which
it considered adequate for its business operations. The Company will expand its
management and administrative personnel, as necessary, to meet future growth.
None of the Company's employees is covered by a collective bargaining agreement
and the Company believes that it has maintained excellent employee relations.
The Company provides certain employee benefits, including retirement plans and
health, life, disability and accident insurance.
INSURANCE
The Company requires its lessees to carry those types of insurance which
are customary in the air transportation industry, including comprehensive
liability insurance and aircraft hull insurance. In general, the Company is an
additional insured on liability policies carried by the lessees. All policies
contain a breach of warranty endorsement so that the interests of the Company
are not prejudiced by any act or omission of the operator-lessee.
Insurance premiums are prepaid by the lessee, with payment acknowledged by
the insurance carrier. The territorial coverage is, in each case, suitable for
the lessee's area of operations and the policies contain, among other
provisions, a "no co-insurance" clause and a provision prohibiting cancellation
or material change without at least 30 days advance written notice to the
Company. Furthermore, the insurance is primary and not contributory and all
insurance carriers are required to waive rights of subrogation against the
Company.
The stipulated loss value schedule under aircraft hull insurance policies
is on an agreed value basis acceptable to the Company, which usually exceeds the
book value of the aircraft. In cases where the Company believes that the agreed
value stated in the lease is not sufficient, the Company purchases additional
Total Loss Only coverage for the deficiency. Additionally, all aircraft in the
Company's fleet are covered by Contingent Liability insurance. Aircraft hull
policies contain standard clauses covering aircraft engines with deductibles
required to be paid by the lessee. Furthermore, the aircraft hull policies
contain full war risk endorsements, including, but not limited to, confiscation,
seizure, hijacking and similar forms of retention or terrorist acts. All losses
under such policies are payable in U.S. dollars.
The comprehensive liability insurance policies include provisions for
bodily injury, property damage, passenger liability, cargo liability and such
other provisions reasonably necessary in commercial passenger and cargo airline
operations with minimal deductibles. Such policies generally have combined
comprehensive single liability limits of not less than $250 million and all
losses are payable in U.S. dollars, U.K. pounds or German marks.
The Company also maintains other insurance covering the specific needs of
its business operations. Insurance policies are generally placed or reinsured
through AIG subsidiaries, with costs allocated back to the Company. The Company
believes that its insurance is adequate both as to coverage and amount.
5
<PAGE> 8
RECENT EVENTS
Due to the economic problems in Brazil, ILFC has initiated discussions with
its Brazilian lessees to restructure lease agreements. Discussions with these
lessees continue, and the impact of possible restructurings cannot be determined
at this time. Lease revenues from Brazilian lessees were $55.4 million in 1998.
ITEM 2. PROPERTIES
FLIGHT EQUIPMENT
The Company's management frequently reviews opportunities to acquire
suitable commercial jet aircraft based not only on market demand and customer
airline requirements, but also on the Company's fleet portfolio mix criteria and
planning strategies for leasing. Before committing to purchase specific
aircraft, the Company takes into consideration factors such as estimates of
future values, potential for remarketing, trends in supply and demand for the
particular type, make and model of aircraft and engines and anticipated
obsolescence. As a result, certain types and vintages of aircraft do not
necessarily fit the profile for inclusion in the Company's portfolio of aircraft
owned and used in its leasing operations.
At December 31, 1998, all of the Company's fleet was Stage III compliant,
meaning that the aircraft hold or are capable of holding a noise certificate
issued under Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago
Convention or have been shown to comply with the Stage III noise levels set out
in Section 36.5 of Appendix C of Part 36 of the Federal Aviation Regulations of
the United States. At December 31, 1998, the average age of the Company's
aircraft was 3.78 years.
The following table shows the scheduled lease terminations (for the minimum
noncancelable period) by aircraft type for the Company's lease portfolio at
December 31, 1998:
<TABLE>
<CAPTION>
AIRCRAFT TYPE 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2010 TOTAL
------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
737-300/400/500.............. 7 22 18 18 25 8 4 1 1 104
737-600/700/800.............. 4 4 2 1 11
757-200...................... 3 11 6 3 3 2 9 9 7 1 54
767-200...................... 1 2 3
767-300...................... 2 4 6 7 7 5 2 2 1 2 38
777-200...................... 2 3 5
747-300...................... 2 2
747-400...................... 3 4 2 1 10
MD-83........................ 2 1 3
MD-87........................ 1 1
MD-11........................ 3 3 6
A300-600R.................... 2 1 1 1 1 1 7
A310-300..................... 4 2 1 7
A319......................... 2 4 6
A320......................... 2 7 3 5 16 5 1 4 43
A321......................... 4 4 5 3 2 1 2 21
A330-200..................... 2 1 3
A330-300..................... 6 1 3 1 11
A340......................... 1 7 2 1 11
-- -- -- -- -- -- -- -- -- -- -- ---
Total........................ 27 63 48 46 61 24 29 29 12 6 1 346
</TABLE>
- ---------------
This schedule does not include three Boeing 737-500 aircraft committed for
sale in 1999. This schedule includes 20 aircraft leased by the Company and
subleased to others.
6
<PAGE> 9
COMMITMENTS
At December 31, 1998, the Company had committed to purchase the following
aircraft at an estimated aggregate purchase price (including adjustment for
anticipated inflation) of approximately $17.4 billion for delivery as shown:
<TABLE>
<CAPTION>
AIRCRAFT TYPE 1999 2000 2001 2002 2003 2004 2005 2006 TOTAL
------------- ---- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
737-600/700/800(a).................. 8 9 12 11 13 13 10 9 85
757-200............................. 7 4 3 2 1 17
767-300............................. 4 4 2 1 1 1 13
767-400............................. 1 2 1 4
777-200............................. 4 3 4 4 4 4 3 3 29
747-400............................. 2 2
A319................................ 5 9 5 6 6 6 6 43
A320-200............................ 6 5 6 4 3 5 4 2 35
A321-200............................ 9 5 3 3 2 2 2 26
A330-200............................ 10 4 4 4 4 4 1 31
A340/300/500/600(a)................. 1 1 2 5 3 2 2 2 18
-- -- -- -- -- -- -- -- ---
Total..................... 56 44 42 42 38 37 28 16 303
</TABLE>
- ---------------
(a) The Company has the right to designate the size of the aircraft within the
specific model type at specific dates prior to contractual delivery.
Management anticipates that a significant portion of such aggregate
purchase price will be funded by incurring additional debt. The exact amount of
the indebtedness to be incurred will depend upon the actual purchase price of
the aircraft, which can vary due to a number of factors, including inflation,
and the percentage of the purchase price of the aircraft which must be financed.
The aircraft listed above are being purchased pursuant to master agreements
with each of The Boeing Company ("Boeing") and AVSA, S.A.R.L., the sales
subsidiary of Airbus Industrie ("Airbus"). These agreements establish the
pricing formulas (which include certain price adjustments based upon inflation
and other factors) and various other terms with respect to the purchase of
aircraft. Under certain circumstances, the Company has the right to alter the
mix of aircraft type ultimately acquired. As of December 31, 1998, the Company
had made non-refundable deposits (exclusive of capitalized interest) with
respect to the aircraft which the Company has committed to purchase of
approximately $440,254,000 and $388,387,000 with Boeing and Airbus,
respectively.
As of March 15, 1999, the Company had entered into contracts for the lease
of all of the 56 aircraft to be delivered in 1999, 35 of the 44 aircraft to be
delivered in 2000, 19 of the 42 aircraft to be delivered in 2001, 3 of the 42
aircraft to be delivered in 2002 and none of the 119 aircraft to be delivered
subsequent to 2002. The Company will need to find customers for aircraft
presently on order and any new aircraft ordered and arrange financing for
portions of the purchase price of such equipment. Although the Company has been
successful to date in placing its new aircraft on lease or sales contracts, and
has obtained adequate financing in the past, there can be no assurance as to the
future continued availability of lessees or purchasers, or of sufficient amounts
of financing on terms acceptable to the Company.
FACILITIES
The Company's principal offices are located at 1999 Avenue of the Stars,
Los Angeles, California. The Company occupies space under leases which expire in
2000. The leases cover approximately 30,000 square feet of office space, provide
for annual rentals of approximately $1,597,000, and the rental payments
thereunder are subject to certain indexed escalation provisions.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any significant legal proceedings.
7
<PAGE> 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company is indirectly wholly owned by AIG and the Company's Common
Stock is not listed on any national exchange or traded in any established
market. During the years ended December 31, 1998, 1997 and 1996, the Company
paid cash dividends to its parent company of $25,200,000, $19,700,000 and
$20,600,000, respectively. It is the intent of the Company to pay its parent
company an annual dividend of at least 7% of net income subject to the dividend
preference of any preferred stock outstanding. Under the most restrictive
provisions of the Company's borrowing arrangements, consolidated retained
earnings at December 31, 1998 in the amount of $582,174,000 were unrestricted as
to the payment of dividends.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected consolidated financial data and
certain operating information of the Company. The selected consolidated
financial data should be read in conjunction with the Consolidated Financial
Statements and notes thereto and "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Form 10-K.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1994 1995 1996 1997 1998
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Rentals of flight equipment..... $ 993,596 $ 1,254,020 $ 1,444,439 $ 1,732,667 $ 1,853,983
Flight equipment marketing...... 76,193 119,078 136,099 176,005 117,194
Interest and other income....... 40,267 49,390 51,976 49,335 74,489
Total revenues.................. 1,110,056 1,422,488 1,632,514 1,958,007 2,045,666
Expenses........................ 798,049 1,084,142 1,237,575 1,431,848 1,483,392
Income before income taxes...... 312,007 338,346 394,939 526,159 562,274
Net income...................... 201,943 196,437 251,774 338,684 369,352
RATIO OF EARNINGS TO FIXED
CHARGES AND PREFERRED STOCK
DIVIDENDS(1): 1.59x 1.43x 1.47x 1.58x 1.60x
BALANCE SHEET DATA:
Flight equipment under operating
leases (net of accumulated
depreciation)................. $ 8,851,079 $10,762,870 $12,182,774 $12,792,531 $14,872,430
Net investment in finance and
sales-type leases............. 92,233 86,237 103,629 98,026 89,904
Total assets.................... 10,386,256 12,329,182 13,725,596 14,551,954 16,379,632
Total debt...................... 7,583,006 8,892,634 9,794,260 9,954,362 11,184,010
Shareholders' equity............ 1,640,772 2,000,107 2,214,552 2,517,188 2,844,375
OTHER DATA:
Aircraft owned at period
end(2)........................ 270 278 296 299 329
Aircraft sold or remarketed
during the period............. 24 41 37 57 31
</TABLE>
- ---------------
(1) See Exhibit 12.
(2) See "Item 2. Properties -- Flight Equipment."
8
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INDUSTRY CONDITION
From time to time, certain of the Company's customers have experienced
economic difficulties resulting in the Company's participation in customer
restructurings. Such restructurings have involved the voluntary early
termination of leases and the rescheduling of payments. In addition, in certain
circumstances, the Company has been required to repossess aircraft. Three
aircraft owned by the Company were repossessed in 1998 and promptly re-leased.
See "Item 1. Business -- Customers."
FINANCIAL CONDITION
The Company borrows funds to purchase flight equipment, including funds for
progress payments during the construction phase, principally on an unsecured
basis from various sources. At December 31, 1998, 1997 and 1996, the Company's
debt financing and capital lease obligations were comprised of the following:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Public term debt with single
maturities.......................... $ 3,825,000 $3,950,000 $3,500,000
Public medium-term notes with varying
maturities.......................... 3,348,350 2,896,865 2,563,720
Capital lease obligations............. 810,768 903,320 995,872
Bank and other term debt.............. -- -- --
----------- ---------- ----------
Total term debt and
capital lease
obligations............... 7,984,118 7,750,185 7,059,592
Commercial paper...................... 3,214,744 2,212,601 2,757,417
Less: Deferred debt discount.......... (14,852) (8,424) (22,749)
----------- ---------- ----------
Debt financing and capital
lease obligations......... $11,184,010 $9,954,362 $9,794,260
=========== ========== ==========
Composite interest rate............... 6.03% 6.44% 6.23%
Percentage of total debt at fixed
rate................................ 64.20% 76.49% 68.95%
Composite interest rate on fixed
debt................................ 6.41% 6.63% 6.58%
Bank prime rate....................... 7.75% 8.50% 8.25%
</TABLE>
The interest on substantially all of the public debt (exclusive of the
commercial paper) is fixed for the term of the note. As of December 31, 1998,
the Company had committed revolving loans and lines of credit with 51 commercial
banks aggregating $2.75 billion and uncommitted lines of credit with one bank
for varying amounts. Bank debt principally provides for interest rates that vary
according to the pricing option in effect at the time of borrowing and range
from prime to .20% over LIBOR at the Company's option. Bank financings are
subject to facility fees of up to .08% of amounts available. Bank financing is
used primarily as backup for the Company's Commercial Paper program.
In January 1999, the Company replaced $1.35 billion of the committed
revolving loans with a new, expanded facility for $1.50 billion. The facility is
a 364 day commitment with an 8 basis point annual facility fee. The pricing
options available are prime and .22% over LIBOR to .32% over LIBOR, based upon
utilization.
As of December 31, 1998, the Company had an effective shelf registration
statement with respect to $2.13 billion of debt securities, under which $525
million of notes were sold through 1998. Additionally, a $1.25 billion
Medium-Term Note program was implemented under the shelf registration statement,
under which $1.04 billion was sold through 1998. Through March 15, 1999, the
Company increased the size of the Medium-Term Note program to $1.605 billion and
sold an additional $465 million of Medium-Term Notes.
In March 1999, a new registration statement of the Company with respect to
$2.0 billion of debt securities was declared effective.
9
<PAGE> 12
The Company has Export Credit Lease financings which provide ten year,
amortizing loans in the form of capital lease obligations. The interest rate on
62.5% of the original financing available is 6.55% and the interest rate on
22.5% of the original financing available varies between 6.18% and 6.89%. These
two tranches are guaranteed by various European Export Credit Agencies. The
remaining 15% of the original financing available provides for LIBOR based
pricing.
In January 1999, the Company entered into a new Export Credit Facility, up
to a maximum of $4.3 billion, for approximately 75 aircraft to be delivered from
1999 through 2001. The Company has the right, but is not required, to use the
facility to fund 85% of each aircraft's purchase price. This facility is
guaranteed by various European Expert Credit Agencies. The interest rate varies
from 5.753% to 5.898% on the first 75 aircraft depending on the delivery date of
the aircraft. Through March 15, 1999, the Company borrowed $403.7 million under
this facility.
In 1995, 1996 and 1997, the Company, through unrestricted subsidiaries,
entered into sale-leaseback transactions providing proceeds to the Company in
the amounts of $413.0 million, $507.6 million and $601.9 million, respectively,
each relating to seven aircraft. The transactions resulted in the sale and
leaseback of these aircraft for one year operating leases, each with six one
year extension options for a total of seven years for each aircraft. The Company
has the option to either buy back the aircraft or redeliver the aircraft for a
fee to the lessor at the end of any lease period. The lease rates equate to
fixed principal amortization and floating interest payments based on LIBOR or
commercial paper pricing. As of December 31, 1998, the Company had repurchased
one aircraft which was sold to a third party in January, 1998.
The Company believes that the combination of internally generated funds and
debt financing currently available to the Company will allow the Company to meet
its capital requirements for at least the next 12 months.
In the normal course of business, the Company employs a variety of
off-balance sheet financial instruments and other derivative products to manage
its exposure to interest rates and the resulting impact of changes in interest
rates on earnings, with the objective to lower its overall borrowing cost and to
maintain its optimal mix of variable and fixed rate interest obligations. The
Company only enters into derivative transactions to hedge interest rate risk and
not to speculate on interest rates. These derivative products include interest
rate swap agreements, interest rate spreadlocks, interest rate swaptions and
interest rate floors.
The counterparties to the Company's derivative instruments are all
recognized U.S. derivative dealers. The counterparties to the majority of the
notional amounts of the Company's derivative instruments are "AAA" rated and all
have at least an "A" credit rating. The derivatives are subject to a bilateral
security agreement which, in certain circumstances, may allow one party to the
agreement to require the second party to the agreement to establish a cash
collateral account. Any failure of the instruments or counterparties to perform
under the derivative contracts would have an immaterial impact on the Company's
earnings.
Measuring potential losses in fair values has recently become the focus of
risk management efforts by many companies. Such measurements are performed
through the application of various statistical techniques. One such technique is
Value at Risk (VaR), a summary statistical measure that uses historical interest
rates and estimates the volatility and correlation of these rates to calculate
the maximum loss that could occur over a defined period of time given a certain
probability.
ILFC believes that statistical models alone do not provide a reliable
method of monitoring and controlling market risk. While VaR models are
relatively sophisticated, the quantitative market risk information generated is
limited by the assumptions and parameters established in creating the related
models. Therefore, such models are tools and do not substitute for the
experience or judgment of senior management.
ILFC is exposed to market risk and the risk of loss of fair value resulting
from adverse fluctuations in interest rates. As of December 31, 1998, ILFC
statistically measured the loss of fair value through the application of a VaR
model. In this analysis the net fair value of ILFC was determined using the
financial instrument assets, which included the tax adjusted future flight
equipment lease revenue, and the financial instrument liabilities, which
included the future servicing of the current debt. The estimated impact of the
current derivative positions was also taken into account.
10
<PAGE> 13
ILFC calculated the VaR with respect to the net fair value using the
variance-covariance (delta-normal) methodology. This calculation also used daily
historical interest rates for the two years ending December 31, 1998. The VaR
model estimated the volatility of each of these interest rates and the
correlation among them. The yield curve was constructed using eleven key points
on the curve to model possible curve movements. Thus, the VaR measured the
sensitivity of the assets and liabilities to the calculated interest rate
exposures. These sensitivities were then applied to a database, which contained
the historical ranges of movements in interest rates and the correlation among
them. The results were aggregated to provide a single amount that depicts the
maximum potential loss in fair value of a confidence level of 95 percent for a
time period of one month. As December 31, 1998, the VaR of ILFC with respect to
its aforementioned net fair value was $9 million.
RESULTS OF OPERATIONS
The increase in revenues from rentals of flight equipment from $1,444.4
million in 1996 to $1,732.7 million in 1997 to $1,854.0 million in 1998 is due
to the increase in the number of aircraft available for operating lease from 306
in 1996, to 319 in 1997 to 349 in 1998. The increase is also attributable to the
increase in the cost of the leased fleet, which includes aircraft subject to
sale-leaseback transactions from which rental income is earned, from $14.4
billion in 1996 to $15.9 billion in 1997 and $18.3 billion in 1998.
Additionally, the percentage of widebodies, for which higher lease payments are
typically received, has increased from 25% to 28% to 30% of the fleet in 1996,
1997 and 1998, respectively.
In addition to its leasing operations, the Company engages in the marketing
of flight equipment at the end of, or during, the lease term, as well as the
sales of flight equipment on a principal and commission basis. Revenue from such
flight equipment marketing increased from $136.1 million in 1996 to $176.0
million in 1997, and decreased to $117.2 million in 1998 as a result of the type
and the number of the flight equipment marketed in each period which fluctuated
from 36 aircraft in 1996 to 57 aircraft in 1997 and to 31 aircraft in 1998.
In addition, the Company sold seven engines (1996), 11 engines (1997) and
15 engines (1998).
Interest expense fluctuated from $573.6 million in 1996 to $642.3 million
in 1997, to $640.0 million in 1998, as a result of an increase in debt
outstanding, excluding the effect of debt discount, from $9.817 billion in 1996
to $9.963 billion in 1997 to $11.200 billion in 1998, to finance aircraft
acquisitions, offset in part by lower composite borrowing rates in 1998. The
Company's composite borrowing rate fluctuated as follows:
<TABLE>
<S> <C>
December 31, 1995........................................... 6.47%
March 31, 1996.............................................. 6.31
June 30, 1996............................................... 6.22
September 30, 1996.......................................... 6.28
December 31, 1996........................................... 6.23
March 31, 1997.............................................. 6.20
June 30, 1997............................................... 6.32
September 30, 1997.......................................... 6.34
December 31, 1997........................................... 6.44
March 31, 1998.............................................. 6.29
June 30, 1998............................................... 6.22
September 30, 1998.......................................... 6.18
December 31, 1998........................................... 6.03
</TABLE>
Depreciation of flight equipment increased from $485.1 million in 1996 to
$546.2 million in 1997 to $556.1 million in 1998 due to the addition of
aircraft. The cost of flight equipment during the same periods increased from
$13.7 billion at December 31, 1996 to $14.4 billion at December 31, 1997 to
$16.9 billion at December 31, 1998. The increase in depreciation expense due to
increased flight equipment cost was partially offset by increasing depreciation
taken in 1996 and 1997 on older aircraft, which were acquired used, that were
either sold or fully depreciated prior to the end of 1997.
11
<PAGE> 14
Provisions for overhauls also increased from $85.1 million in 1996 to $99.5
million in 1997 to $102.5 million in 1998 due to an increase in the number of
aircraft on which the Company collects overhaul reserves resulting in an
increase in the aggregate number of hours flown for which overhaul reserves are
provided.
Rent expense increased from $51.8 million in 1996 to $103.9 million in 1997
to $138.4 million in 1998 due to the increase in the number of sale-leaseback
transactions from 14 aircraft in 1996 to 20 in 1997 and 1998.
The effective tax rate decreased from 36.2% in 1996 to 35.7% in 1997 to
34.3% in 1998.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. This could
result in a failure of the information technology systems (IT systems) and other
equipment containing imbedded technology (non-IT systems) in the year 2000,
causing disruption of operation of the Company, its lessees, vendors, or
business partners.
The Company has developed a plan to address the Year 2000 issue as it
affects the Company's internal IT and non-IT systems, and to assess Year 2000
issues relating to third parties on which the Company has critical dependencies.
A Steering Committee made up of executives of member companies of American
International Group, Inc. ("AIG"), the Company's parent, has had oversight of
the plan's development and execution.
The plan for addressing internal systems includes: an assessment of
internal IT and non-IT systems and equipment affected by the Year 2000 issue;
definition of strategies to address affected systems and equipment; remediation
of identified affected systems and equipment; and review and approval by AIG
that each internal system is Year 2000 compliant. The Company has completed this
project and testing results have been reviewed and approved by AIG staff.
The plan for addressing third party critical dependencies includes:
identification of third party critical dependencies including lessees, vendors
and financial institutions; circulation to all applicable third parties of a
written request for their plans and progress in addressing the Year 2000 issue;
evaluation of responses; and development of contingency plans to address risks
of non-compliance by third parties. The Company has completed the identification
of critical dependencies and the circulation of requests for Year 2000
compliance status. The Company has received responses from 80% of the third
parties identified. Based upon these responses, the Company has concluded that
65% of critical dependencies are or will be Year 2000 compliant before December
31, 1999. Follow up with non-compliant third parties and those who have not
responded is ongoing.
The costs associated with addressing the Year 2000 issue, including
developing and implementing the above stated plan and remediating affected
systems and equipment, have been nominal and were expensed as incurred. Such
costs do not include normal system upgrades and replacements. The Company does
not expect to incur any significant future costs relating to internal IT and
non-IT systems as a result of the Year 2000 issue.
While the Company expects to have no interruption of operations as a result
of internal IT and non-IT systems, significant uncertainties remain about the
effect of third party critical dependencies who are not Year 2000 compliant. The
Company is developing contingency plans for critical vendors.
The Company is not aware of any significant Year 2000 system issues with
respect to the airworthiness of aircraft; however, should such an issue result
in Airworthiness Directives or other manufacturer recommended maintenance, the
implementation and the majority of the cost of such implementation would be the
responsibility of the aircraft lessee. The Company has notified the lessees of
this responsibility. Any resulting costs to the Company cannot be estimated at
this time.
Non-compliance on the part of a lessee could result in inadequate insurance
coverage, lost revenue, and an inability to make lease payments to the Company.
Non-compliance by the lessee's financial institution could also affect the
ability to process lease payments. The Company has attempted to mitigate such
risks by
12
<PAGE> 15
inquiring of each lessee about its Year 2000 plans, including whether they have
addressed the issue with their financial institution.
Non-compliant manufacturing systems at the Company's primary vendors of
aircraft and engines may affect their ability to deliver products on a timely
basis. As there is no alternative source of supply, such an occurrence would
limit the Company's future growth opportunities.
A possible scenario would be that a large number of lessees will be unable
to operate and generate revenues and as a result be unable to make lease
payments. The Company is unable to estimate the likelihood or the magnitude of
the resulting lost revenue at this time. Should this occur, the Company would
attempt to repossess aircraft from non-compliant lessees and place the aircraft
with compliant lessees. No assurances can be given that the Company would be
able to re-lease such aircraft at favorable terms or at all. If a significant
number of aircraft could not be re-leased at favorable terms or at all, or their
re-lease is delayed, the Company's business, financial condition and results of
operations would be adversely affected.
Certain of the statements in this discussion, as well as other
forward-looking statements within this document, contain estimates and
projections of cash flows and debt financing to support future capital
requirements. While these forward-looking statements are made in good faith,
future operating, market, competitive, economic and other conditions and events
could cause actual results to differ materially from those in the
forward-looking statements.
NEW ACCOUNTING PRONOUNCEMENTS, ISSUED BUT NOT YET EFFECTIVE
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (FAS 133). FAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1,
2000 for the Company). FAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. The Company had not
yet determined the impact that the adoption of FAS 133 will have on its earnings
or statement of financial position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted as a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2): Financial Statements and Financial Statement Schedule: The
response to this portion of Item 14 is submitted as a separate section of this
report beginning on page 14.
(a)(3) and (c): Exhibits: The response to this portion of Item 14 is
submitted as a separate section on this report beginning on page 14.
(b) Reports on Form 8-K: None.
13
<PAGE> 16
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
FORM 10-K
ITEMS 8, 14(a), AND 14(c)
INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
The following consolidated financial statements of the Company and its
subsidiaries required to be included in Item 8 are listed below:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Auditors............................. 16-17
Consolidated Financial Statements:
Balance Sheets at December 31, 1997 and 1998.............. 18
Statements of Income for the years ended December 31,
1996, 1997 and 1998.................................... 19
Statements of Shareholders' Equity for the years ended
December 31, 1996, 1997 and 1998....................... 20
Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998.................................... 21-22
Notes to Consolidated Financial Statements................ 23
</TABLE>
The following financial statement schedule of the Company and its
subsidiaries is included in Item 14(a)(2):
<TABLE>
<CAPTION>
SCHEDULE NUMBER DESCRIPTION PAGE
- --------------- ----------- ----
<C> <S> <C>
II Valuation and Qualifying Accounts........................... 36
</TABLE>
All other financial statements and schedules not listed have been omitted
since the required information is included in the consolidated financial
statements or the notes thereto, or is not applicable or required.
The following exhibits of the Company and its subsidiaries are included in
Item 14(c):
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Restated Articles of Incorporation of the Company, as
amended through December 9, 1992, filed November 3, 1993
(filed as an exhibit to Registration Statement No. 33-50913
and incorporated herein by reference).
3.2 Certificate of Determination of Preferences of Series C
Market Auction Preferred Stock (filed as an exhibit to Form
10-K for the year ended December 31, 1994 and incorporated
herein by reference).
3.3 Certificate of Determination of Preferences of Series D
Market Auction Preferred Stock (filed as an exhibit to Form
10-K for the year ended December 31, 1994 and incorporated
herein by reference).
3.4 Certificate of Determination of Preferences of Series E
Market Auction Preferred Stock (filed as an exhibit to Form
10-K for the year ended December 31, 1994 and incorporated
herein by reference).
3.5 Certificate of Determination of Preferences of Series F
Market Auction Preferred Stock (filed as an exhibit to Form
10-K for the year ended December 31, 1994 and incorporated
herein by reference).
3.6 Certificate of Determination of Preferences of Series G
Market Auction Preferred Stock (filed as an exhibit to Form
10-K for the year ended December 31, 1995 and incorporated
herein by reference).
3.7 Certificate of Determination of Preferences of Series H
Market Auction Preferred Stock (filed as an exhibit to Form
10-K for the year ended December 31, 1995 and incorporated
herein by reference).
3.8 By-Laws of the Company, including amendment thereto dated
August 31, 1990 (filed as an exhibit to Registration
Statement No. 33-37600 and incorporated herein by
reference).
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
4.1 Indenture dated as of November 1, 1991, between the Company
and U.S. Bank Trust National Association (successor to
Continental Bank, National Association), as Trustee (filed
as an exhibit to Registration Statement No. 33-43698 and
incorporated herein by reference).
4.2 The Company agrees to furnish to the Commission upon request
a copy of each instrument with respect to issues of
long-term debt of the Company and its subsidiaries, the
authorized principal amount of which does not exceed 10% of
the consolidated assets of the Company and its subsidiaries.
10.1 Revolving Credit Agreement, dated as of January 17, 1997,
among the Company, Union Bank of Switzerland, New York
Branch, and the other banks listed therein providing up to
$1,250,000,000 (five year facility) (filed as an exhibit to
Form 10-K for the year ended March 31, 1996 and incorporated
herein by reference).
10.2 Revolving Credit Agreement, dated as of January 15, 1999,
among the Company, Citicorp USA, Inc., and the other banks
listed therein providing up to $1,500,000,000 (364 day
facility).
10.3 Aircraft Facility Agreement, dated as of January 19, 1999,
among the Company, Halifax PLC and the other banks listed
therein providing up to $4,327,260,000 for the financing of
approximately seventy-five Airbus aircraft.
12. Computation of Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Ernst and Young LLP.
27. Financial Data Schedule.
</TABLE>
15
<PAGE> 18
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
International Lease Finance Corporation
Los Angeles, California
In our opinion, the consolidated financial statements listed in the index
appearing under Items 14(a)(1) and (2) on page 14 present fairly, in all
material respects, the financial position of International Lease Finance
Corporation and its subsidiaries (the "Company") at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the two
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
February 9, 1999
16
<PAGE> 19
REPORT OF INDEPENDENT AUDITORS
Shareholders And Board of Directors
International Lease Finance Corporation
Los Angeles, California
We have audited the accompanying consolidated statements of income,
shareholders' equity, and cash flows of International Lease Finance Corporation
and subsidiaries for the year ended December 31, 1996. Our audit also included
the financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of International Lease Finance Corporation and subsidiaries for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Century City,
Los Angeles, California
February 19, 1997
17
<PAGE> 20
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash, including interest bearing accounts of
$33,716 (1998) and $35,113 (1997)......................... $ 52,723 $ 63,754
Current income taxes........................................ 16,007 --
Notes receivable............................................ 340,344 467,688
Net investment in finance and sales-type leases............. 89,904 98,026
Flight equipment under operating leases..................... 16,860,789 14,425,091
Less accumulated depreciation............................. 1,988,359 1,632,560
----------- -----------
14,872,430 12,792,531
Deposits on flight equipment purchases...................... 906,197 1,017,628
Accrued interest, other receivables and other assets........ 60,754 60,416
Investments................................................. 11,771 18,731
Deferred debt issue costs -- less accumulated amortization
of
$62,115 (1998) and $52,444 (1997)......................... 29,502 33,180
----------- -----------
$16,379,632 $14,551,954
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued interest and other payables......................... $ 235,046 $ 214,106
Current income taxes........................................ -- 64,891
Debt financing, net of deferred debt discount of
$14,852 (1998) and $8,424 (1997).......................... 10,373,242 9,051,042
Capital lease obligations................................... 810,768 903,320
Security and other deposits on flight equipment............. 863,832 744,800
Rentals received in advance................................. 119,682 129,586
Deferred income taxes....................................... 1,132,687 927,021
Commitments and contingencies -- Note K
SHAREHOLDERS' EQUITY
Preferred stock -- no par value; 20,000,000 authorized
shares
Market Auction Preferred Stock, $100,000 per share
liquidation value; Series A, B, C, D, E, F, G and H
(1998 and 1997), each having
500 shares issued and outstanding...................... 400,000 400,000
Common stock -- no par value; 100,000,000 authorized
shares, 35,818,122 shares (1998 and 1997) issued and
outstanding............................................ 3,582 3,582
Paid-in capital........................................... 579,955 579,955
Retained earnings......................................... 1,860,838 1,533,651
----------- -----------
2,844,375 2,517,188
----------- -----------
$16,379,632 $14,551,954
=========== ===========
</TABLE>
See accompanying notes.
18
<PAGE> 21
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental of flight equipment............................... $1,853,983 $1,732,667 $1,444,439
Flight equipment marketing............................... 117,194 176,005 136,099
Interest and other....................................... 74,489 49,335 51,976
---------- ---------- ----------
2,045,666 1,958,007 1,632,514
Expenses:
Interest................................................. 639,964 642,321 573,599
Depreciation of flight equipment......................... 556,082 546,226 485,102
Provision for overhaul................................... 102,508 99,458 85,083
Flight equipment rent expense............................ 138,392 103,883 51,809
Selling, general and administrative...................... 46,446 39,960 41,982
---------- ---------- ----------
1,483,392 1,431,848 1,237,575
---------- ---------- ----------
INCOME BEFORE INCOME TAXES............................ 562,274 526,159 394,939
Provision for income taxes................................. 192,922 187,475 143,165
---------- ---------- ----------
NET INCOME............................................ $ 369,352 $ 338,684 $ 251,774
========== ========== ==========
</TABLE>
See accompanying notes.
19
<PAGE> 22
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARKET AUCTION
PREFERRED STOCK COMMON STOCK
--------------------- --------------------
NUMBER OF NUMBER OF PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- -------- ---------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995........ 4,000 $400,000 35,818,122 $3,582 $580,085 $1,016,440 $2,000,107
Sale of MAPS preferred............ (130) (130)
Dividend to AIG................... (20,600) (20,600)
Preferred stock dividends......... (16,599) (16,599)
Net income........................ 251,774 251,774
----- -------- ---------- ------ -------- ---------- ----------
Balance at December 31, 1996........ 4,000 $400,000 35,818,122 $3,582 $579,955 $1,231,015 $2,214,552
Dividends to AIG.................. (19,700) (19,700)
Preferred stock dividends......... (16,348) (16,348)
Net income........................ 338,684 338,684
----- -------- ---------- ------ -------- ---------- ----------
Balance at December 31, 1997........ 4,000 $400,000 35,818,122 $3,582 $579,955 $1,533,651 $2,517,188
Dividends to AIG.................. (25,200) (25,200)
Preferred stock dividends......... (16,965) (16,965)
Net income........................ 369,352 369,352
----- -------- ---------- ------ -------- ---------- ----------
Balance at December 31, 1998........ 4,000 $400,000 35,818,122 $3,582 $579,955 $1,860,838 $2,844,375
===== ======== ========== ====== ======== ========== ==========
</TABLE>
See accompanying notes.
20
<PAGE> 23
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 369,352 $ 338,684 $ 251,774
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of flight equipment........................ 556,082 546,226 485,102
Deferred income taxes................................... 205,666 117,727 148,356
Amortization of deferred debt issue costs............... 10,242 9,505 8,841
Gain on sale of flight equipment included in amount
financed.............................................. (10,747) (30,369) (16,063)
Increase in notes receivable............................ (18,591) (712) (66,721)
Equity in net (income) loss of affiliates............... (1,159) (632) (788)
Change in unamortized debt discount..................... (6,428) 14,325 (7,057)
Changes in operating assets and liabilities:
(Increase) decrease in accrued interest, other
receivables and other assets.......................... (338) (9,521) 37,096
Increase (decrease) in accrued interest and other
payables.............................................. 20,940 (5,005) 22,435
(Increase) decrease in current income taxes
receivable............................................ (80,898) 81,311 14,383
(Decrease) increase in rentals received in advance...... (9,904) 52,479 (3,704)
----------- ----------- -----------
Net cash provided by operating activities................... 1,034,217 1,114,018 873,654
----------- ----------- -----------
INVESTING ACTIVITIES:
Acquisition of flight equipment for operating leases...... (3,274,247) (3,289,744) (3,210,986)
Decrease (increase) in deposits and progress payments..... 111,431 (156,273) (55,785)
Proceeds from disposal of flight equipment -- net of
gain.................................................... 587,882 2,038,390 1,194,946
Advances on notes receivable.............................. (7,000) -- --
Collections on notes receivable........................... 214,067 82,464 163,298
Collections on finance and sales-type leases.............. 8,122 11,049 7,781
Purchase of investments................................... (6) -- --
Dividend from unconsolidated subsidiary................... 8,125 -- --
----------- ----------- -----------
Net cash used in investing activities....................... (2,351,626) (1,314,114) (1,900,746)
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from debt financing and capital lease
obligations............................................. 5,772,791 6,084,081 5,042,064
Payments in reduction of debt financing and capital lease
obligations............................................. (4,536,715) (5,938,304) (4,133,381)
Proceeds from sale of MAPS preferred stock (net of issue
costs).................................................. -- -- (130)
Debt issue costs.......................................... (6,565) (15,966) (8,057)
Payment of common and preferred dividends................. (42,165) (36,048) (37,199)
Increase in customer deposits............................. 119,032 133,529 113,256
----------- ----------- -----------
Net cash provided by financing activities................... 1,306,378 227,292 976,553
----------- ----------- -----------
Net increase (decrease) in cash............................. (11,031) 27,196 (50,539)
Cash at beginning of year................................... 63,754 36,558 87,097
----------- ----------- -----------
Cash at end of year..................................... $ 52,723 $ 63,754 $ 36,558
=========== =========== ===========
(Table continued on next page)
</TABLE>
21
<PAGE> 24
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest (net of amount capitalized $54,297 (1998),
$48,818 (1997)
and $50,368 (1996))................................... $ 628,819 $ 619,274 $ 559,437
Income taxes (net of amounts paid)...................... 68,154 (11,563) (19,574)
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
1998
Notes and finance and sales-type leases in the amount of $107,155 were
received as partial payment in exchange for flight equipment sold with a
book value of $96,407.
Flight equipment was received in exchange for notes receivable in the amount
of $46,023.
1997
Notes and finance and sales-type leases in the amount of $125,741 were
received as partial payment in exchange for flight equipment sold with a
book value of $95,372.
1996
Notes and finance and sale-type leases in the amount of $173,404 were
received as partial payment in exchange for flight equipment sold with a
book value of $157,340.
Flight equipment was received in exchange for notes receivable in the amount
of $46,307.
See accompanying notes.
22
<PAGE> 25
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: The Company is primarily engaged in the acquisition of new
and used commercial jet aircraft and the leasing and sale of such aircraft to
charter and scheduled airlines throughout the world. In addition, the Company is
engaged in the remarketing of commercial jets for its own account, for airlines
and for financial institutions.
Parent Company: International Lease Finance Corporation (the "Company") is
an indirect wholly owned subsidiary of American International Group, Inc.
("AIG"). AIG is a holding company which through its subsidiaries is primarily
engaged in a broad range of insurance and insurance-related activities and
financial services in the United States and abroad.
Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. Investments of less than 20% in other entities are carried at
cost. Investments of between 20% and 50% in other entities are carried under the
equity method. All significant intercompany balances and transactions have been
eliminated in consolidation.
Intercompany Allocations: The Company is party to cost sharing agreements
with AIG. Generally, these agreements provide for the allocation of costs upon
either a specific identification basis or a proportional cost allocation basis.
The charges aggregated $3,828 (1998), $4,526 (1997) and $5,595 (1996).
Rentals: The Company, as lessor, leases flight equipment principally under
operating leases. Accordingly, income is reported over the life of the lease as
rentals become receivable under the provisions of the lease or, in the case of
leases with varying payments, under the straight-line method over the
noncancelable term of the lease. In certain cases, leases provide for additional
rentals based on usage.
Flight Equipment Marketing: The Company is a marketer of flight equipment.
Marketing revenues include all revenues from such operations consisting of net
gains on sales of flight equipment and commissions.
Flight Equipment: Flight equipment is stated at cost. Major additions and
modifications are capitalized. Normal maintenance and repairs; airframe and
engine overhauls; and compliance with return conditions of flight equipment on
lease are provided by and paid for by the lessee. Under the provisions of most
leases, for certain airframe and engine overhauls, the lessee is reimbursed for
costs incurred up to but not exceeding related contingent rentals paid to the
Company by the lessee. Such rentals are included in the caption Rental of flight
equipment. The Company provides a charge to operations for such reimbursements
based on the estimated reimbursements expected during the life of the lease,
which amount is included in overhaul reserves.
Generally, all aircraft, including aircraft acquired under capital leases,
are depreciated using the straight-line method over a 25 year life from the date
of manufacture to a 15% residual value.
At the time assets are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the related accounts and the
difference, net of proceeds, is recorded as a gain or loss.
The Company regularly reviews its flight equipment to determine that its
carrying value is not impaired.
Capitalized Interest: The Company borrows certain funds to finance progress
payments for the construction of flight equipment ordered. The interest incurred
on such borrowings is capitalized and included in the cost of the equipment.
Deferred Debt Issue Costs: Deferred debt issue costs incurred in connection
with debt financing are amortized over the life of the debt using the interest
rate method and are charged to interest expense.
Financial Instruments: The Company has granted certain parties the right
but not the obligation to effectively convert certain of the Company's fixed
rate obligations to floating rate obligations based on an established notional
amount. The proceeds of such option agreements are initially recorded as a
liability.
23
<PAGE> 26
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
When swap agreements are effective in modifying the terms of actual debt
agreements, such swaps are accounted for by the accrual method. Periodic
payments as well as the amortization (by a level yield method) of the initial
value are treated as adjustments to interest expense of the related debt.
Income Taxes: The Company and its U.S. subsidiaries are included in the
consolidated federal income tax return and the combined California unitary tax
return of AIG. The provision for income taxes is calculated on a separate return
basis. Income tax payments are made pursuant to a tax payment allocation
agreement whereby AIG credits or charges the Company for the corresponding
increase or decrease (not to exceed the separate return basis calculation) in
AIG's current taxes resulting from the inclusion of the Company in AIG's
consolidated tax return. Intercompany payments are made when such taxes are due
or tax benefits are realized by AIG.
The deferred tax liability is determined based on the difference between
the financial statement and tax basis of assets and liabilities and is measured
at the enacted tax rates that will be in effect when these differences reverse.
Deferred tax expense is determined by the change in the liability for deferred
taxes ("Liability Method").
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassifications: Certain amounts have been reclassified in the 1997 and
1996 financial statements to conform to the Company's 1998 presentation.
NOTE B -- NOTES RECEIVABLE
Notes receivable are primarily from the sale of flight equipment and are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Fixed rate notes receivable due in varying
installments to 2008:
Less than 6%..................................... $ 3,504 $ 3,691
6% to 7.99%...................................... 219,493 306,053
8% to 9.99%...................................... 83,711 94,788
10% to 13%....................................... 11,199 6,126
LIBOR plus 1.1% to LIBOR plus 1.5% notes receivable
in varying installments to 2002.................. 22,437 57,030
-------- --------
$340,344 $467,688
======== ========
</TABLE>
Included above, the Company had notes receivable of $10,328 (1998) and
$4,374 (1997) representing restructured lease payments.
24
<PAGE> 27
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE B -- NOTES RECEIVABLE (CONTINUED)
At December 31, 1998, the minimum future notes receivable payments to be
received are as follows:
<TABLE>
<S> <C> <C>
1999................................................... $ 54,856
2000................................................... 30,905
2001................................................... 41,163
2002................................................... 33,136
2003................................................... 29,362
Thereafter............................................. 150,922
--------
$340,344
========
</TABLE>
The Company sold notes receivable with certain limited recourse provisions
to a related party of the Company. The notes were sold at face value including
accrued interest and aggregated $68,694 in 1998 and $116,235 in 1996. The
Company continues to collect payments on the notes, transfers the payments to
the related party and receives a servicing fee. The Company recorded no gain or
loss on the sale. The Company recorded servicing fee income of $1 (1998), $112
(1997) and $16 (1996) related to the notes sold. The Company's maximum exposure
under recourse provisions was $13,739 at December 31, 1998 and $0 at December
31, 1997. During 1997 the Company repurchased one note sold in 1996. The note
was not repurchased under the recourse provisions.
NOTE C -- NET INVESTMENT IN FINANCE AND SALES-TYPE LEASES
The following lists the components of the net investment in finance and
sales-type leases:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Total minimum lease payments to be received............ $ 93,832 $109,615
Estimated residual values of leased flight equipment... 19,949 19,993
Less: Unearned income.................................. (23,877) (31,582)
-------- --------
Net investment in finance and sales-type leases........ $ 89,904 $ 98,026
======== ========
</TABLE>
Minimum future lease payments to be received for flight equipment on
finance and sales-type leases at December 31, 1998 are as follows:
<TABLE>
<S> <C> <C>
1999.................................................... $14,681
2000.................................................... 16,095
2001.................................................... 16,095
2002.................................................... 16,035
2003.................................................... 15,843
Thereafter.............................................. 15,083
-------
Total minimum lease payments to be received............. $93,832
=======
</TABLE>
25
<PAGE> 28
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE D -- INVESTMENTS
Investments consist of the following:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
PERCENT PERCENT
OWNED AMOUNT OWNED AMOUNT
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cost method:
Air Liberte......................... (A) $ 4,792 (A) $ 4,792
Others.............................. 1,158 1,150
Equity method:
Pacific Ocean Leasing Ltd........... 50.0% 5,219 50.0% 5,995
Pacific Asia Leasing Ltd............ 25.0% 602 25.0% 6,794
------- -------
$11,771 $18,731
======= =======
</TABLE>
- ---------------
(A) During 1997, Air Liberte was acquired by British Airways. As a result of the
acquisition, ILFC's percentage ownership will be reduced. Until the
acquisition is complete, ILFC's percentage ownership is not determinable.
The Company has a 50% interest in Pacific Ocean Leasing Ltd. ("POL"), a
Bermuda corporation. POL owns one Boeing 767-200 aircraft and one spare engine,
both of which were on lease to an airline. POL also owns an inventory of spare
parts. The aircraft and spare engine were sold in January 1999. Additionally,
the Company had guaranteed the bank loan to POL (see Note K).
The Company has a 25% interest in Pacific Asia Leasing Ltd. ("PAL"), a
Bermuda corporation. PAL owned one Boeing 767-300ER aircraft on lease to an
airline. The aircraft was sold in 1998. The Company had a demand note, which
bore interest at Libor+1 5/8%, with PAL of $26,751 (1997). The note was paid in
full as of December 31, 1998. The Company received a dividend of $8,125 in 1998.
26
<PAGE> 29
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS
Debt financing and capital lease obligations are comprised of the
following:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Commercial Paper (weighted average interest rate at
December 31, 5.30% (1998) and 5.89% (1997))...... $ 3,214,744 $2,212,601
Term Notes......................................... 3,825,000 3,950,000
Medium-Term Notes.................................. 3,348,350 2,896,865
Capital Lease Obligations.......................... 810,768 903,320
Less: Deferred debt discount....................... (14,852) (8,424)
----------- ----------
$11,184,010 $9,954,362
=========== ==========
</TABLE>
Bank Financing:
The interest on substantially all of the public debt (exclusive of the
commercial paper) is fixed for the term of the note. As of December 31, 1998,
the Company had committed revolving loans and lines of credit with 51 commercial
banks aggregating $2.75 billion and uncommitted lines of credit with one bank
for varying amounts. Bank debt principally provides for interest rates that vary
according to the pricing option in effect at the time of borrowing and range
from prime to .20% over LIBOR at the Company's option. Bank financings are
subject to facility fees of up to .08% of amounts available. Bank financing is
used primarily as backup for the Company's Commercial Paper program.
27
<PAGE> 30
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
Term Notes:
The Company has issued the following Notes which provide for a single
principal payment at maturity and cannot be redeemed prior to maturity:
<TABLE>
<CAPTION>
INITIAL
TERM 1998 1997
-------- ---------- ----------
<S> <C> <C> <C>
8 1/8% Notes due January 15, 1998........................... 3 years $ $ 150,000
5 5/8% Notes due March 1, 1998.............................. 4 years 100,000
5 3/4% Notes due March 15, 1998............................. 5 years 100,000
7% Notes due June 1, 1998................................... 4 years 100,000
6 1/4% Notes due June 15, 1998.............................. 3 years 100,000
Floating Rate Notes due June 19, 1998 (swapped to 6.50%).... 2 years 100,000
5 3/4% Notes due July 1, 1998............................... 5 years 100,000
8.35% Notes due October 1, 1998............................. 7 years 100,000
Floating Rate Notes due November 2, 1998 (swapped to
6.0725%).................................................. 2 years 100,000
5 3/4% Notes due January 15, 1999........................... 5 years 150,000 150,000
5 1/2% Notes due January 15, 1999........................... 3 years 150,000 150,000
7 1/2% Notes due March 1, 1999.............................. 4 years 100,000 100,000
6 5/8% Notes due April 1, 1999.............................. 5 years 100,000 100,000
6.70% Notes due April 30, 1999.............................. 2 years 100,000 100,000
Floating Rate Notes due June 2, 1999 (swapped to 6.64%)..... 4 years 100,000 100,000
Floating Rate Notes due July 15, 1999 (swapped to 6.235%)... 4 years 100,000 100,000
6 1/2% Notes due August 15, 1999............................ 7 years 100,000 100,000
6 1/8% Notes due November 1, 1999........................... 4 years 100,000 100,000
5 3/4% Notes due December 15, 1999.......................... 4 years 150,000 150,000
8 1/4% Notes due January 15, 2000........................... 5 years 100,000 100,000
6 3/8% Notes due January 18, 2000........................... 3 years 200,000 200,000
6.65% Notes due April 1, 2000............................... 3 years 100,000 100,000
6.20% Notes due May 1, 2000................................. 7 years 100,000 100,000
7% Notes due May 15, 2000................................... 5 years 100,000 100,000
6 5/8% Notes due June 1, 2000............................... 3 years 100,000 100,000
6 5/8% Notes due August 15, 2000............................ 4 years 100,000 100,000
6 1/4% Notes due October 15, 2000........................... 5 years 100,000 100,000
Floating Rate Notes due February 1, 2001 (swapped to
6.53%).................................................... 4 years 100,000 100,000
8 7/8% Notes due April 15, 2001............................. 10 years 150,000 150,000
5.875% Notes due January 15, 2001........................... 3 years 200,000
6 7/8% Notes due May 1, 2001................................ 4 years 100,000 100,000
5.95% Notes due June 1, 2001................................ 3 years 100,000
6 1/2% Notes due July 1, 2001............................... 4 years 100,000 100,000
5 7/8% Notes due July 1, 2001............................... 3 years 125,000
6 3/8% Notes due August 1, 2001............................. 4 years 100,000 100,000
6 1/2% Notes due October 15, 2001........................... 5 years 100,000 100,000
6 3/8% Notes due February 15, 2002.......................... 5 years 100,000 100,000
5.90% Notes due April 15, 2002.............................. 4 years 100,000
6.00% Notes due May 15, 2002................................ 4 years 100,000
6 3/8% Notes due August 1, 2002............................. 5 years 100,000 100,000
5 3/4% Notes due January 15, 2003........................... 5 years 100,000
6.00% Notes due June 15, 2003............................... 5 years 100,000
8 3/8% Notes due December 15, 2004.......................... 10 years 100,000 100,000
---------- ----------
$3,825,000 $3,950,000
========== ==========
</TABLE>
- ---------------
See Note L -- Financial Instruments.
28
<PAGE> 31
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
Medium-Term Notes:
The Company's Medium-Term Notes have an average notional amount of $14
million, bear interest at rates varying between 4.85% and 8.55%, inclusive, with
maturities from 1999 through 2005. The Medium-Term Notes provide for a single
principal payment at the maturity of the respective note. They cannot be
redeemed by the Company prior to maturity.
Capital Lease Obligations:
The Company's Capital Lease Obligations provide 10 year, fully amortizing
debt in three interest rate tranches. The first 62.5% of the original debt is at
a fixed rate of 6.55%. The second 22.5% of the original debt is at fixed rates
varying between 6.18% and 6.89%. These two tranches are guaranteed by various
European Export Credit Agencies. The final 15% of the original debt is at a
floating LIBOR based rate. The debt matures through 2005. The flight equipment
associated with the obligations, and included in flight equipment under
operating leases in the balance sheet, had a net book value of $1,104,413 (1998)
and $1,147,514 (1997).
The following is a schedule by years of future minimum lease payments under
capitalized leases together with the present value of the net minimum lease
payments as of December 31, 1998:
<TABLE>
<S> <C>
1999..................................................... $ 144,238
2000..................................................... 138,113
2001..................................................... 131,816
2002..................................................... 125,636
2003..................................................... 119,326
Thereafter............................................... 373,301
----------
Total minimum lease payments............................. 1,032,430
Less amount representing interest........................ 221,662
----------
Present value of net minimum lease payments.............. $ 810,768
==========
</TABLE>
Maturities of debt financing and capital lease obligations (excluding
commercial paper and deferred debt discount) at December 31, 1998 are as
follows:
<TABLE>
<S> <C>
1999..................................................... $1,975,802
2000..................................................... 1,998,052
2001..................................................... 2,034,552
2002..................................................... 870,652
2003..................................................... 552,052
Thereafter............................................... 553,008
----------
$7,984,118
==========
</TABLE>
Under the most restrictive provisions of the related borrowings,
consolidated retained earnings at December 31, 1998, in the amount of $582,174,
are unrestricted as to payment of dividends based on consolidated tangible net
worth requirements.
The Company has entered into various debt and derivative transactions with
an affiliate acting as a broker-dealer. These transactions were either awarded
on a competitive bid basis or have terms that are no less favorable to the
Company than could be obtained from other broker-dealers.
29
<PAGE> 32
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE F -- SHAREHOLDERS' EQUITY
Preferred Stock:
Issuance costs of $130 for Series G and H Market Auction Preferred Stock
("MAPS"), issued in November 1995, were incurred in 1996. The MAPS have a
liquidation value of $100 per share and are not convertible. The dividend rate,
other than the initial rate, for each dividend period for each series is reset
approximately every 7 weeks (49 days) on the basis of orders placed in an
auction. At December 31, 1998, the dividend rates for Series A through H ranged
from 4.090% to 4.440%.
Stock Appreciation Rights:
Stock Appreciation Rights ("SARs") were granted to certain employees of the
Company during 1990. The SARs granted generally vest over a nine year period
from the effective date and are exercisable immediately upon vesting. SARs
initially have no value but can gain a cash value based upon the difference
between a Benchmark Price and a Formula Price (based on adjusted pre-tax cash
flow of the Company), but not in excess of an aggregate of $150,000, to be
accrued and paid over the period of the plan. The SAR plan became effective on
January 1, 1991. No value has been earned or accrued under the SAR plan as of
December 31, 1998.
NOTE G -- RENTAL INCOME
Minimum future rentals on noncancelable operating leases and subleases of
flight equipment which have been delivered at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------
<S> <C>
1999..................................................... $1,588,664
2000..................................................... 1,391,190
2001..................................................... 1,237,333
2002..................................................... 1,055,109
2003..................................................... 802,372
Thereafter............................................... 1,173,187
----------
$7,247,855
==========
</TABLE>
Additional rentals earned by the Company based on the lessees' usage
aggregated $202,425 (1998), $219,380 (1997) and $194,741 (1996). Flight
equipment is leased, under operating leases, with remaining terms ranging from
one to 12 years.
NOTE H -- RENTAL EXPENSE
During 1995, 1996 and 1997, the Company entered into sale-leaseback
transactions providing proceeds to the Company in the amounts of $412,626,
$507,600 and $601,860, respectively, relating to seven aircraft for each
transaction. The transactions resulted in the sale and leaseback of these
aircraft under one year operating leases, each with six one year extension
options, maturing on December 22, 1999, September 20, 1999 and September 13,
1999, respectively. During 1997 one aircraft was repurchased. The lease rates
equate to fixed principal amortization and floating interest payments based on
LIBOR or commercial paper pricing.
Minimum future rental expense for 1999 is $43,977 at December 31, 1998.
30
<PAGE> 33
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE I -- INCOME TAXES
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal(1)........................................... $(10,033) $ 60,003 $(16,700)
State................................................ (2,938) 8,280 1,957
Foreign.............................................. 227 1,465 9,381
-------- -------- --------
(12,744) 69,748 (5,362)
Deferred:
Federal.............................................. 191,633 111,120 138,750
State................................................ 14,033 6,607 9,777
-------- -------- --------
205,666 117,727 148,527
-------- -------- --------
$192,922 $187,475 $143,165
======== ======== ========
</TABLE>
- ---------------
(1) Including U.S. tax on foreign income
The provision for deferred income taxes is comprised of the following
temporary differences:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Accelerated depreciation on flight equipment........... $194,352 $123,486 $132,101
Excess of state income taxes not currently deductible
for Federal income tax purposes...................... (4,912) (2,312) (3,422)
Tax versus book lease differences...................... 23,341 18,568 35,933
Provision for overhauls................................ (15,616) (2,873) (7,726)
Rentals received in advance............................ 3,464 (18,270) (5,855)
Straight line rents.................................... 829 778 (3,020)
Other.................................................. 4,208 (1,650) 516
-------- -------- --------
$205,666 $117,727 $148,527
======== ======== ========
</TABLE>
The deferred tax liability consists of the following:
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Accelerated depreciation on flight equipment........ $1,137,213 $942,861
Excess of state income taxes not currently
deductible
for Federal income tax purposes................... (24,695) (19,783)
Tax versus book lease differences................... 109,806 86,465
Provision for overhauls............................. (57,262) (41,646)
Rentals received in advance......................... (51,283) (54,747)
Straight line rents................................. 16,015 15,186
Other............................................... 2,893 (1,315)
---------- --------
$1,132,687 $927,021
========== ========
</TABLE>
31
<PAGE> 34
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE I -- INCOME TAXES (CONTINUED)
A reconciliation of computed expected total provision for income taxes to
the amount recorded is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Computed expected provision based upon a federal rate
of 35%............................................... $196,796 $184,156 $138,229
State income taxes, net of Federal income taxes........ 7,211 9,676 7,628
Foreign sales corporation benefit...................... (8,719) (6,920) (6,160)
Foreign taxes.......................................... (3,194) -- 5,286
Other.................................................. 828 563 (1,818)
-------- -------- --------
$192,922 $187,475 $143,165
======== ======== ========
</TABLE>
NOTE J -- OTHER INFORMATION
Concentration of Credit Risk
The Company leases and sells aircraft to airlines. All of the lease
receivables and the majority of notes receivable are from airlines located
throughout the world. The Company generally obtains deposits on leases and
obtains collateral in flight equipment on notes receivable. The Company has no
single customer which accounts for 10% or more of revenues.
Segment Information
The Company operates within one industry; the leasing, sales and management
of flight equipment.
Revenues include rentals of flight equipment to foreign airlines of
$1,623,891 (1998), $1,472,075 (1997) and $1,202,651 (1996).
The following table sets forth the dollar amount and percentage of total
rental revenues attributable to the indicated geographic areas for the years
indicated:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ ------------------
AMOUNT % AMOUNT % AMOUNT %
---------- ----- ---------- ----- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Europe............................. $ 798,773 43.1% $ 705,128 40.7% $ 551,703 38.2%
Asia/Pacific....................... 410,600 22.1 358,687 20.7 332,159 23.0
United States and Canada........... 333,472 18.0 345,143 19.9 304,801 21.2
Central, South America and
Mexico........................... 190,572 10.3 211,152 12.2 165,819 11.5
Africa and the Middle East......... 120,566 6.5 112,557 6.5 89,957 6.2
---------- ----- ---------- ----- ---------- -----
$1,853,983 100.0% $1,732,667 100.0% $1,444,439 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
Employee Benefit Plans
The Company's employees participate in various benefit plans sponsored by
AIG, including a noncontributory qualified defined benefit retirement plan,
various stock option and purchase plans and a voluntary savings plan (401(k)
plan).
AIG's U.S. plans do not separately identify projected benefit obligations
and plan assets attributable to employees of participating affiliates. AIG's
projected benefit obligations exceeded the plan assets at December 31, 1998 by
$49,448.
32
<PAGE> 35
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE K -- COMMITMENTS AND CONTINGENCIES
Aircraft orders
At December 31, 1998, the Company had committed to purchase 303 aircraft
deliverable from 1999 through 2006 at an estimated aggregate purchase price
(including adjustment for anticipated inflation) of approximately $17.4 billion.
Most of these purchase commitments and options are based upon master
arrangements with each of The Boeing Company ("Boeing") and AVSA, S.A.R.L., the
sales subsidiary of Airbus Industrie ("Airbus").
The Boeing aircraft (models 737, 747, 757, 767 and 777), and the Airbus
aircraft (models A319, A320, A321, A330 and A340) are being purchased pursuant
to agreements executed by the Company and Boeing or Airbus. These agreements
establish the pricing formulas (which include certain price adjustments based
upon inflation and other factors) and various other terms with respect to the
purchase of aircraft. Under certain circumstances, the Company has the right to
alter the mix of aircraft type ultimately acquired. As of December 31, 1998, the
Company had made non-refundable deposits (exclusive of capitalized interest)
with respect to the aircraft which the Company has committed to purchase of
approximately $440,254 and $388,387 with Boeing and Airbus, respectively.
Management anticipates that a significant portion of such aggregate
purchase price will be funded by incurring additional debt. The exact amount of
the indebtedness to be incurred will depend upon the actual purchase price of
the aircraft, which can vary due to a number of factors, including inflation,
and the percentage of the purchase price of the aircraft which must be financed.
Asset Value Guarantees
The Company has guaranteed a portion of the residual value of 37 aircraft
to financial institutions expiring at various dates through 2006. The guarantees
generally provide for the Company to pay the difference between the fair market
value of the aircraft and the guaranteed value up to certain specified amounts,
or, at the option of the Company, purchase the aircraft for the guaranteed
value. At December 31, 1998 and 1997, the maximum exposure if the Company were
to pay under such guarantees was $155,656 and $145,733 respectively.
Other Guarantees
The Company has guaranteed certain obligations for entities in which it has
an investment. At December 31, 1998 and 1997, the Company guaranteed nine loans
collateralized by aircraft aggregating $57,088 and $62,256 respectively.
The Company guaranteed a customer loan, collateralized by flight equipment,
with a December 31, 1998 balance of $3,300. At December 31, 1997, the Company
guaranteed three customer loans, collateralized by flight equipment, with an
aggregate balance of $12,850.
NOTE L -- FINANCIAL INSTRUMENTS
In the normal course of business, the Company employs a variety of
off-balance sheet derivative transactions with the objective to lower its
overall borrowing cost and to maintain its optimal mix of variable and fixed
rate interest obligations. These derivative products include interest rate swap
agreements, swaptions and interest rate floors (off-balance sheet derivative
transactions).
The Company accounts for its off-balance sheet derivative transactions on
an accrual basis. As such, accrued future payments or receipts are reflected in
operating income in the period incurred or earned. Credit risk exposure arises
from the potential that the counterparty may not perform under these agreements
with
33
<PAGE> 36
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE L -- FINANCIAL INSTRUMENTS (CONTINUED)
respect to the off-balance sheet derivative transactions. The Company minimizes
such exposure through transacting with recognized U.S. derivative dealers
assigned at least an "A" rating by a recognized statistical rating organization.
The counterparties to the majority of the off-balance sheet derivative
transactions are assigned an "AAA" rating. One of the counterparties is a
related party of the Company. The Company monitors each counterparty's assigned
credit rating throughout the life of the off-balance sheet derivative
transaction. The Company currently does not require, nor is it required by, its
counterparties to provide security for its positions with the Company although
it can in certain circumstances.
The following table provides the notional amounts of the Company's
off-balance sheet derivative transactions at December 31, 1998. The notional
amounts used to express the extent of the Company's involvement in swap
transactions represent a standard measurement of the volume of the Company's
swap transactions. Notional amount is not a quantification of market risk or
credit risk and is not recorded on the balance sheet. Notional amounts represent
those amounts used to calculate contractual cash flows to be exchanged and are
not paid or received. The timing and the amount of cash flows relating to
swaption and other interest rate option contracts are determined by each of the
respective contractual agreements.
It is management's belief that any failure of a counterparty to perform
under the agreement with respect to these off-balance sheet transactions would
have an immaterial effect on the Company's results of operations, financial
condition and liquidity.
The following table presents the notional amounts of the Company's interest
rate swap agreements, swaptions and interest rate floors by maturity at December
31, 1998.
<TABLE>
<CAPTION>
REMAINING LIFE
------------------------------------
TWO TO AFTER FIVE TOTAL TOTAL
TYPE ONE YEAR FIVE YEARS YEARS 1998 1997
---- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Interest Rate:
Swaps......................... $472,742 $1,435,793 $2,277,410 $4,185,945 $1,287,527
Swaptions(1).................. 100,000 100,000 100,000
Floors........................ 33,410 797,245 830,655 867,065
-------- ---------- ---------- ---------- ----------
Total......................... $506,152 $2,333,038 $2,277,410 $5,116,600 $2,254,592
======== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) Swaptions obligate the Company to convert certain fixed rate obligations to
floating rate obligations if the option purchaser chooses to exercise. These
amounts do not represent credit exposure.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying value reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Notes receivable: The fair values for notes receivable are estimated
using discounted cash flow analyses, using interest rates currently being
offered for similar loans to borrowers with similar credit ratings.
Investments: It was not practicable to estimate the fair value of most
of the Company's investments in the common and preferred stocks of other
companies because of the lack of a quoted market price and the inability to
estimate fair value without incurring excessive costs due to their short
maturities. The carrying amount of these investments at December 31, 1998
represents the original cost or original cost plus the Company's share of
earnings of the investment. For investments held by the Company that had a
34
<PAGE> 37
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE L -- FINANCIAL INSTRUMENTS (CONTINUED)
quoted market price at December 31, 1998, the Company used such quoted
market price in estimating the fair value of such investments.
Debt financing: The carrying value of the Company's commercial paper
and term debt maturing within one year approximates its fair value. The
fair value of the Company's long-term debt is estimated using discounted
cash flow analyses, based on the Company's spread to U.S. Treasury bonds
for similar debt at year-end.
Off-balance-sheet instruments: Fair values for the Company's
off-balance-sheet instruments are based on pricing models or formulas using
current assumptions (swaps, swaptions and interest rate floors) and the
amount of the guarantee which would not be covered by the fair value of the
underlying collateral (loan guarantees and asset value guarantees).
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------- -------------------------------------
CARRYING CARRYING
AMOUNT OF FAIR VALUE OF AMOUNT OF FAIR VALUE OF
ASSET (LIABILITY) ASSET (LIABILITY) ASSET (LIABILITY) ASSET (LIABILITY)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Cash and cash equivalents............ $ 52,723 $ 52,723 $ 63,754 $ 63,754
Notes receivable..................... 340,344 334,452 467,688 456,592
Investments.......................... 11,771 11,879 18,731 19,056
Debt financing....................... (10,373,242) (10,607,696) (9,051,042) (9,211,790)
Off-balance-sheet financial
instruments:
Swaps........................... (36,260) (36,384) (6,030) 4,386
Swaptions....................... (2,501) -- (2,936) (294)
Interest rate floors............ (1,568) (10,824) (1,927) (2,122)
</TABLE>
35
<PAGE> 38
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------------ ----------------------------- ------------ -------------
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER ACCOUNTS-- DEDUCTIONS-- BALANCE AT
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE(1) END OF PERIOD
----------- ------------ ---------- ---------------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Reserve for overhaul:
Year ended December 31, 1998...... $110,822 $102,508 $60,566 $152,764
Year ended December 31, 1997...... $102,492 $ 99,458 $91,128 $110,822
Year ended December 31, 1996...... 83,857 85,083 783(2) 67,231 102,492
</TABLE>
- ---------------
(1) Reimbursements to lessees for overhauls performed and amounts transferred to
buyers for aircraft sold.
(2) Payments received from lessees in lieu of compliance with return conditions.
36
<PAGE> 39
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.
Dated: March 19, 1999
INTERNATIONAL LEASE FINANCE
CORPORATION
By /s/ LESLIE L. GONDA
------------------------------------
Leslie L. Gonda
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LESLIE L. GONDA Director March 19, 1999
- ------------------------------------------------
Leslie L. Gonda
/s/ STEVEN F. UDVAR-HAZY Chief Executive Officer and March 19, 1999
- ------------------------------------------------ Director
Steven F. Udvar-Hazy
/s/ LOUIS L. GONDA Director March 19, 1999
- ------------------------------------------------
Louis L. Gonda
/s/ M. R. GREENBERG Director March 19, 1999
- ------------------------------------------------
M. R. Greenberg
/s/ EDWARD E. MATTHEWS Director March 19, 1999
- ------------------------------------------------
Edward E. Matthews
/s/ WILLIAM N. DOOLEY Director March 19, 1999
- ------------------------------------------------
William N. Dooley
/s/ HOWARD I. SMITH Director March 19, 1999
- ------------------------------------------------
Howard I. Smith
/s/ ALAN H. LUND Chief Financial Officer and March 19, 1999
- ------------------------------------------------ Chief Accounting Officer
Alan H. Lund
</TABLE>
37
<PAGE> 40
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
Since the Registrant is an indirect wholly owned subsidiary of AIG, no
annual report to security holders for the year ended December 31, 1998 or proxy
statement, form of proxy or other proxy soliciting materials have been sent to
securities holders since January 1, 1990.
38
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
$1,500,000,000 364-Day Revolving Credit Agreement
dated as of
January 15, 1999
among
INTERNATIONAL LEASE FINANCE CORPORATION,
THE BANKS (as defined herein),
CITICORP USA, INC.,
as Administrative Agent,
THE CHASE MANHATTAN BANK,
COMMERZBANK,
SOCIETE GENERALE,
as Co-Syndication Agents,
and
SALOMON SMITH BARNEY, INC.,
as Arranger and Book Manager
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. CERTAIN DEFINITIONS..............................................................1
Section 1.1. Terms Generally.......................................................1
Section 1.2. Specific Terms........................................................1
SECTION 2. BID LOANS AND BID NOTES.........................................................10
Section 2.1. Making of Bid Loans..................................................10
Section 2.2. Procedure for Bid Loans..............................................10
Section 2.3. Funding of Bid Loans.................................................12
Section 2.4. Bid Notes............................................................12
SECTION 3. COMMITTED LOANS AND NOTES.......................................................13
Section 3.1. Agreement to Make Committed Loans....................................13
Section 3.2. Procedure for Committed Loans........................................13
Section 3.3. Maturity of Committed Loans..........................................14
Section 3.4. Committed Notes......................................................14
SECTION 4. INTEREST AND FEES...............................................................15
Section 4.1. Interest Rates.......................................................15
Section 4.2. Interest Payment Dates...............................................15
Section 4.3. Setting and Notice of Committed Loan Rates...........................15
Section 4.4. Facility Fee.........................................................16
Section 4.5. Agent's Fees.........................................................17
Section 4.6. Computation of Interest and Fees.....................................17
SECTION 5. REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS........................17
Section 5.1. Voluntary Termination or Reduction of the Commitments................17
Section 5.2. Voluntary Prepayments................................................17
SECTION 6. MAKING AND PRORATION OF PAYMENTS; SET-OFF; TAXES................................18
Section 6.1. Making of Payments...................................................18
Section 6.2. Pro Rata Treatment; Sharing..........................................18
Section 6.3. Set-off..............................................................19
Section 6.4. Taxes, etc...........................................................19
SECTION 7.INCREASED COSTS AND SPECIAL PROVISIONS FOR ABSOLUTE RATE LOANS AND
LIBOR RATE LOANS.................................................................20
Section 7.1. Increased Costs......................................................20
Section 7.2. Basis for Determining Interest Rate Inadequate or Unfair.............21
Section 7.3. Changes in Law Rendering Certain Loans Unlawful......................22
Section 7.4. Funding Losses.......................................................22
Section 7.5. Discretion of Banks as the Manner of Funding.........................23
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 7.6. Conclusiveness of Statements; Survival of Provisions.................23
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................23
Section 8.1. Organization, etc....................................................23
Section 8.2. Authorization; Consents; No Conflict.................................23
Section 8.3. Validity and Binding Nature..........................................24
Section 8.4. Financial Statements.................................................24
Section 8.5. Litigation and Contingent Liabilities................................24
Section 8.6. Employee Benefit Plans...............................................24
Section 8.7. Investment Company Act...............................................25
Section 8.8. Public Utility Holding Company Act...................................25
Section 8.9. Regulation U.........................................................25
Section 8.10. Information.........................................................25
Section 8.11. Compliance with Applicable-Laws, etc................................25
Section 8.12. Insurance...........................................................25
Section 8.13. Taxes...............................................................25
Section 8.14. Use of Proceeds.....................................................26
Section 8.15. Pari Passu..........................................................26
Section 8.16. Ownership and Liens.................................................26
Section 8.17. Year 2000...........................................................26
SECTION 9. COVENANTS......................................................................26
Section 9.1. Reports, Certificates and Other Information..........................26
Section 9.2. Existence............................................................28
Section 9.3. Nature of Business...................................................28
Section 9.4. Books, Records and Access............................................28
Section 9.5. Insurance............................................................28
Section 9.6. Repair...............................................................28
Section 9.7. Taxes................................................................29
Section 9.8. Compliance...........................................................29
Section 9.9. Sale of Assets.......................................................29
Section 9.10. Consolidated Indebtedness to Consolidated Tangible Net Worth Ratio..29
Section 9.11. Fixed Charge Coverage Ratio.........................................29
Section 9.12. Consolidated Tangible Net--Worth....................................29
Section 9.13. Restricted Payments.................................................29
Section 9.14. Liens...............................................................30
Section 9.15. Leases..............................................................32
Section 9.16. Use of Proceeds.....................................................32
SECTION 10. CONDITIONS TO LENDING.........................................................32
Section 10.1. Conditions Precedent to All Loans...................................32
Section 10.2. Conditions to the Availability of the Commitments...................33
SECTION 11. EVENTS OF DEFAULT AND THEIR EFFECT............................................34
Section 11.1. Events of Default....................................................34
Section 11.2. Effect of Event of Default..........................................36
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 12. THE AGENT...................................................................36
Section 12.1. Authorization........................................................36
Section 12.2. Indemnification......................................................36
Section 12.3. Action on Instructions of the Required Banks.........................37
Section 12.4. Payments.............................................................37
Section 12.5. Exculpation..........................................................38
Section 12.6. Credit Investigation.................................................38
Section 12.7. CUSA and Affiliates..................................................39
Section 12.8. Resignation..........................................................39
SECTION 13. GENERAL.......................................................................39
Section 13.1. Waiver; Amendments..................................................39
Section 13.2. Notices.............................................................40
Section 13.3. Computations........................................................40
Section 13.4. Assignments; Participations.........................................40
Section 13.5. Costs, Expenses and Taxes...........................................43
Section 13.6. Indemnification.....................................................43
Section 13.7. Regulation U........................................................43
Section 13.8. Extension of Termination Dates; Removal of Banks; Substitution of
Banks...............................................................44
Section 13.9. Captions............................................................46
Section 13.10. Governing Law; Severability.........................................46
Section 13.11. Counterparts; Effectiveness.........................................46
Section 13.12. Further Assurances..................................................46
Section 13.13. Successors and Assigns..............................................46
Section 13.14. Waiver of Jury Trial................................................46
</TABLE>
iii
<PAGE> 5
SCHEDULES AND EXHIBITS
Schedule I Schedule of Banks (Sections 1.2 and 13.8)
Schedule II Fees and Margins (Sections 1.2, 4.4, 4.5 and 4.6)
Exhibit A Form of Notice of Competitive Bid Borrowing (Sections 1.2 and
2.2)
Exhibit B Form of Bid (Sections 1.2 and 2.2)
Exhibit C Form of Committed Loan Request (Section 1.2 and 3.2)
Exhibit D Form of Bid Note (Section 1.2 and 2.4)
Exhibit E Form of Committed Note (Section 1.2 and 3.4)
Exhibit F Fixed Charge Coverage Ratio (Sections 1.2 and 9.11)
Exhibit G Form of Opinion of Counsel for the Company (Section 10.2.5)
Exhibit H Form of Opinion of the General Counsel of the Company (Section
10.2.5)
Exhibit I Form of Assignment and Assumption Agreement (Section 13.4.1)
Exhibit J Form of Request for Extension of Termination Date (Section 13.8)
iv
<PAGE> 6
364-DAY REVOLVING CREDIT AGREEMENT
364-DAY REVOLVING CREDIT AGREEMENT (this "Agreement"), dated as
of January 15, 1999, among INTERNATIONAL LEASE FINANCE CORPORATION, a California
corporation (herein called the "Company"), the financial institutions listed on
the signature pages hereof (herein, together with their respective successors
and assigns, collectively called the "Banks" and individually each called a
"Bank") and CITICORP USA, INC. (herein, in its individual corporate capacity,
together with its successors and assigns, called "CUSA"), as agent for the Banks
(herein, in such capacity, together with its successors and assigns in such
capacity, called the "Agent").
W I T N E S S E T H:
WHEREAS, the Company has requested the Banks to lend up to
$1,500,000,000 to the Company on a 364-day revolving basis to enable the Company
to support its commercial paper program and for other general corporate
purposes;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
Section 1.1. Terms Generally. The definitions ascribed to terms
in this Section 1 and elsewhere in this Agreement shall apply equally to both
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The words "hereby", "herein",
"hereof", "hereunder" and words of similar import refer to this Agreement as a
whole (including any exhibits and schedules hereto) and not merely to the
specific section, paragraph or clause in which such word appears. All references
herein to Sections, Exhibits and Schedules shall be deemed references to
Sections of and Exhibits and Schedules to this Agreement unless the context
shall otherwise require.
Section 1.2. Specific Terms. When used herein, the following
terms shall have the following meanings:
"Absolute Rate" means a rate of interest per annum, expressed as
a percentage to four decimal places and set forth in a Bid for a particular Bid
Loan amount and a particular Loan Period.
"Absolute Rate Loan" means any Loan which bears interest at an
Absolute Rate.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such Person. A Person shall be deemed to control another
Person if such first Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through ownership of stock, by contract or otherwise.
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<PAGE> 7
"Agent" - see Preamble.
"Aggregate Commitment" means $1,500,000,000, as reduced by any
reduction in the Commitments made from time to time pursuant to Section 5.1 or
13.8.
"Agreement" - see Preamble.
"AIG" means American International Group, Inc.
"Assignee" - see Section 13.4.1.
"Authorized Officer" of the Company means any of the Chairman of
the Board, the President, the Executive Vice President and Chief Financial
Officer, the Treasurer, the Controller and the Assistant Controller of the
Company.
"Available Commitment" - see Section 2.2(a).
"Bank" - see Preamble.
"Bank Parties" - see Section 13.6.
"Base LIBOR" means, with respect to any Loan Period for a LIBOR
Rate Loan, the rate per annum determined by the Agent to be the arithmetic mean
(rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the
next higher 1/16 of 1%) of the respective rates of interest communicated by the
Reference Banks to the Agent as the rate at which Dollar deposits are offered to
the Reference Banks by leading banks in the London interbank deposit market at
approximately 11:00 a.m., London time, on the second full Business Day preceding
the first day of such Loan Period in an amount substantially equal to the amount
of such LIBOR Rate Loan for such Reference Banks and for a period equal to such
Loan Period.
"Base Rate" means a fluctuating interest rate per annum, as shall
be in effect from time to time, which rate per annum shall be equal to the
higher of (i) the Prime Rate and (ii) one half of one percent per annum above
the Federal Funds Rate.
"Base Rate Loan" means any Loan which bears interest at the Base
Rate.
"Bid" means one or more offers by a Bank to make one or more Bid
Loans, submitted to the Agent by telephone no later than the Submission Deadline
and promptly confirmed in writing on the same day on a duly completed and
executed form substantially similar to Exhibit B, personally delivered or
transmitted by facsimile to the Agent.
"Bid Borrowing" - see Section 2.2(a).
"Bid Loan" means a Loan in Dollars that is an Absolute Rate Loan
or a LIBOR Rate Loan made pursuant to Section 2.
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<PAGE> 8
"Bid Note" means a promissory note of the Company, substantially
in the form of Exhibit D, duly completed, evidencing Bid Loans made to the
Company, as such note may be amended, modified or supplemented or supplanted
pursuant to Section 13.4.1 from time to time.
"Business Day" means any day of the year on which banks are open
for commercial banking business in the City of New York and, if the applicable
Business Day relates to the determination of LIBOR for any LIBOR Rate Loan, any
such Business Day on which dealings in deposits in Dollars are transacted in the
London interbank market.
"Capitalized Lease" means any lease under which any obligations
of the lessee are, or are required to be, capitalized on a balance sheet of the
lessee in accordance with generally accepted accounting principles in the United
States.
"Capitalized Rentals" means, as of the date of any determination,
the amount at which the obligations of the lessee, due and to become due under
all Capitalized Leases under which the Company or any Subsidiary is a lessee,
are reflected as a liability on a consolidated balance sheet of the Company and
its Subsidiaries.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" means the Banks' commitments to make Committed
Loans hereunder; and "Commitment" as to any Bank means the amount set forth
opposite such Bank's name on Schedule I (as reduced in accordance with Section
5.1, or as periodically revised in accordance with Section 13.4 or Section
13.8).
"Committed Loan" means a Loan in Dollars that is a Base Rate Loan
or LIBOR Rate Loan made pursuant to Section 3.
"Committed Loan Request" - see Section 3.2(a).
"Committed Note" means a promissory note of the Company,
substantially in the form of Exhibit E, duly completed, evidencing Committed
Loans to the Company, as such note may be amended, modified or supplemented or
supplanted pursuant to Section 13.4.1 from time to time.
"Company" - see Preamble.
"Consolidated Indebtedness" means, as of the date of any
determination, the total amount of Indebtedness, less the amount of current and
deferred income taxes and rentals received in advance of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles in the United States.
"Consolidated Tangible Net Worth" means, as of the date of any
determination, the total of shareholders' equity (including capital stock,
additional paid-in capital and retained earnings after deducting treasury
stock), less the sum of the total amount of goodwill, organization expenses,
unamortized debt issue costs (determined on an after-tax basis), deferred assets
other than prepaid insurance and prepaid taxes, the excess of cost of shares
acquired over book value of related assets, surplus resulting from any
revaluation write-up of assets subsequent
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<PAGE> 9
to September 30, 1994 and such other assets as are properly classified as
intangible assets, all determined in accordance with generally accepted
accounting principles in the United States consolidating the Company and its
Subsidiaries.
"CUSA" - see Preamble
"Dollar", and $, refer to the lawful money of the United States.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any corporation, trade or business that
is, along with the Company or any Subsidiary, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
sections 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA.
"Eurodollar Reserve Percentage" means for any day in any Loan
Period for any LIBOR Rate Loan that percentage in effect on such day as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor thereto) or other U.S. government agency for determining the reserve
requirement (including, without limitation, any marginal, basic, supplemental or
emergency reserves) for a member bank of the Federal Reserve System in New York
City with deposits exceeding one billion dollars in respect of eurocurrency
funding liabilities. LIBOR shall be adjusted automatically on and as of the
effective date of any change in the Eurodollar Reserve Percentage.
"Event of Default" means any of the events described in Section
11.1.
"Existing Litigation" - see Section 10.1.3.
"FASB 13" means the Statement of Financial Accounting Standards
No. 13 (Accounting for Leases) as in effect on the date hereof.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Board of Governors of the Federal Reserve System
(including any such successor publication, "H.15(519)") for such day opposite
the caption "Federal Funds (Effective)". If on any relevant day such rate is not
yet published in H.15(519), the rate for such day will be the rate set forth in
the daily statistical release designated as the Composite 3:30 p.m. Quotations
for U.S. Government Securities, or any successor publication, published by the
Federal Reserve Bank of New York (including any such successor publication, the
"Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds
Effective Rate". If on any relevant day the appropriate rate for such day is not
yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the
rate for such day will be the arithmetic mean of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m., New York
City time, on such day by each of three leading brokers of Federal funds
transactions in New York City, selected by the Agent. The rate for any day which
is not a Business Day shall be the rate for the immediately preceding Business
Day.
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<PAGE> 10
"Fixed Charge Coverage Ratio" on the last day of any quarter of
any fiscal year of the Company means the ratio for the period of four fiscal
quarters ending on such day of earnings to combined fixed charges and preferred
stock dividends referred to in Paragraph (d)(1)(i) of Item 503 of Regulation S-K
of the Securities and Exchange Commission, as amended from time to time, and
determined pursuant to Paragraphs (d)(2) through (d)(10) of such Item 503 with
the Company as "registrant" (such ratio for the four fiscal quarters ended
September 30, 1996 is attached hereto as Exhibit F); provided, however, that if
the Required Banks in their sole discretion determine that amendments to
Regulation S-K subsequent to the date hereof substantially modify the provisions
of such Item 503, "Fixed Charge Coverage Ratio" shall have the meaning
determined by this definition without regard to any such amendments.
"Funding Date" means the date on which any Loan is scheduled to
be disbursed.
"Funding Office" means, with respect to any Bank, any office or
offices of such Bank or Affiliate or Affiliates of such Bank through which such
Bank shall fund or shall have funded any Loan. A Funding Office may be, at such
Bank's option, either a domestic or foreign office of such Bank or a domestic or
foreign office of an Affiliate of such Bank.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranties" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person (the "Primary
Obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (b) to advance or supply
funds (i) for the purchase or payment of such Indebtedness or obligation or (ii)
to maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (c) to lease property or to purchase securities or other property
or services primarily for the purpose of assuring the owner of such Indebtedness
or obligation of the ability of the Primary Obligor to make payment of the
Indebtedness or obligation or (d) otherwise to assure the owner of the
Indebtedness or obligation of the Primary Obligor against loss in respect
thereof; provided, however, that the obligation described in clause (c) shall
not include (i) obligations of a buyer under an agreement with a seller to
purchase goods or services entered into in the ordinary course of such buyer's
and seller's businesses unless such agreement requires that such buyer make
payment whether or not delivery is ever made of such goods or services and (ii)
remarketing agreements where the remaining debt on an aircraft does not exceed
the aircraft's net book value, determined in accordance with industry standards,
except that clause (c) shall apply to the amount of remaining debt under a
remarketing agreement that exceeds the net book value of the aircraft. For the
purposes of all computations made under this Agreement, a Guaranty in respect of
any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to
the principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any
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<PAGE> 11
dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"Indebtedness" of any Person means and includes all obligations
of such Person which in accordance with generally accepted accounting principles
in the United States shall be classified upon a balance sheet of such Person as
liabilities of such Person, and in any event shall include all:
(a) obligations of such Person for borrowed money or which have
been incurred in connection with the acquisition of property or assets (other
than security and other deposits on flight equipment),
(b) obligations secured by any Lien or other charge upon property
or assets owned by such Person, even though such Person has not assumed or
become liable for the payment of such obligations,
(c) obligations created or arising under any conditional sale, or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property,
(d) Capitalized Rentals of such Person under any Capitalized
Lease,
(e) obligations evidenced by bonds, debentures, notes or other
similar instruments, and
(f) Guaranties by such Person to the extent required pursuant to
the definition thereof.
"Indemnified Liabilities" - see Section 13.6.
"Investment" means any investment, made in cash or by delivery of
any kind of property or asset, in any Person, whether (i) by acquisition of (x)
shares of stock or similar interest, (y) Indebtedness or (z) other obligation or
security or (ii) by loan, advance or capital contribution, or otherwise. For
purposes of this Agreement, Investment shall exclude any notes receivable and
any finance or sales type leases entered into by the Company or any of its
Subsidiaries in the ordinary course of business. The amount of any Investment
shall be the original cost of such Investment plus the cost of all additions
thereto and minus the amount of any portion of such Investment repaid to such
Person in cash as a return of capital, but without any other adjustment for
increases or decreases in value, or write ups, write-downs or write-offs with
respect to such Investment.
"LIBOR" means with respect to any Loan Period the rate per annum
(rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the
next higher 1/16 of 1%), determined pursuant to the following formula:
LIBOR= Base LIBOR
---------------------------------------------
(1 - Eurodollar Reserve Percentage)
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<PAGE> 12
"LIBOR Rate" means (i) with respect to Committed Loans that are
LIBOR Rate Loans, LIBOR plus the applicable rate margin set forth in Schedule II
and (ii) with respect to Bid Loans that are LIBOR Rate Loans, LIBOR plus or
minus the rate margin set forth in a Bid for a particular Bid Loan amount and a
particular Loan Period.
"LIBOR Rate Loan" means any Loan which bears interest at a LIBOR
Rate.
"Lien" means any mortgage, pledge, lien, security interest or
other charge, encumbrance or preferential arrangement, including the retained
security title of a conditional vendor or lessor.
"Litigation Actions" means all litigation, claims and arbitration
proceedings, proceedings before any Governmental Authority or investigations
which are pending or, to the knowledge of the Company, threatened against, or
affecting, the Company or any Subsidiary.
"Loan Period" means (i) with respect to any Absolute Rate Loan,
the period commencing on such Loan's Funding Date and ending not less than 14
days thereafter nor more than 183 days thereafter as specified in the Bid Loan
Request related to such Bid Loan and (ii) with respect to any LIBOR Rate Loan,
the period commencing on such Loan's Funding Date and ending 1, 2, 3 or 6 months
thereafter as selected by the Company pursuant to Section 3.2(a) or specified in
the Notice of Competitive Bid Borrowing, as the case may be; provided, however,
that
(a) if a Loan Period would otherwise end on a day which is not a
Business Day, such Loan Period shall end on the next succeeding Business
Day (unless, in the case of a LIBOR Rate Loan, such next succeeding
Business Day would fall in the next succeeding calendar month, in which
case such Loan Period shall end on the next preceding Business Day);
(b) in the case of a Loan Period for any LIBOR Rate Loan, if
there exists no day numerically corresponding to the day such Loan was
made in the month in which the last day of such Loan Period would
otherwise fall, such Loan Period shall end on the last Business Day of
such month; and
(c) on the date of the making of any Loan by a Bank, the Loan
Period for such Loan shall not extend beyond the then-scheduled
Termination Date for such Bank.
"Loans" means, collectively, the Bid Loans and the Committed
Loans and, individually, any Bid Loan or Committed Loan.
"Material Adverse Effect" means (i) any material adverse effect
on the business, properties, condition (financial or otherwise) or operations,
present or prospective, of the Company and its Subsidiaries, taken as a whole
since any stated reference date or from and after the date of determination, as
the case may be, (ii) any material adverse effect on the ability of the Company
to perform its obligations hereunder and under the Notes or (iii) any material
adverse effect on the legality, validity, binding effect or enforceability of
this Agreement or any Note.
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<PAGE> 13
"Multiemployer Plan" has the meaning assigned to such term in
Section 3(37) of ERISA.
"New Litigation" - see Section 10.1.3.
"Notes" means, collectively, the Bid Notes and the Committed
Notes; and "Note" means any individual Bid Note or Committed Note.
"Notice of Competitive Bid Borrowing" - see Section 2.2(a).
"Notice Office" means the office of CUSA which, as of the date
hereof, is located at 2 Penns Way, Suite 200, New Castle, DE 19720, Attn:
Christian Laughton, Telecopy Number 302-894-6005; Telephone 302-894-6120.
"Operating Lease" means any lease other than a Capitalized Lease;
provided, however, that leases with an original term of less than one year shall
not be Operating Leases.
"Operating Lease Rental" of an Operating Lease means, as of the
date of any determination thereof, the net present value of the aggregate unpaid
amount due at such date and to become due from the Company or any Subsidiary, on
a consolidated basis, as lessee under such Operating Lease discounted at such
lessee's incremental borrowing rate or if the interest rate implicit in such
Operating Lease can be practically determined and is smaller, at such interest
rate, such present value and interest rate being determined in accordance with
standard financial practice and such borrowing rate being determined in
accordance with FASB 13, excluding from such aggregate amount all amounts which
are in excess of the minimum aggregate unpaid amount due at such date and to
become due from such lessee under such Operating Lease assuming that such lessee
would take or fail to take all actions with respect to all termination, renewal,
purchase and other options as would produce the least amount becoming due under
such Operating Lease, and "Operating Lease Rentals" means, as of the date of any
determination, the aggregate Operating Lease Rental of all Operating Leases as
of such date.
"Participant" - see Section 13.4.2.
"Payment Office" means the office of the Agent which, as of the
date hereof, is at 2 Penns Way, Suite 200, New Castle, DE 19720, Account Number:
36852248, Attn: Christian Laughton.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Percentage" means as to any Bank the ratio, expressed as a
percentage, that such Bank's Commitment as set forth opposite such Bank's name
on Schedule I, as periodically revised in accordance with Section 13.4 or 13.8,
bears to the Aggregate Commitment or, if the Commitments have been terminated,
the ratio, expressed as a percentage, that the aggregate principal amount of
such Bank's outstanding Loans bears to the aggregate principal amount of all
outstanding Loans.
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<PAGE> 14
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.
"Plan" means, at any date, any employee pension benefit plan (as
defined in section 3(2) of ERISA) which is subject to Title IV of ERISA (other
than a Multiemployer Plan) and to which the Company or any ERISA Affiliate may
have any liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
"Prime Rate" means the rate of interest publicly announced from
time to time by Citibank, N.A. as its prime commercial lending rate.
"Reference Banks" means Citibank, N.A., Commerzbank and Societe
Generale.
"Reportable Event" has the meaning assigned to such term in
section 4043 of ERISA.
"Required Banks" means Banks having an aggregate Percentage of
51% or more.
"Significant Subsidiary" means any Subsidiary which is so defined
pursuant to Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission.
"Submission Deadline" - see Section 2.2(b).
"Subsidiary" means any Person of which or in which the Company
and its other Subsidiaries own directly or indirectly 50% or more of:
(a) the combined voting power of all classes of stock having
general voting power under ordinary circumstances to elect a majority of
the board of directors of such Person, if it is a corporation,
(b) the capital interest or profits interest of such Person, if
it is a partnership, joint venture or similar entity, or
(c) the beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.
"Successor Bank" - see Section 13.8(c).
"Taxes" with respect to any Person means income, excise and other
taxes, and all assessments, imposts, duties and other governmental charges or
levies, imposed upon such Person, its income or any of its properties,
franchises or assets by any Governmental Authority.
"Terminating Bank" - see Section 13.8(c).
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<PAGE> 15
"Termination Date" means, with respect to any Bank, the earliest
to occur of (i) January 14, 2000 or such later date as may be agreed to by such
Bank pursuant to Section 13.8(a), or if such day is not a Business Day, the next
preceding Business Day, (ii) the date on which the Commitments shall terminate
pursuant to Section 11.2 or the Commitments shall be reduced to zero pursuant to
Section 5.1 and (iii) the date specified as such Bank's Termination Date
pursuant to Section 13.8(b), or, if such day is not a Business Day, the next
preceding Business Day; in all cases, subject to the provisions of Section
13.8(d).
"Unmatured Event of Default" means any event which if it
continues uncured will, with lapse of time or notice or lapse of time and
notice, constitute an Event of Default.
"Wholly-owned Subsidiary" means any Person of which or in which
the Company and its other Wholly-owned Subsidiaries own directly or indirectly
100% of:
(a) the issued and outstanding shares of stock (except shares
required as directors, qualifying shares),
(b) the capital interest or profits interest of such Person, if
it is a partnership, joint venture or similar entity, or
(c) the beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.
SECTION 2. BID LOANS AND BID NOTES.
Section 2.1. Making of Bid Loans. On the terms and subject to the
conditions of this Agreement, each Bank, severally and for itself alone, may
(but is not obligated to) make Bid Loans to the Company from time to time on or
after the date hereof and prior to the date which is the fourteenth day
preceding such Bank's Termination Date in amounts equal to such Bank's Bids that
have been accepted as provided in Section 2.2(c); provided, that the aggregate
principal amount of all outstanding Loans shall not at any time exceed the then
Aggregate Commitment.
Section 2.2. Procedure for Bid Loans.
(a) Bid Loan Request. Whenever the Company desires to incur a
competitive bid borrowing (a "Bid Borrowing"), it shall give the Agent written
notice (or telephonic notice promptly confirmed in writing), such notice to be
delivered to the Agent at its Notice Office no later than 12:00 Noon (New York
City time), at least three Business Days prior to any proposed LIBOR Rate Loan
and at least one Business Day prior to any proposed Absolute Rate Loan. Each
such notice shall be substantially in the form of Exhibit A hereto (each a
"Notice of Competitive Bid Borrowing"), and shall specify in each case (i) the
date of such proposed Bid Borrowing (which shall be a Business Day), (ii) the
aggregate amount of the proposed Bid Borrowing, (iii) whether the proposed Bid
Borrowing is to be an Absolute Rate Loan or a LIBOR Rate Loan and the Loan
Period, (iv) the maturity date for repayment of each Bid Loan to be made as part
of such borrowing (which maturity date shall not be earlier than one month after
the date of any proposed LIBOR Rate Loan or 14 days after the date of any
proposed Absolute Rate Loan or later than the earliest to occur of (x) six
months after the date of such proposed Bid Loan, (y) the Termination Date and
(z) if the proposed Bid Loan has an interest rate that is the
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<PAGE> 16
LIBOR Rate, the last day of the proposed Loan Period), (v) the interest payment
date or dates relating thereto, (vi) the account of the Company to which the
proceeds of such Bid Borrowing are to be credited and (vii) any other terms to
be applicable to such Bid Borrowing. The Agent shall promptly give each Bank
written notice (or telephonic notice promptly confirmed in writing) of each such
request for a Bid Borrowing received by it from the Company. Each Notice of
Competitive Bid Borrowing shall contemplate Bid Loans in a minimum aggregate
principal amount of $10,000,000 or a higher integral multiple of $1,000,000, not
to exceed, however, the excess of the then Aggregate Commitment over the
aggregate principal amount of all outstanding Loans, calculated as of the
relevant Funding Date, assuming that the Company will pay, when due, all Loans
maturing on or prior to such Funding Date (the "Available Commitment").
(b) Bidding Procedure. Each Bank shall, if in its sole discretion
it elects to do so, irrevocably offer to make one or more Bid Loans to the
Company as part of such proposed Bid Borrowing at a rate or rates of interest
specified by such Bank in its sole discretion and determined by such Bank
independently of each other Bank, by notifying by telephone confirmed in writing
to the Agent at its Notice office (which shall give prompt notice thereof to the
Company), before 10:00 a.m. (New York City time) on the date (the "Submission
Deadline") that is (x) in the case of a proposed Absolute Rate Loan, the same
day as the date of such proposed Bid Loan and (y) in the case of a proposed
LIBOR Rate Loan, two Business Days before the date of such proposed Bid Loan.
Each Bid shall be substantially in the form of Exhibit B (each a "Bid"), and
shall specify in each case (i) the Loan Period, (ii) the minimum amount and
maximum amount of each Bid Loan that such Bank would be willing to make as part
of such proposed Bid Borrowing (which amounts may, subject to the proviso in
Section 2.1, exceed such Bank's Commitment), (iii) the rate or rates of interest
therefor and (iv) such Bank's lending office with respect to such Bid Loan;
provided, that if the Agent in its capacity as a Bank shall, in its sole
discretion, elect to make any such offer, it shall notify the Company of such
offer before 8:30 a.m. (New York City time) on the Submission Deadline.
(c) Acceptance of Bids. The Company shall, in turn, before 10:30
a.m. (New York City time) on the Submission Deadline, either:
(i) cancel such proposed Bid Borrowing by giving the Agent notice
to that effect, or
(ii) accept (such acceptance to be irrevocable) one or more of
the offers made by any Bank or Banks pursuant to clause (b) above by
giving notice (in writing or by telephone confirmed in writing) to the
Agent of the amount of each Bid Loan (which amount shall be equal to or
greater than the minimum amount, and equal to or less than the maximum
amount, notified to the Company by the Agent on behalf of such Bank for
such Bid Borrowing pursuant to clause (b) above) to be made by such Bank
as part of such Bid Borrowing, and reject any remaining offers made by
any Bank pursuant to clause (b) above by giving the Agent notice to that
effect; provided, that for any maturity date acceptance of offers may
only be made on the basis of ascending Absolute Rates (in the case of an
Absolute Rate Loan) or floating rates (in the case of a LIBOR Rate
Loan), in each case commencing with the lowest rate so offered and only
as to offers made in conformity with the terms hereof; provided,
further, however, if offers are made by two
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<PAGE> 17
or more Banks at the same rate or rates and acceptance of all such equal
offers would result in a greater principal amount of Bid Loans being
accepted than the aggregate principal amount requested by the Company,
the Company shall have the right to accept one or more of such equal
offers in their entirety and reject the other equal offer or offers or
to allocate acceptance among all such equal offers (but giving effect to
the minimum and maximum amounts specified for each such offer pursuant
to clause (b) above), as the Company may elect in its sole discretion.
The Company may not accept offers whose aggregate principal amount is
greater than the requested aggregate amount as specified in the related
Notice of Competitive Bid Borrowing, subject to the proviso in Section
2.1.
(d) Cancellation of Bid Borrowing. If the Company notifies the
Agent that such proposed Bid Borrowing is cancelled pursuant to clause (c)(i)
above, the Agent shall give prompt notice thereof to the Banks and such Bid
Borrowing shall not be made.
(e) Notification of Acceptance. If the Company accepts one or
more of the offers made by any Bank or Banks pursuant to clause (c)(ii) above,
the Agent shall in turn promptly notify (x) each Bank that has made an offer as
described in clause (b) above, of the date and aggregate amount of such Bid
Borrowing and whether or not any offer or offers made by such Bank pursuant to
clause (b) above have been accepted by the Company and (y) each Bank that is to
make a Bid Loan as part of such Bid Borrowing, of the amount of each Bid Loan to
be made by such Bank as part of such Bid Borrowing.
(f) Reliance. The Agent may rely and act upon notice given by
telephone by individuals reasonably believed by the Agent to be those designated
to the Agent by the Company or by any Bank in writing from time to time, without
waiting for receipt of written confirmation thereof, and the Company hereby
agrees to indemnify and hold harmless the Agent from and against any and all
losses, costs, expenses, damages, claims, actions or other proceedings relating
to such reliance.
Section 2.3. Funding of Bid Loans. No later than 1:00 p.m. (New
York City time) on the date specified in each Notice of Competitive Bid
Borrowing, each Bank will make available the Bid Loan, if any, to be made by
such Bank as part of the Bid Borrowing requested to be made on such date in the
manner provided below. All amounts shall be made available to the Agent in
Dollars and immediately available funds at the Payment Office of the Agent and
the Agent promptly will make available to the Company at its account specified
in the relevant Notice of Competitive Bid Borrowing the aggregate of the amounts
so made available in the type of funds received. Unless the Agent shall have
been notified by any Bank which has submitted a bid pursuant to Section 2.2(b)
prior to the date of the proposed Bid Borrowing that such Bank does not intend
to make available to the Agent its portion, if any, of the Bid Borrowing to be
made on such date, the Agent may assume that such Bank has made such amount
available to the Agent on such date of the Bid Borrowing, and the Agent, in
reliance upon such assumption, may (in its sole discretion and without any
obligation to do so) make available to the Company a corresponding amount.
Section 2.4. Bid Notes. The Bid Loans of each Bank shall be
evidenced by a Bid Note payable to the order of such Bank in the original
principal amount of the Aggregate Commitment. Each Bank shall record in its
records, or at its option on the schedule attached to
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its Bid Note, the date and amount of each Bid Loan made by such Bank, each
repayment thereof, and the dates on which the Loan Period for such Loan shall
begin and end. The aggregate unpaid principal amount so recorded shall be
refutable presumptive evidence of the principal amount owing and unpaid on such
Note. The failure to so record or any error in so recording any such amount or
any payment thereof shall not, however, limit or otherwise affect the
obligations of the Company hereunder or under such Bid Note to repay the
principal amount of each Bid Loan together with all interest accruing thereon.
SECTION 3. COMMITTED LOANS AND NOTES.
Section 3.1. Agreement to Make Committed Loans. On the terms and
subject to the conditions of this Agreement, each Bank, severally and for itself
alone, agrees to make Loans (herein collectively called "Committed Loans" and
individually each called a "Committed Loan") on a revolving basis from time to
time from the date hereof until such Bank's Termination Date in such Bank's
Percentage of such aggregate amounts as the Company may from time to time
request as provided in Section 3.2; provided, that (a) the aggregate principal
amount of all outstanding Committed Loans of any Bank shall not at any time
exceed the amount set forth opposite such Bank's name on Schedule I (as reduced
in accordance with Section 5.1, 13.4 or 13.8) and (b) the aggregate principal
amount of all outstanding Committed Loans of all Banks plus the aggregate
principal amount of all outstanding Bid Loans of all Banks shall not at any time
exceed the then Aggregate Commitment. Within the limits of this Section 3.1, the
Company may from time to time borrow, prepay and reborrow Committed Loans on the
terms and conditions set forth in this Agreement.
Section 3.2. Procedure for Committed Loans.
(a) Committed Loan Requests. The Company shall give the Agent
irrevocable telephonic notice at the Notice Office (promptly confirmed in
writing on the same day), not later than 10:30 a.m., New York City time, (i) at
least three Business Days prior to the Funding Date in the case of LIBOR Rate
Loans or (ii) on the Funding Date in the case of Base Rate Loans, of each
requested Committed Loan, and the Agent shall promptly advise each Bank thereof
and, in the case of a LIBOR Rate Loan, request each Reference Bank to notify the
Agent of its applicable rate (as contemplated in the definition of Base LIBOR).
Each such notice to the Agent (a "Committed Loan Request") shall be
substantially in the form of Exhibit C and shall specify (i) the Funding Date
(which shall be a Business Day), (ii) the aggregate amount of the Loans
requested (in an amount permitted under clause (b) below), (iii) whether each
Loan shall be a LIBOR Rate Loan or a Base Rate Loan and (iv) if a LIBOR Rate
Loan, the Loan Period therefor (subject to the limitations set forth in the
definition of Loan Period).
(b) Amount and Increments of Committed Loans. Each Committed Loan
Request shall contemplate Committed Loans in a minimum aggregate amount of
$10,000,000 or a higher integral multiple of $1,000,000, not to exceed in the
aggregate (for all requested Committed Loans) the Available Commitment.
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(c) Funding of Committed Loans.
(i) Not later than 1:30 p.m., New York City time, on the Funding
Date of a Committed Loan, each Bank shall, subject to this Section 3.2(c),
provide the Agent at its Notice Office with immediately available funds covering
such Bank's Committed Loan (provided, that a Bank's obligation to provide funds
to the Agent shall be deemed satisfied by such Bank's delivery to the Agent at
its Notice Office not later than 1:30 p.m., New York City time, of a federal
reserve wire confirmation number covering the proceeds of such Bank's Committed
Loan) and the Agent shall pay over such funds to the Company not later than 2:00
p.m., New York City time, on such day if the Agent shall have received the
documents required under Section 10 with respect to such Loan and the other
conditions precedent to the making of such Loan shall have been satisfied not
later than 10:00 a.m., New York City time, on such day. If the Agent does not
receive such documents or such other conditions precedent have not been
satisfied prior to such time, then (A) the Agent shall not pay over such funds
to the Company, (B) the Company's Committed Loan Request related to such Loan
shall be deemed cancelled in its entirety, (C) in the case of Committed Loan
Requests relative to LIBOR Rate Loans, the Company shall be liable to each Bank
in accordance with Section 7.4(b) and (D) the Agent shall return the amount
previously provided to the Agent by each Bank on the next following Business
Day.
(ii) The Company agrees, notwithstanding its previous delivery of
any documents required under Section 10 with respect to a particular Loan,
immediately to notify the Agent of any failure by it to satisfy the conditions
precedent to the making of such Loan. The Agent shall be entitled to assume,
after it has received each of the documents required under Section 10 with
respect to a particular Loan, that each of the conditions precedent to the
making of such Loan has been satisfied absent actual knowledge to the contrary
received by the Agent prior to the time of the receipt of such documents. Unless
the Agent shall have notified the Banks prior to 10:30 a.m., New York City time,
on the Funding Date of any Loan that the Agent has actual knowledge that the
conditions precedent to the making of such Loan have not been satisfied, the
Banks shall be entitled to assume that such conditions precedent have been
satisfied.
(d) Repayment of Loans. If any Bank is to make a Committed Loan
hereunder on a day on which the Company is to repay (or has elected to prepay,
pursuant to Section 5.2) all or any part of any outstanding Loan held by such
Bank, the proceeds of such new Committed Loan shall be applied to make such
repayment and only an amount equal to the positive difference, if any, between
the amount being borrowed and the amount being repaid shall be requested by the
Agent to be made available by such Bank to the Agent as provided in Section
3.2(c).
Section 3.3. Maturity of Committed Loans. Except for a Base Rate
Loan, which shall mature on the Termination Date, a Committed Loan made by a
Bank shall mature on the last day of the Loan Period applicable to such
Committed Loan, but in no event later than the Termination Date for such Bank.
Section 3.4. Committed Notes. The Committed Loans of each Bank
shall be evidenced by a Committed Note payable to the order of such Bank in the
original principal amount of such Bank's Commitment. Each Bank shall record in
its records, or at its option on
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the schedule attached to its Committed Note, the date and amount of each Loan
made by such Bank thereunder, each repayment or prepayment thereof, and, if
applicable, the dates on which the Loan Period for such Loan shall begin and
end. The aggregate unpaid principal amount so recorded shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on such Note. The
failure to so record or any error in so recording any such amount or any payment
thereof shall not, however, limit or otherwise affect the obligations of the
Company hereunder or under such Committed Note to repay the principal amount of
each Committed Loan together with all interest accruing thereon.
SECTION 4. INTEREST AND FEES.
Section 4.1. Interest Rates. The Company hereby promises to pay
interest on the unpaid principal amount of each Loan for the period commencing
on the Funding Date until such Loan is paid in full, as follows:
(a) if such Loan is a Bid Loan, at a rate per annum equal to the
Absolute Rate or the LIBOR Rate, as applicable, offered by the applicable Bank
and accepted by the Company for such Bid Loan;
(b) if such Loan is a Base Rate Loan, at a rate per annum equal
to the Base Rate from time to time in effect; and
(c) if such Loan is a Committed Loan that is a LIBOR Rate Loan,
at a rate per annum equal to the LIBOR Rate applicable to the Loan Period for
such Loan;
provided, however, that after the maturity of any Loan (whether by acceleration
or otherwise), such Loan shall bear interest on the unpaid principal amount
thereof at a rate per annum (calculated on the basis of a 360-day year for the
actual number of days involved) equal to the Base Rate from time to time in
effect (but not less than the interest rate in effect for such Loan immediately
prior to maturity) plus 1% per annum.
Section 4.2. Interest Payment Dates. Except for Base Rate Loans,
as to which accrued interest shall be payable on the last day of each calendar
quarter and on the Termination Date, accrued interest on each Loan shall be
payable in arrears on the last day of the Loan Period therefor and (i) with
respect to each LIBOR Rate Loan with a Loan Period of six months, on the day
that is three months after the first day of such Loan Period (or, if there is no
day in such third month numerically corresponding to such first day of the Loan
Period, on the last Business Day of such month) and (ii) with respect to each
Absolute Rate Loan with a Loan Period exceeding 90 days, on the day that is 90
days after the first day of such Loan Period. After the maturity of any Loan,
accrued interest on such Loan shall be payable on demand. If any interest
payment date falls on a day that is not a Business Day, such interest payment
date shall be postponed to the next succeeding Business Day and the interest
paid shall cover the period of postponement (except that if the Loan is a LIBOR
Rate Loan and the next succeeding Business Day falls in the next succeeding
calendar month, such interest payment date shall be the immediately preceding
Business Day).
Section 4.3. Setting and Notice of Committed Loan Rates. The
applicable interest rate for each Committed Loan hereunder shall be determined
by the Agent and notice
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thereof shall be given by the Agent promptly to the Company and to each Bank.
Each determination of the applicable interest rate by the Agent shall be
conclusive and binding upon the parties hereto in the absence of demonstrable
error.
In the case of LIBOR Rate Loans, each Reference Bank agrees to
use its best efforts to notify the Agent in a timely fashion of its applicable
rate after the Agent's request therefor under Section 2.2(a) and Section 3.2(a)
(as contemplated in the definition of Base LIBOR). If as to any Loan Period any
one or more of the Reference Banks is unable or for any reason fails to notify
the Agent of its applicable rate by 11:30 a.m., New York City time, two Business
Days before the Funding Date, then the applicable LIBOR Rate shall be determined
on the basis of the rate or rates of which the Agent is given notice by the
remaining Reference Bank or Banks by such time. If none of the Reference Banks
notifies the Agent of the applicable rate prior to 11:30 a.m., New York City
time, two Business Days before the Funding Date, then (i) the Agent shall
promptly notify the other parties thereof and (ii) at the option of the Company
the Committed Loan Request delivered by the Company pursuant to Section 3.2(a)
with respect to such Funding Date shall be cancelled or shall be deemed to have
specified a Base Rate Loan.
The Agent shall, upon written request of the Company or any Bank,
deliver to the Company or such Bank a statement showing the computations used by
the Agent in determining the interest rate applicable to any LIBOR Rate Loan.
Section 4.4. Facility Fee. The Company agrees to pay to the Agent
for the accounts of the Banks pro rata in accordance with their respective
Percentages an annual facility fee computed by multiplying the average daily
amount of the Aggregate Commitment (whether used or unused) by the applicable
percentage determined with respect to such facility fee in accordance with
Schedule II hereto. Such fee shall be payable quarterly in arrears on the last
Business Day of March, June, September and December of each year (beginning with
the last Business Day of March, 1999) until the Commitments have expired or have
been terminated and on the date of such expiration or termination (and, in the
case of any Terminating Bank, such Bank's Termination Date), in each case for
the period then ending for which such facility fee has not previously been paid.
Section 4.5. Utilization Fee. The Company agrees to pay to the
Agent for the accounts of the Banks pro rata in accordance with their respective
Percentages, (i) during any period that the aggregate outstanding principal
amount of the Loans exceeds 33.33% of the Aggregate Commitment, a utilization
fee computed by multiplying the average daily amount of the Aggregate Commitment
by the applicable percentage determined with respect to such utilization fee in
accordance with Schedule II hereto and (ii) during any period that the aggregate
outstanding principal amount of the Loans exceeds 66.66% of the Aggregate
Commitment, a utilization fee computed by multiplying the average daily amount
of the Aggregate Commitment by the applicable percentage determined with respect
to such utilization fee in accordance with Schedule II hereto; provided, that in
calculating the aggregate outstanding principal amount of the Loans for purposes
of this Section 4.5 only, the aggregate outstanding principal amount of the
Loans shall not include the first $300,000,000 of the aggregate outstanding
principal amount of Bid Loans. Accrued utilization fees shall be due and payable
on each date that interest is payable on each such Loan.
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Section 4.6. Agent's Fees. The Company agrees promptly to pay to
the Agent such fees as may be agreed from time to time by the Company and the
Agent.
Section 4.7. Computation of Interest and Fees. Interest on LIBOR
Rate Loans and where the Base Rate is calculated in reference to the Federal
Funds Rate, and facility and utilization fees shall be computed for the actual
number of days elapsed on the basis of a 360-day year; and interest on Base Rate
Loans where the Base Rate is calculated in reference to the Prime Rate shall be
computed for the actual number of days elapsed on the basis of a 365/366 day
year, as the case may be. The interest rate applicable to each LIBOR Rate Loan
and Base Rate Loan, and (to the extent applicable) after the maturity of any
other type of Loan, the interest rate applicable to such Loan, shall change
simultaneously with each change in the LIBOR Rate or the Base Rate, as
applicable.
SECTION 5. REDUCTION OR TERMINATION OF THE COMMITMENTS;
REPAYMENT; PREPAYMENTS.
Section 5.1. Voluntary Termination or Reduction of the
Commitments. The Company may at any time on at least 5 days' prior irrevocable
notice received by the Agent (which shall promptly on the same day or on the
next Business Day advise each Bank thereof) permanently reduce the amount of the
Commitments (such reduction to be pro rata among the Banks according to their
respective Percentages) to an amount not less than the aggregate principal
amount of all outstanding Loans. Any such reduction shall be in the amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof. Concurrently
with any such reduction, the Company shall prepay the principal of any Committed
Loans outstanding to the extent that the aggregate amount of such Loans
outstanding shall then exceed the Aggregate Commitment, as so reduced. The
Company may from time to time on like irrevocable notice terminate the
Commitments upon payment in full of all Loans, all interest accrued thereon, all
fees and all other obligations of the Company hereunder; provided, however, that
the Company may not at any time terminate the Commitments if any Bid Loan is
outstanding (unless the holder of each such outstanding Bid Loan has given its
prior written consent to the concurrent repayment of such Bid Loan).
Section 5.2. Voluntary Prepayments. The Company may voluntarily
prepay Loans (other than Bid Loans, which may only be prepaid with the prior
written consent of the holder thereof) without premium or penalty, except as may
be required pursuant to subsection (e) below, in whole or in part; provided,
that (a) each prepayment shall be in an aggregate principal amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof, (b) except
for the prepayment of the aggregate amount of all Loans outstanding, no such
prepayment shall result in there being less than $10,000,000 in Loans
outstanding in the aggregate, (c) the Company shall give the Agent at its Notice
Office (which shall promptly advise each Bank) not less than three Business
Days' prior notice thereof specifying the Loans to be prepaid and the date and
amount of prepayment, (d) any prepayment of principal of any Loan shall include
accrued interest to the date of prepayment on the principal amount being prepaid
and (e) any prepayment of a LIBOR Rate Loan shall be subject to the provisions
of Section 7.4.
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SECTION 6. MAKING AND PRORATION OF PAYMENTS; SET-OFF; TAXES.
Section 6.1. Making of Payments. Except as provided in Section
3.2(d), payments (including those made pursuant to Sections 5.1) of principal
of, or interest on, the Loans and all payments of fees shall be made by the
Company to the Agent in immediately available funds at its Payment Office not
later than 12:00 Noon, New York City time, on the date due; and funds received
after that hour shall be deemed to have been received by the Agent on the next
following Business Day. The Agent shall promptly remit to each Bank or other
holder of a Note its share (if any) of each such payment. All payments under
Section 7 shall be made by the Company directly to the Persons entitled thereto.
Section 6.2. Pro Rata Treatment; Sharing.
(a) Except as required pursuant to Section 7 or Section 13.8,
each payment or prepayment of principal of any Committed Loans, each payment of
interest on the Committed Loans, and each payment of the facility fee shall be
allocated pro rata among the Banks in accordance with their respective
Percentages. Each payment of principal of any Bid Borrowing shall be allocated
pro rata among the Banks participating in such Bid Borrowing in accordance with
the respective principal amounts of their outstanding Bid Loans comprising such
Bid Borrowing. Each payment of interest on any Bid Borrowing shall be allocated
pro rata among the Banks participating in such Bid Borrowing in accordance with
the respective amounts of accrued and unpaid interest on their outstanding Bid
Loans comprising such Bid Borrowing.
(b) If any Bank or other holder of a Committed Loan shall obtain
any payment or other recovery (whether voluntary, involuntary, by application of
offset or otherwise) on account of principal of, interest on or fees or other
amounts with respect to any Committed Loan in excess of the share of payments
and other recoveries (exclusive of payments or recoveries under Section 7 or
pursuant to Section 13.8) such Bank or other holder would have received if such
payment had been distributed pursuant to the provisions of Section 6.2(a), such
Bank or other holder shall purchase from the other Banks or holders, in a manner
to be specified by the Agent, such participations in the Committed Loans held by
them as shall be necessary so that all such payments of principal and interest
with respect to the Committed Loans shall be shared by the Banks and other
holders pro rata in accordance with their respective Percentages; provided,
however, that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Bank or holder, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
(c) If any Bank or other holder of a Bid Loan shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
offset or otherwise) on account of principal of, interest on or fees or other
amounts with respect to any Bid Loan in excess of the share of payments and
other recoveries (exclusive of payments or recoveries pursuant to Section 7 or
Section 13.8, such Bank or other holder would have received if such payment had
been distributed pursuant to the provisions of Section 6.2(a), such Bank or
other holder shall purchase from the other Banks or holders participating in
such Bid Borrowing, in a manner to be specified by the Agent, such
participations in the Bid Loans held by them as shall be necessary so that all
such payments of principal and interest with respect to the Bid Loans shall be
shared by the
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Banks and other holders participating in such Bid Borrowing in a manner
consistent with Section 6.2(a); provided, however, that if all or any portion of
the excess payment or other recovery is thereafter recovered from such
purchasing Bank or holder, the purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
Section 6.3. Set-off. The Company agrees that the Agent, each
holder of a Note, each Assignee and each Participant has all rights of set-off
and bankers' lien provided by applicable law, and the Company further agrees
that at any time (i) any amount owing by the Company under this Agreement is due
to any such Person or (ii) any Event of Default exists, each such Person may
apply to the payment of any amount payable hereunder any and all balances,
credits, deposits, accounts or moneys of the Company then or thereafter with
such Person.
Section 6.4. Taxes, etc. (a) All payments made by the Company to
the Agent, any Bank, any Assignee or any Participant under this Agreement and
the Notes shall be made without any set-off or counterclaim, and free and clear
of and without deduction for or on account of any present or future Taxes now or
hereafter imposed (except to the extent that such withholding or deduction is
compelled by law or results from the breach, by the recipient of a payment, of
its agreement contained in Section 6.4(b) or would not be required if the
representation or warranty contained in Section 6.4(b) were true), excluding any
Taxes generally assessed on the overall net income of the Agent, any Bank, any
Assignee or any Participant, as the case may be, by the government or other
authority of the country in which the Agent, such Bank, such Assignee or such
Participant is incorporated or in which its Funding Office or the office through
which it is acting is located. If the Company is compelled by law to make any
such deductions or withholdings it will:
(i) pay to the relevant authorities the full amount required to
be so withheld or deducted,
(ii) except to the extent that such withholding or deduction
results from the breach by the recipient of a payment of its agreement
contained in Section 6.4(b) or would not be required if the
representation or warranty contained in Section 6.4(b) were true, pay
such additional amounts as may be necessary in order that the net amount
received by the Agent, each Bank, each Assignee and each Participant
after such deductions or withholdings (including any required deduction
or withholding on such additional amounts) shall equal the amount such
payee would have received had no such deductions or withholdings been
made, and
(iii) promptly forward to the Agent (for delivery to such payee)
an official receipt or other documentation satisfactory to the Agent
evidencing such payment to such authorities.
Moreover, if any Taxes are directly asserted against the Agent,
any Bank, any Assignee or any Participant, such payee may pay such Taxes and the
Company shall promptly pay such additional amount (including, without
limitation, any penalties, interest or expenses) as may be necessary in order
that the net amount received by such payee after the payment of such Taxes
(including any Taxes on such additional amount) shall equal the amount such
payee would
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have received had no such Taxes been asserted (provided, that the Agent, the
Banks, and any Assignee or Participant shall use reasonable efforts, to the
extent consistent with applicable laws and regulations, to minimize to the
extent possible any such Taxes if they can do so without material cost or legal
or regulatory disadvantage). For purposes of this Section 6.4, a distribution
hereunder by the Agent or any Bank to or for the account of any Bank, Assignee
or Participant shall be deemed to be a payment by the Company. The Company's
agreement under this Section 6.4 shall survive repayment of the Loans,
cancellation of the Notes or any termination of this Agreement.
(b) In consideration of, and as a condition to, the Company's
undertakings in Section 6.4(a), each Bank (other than a Bank that is organized
and existing under the laws of the United States of America or any State
thereof) agrees to execute and deliver to the Agent at its Payment Office for
delivery to the Company, before the first scheduled payment date in each year,
two United States Internal Revenue Service Forms 1001 or 4224, or any successor
forms, as appropriate, properly completed and claiming complete exemption from
withholding and deduction of United States federal Taxes. Each Bank represents
and warrants to the Company that, at the date of this Agreement, or at the time
such Bank becomes a Bank hereunder pursuant to Section 13.4.1, its Funding
Office is entitled to receive payments of principal and interest hereunder
without deduction for or on account of any Taxes imposed by the United States or
any political subdivision thereof.
SECTION 7. INCREASED COSTS AND SPECIAL PROVISIONS FOR ABSOLUTE
RATE LOANS AND LIBOR RATE LOANS.
Section 7.1. Increased Costs. (a) If (i) Regulation D of the
Board of Governors of the Federal Reserve System or (ii) after the date hereof,
the adoption of any applicable law, rule or 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 (or any
Funding Office of such Bank) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency,
(A) shall subject any Bank (or any Funding Office of such Bank)
to any tax, duty or other charge with respect to its LIBOR Rate Loans,
its Notes or its obligation to make LIBOR Rate Loans, or shall change
the basis of taxation of payments to any Bank (or any Funding Office of
such Bank) of the principal of or interest on its LIBOR Rate Loans or
any other amounts due under this Agreement in respect of its LIBOR Rate
Loans or its obligation to make LIBOR Rate Loans (except for changes in
the rate of tax on the overall net income of such Bank or its Funding
Office imposed by any Governmental Authority of the country in which
such Bank is incorporated or in which such Bank's Funding Office is
located);
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
Governors of the Federal Reserve System, but excluding any reserve
included in the determination of additional interest pursuant to Section
4.1), special deposit, assessment (including any assessment for
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insurance of deposits) or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Bank (or
any Funding Office of such Bank); or
(C) shall impose on any Bank (or any Funding Office of such Bank)
any other condition affecting its LIBOR Rate Loans, its Notes or its
obligation to make or maintain LIBOR Rate Loans;
and the result of any of the foregoing is to increase the cost to (or to impose
an additional cost on) such Bank (or any Funding Office of such Bank) of making
or maintaining any LIBOR Rate Loan, or to reduce the amount of any sum received
or receivable by such Bank (or such Bank's Funding Office) under this Agreement
or under its Notes with respect thereto, then within 10 days after demand by
such Bank (which demand shall be accompanied by a statement setting forth the
basis of such demand), the Company shall pay directly to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or such reduction (without duplication of any amounts which have been
reimbursed pursuant to Section 6.4).
(b) If, after the date hereof, any Bank shall determine that the
adoption, effectiveness or phase-in of any applicable law, rule, guideline or
regulation regarding capital adequacy, 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 (or any Funding Office of such
Bank or any Person controlling such Bank) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the capital of such Bank or any Person
controlling such Bank as a consequence of its obligations hereunder to a level
below that which such Bank or such controlling Person could have achieved but
for such adoption, change or compliance (taking into consideration such Bank's
or such controlling Person's policies with respect to capital adequacy), then,
from time to time, within 10 days after demand by such Bank (which demand shall
be accompanied by a statement setting forth the basis of such demand), the
Company shall pay directly to such Bank such additional amount or amounts as
will compensate such Bank or such controlling Person for such reduction.
(c) Each Bank shall promptly notify the Company and the Agent of
any event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section 7.1 and will
designate a different Funding Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in such Bank's
sole judgment, be otherwise disadvantageous to such Bank.
Section 7.2. Basis for Determining Interest Rate Inadequate or
Unfair. If with respect to the Loan Period for any LIBOR Rate Loan:
(a) the Agent is advised by two or more Reference Banks that
deposits in Dollars (in the applicable amounts) are not being offered to
such Reference Banks in the relevant market for such Loan Period, or the
Agent otherwise determines (which determination shall be binding and
conclusive on all parties) that, by reason of circumstances affecting
the LIBOR market, adequate and reasonable means do not exist for
ascertaining the applicable LIBOR Rate; or
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(b) the Required Banks advise the Agent that the LIBOR Rate, as
determined by the Agent will not adequately and fairly reflect the cost
to such Required Banks of maintaining or funding LIBOR Rate Loans for
such Loan Period, or that the making or funding of LIBOR Rate Loans has
become impracticable as a result of an event occurring after the date of
this Agreement which in such Required Banks' opinion materially affects
LIBOR Rate Loans,
then (i) the Agent shall promptly notify the other parties thereof and (ii) so
long as such circumstances shall continue, no Bank shall be under any obligation
to make any LIBOR Rate Loan.
Section 7.3. Changes in Law Rendering Certain Loans Unlawful. In
the event that any change in (including the adoption of any new) applicable laws
or regulations, or in the interpretation of applicable laws or regulations by
any Governmental Authority or other regulatory body charged with the
administration thereof, should make it (or in the good faith judgment of such
Bank raise a substantial question as to whether it is) unlawful for a Bank to
make, maintain or fund any LIBOR Rate Loan, then (a) such Bank shall promptly
notify each of the other parties hereto, (b) upon the effectiveness of such
event and so long as such unlawfulness shall continue, the obligation of such
Bank to make LIBOR Rate Loans shall be suspended and any request by the Company
for LIBOR Rate Loans shall, as to such Bank, be deemed to be a request for a
Base Rate Loan, if said LIBOR Rate Loan is a Committed Loan, or an Absolute Rate
Loan, if said LIBOR Rate Loan is a Bid Loan and (c) on the last day of the
current Loan Period for such Bank's LIBOR Rate Loans (or, in any event, if such
Bank so requests on such earlier date as may be required by the relevant law,
regulation or interpretation) such Bank's Loans which are LIBOR Rate Loans shall
cease to be maintained as LIBOR Rate Loans and shall thereafter bear interest at
a floating rate per annum equal to the Base Rate, if said LIBOR Rate Loan is a
Committed Loan, or at an Absolute Rate, which Absolute Rate shall be the LIBOR
Rate in effect during such Loan Period, if said LIBOR Rate Loan is a Bid Loan.
If at any time the event giving rise to such unlawfulness shall no longer exist,
then such Bank shall promptly notify the Company and the Agent.
Section 7.4. Funding Losses. The Company hereby agrees that upon
demand by any Bank (which demand shall be accompanied by a statement setting
forth the basis for the calculations of the amount being claimed) the Company
will indemnify such Bank against any net loss or expense which such Bank may
sustain or incur (including, without limitation, any net loss or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Bank to fund or maintain any LIBOR Rate Loan or Absolute Rate
Loan), as reasonably determined by such Bank, as a result of (a) any payment or
mandatory or voluntary prepayment (including, without limitation, any payment
pursuant to Section 7.3 or any payment resulting from acceleration) of any LIBOR
Rate Loan or Absolute Rate Loan of such Bank on a date other than the last day
of the Loan Period for such Loan or (b) any failure of the Company to borrow any
Loans on the originally scheduled Funding Date specified therefor pursuant to
this Agreement (including, without limitation, any failure to borrow resulting
from any failure to satisfy the conditions precedent to such borrowing). For
this purpose, all notices to the Agent pursuant to this Agreement (including,
without limitation, all acceptances of Bids) shall be deemed to be irrevocable.
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Section 7.5. Discretion of Banks as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary (but subject to
Section 7.1(c)), 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 such Bank had actually funded and maintained each LIBOR Rate
Loan or Absolute Rate Loan during the Loan Period for such Loan through the
purchase of deposits having a maturity corresponding to such Loan Period and
bearing an interest rate equal to the rate borne by such Loan for such Loan
Period.
Section 7.6. Conclusiveness of Statements; Survival of
Provisions. Determinations and statements of any Bank pursuant to this Section 7
shall be conclusive absent demonstrable error, and each Bank may use reasonable
averaging and attribution methods in determining compensation pursuant to
Section 7.1 or 7.4. The provisions of this Section 7 shall survive termination
of this Agreement and payment of the Notes.
SECTION 8. REPRESENTATIONS AND WARRANTIES.
To induce the Banks to enter into this Agreement and to make
Loans hereunder, the Company hereby makes the following representations and
warranties to the Agent and the Banks, which representations and warranties
shall survive the execution and delivery of this Agreement and the Notes and the
disbursement of the initial Loans hereunder:
Section 8.1. Organization, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California; each corporate Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; each other Subsidiary (if any) is an entity duly organized and
validly existing under the laws of the jurisdiction of its organization; and
each of the Company and each Subsidiary has the power to own its property and to
carry on its business as now being conducted and is duly qualified and in good
standing as a foreign corporation or other entity authorized to do business in
each jurisdiction where, because of the nature of its activities or properties,
such qualification is required, except where the failure to be so qualified or
in good standing could not reasonably be expected to have a Material Adverse
Effect.
Section 8.2. Authorization; Consents; No Conflict. The execution
and delivery by the Company of this Agreement and the Notes, the borrowings
hereunder and the performance by the Company of its obligations under this
Agreement and the Notes (a) are within the corporate powers of the Company, (b)
have been duly authorized by all necessary corporate action on the part of the
Company, (c) have received all necessary approvals, authorizations, consents,
registrations, notices, exemptions and licenses (if any shall be required) from
Governmental Authorities and other Persons, except for any such approvals,
authorizations, consents, registrations, notices, exemptions or licenses
non-receipt of which could not reasonably be expected to have a Material Adverse
Effect, (d) do not and will not contravene or conflict with any provision of (i)
law, (ii) any judgment, decree or order to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary is bound, (iii) the
charter, by-laws or other organizational documents of the Company or any
Subsidiary or (iv) any provision of any agreement or instrument binding on the
Company or any Subsidiary, or any agreement or instrument of which the Company
is aware affecting the properties of the Company or any
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Subsidiary, except with respect to (i), (ii) and (iv) above, for any such
contravention or conflict which could not reasonably be expected to have a
Material Adverse Effect and (e) do not and will not result in or require the
creation or imposition of any Lien on any of the Company's or its Subsidiaries'
properties.
Section 8.3. Validity and Binding Nature. This Agreement is, and
the Notes when duly executed and delivered will be, legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
Section 8.4. Financial Statements. The Company's audited
consolidated financial statements as at December 31, 1997, and unaudited
consolidated financial statements as at September 30, 1998, a copy of each of
which has been furnished to each Bank, have been prepared in conformity with
generally accepted accounting principles in the United States applied on a basis
consistent with that of the preceding fiscal year and fairly present the
financial condition of the Company and its Subsidiaries as at such dates and the
results of their operations for the year then ended.
Section 8.5. Litigation and Contingent Liabilities. All Litigation
Actions, taken as a whole, could not reasonably be expected to have a Material
Adverse Effect. Other than any liability incident to such Litigation Actions or
provided for or disclosed in the financial statements referred to in Section
8.4, neither the Company nor any Subsidiary has any contingent liabilities which
are material to the business, credit, operations, financial condition or
prospects of the Company and its Subsidiaries taken as a whole.
Section 8.6. Employee Benefit Plans. Each employee benefit plan (as
defined in Section 3(3) of ERISA) as to which the Company, or any Subsidiary or
any ERISA Affiliate may have any liability complies in all material respects
with all applicable requirements of law and regulations. During the
twelve-consecutive-month period prior to the execution and delivery of this
Agreement, (i) no steps have been taken to terminate any Plan and no
contribution failure has occurred with respect to any Plan sufficient to give
rise to a lien under Section 302(f) of ERISA, (ii) no Reportable Event has
occurred with respect to any Plan and (iii) neither the Company nor any ERISA
Affiliate has either withdrawn or instituted steps to withdraw from any
Multiemployer Plan, except in any such case for actions which individually or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect. No condition exists or event or transaction has occurred in connection
with any Plan which could reasonably be expected to result in the incurrence by
the Company, any Subsidiary or any ERISA Affiliate of any material liability,
fine or penalty (imposed by Section 4975 of the Code or Section 502(i) of ERISA
or otherwise). Neither the Company nor any ERISA Affiliate is a member of, or
contributes to, any Multiemployer Plan. Neither the Company nor any ERISA
Affiliate has any contingent liability with respect to any post retirement
benefit under an employee welfare benefit plan (as defined in section 3(i) of
ERISA), other than liability for continuation coverage described in Part 6 of
Title I of ERISA.
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Section 8.7. Investment Company Act. The Company is not an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
Section 8.8. Public Utility Holding Company Act. Neither the
Company nor any Subsidiary is 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", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 8.9. Regulation U. Neither the Company nor any Subsidiary
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System).
Section 8.10. Information.
(a) All information with respect to the Company contained in the
December 2, 1998 memorandum furnished by the Agent to the Banks and all
information heretofore furnished by the Company to the Agent or any Bank is, to
the best of the Company's knowledge after due inquiry, true and accurate in
every material respect as of the date thereof, and none of such information
contains any material misstatement of fact or omits to state any material fact
necessary to make such information not misleading.
(b) All information furnished by the Company to the Agent or any
Bank on and after the date hereof shall be, to the best of the Company's
knowledge after due inquiry, true and accurate in every material respect as of
the date of such information, and none of such information shall contain any
material misstatement of fact or shall omit to state any material fact necessary
to make such information not misleading.
Section 8.11. Compliance with Applicable-Laws, etc. The Company and
its Subsidiaries are in material compliance with the requirements of all
applicable laws, rules, regulations and orders of all Governmental Authorities
(including, without limitation, ERISA and all applicable environmental laws).
Neither the Company nor any Subsidiary is in default under any agreement or
instrument to which the Company or such Subsidiary is a party or by which it or
any of its properties or assets is bound, which default could reasonably be
expected to have a Material Adverse Effect on the business, credit, operations,
financial condition or prospects of the Company and its Subsidiaries taken as a
whole. No Event of Default or Unmatured Event of Default has occurred and is
continuing.
Section 8.12. Insurance. Each of the Company and each Subsidiary
maintains, or, in the case of any property owned by the Company or any
Subsidiary and leased to lessees, has caused such lessees to maintain, insurance
with financially sound and reputable insurers to such extent and against such
hazards and liabilities as is commonly maintained, or caused to be maintained,
as the case may be, by companies similarly situated.
Section 8.13. Taxes. Each of the Company and each Subsidiary has
filed all tax returns which are required to have been filed and has paid, or
made adequate provisions for the payment of, all of its Taxes which are due and
payable, except such Taxes, if any, as are being
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contested in good faith and by appropriate proceedings and as to which such
reserves or other appropriate provisions as may be required by generally
accepted accounting principles have been established and except where failure to
pay such Taxes, individually or in the aggregate, cannot reasonably be expected
to have a Material Adverse Effect.
Section 8.14. Use of Proceeds. The proceeds of the Loans will be
used by the Company to support the Company's commercial paper program and for
other general corporate purposes.
Section 8.15. Pari Passu. All obligations and liabilities of the
Company hereunder shall rank at least equally and ratably (pari passu) in
priority with all other unsubordinated, unsecured obligations of the Company to
any other creditor.
Section 8.16. Ownership and Liens. Each of the Company and each
Subsidiary has title to, or valid leasehold interests in, all of its properties
and assets, real and personal, including the properties and assets, and
leasehold interests reflected in the financial statements referred to in Section
8.4 (other than any properties or assets disposed of in the ordinary course of
business) other than such imperfections in title or leasehold interests which
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect, and none of the properties and assets owned by the Company or any of its
Subsidiaries and none of its leasehold interests is subject to any Lien, except
as disclosed in such financial statements or as may be permitted under this
Agreement.
Section 8.17. Year 2000. The Company has reviewed and is currently
completing a detailed analysis of its operations with a view to assessing
whether it will be vulnerable to a Year 2000 Problem (as defined below). Based
on such review, the Company does not believe that a Material Adverse Effect will
result from a Year 2000 problem. For purposes of this Section 8.17, "Year 2000
Problem" means any significant risk that computer hardware or software used in
the essential business systems, process control systems or other operations of
the Company will not, in the case of dates or time periods occurring after
December 31, 1999, function adequately so that no Material Adverse Effect will
result from the advent of year 2000.
SECTION 9. COVENANTS.
Until the expiration or termination of the Commitments, and
thereafter until all obligations of the Company hereunder and under the Notes
are paid in full, the Company agrees that, unless at any time the Required Banks
shall otherwise expressly consent in writing, it will:
Section 9.1. Reports, Certificates and Other Information. Furnish
to the Agent with sufficient copies for each Bank which the Agent shall promptly
furnish to each Bank:
9.1.1. Audited Financial Statements. As soon as available, and in
any event within 95 days after each fiscal year of the Company, a copy
of the audited financial statements and annual audit report of the
Company and its Subsidiaries for such fiscal year prepared on a
consolidated basis and in conformity with generally accepted accounting
principles in the United States and certified by Ernst & Young or by
another independent certified public accountant of recognized national
standing selected by the Company and satisfactory to the Required Banks.
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9.1.2. Interim Reports. As soon as available, and in any event
within 50 days after each quarter (except the last quarter) of each
fiscal year of the Company, a copy of the unaudited financial statements
of the Company and its Subsidiaries for such quarter prepared in a
manner consistent with the audited financial statements referred to in
Section 9.1.1, signed by the Company's chief financial officer and
consisting of at least a balance sheet as at the close of such quarter
and statements of earnings and cash flows for such quarter and for the
period from the beginning of such fiscal year to the close of such
quarter.
9.1.3. Certificates. Contemporaneously with the furnishing of a
copy of each annual audit report and of each set of quarterly statements
provided for in this Section 9.1, a certificate of the Company dated the
date of delivery of such annual report or such quarterly statements and
signed by the Company's chief financial officer, to the effect that no
Event of Default or Unmatured Event of Default has occurred and is
continuing, or, if there is any such event, describing it and the steps,
if any, being taken to cure it and containing a computation of, and
showing compliance with, each of the financial ratios and restrictions
contained in this Section 9.
9.1.4. Certain Notices. Forthwith upon learning of the occurrence
of any of the following, written notice thereof, describing the same and
the steps being taken by the Company or the Subsidiary affected with
respect thereto:
(i) the occurrence of an Event of Default or an Unmatured
Event of Default;
(ii) the institution of any Litigation Action; provided,
that the Company need not give notice of any new Litigation
Action unless such Litigation Action, together with all other
pending Litigation Actions, could reasonably be expected to have
a Material Adverse Effect;
(iii) the entry of any judgment or decree against the
Company or any Subsidiary if the aggregate amount of all
judgments and decrees then outstanding against the Company and
all Subsidiaries exceeds $50,000,000 after deducting (i) the
amount with respect to which the Company or any Subsidiary is
insured and with respect to which the insurer has not denied
coverage in writing and (ii) the amount for which the Company or
any Subsidiary is otherwise indemnified if the terms of such
indemnification are satisfactory to the Agent and the Required
Banks;
(iv) the occurrence of a Reportable Event with respect to
any Plan; the institution of any steps by the Company, any ERISA
Affiliate, the PBGC or any other Person to terminate any Plan;
the institution of any steps by the Company or any ERISA
Affiliate to withdraw from any Plan; the incurrence of any
material increase in the contingent liability of the Company or
any Subsidiary with respect to any post-retirement welfare
benefits; or the failure of the Company or any other Person to
make a required contribution to a Plan if such failure is
sufficient to give rise to a lien under Section 302(f) of ERISA;
provided, however, that no
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notice shall be required of any of the foregoing unless the
circumstance could reasonably be expected to have a Material
Adverse Effect; or
(v) the occurrence of a material adverse change in the
business, credit, operations, financial condition or prospects of
the Company and its Subsidiaries taken as a whole.
9.1.5. SEC Filings. Promptly after the filing or making thereof,
copies of all 8-K's (other than 8-K's relating solely to the issuance by
the Company of securities pursuant to an effective registration
statement), 10-Q's, 10-K's, and other material reports or registration
statements filed by the Company or any Subsidiary with or to any
securities exchange or the Securities and Exchange Commission.
9.1.6. Other Information. From time to time such other
information concerning the Company and its Subsidiaries as any Bank or
the Agent may reasonably request.
Section 9.2. Existence. Maintain and preserve, and, subject to the
proviso in Section 9.9, cause each Subsidiary to maintain and preserve, its
respective existence as a corporation or other form of business organization, as
the case may be, and all rights, privileges, licenses, patents, patent rights,
copyrights, trademarks, trade names, franchises and other authority to the
extent material and necessary for the conduct of its respective business in the
ordinary course as conducted from time to time, except as may be determined by
the Board of Directors of the Company in good faith to wind up and dissolve a
Subsidiary that is not necessary or material to the business of the Company in
its ordinary course as conducted from time to time.
Section 9.3. Nature of Business. Engage, and cause each
Subsidiary to engage, in substantially the same fields of business as it is
engaged in on the date hereof.
Section 9.4. Books, Records and Access. Maintain, and cause each
Subsidiary to maintain, complete and accurate books and records in which full
and correct entries in conformity with generally accepted accounting principles
in the United States shall be made of all dealings and transactions in relation
to its respective business and activities. Permit, and cause each Subsidiary to
permit, access by the Agent and each Bank to the books and records of the
Company and such Subsidiary during normal business hours, and permit, and cause
each Subsidiary to permit, the Agent and each Bank to make copies of such books
and records.
Section 9.5. Insurance. Maintain, and cause each Subsidiary to
maintain, such insurance as is described in Section 8.12.
Section 9.6. Repair. Maintain, preserve and keep, and cause each
Subsidiary to maintain, preserve and keep, its material properties in good
repair, working order and condition, and from time to time make, and cause each
Subsidiary to make, all necessary and proper repairs, renewals, replacements,
additions, betterments and improvements thereto so that at all times the
efficiency thereof shall be fully preserved and maintained. In the case of
properties leased by the Company or any Subsidiary to lessees, the Company may
satisfy its obligations related to such properties under the previous sentence
by causing, or by causing each Subsidiary to cause, such lessees to perform such
obligations.
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Section 9.7. Taxes. Pay, and cause each Subsidiary to pay, when
due, all of its Taxes, unless and only to the extent that the Company or such
Subsidiary, as the case may be, is contesting any such Taxes in good faith and
by appropriate proceedings and the Company or such Subsidiary has set aside on
its books such reserves or other appropriate provisions therefor as may be
required by generally accepted accounting principles in the United States,
except where failure to pay such Taxes, individually or in the aggregate, cannot
reasonably be expected to have a Material Adverse Effect.
Section 9.8. Compliance. Comply, and cause each Subsidiary to
comply, in all material respects with all statutes (including without limitation
ERISA) and governmental rules and regulations applicable to it; and use
reasonable efforts to cause, and cause each Subsidiary to use reasonable efforts
to cause, each lessee of property owned by the Company or any Subsidiary to
comply in all material respects with all statutes, governmental rules and
regulations applicable to such property or applicable to such lessee in
connection with its leasing.
Section 9.9. Sale of Assets. Not, and not permit any Subsidiary to,
transfer, convey, lease or otherwise dispose of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole; provided, however,
that any Wholly-owned Subsidiary may sell, transfer, convey, lease or assign all
or a substantial part of its assets to the Company or another Wholly-owned
Subsidiary if immediately thereafter and after giving effect thereto no Event of
Default or Unmatured Event of Default shall have occurred and be continuing.
Section 9.10. Consolidated Indebtedness to Consolidated Tangible
Net Worth Ratio. Not permit the ratio of Consolidated Indebtedness to
Consolidated Tangible Net Worth to exceed 600% on and as of the last day of any
fiscal year or 650% at any other time.
Section 9.11. Fixed Charge Coverage Ratio. Not permit the Fixed
Charge Coverage Ratio on the last day of any quarter of any fiscal year of the
Company to be less than 110%.
Section 9.12. Consolidated Tangible Net Worth. Not permit the
Company's Consolidated Tangible Net Worth to be less than $1,500,000,000 plus
50% of (a) the cumulative net income (but without deduction for cumulative net
losses) of the Company and its Subsidiaries since September 30, 1994 determined
on a consolidated basis in accordance with United States generally accepted
accounting principles, (b) the cumulative equity capital contributions from AIG
since September 30, 1994 and (c) the net proceeds from the sale of preferred
stock, in each case for the period from September 30, 1994 to and including the
date of any determination hereunder.
Section 9.13. Restricted Payments. Not declare or pay any dividends
whatsoever or make any distribution on any capital stock of the Company (except
in shares of, or warrants or rights to subscribe for or purchase shares of,
capital stock of the Company), and not, and not permit any Subsidiary to, make
any payment to acquire or retire shares of capital stock of the Company, at any
time when (i) an Event of Default as described in Section 11.1 has occurred and
is continuing and there are Loans outstanding hereunder or (ii) an Event of
Default as described in Section 11.1.1 has occurred and is continuing and there
are no Loans outstanding hereunder; provided, however, that notwithstanding the
foregoing, this Section 9.13 shall not
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prohibit (x) the payment of dividends on any of the Company's market auction
preferred stock that was sold to the public pursuant to an effective
registration statement under the Securities Act of 1933 or (y) the payment of
dividends within 30 days of the declaration thereof if such declaration was not
prohibited by this Section 9.13.
Section 9.14. Liens. Not, and not permit any Subsidiary to,
create or permit to exist any Lien upon or with respect to any of its properties
or assets of any kind, now owned or hereafter acquired, or on any income or
profits therefrom, except for
(a) Liens existing on the date hereof that are reflected in the
financial statements of the Company dated prior to the date hereof;
(b) Liens upon or in any property (other than property acquired
for lease to a Person other than the Company or a Subsidiary) acquired
or held by the Company or a Subsidiary in the ordinary course of
business to secure the purchase price of such property or to secure
Indebtedness permitted under Section 9.15 incurred or guaranteed by the
Company or any Subsidiary prior to, at the time of, or within 60 days
after the later of the acquisition, completion of construction or
commencement of full operation of such property, which Indebtedness was
incurred or guaranteed solely for the purpose of financing the
acquisition of such property or construction or improvements thereon;
provided, however, that in the case of any such acquisition,
construction or improvement, the Lien shall not apply to any property
theretofore owned by the Company or a Subsidiary, other than, in the
case of any such construction or improvement, any theretofore unimproved
real property on which the property so constructed, or the improvement,
is located;
(c) Liens securing the Indebtedness of a Subsidiary owing to the
Company or to a Wholly-owned Subsidiary;
(d) Liens on property of a corporation existing at the time such
corporation is merged into or consolidated with the Company or a
Subsidiary or at the time of a purchase, lease or other acquisition of
the properties of a corporation or firm as an entirety or substantially
as an entirety by the Company or a Subsidiary; provided, that any such
Lien shall not extend to or cover any assets or properties of the
Company or such Subsidiary owned by the Company or such Subsidiary prior
to such merger, consolidation, purchase, lease or acquisition, unless
otherwise permitted under this Section 9.14;
(e) leases or subleases granted to others in the ordinary and
usual course of the Company's business;
(f) easements, rights of way, restrictions and other similar
charges or encumbrances not interfering with the ordinary conduct of the
business of the Company or any Subsidiary;
(g) banker's Liens arising, other than by contract, in the
ordinary and usual course of the Company's business;
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(h) Liens incurred or deposits made in the ordinary course of
business in connection with surety and appeal bonds, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money); provided, however, that the obligation so secured is not overdue
or is being contested in good faith and by appropriate proceedings
diligently pursued;
(i) any replacement or successive replacement in whole or in part
of any Lien referred to in the foregoing clauses (a) to (h), inclusive;
provided, however, that the principal amount of any Indebtedness secured
by the Lien shall not be increased and the principal repayment schedule
and maturity of such Indebtedness shall not be extended and (i) such
replacement shall be limited to all or a part of the property which
secured the Lien so replaced (plus improvements and construction on such
property) or (ii) if the property which secured the Lien so replaced has
been destroyed, condemned or damaged and pursuant to the terms of the
Lien other property has been substituted therefor, then such replacement
shall be limited to all or part of such substituted property;
(j) Liens created by or resulting from any litigation or other
proceeding which is being contested in good faith by appropriate
proceedings, including Liens arising out of judgments or awards against
the Company or any Subsidiary with respect to which the Company or such
Subsidiary is in good faith prosecuting an appeal or proceedings for
review; or Liens incurred by the Company or any Subsidiary for the
purpose of obtaining a stay or discharge in the course of any litigation
or other proceeding to which the Company or such Subsidiary is a party;
(k) carrier's, warehouseman's, mechanic's, landlord's and
materialmen's Liens, Liens for Taxes, assessments and other governmental
charges and other similar Liens, in each case arising in the ordinary
course of business, securing obligations that are not incurred in
connection with the obtaining of any advance or credit and which are
either not overdue or are being contested in good faith and by
appropriate proceedings diligently pursued;
(1) Liens securing Indebtedness of each of the Company's
Wholly-owned Subsidiaries to be incorporated outside the United States
for the purpose of providing subsidized financing of the acquisition of
Airbus Industrie aircraft, the repayment obligations of which will be
supported by guaranties issued by certain European government export
credit agencies (the European Credit Agency Export Finance Program or
"ECA Program") and a Company Guaranty and a pledge of the assets of
(including any rights to or interests in any reserve or security deposit
held by) each such Wholly-owned Subsidiary; provided, that such Liens
shall encumber only the assets of (including any rights to or interests
in any reserve or security deposit held by) each such Wholly-owned
Subsidiary; and provided, further, that the aggregate amount of
Indebtedness of all such Wholly-owned Subsidiaries secured by Liens does
not at the time exceed $3 billion minus the amount of outstanding Liens
permitted under Section 9.14(m); and
(m) other Liens securing Indebtedness of the Company or any
Subsidiary in an aggregate amount which, together with all other
outstanding Indebtedness of the
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Company and the Subsidiaries secured by Liens not listed in clauses (a)
through (l) of this Section 9.14, does not at the time exceed 12.5% of
the Consolidated Tangible Net Worth of the Company as shown on its
audited consolidated financial statements as of the end of the fiscal
year preceding the date of determination minus the amount of outstanding
Liens permitted under Section 9.14(l).
Section 9.15. Leases. Not, and not permit any Subsidiary to, become
obligated, as lessee, under any lease of real or personal property if at the
time of entering into such lease and after giving effect thereto the aggregate
Operating Lease Rentals would exceed 20% of Consolidated Indebtedness.
Section 9.16. Use of Proceeds. Not permit any proceeds of the
Loans to be used, either directly or indirectly,
(a) for the payment of any dividend or for the repurchase of any
of the Company's equity securities;
(b) for the purpose, whether immediate, incidental or ultimate,
of buying or carrying any margin stock within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System, as amended
from time to time;
(c) for the purpose, whether immediate, incidental or ultimate,
of acquiring directly or indirectly any of the outstanding shares of
voting stock of any corporation which (i) has announced that it will
oppose such acquisition or (ii) has commenced any litigation which
alleges that any such acquisition violates, or will violate, applicable
law; or
(d) for any other purpose except (i) to support the Company's
commercial paper program or (ii) for general corporate purposes in the
ordinary course of business.
SECTION 10. CONDITIONS TO LENDING.
Section 10.1. Conditions Precedent to All Loans. Each Bank's
obligation to make each Loan is subject to the following conditions precedent:
10.1.1. No Default. (a) No Event of Default or Unmatured Event of
Default has occurred and is continuing or will result from the making of
such Loan, (b) the representations and warranties contained in Section 8
are true and correct in all material respects as of the date of such
requested Loan, with the same effect as though made on the date of such
Loan (it being understood that each request for a Loan shall
automatically constitute a representation and warranty by the Company
that, as at the requested date of such Loan, (x) all conditions under
this Section 10.1.1 shall be satisfied and (y) after the making of such
Loan the aggregate principal amount of all outstanding Loans will not
exceed the Aggregate Commitment).
10.1.2. Documents. The Agent shall have received (a) a
certificate signed by an Authorized Officer of the Company as to
compliance with Section 10.1.1, which requirement shall be deemed
satisfied by the submission of a properly completed Notice
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of Competitive Bid Borrowing or Committed Loan Request and (b) such
other documents as the Agent may reasonably request in support of such
Loan.
10.1.3. Litigation. No Litigation Action not disclosed in writing
by the Company to the Agent and the Banks prior to the date of the last
previous Loan hereunder (or, in the case of the initial Loan, prior to
the date of execution and delivery of this Agreement) ("New Litigation")
has been instituted and no development not so disclosed has occurred in
any other Litigation Action ("Existing Litigation"), unless the
resolution of all New Litigation and Existing Litigation against the
Company and its Subsidiaries could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 10.2. Conditions to the Availability of the Commitments.
The obligations of each Bank hereunder are subject to, and the Banks'
Commitments shall not become available until the date on which each of the
following conditions precedent shall have been satisfied or waived in writing by
the Required Banks:
10.2.1. Revolving Credit Agreement. The Agent shall have received
this Agreement duly executed and delivered by each of the Banks and the
Company and each of the Banks shall have received a fully executed
Committed Note and a fully executed Bid Note.
10.2.2. Evidence of Corporate Action. The Agent shall have received
certified copies of all corporate actions taken by the Company to
authorize this Agreement and the Notes.
10.2.3. Incumbency and Signatures. The Agent shall have received a
certificate of the Secretary or an Assistant Secretary of the Company
certifying the names of the officer or officers of the Company
authorized to sign this Agreement, the Notes and the other documents
provided for in this Agreement to be executed by the Company, together
with a sample of the true signature of each such officer (it being
understood that the Agent and each Bank may conclusively rely on such
certificate until formally advised by a like certificate of any changes
therein).
10.2.4. Good Standing Certificates. The Agent shall have received
such good standing certificates of state officials with respect to the
incorporation of the Company, or other matters, as the Agent or the
Banks may reasonably request.
10.2.5. Opinions of Company Counsel. The Agent shall have received
favorable written opinions of O'Melveny & Myers, counsel for the
Company, in substantially the form of Exhibit G, and the General Counsel
of the Company, in substantially the form of Exhibit H.
10.2.6. Opinion of Agent's Counsel. The Agent shall have received a
favorable written opinion of Milbank, Tweed, Hadley & McCloy, special
New York counsel to the Agent, with respect to documents received by the
Agent and the Banks and such legal matters as the Agent reasonably may
require.
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10.2.7. Other Documents. The Agent shall have received such other
certificates and documents as the Agent or the Banks reasonably may
require.
10.2.8. Fees. The Agent shall have received for the account of the
Agent, the Agent's fees payable to the Funding Date pursuant to Section
4.6 hereof.
10.2.9. Material Adverse Change. The Agent shall have received a
certificate of the Company's chief financial officer confirming that
since the date of the audited financial statements identified in Section
8.4 hereof, there shall not have occurred any material adverse change in
the business, credit, operations, financial condition or prospects of
the Company and its Subsidiaries taken as a whole.
10.2.10. Termination of Revolving Credit Facilities. The Company
shall have paid all amounts owing and otherwise satisfied and discharged
all of its obligations arising under the Revolving Credit Agreement,
dated as of January 17, 1997, as amended, among the Company, the Agent
and the banks named therein, and such agreements shall have been
terminated and be of no further force and effect, evidence of which
shall have been made available to the Agent.
SECTION 11. EVENTS OF DEFAULT AND THEIR EFFECT.
Section 11.1. Events of Default. Each of the following shall
constitute an Event of Default under this Agreement:
11.1.1. Non-Payment of Notes, etc. Default in the payment when due
of any principal of any Loan; or default, and continuance thereof for
three Business Days, in the payment when due of any interest on any
Loan, any fees or any other amounts payable by the Company hereunder.
11.1.2. Non-Payment of Other Indebtedness for Borrowed Money.
Default in the payment when due (subject to any applicable grace
period), whether by acceleration or otherwise, of any principal of,
interest on or fees incurred in connection with any other Indebtedness
of, or guaranteed by, the Company or any Significant Subsidiary (except
(i) any such Indebtedness of any Subsidiary to the Company or to any
other Subsidiary and (ii) any Indebtedness hereunder) and, if a default
in the payment of interest or fees, continuance of such default for five
days, in the case of interest, or 30 days, in the case of fees, or
default in the performance or observance of any obligation or condition
with respect to any such other Indebtedness if the effect of such
default (subject to any applicable grace period) is to accelerate the
maturity of any such Indebtedness or to permit the holder or holders
thereof, or any trustee or agent for such holders, to cause such
Indebtedness to become due and payable prior to its expressed maturity;
provided, however, that the aggregate principal amount of all
Indebtedness as to which there has occurred any default as described
above shall equal or exceed $50,000,000.
11.1.3. Bankruptcy, Insolvency, etc. The Company or any Significant
Subsidiary becomes insolvent or generally fails to pay, or admits in
writing its inability or refusal to pay, debts as they become due; or
the Company or any Significant Subsidiary applies for, consents to, or
acquiesces in the appointment of a trustee, receiver or other custodian
for
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the Company or such Significant Subsidiary or any property thereof, or
makes a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee,
receiver or other custodian is appointed for the Company or any
Significant Subsidiary or for a substantial part of the property of any
thereof and is not discharged within 60 days; or any warrant of
attachment or similar legal process is issued against any substantial
part of the property of the Company or any of its Significant
Subsidiaries which is not released within 60 days of service; or any
bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding (except the voluntary dissolution, not under any
bankruptcy or insolvency law, of a Significant Subsidiary), is commenced
in respect of the Company or any Significant Subsidiary, and, if such
case or proceeding is not commenced by the Company or such Significant
Subsidiary it is consented to or acquiesced in by the Company or such
Significant Subsidiary or remains for 60 days undismissed; or the
Company or any Significant Subsidiary takes any corporate action to
authorize, or in furtherance of, any of the foregoing.
11.1.4. Non-Compliance with this Agreement. Failure by the Company
to comply with or to perform any of the Company's covenants herein or
any other provision of this Agreement (and not constituting an Event of
Default under any of the other provisions of this Section 11.1) and
continuance of such failure for 60 days (or, if the Company failed to
give notice of such noncompliance or nonperformance pursuant to Section
9.1.4 within one Business Day after obtaining actual knowledge thereof,
60 days less the number of days elapsed between the date the Company
obtained such actual knowledge and the date the Company gives the notice
pursuant to Section 9.1.4, but in no event less than one Business Day)
after notice thereof to the Company from the Agent, any Bank, or the
holder of any Note.
11.1.5. Representations and Warranties. Any representation or
warranty made by the Company herein is untrue or misleading in any
material respect when made or deemed made; or any schedule, statement,
report, notice, or other writing furnished by the Company to the Agent
or any Bank is false or misleading in any material respect on the date
as of which the facts therein set forth are stated or certified; or any
certification made or deemed made by the Company to the Agent or any
Bank is untrue or misleading in any material respect on or as of the
date made or deemed made.
11.1.6. Employee Benefit Plans. The institution by the Company or
any ERISA Affiliate of steps to terminate any Plan if, in order to
effectuate such termination, (i) the Company or any ERISA Affiliate
would be required to make a contribution to such Plan or would incur a
liability or obligation to such Plan in an amount in excess of
$10,000,000 and (ii) immediately after giving effect to the payment or
satisfaction of such contribution, liability or obligation (if made or
undertaken by the Company or any Subsidiary) an Event of Default or
Unmatured Event of Default would exist and be continuing; or the
institution by the PBGC of steps to terminate any Plan; or a
contribution failure occurs with respect to a Plan sufficient to give
rise to a lien under Section 302(f) of ERISA securing an amount in
excess of $10,000,000.
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11.1.7. Litigation. There shall be entered against the Company or
any Subsidiary one or more judgments or decrees in excess of $50,000,000
in the aggregate at any one time outstanding for the Company and all
Subsidiaries and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 60 days from
the entry thereof, excluding those judgments or decrees for and to the
extent to which the Company or any Subsidiary is insured and with
respect to which the insurer has not denied coverage in writing or for
and to the extent to which the Company or any Subsidiary is otherwise
indemnified if the terms of such indemnification are satisfactory to the
Required Banks; and
11.1.8. Change of Ownership. AIG shall cease to own beneficially at
least 51% of all of the outstanding shares of the common stock of the
Company.
Section 11.2. Effect of Event of Default. If any Event of Default
described in Section 11.1.3 shall occur, the Commitments (if they have not
theretofore terminated) shall immediately terminate and all Loans and all
interest and other amounts due hereunder shall become immediately due and
payable, all without presentment, demand or notice of any kind; and, in the case
of any other Event of Default, the Agent may, and upon written request of the
Required Banks shall, declare the Commitments (if they have not theretofore
terminated) to be terminated and all Loans and all interest and other amounts
due hereunder to be due and payable, whereupon the Commitments (if they have not
theretofore terminated) shall immediately terminate and all Loans and all
interest and other amounts due hereunder shall become immediately due and
payable, all without presentment, demand or notice of any kind. The Agent shall
promptly advise the Company and each Bank of any such declaration, but failure
to do so shall not impair the effect of such declaration.
SECTION 12. THE AGENT.
Section 12.1. Authorization. Each Bank and the holder of each Note
authorizes the Agent to act on behalf of such Bank or holder to the extent
provided herein and in any other document or instrument delivered hereunder or
in connection herewith, and to take such other action as may be reasonably
incidental thereto. Subject to the provisions of Section 12.3, the Agent will
take such action permitted by any agreement delivered in connection with this
Agreement as may be requested in writing by the Required Banks or if required
under Section 13.1, all of the Banks. The Agent shall promptly remit in
immediately available funds to each Bank or other holder its share of all
payments received by the Agent for the account of such Bank or holder, and shall
promptly transmit to each Bank (or share with each Bank the contents of) each
notice it receives from the Company pursuant to this Agreement.
Section 12.2. Indemnification. The Banks agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by the Company),
ratably according to their respective Percentages, from and against any and all
actions, causes of action, suits, losses, liabilities, damages and expenses
which may at any time (including, without limitation, at any time following the
payment of the Notes) be imposed on, incurred by or asserted against the Agent
in any way relating to or arising out of this Agreement, or any documents
contemplated by or referred to herein or the transactions contemplated hereby or
any action taken or omitted by the Agent under or in connection with any of the
foregoing; provided, that no Bank shall be
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liable for the payment to the Agent of any portion of such actions, causes of
action, suits, losses, liabilities, damages and expenses resulting from the
Agent's or its employees' or agents' gross negligence or willful misconduct.
Without limiting the foregoing, subject to Section 13.5 each Bank agrees to
reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent
in such capacity in connection with the preparation, execution or enforcement
of, or legal advice in respect of rights or responsibilities under, this
Agreement or any amendments or supplements hereto or thereto to the extent that
the Agent is not reimbursed for such expenses by the Company. All obligations
provided for in this Section 12.2 shall survive repayment of the Loans,
cancellation of the Notes or any termination of this Agreement.
Section 12.3. Action on Instructions of the Required Banks. As to
any matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes), the Agent shall not be
required to exercise any discretion or take any action, but the Agent shall in
all cases be fully protected in acting or refraining from acting upon the
written instructions from (i) the Required Banks, except for instructions which
under the express provisions hereof must be received by the Agent from all Banks
and (ii) in the case of such instructions, from all Banks. In no event will the
Agent be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or applicable law. The
relationship between the Agent and the Banks is and shall be that of agent and
principal only and nothing herein contained shall be construed to constitute the
Agent a trustee for any holder of a Note or of a participation therein nor to
impose on the Agent duties and obligations other than those expressly provided
for herein.
Section 12.4. Payments. (a) The Agent shall be entitled to assume
that each Bank has made its Loan available in accordance with Section 2.3 or
Section 3.2(c), as applicable, unless such Bank notifies the Agent at its Notice
Office prior to 11:00 a.m., New York City time, on the Funding Date for such
Loan that it does not intend to make such Loan available, it being understood
that no such notice shall relieve such Bank of any of its obligations under this
Agreement. If the Agent makes any payment to the Company on the assumption that
a Bank has made the proceeds of such Loan available to the Agent but such Bank
has not in fact made the proceeds of such Loan available to the Agent, such Bank
shall pay to the Agent on demand an amount equal to the amount of such Bank's
Loan, together with interest thereon for each day that elapses from and
including such Funding Date to but excluding the Business Day on which the
proceeds of such Bank's Loan become immediately available to the Agent at its
Payment Office prior to 12:00 Noon, New York City time, at the Federal Funds
Rate for each such day, based upon a year of 360 days. A certificate of the
Agent submitted to any Bank with respect to any amounts owing under this Section
12.4(a) shall be conclusive absent demonstrable error. If the proceeds of such
Bank's Loan are not made available to the Agent at its Payment Office by such
Bank within three Business Days of such Funding Date, the Agent shall be
entitled to recover such amount on demand from the Company, together with
interest thereon for each day that elapses from and including such Funding Date
to but excluding the Business Day on which such proceeds become immediately
available to the Agent prior to 12:00 Noon, New York City time, (i) in the case
of a Bid Loan, at the rate per annum applicable thereto and (ii) in the case of
a Committed Loan, at the rate per annum applicable to Base Rate Loans hereunder,
in either case based upon a year of 360 days. Nothing in this paragraph (a)
shall relieve any Bank of any
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obligation it may have hereunder to make any Loan or prejudice any rights which
the Company may have against any Bank as a result of any default by such Bank
hereunder.
(b) The Agent shall be entitled to assume that the Company has
made all payments due hereunder from the Company on the due date thereof unless
it receives notification prior to any such due date from the Company that the
Company does not intend to make any such payment, it being understood that no
such notice shall relieve the Company of any of its obligations under this
Agreement. If the Agent distributes any payment to a Bank hereunder in the
belief that the Company has paid to the Agent the amount thereof but the Company
has not in fact paid to the Agent such amount, such Bank shall pay to the Agent
on demand (which shall be made by telegram, telex, facsimile or personal
delivery) an amount equal to the amount of the payment made by the Agent to such
Bank, together with interest thereon for each day that elapses from and
including the date on which the Agent made such payment to but excluding the
Business Day on which the amount of such payment is returned to the Agent at its
Payment Office in immediately available funds prior to 12:00 Noon, New York City
time, at the Federal Funds Rate for each such day, based upon a year of 360
days. If the amount of such payment is not returned to the Agent in immediately
available funds within three Business Days after demand by the Agent, such Bank
shall pay to the Agent on demand an amount calculated in the manner specified in
the preceding sentence after substituting the term "Base Rate" for the term
"Federal Funds Rate". A certificate of the Agent submitted to any Bank with
respect to amounts owing under this Section 12.4(b) shall be conclusive absent
demonstrable error.
Section 12.5. Exculpation. The Agent shall be entitled to rely upon
advice of counsel concerning legal matters, and upon this Agreement and any
Note, security agreement, schedule, certificate, statement, report, notice or
other writing which it believes to be genuine or to have been presented by a
proper person. Neither the Agent nor any of its directors, officers, employees
or agents shall (i) be responsible for any recitals, representations or
warranties contained in, or for the execution, validity, genuineness,
effectiveness or enforceability of, this Agreement, any Note or any other
instrument or document delivered hereunder or in connection herewith, (ii) be
deemed to have knowledge of an Event of Default or Unmatured Event of Default
until after having received actual notice thereof from the Company or a Bank,
(iii) be under any duty to inquire into or pass upon any of the foregoing
matters, or to make any inquiry concerning the performance by the Company or any
other obligor of its obligations or (iv) in any event, be liable as such for any
action taken or omitted by it or them, except for its or their own gross
negligence or willful misconduct. The agency hereby created shall in no way
impair or affect any of the rights and powers of, or impose any duties or
obligations upon, the Agent in its individual capacity.
Section 12.6. Credit Investigation. Each Bank acknowledges, and
shall cause each Assignee or Participant to acknowledge in its assignment or
participation agreement with such Bank, that it has (i) made and will continue
to make such inquiries and has taken and will take such care on its own behalf
as would have been the case had the Loans been made directly by such Bank or
other applicable Person to the Company without the intervention of the Agent or
any other Bank and (ii) independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made and will continue to make its own credit analysis and
decisions relating to this Agreement. Each Bank agrees and acknowledges, and
shall cause each Assignee or Participant to agree and
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acknowledge in its assignment or participation agreement with such Bank, that
the Agent makes no representations or warranties about the creditworthiness of
the Company or any other party to this Agreement or with respect to the
legality, validity, sufficiency or enforceability of this Agreement or any Note.
Section 12.7. CUSA and Affiliates. CUSA and each of its successors
as Agent shall have the same rights and powers hereunder as any other Bank and
may exercise or refrain from exercising the same as though it were not the
Agent, and CUSA and any such successor and its Affiliates may accept deposits
from, lend money to and generally engage, and continue to engage, in any kind of
business with the Company or any Affiliate thereof as if CUSA or such successor
were not the Agent hereunder.
Section 12.8. Resignation. The Agent may resign as such at any time
upon at least 30 days' prior notice to the Company and the Banks. In the event
of any such resignation, Banks having an aggregate Percentage of more than 50%
shall as promptly as practicable appoint a successor Agent from among the Banks
reasonably acceptable to the Company. If no successor Agent shall have been so
appointed, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent from among the Banks
reasonably acceptable to the Company, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof or under
the laws of another country which is doing business in the United States of
America and having a combined capital, surplus and undivided profits of at least
$1,000,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from all further duties and
obligations under this Agreement. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 12 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
SECTION 13. GENERAL.
Section 13.1. Waiver; Amendments. No delay on the part of the
Agent, any Bank, or the holder of any Loan in the exercise of any right, power
or remedy shall operate as a waiver thereof, nor shall any single or partial
exercise by any of them of any right, power or remedy preclude other or further
exercise thereof, or the exercise of any other right, power or remedy. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or the Notes shall in any event be effective unless the same
shall be in writing and signed and delivered by the Agent and by Banks having an
aggregate Percentage of not less than the aggregate Percentage expressly
designated herein with respect thereto or, in the absence of such designation as
to any provision of this Agreement or the Notes, by the Required Banks, and then
any amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No amendment,
modification, waiver or consent (i) shall extend or increase the amount of the
Commitments, extend the due date for any amount payable hereunder, reduce or
waive any fee hereunder, change the definition of "Required Banks" or Percentage
in Section 1, amend or modify Section 4.1 or change any of the defined terms
used in Section 4.1, amend or modify Section 4.4, Section 4.5, Section 4.7,
Section 11.1.1 or Section 11.1.8, modify this Section 13.1 or otherwise change
the aggregate Percentage
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required to effect an amendment, modification, waiver or consent without the
written consent of all Banks, (ii) shall modify or waive any of the conditions
precedent specified in Section 10.1 for the making of any Loan without the
written consent of the Bank which is to make such Loan or (iii) shall extend the
scheduled maturity or reduce the principal amount of, or rate of interest on, or
extend the due date for any amount payable under, any Loan without the written
consent of the holder of the Note evidencing such Loan. Amendments,
modifications, waivers and consents of the type described in clause (iii) of the
preceding sentence with respect to Bid Loans or Bid Notes may be effected with
the written consent of the holder of such Bid Loans or Bid Notes and no consent
of any other Bank or other holder shall be required in connection therewith. No
provisions of Section 12 shall be amended, modified or waived without the
Agent's written consent.
Section 13.2. Notices. Except as otherwise expressly provided in
this Agreement, any notice hereunder to the Company, the Agent, or any Bank or
other holder of a Loan shall be in writing and, if by telegram, telex, facsimile
or personal delivery, shall be deemed to have been given and received when sent
and, if mailed, shall be deemed to have been given and received three Business
Days after the date when sent by registered or certified mail, postage prepaid,
and addressed to the Company, the Agent, or such Bank (or other holder) at its
address shown below its signature hereto or at such other address as it may, by
written notice received by the other parties to this Agreement, have designated
as its address for such purpose. The Agent, any Bank or the holder of any Note
giving any waiver, consent or notice to, or making any request upon, the Company
hereunder shall promptly notify the Agent thereof. Correspondence of the type
described in Section 2.2 with respect to Bid Loans and notices of Committed Loan
Requests made by the Company shall, except as otherwise provided herein, be
directed to the persons specified for such purpose for each party on the
signature pages hereof or in subsequent writings among the parties. Additional
copies of certain notices which any party may have requested on the signature
pages hereof need not be delivered at the same time as the primary notices to
such party, but the party delivering such primary notices shall use reasonable
efforts to distribute such copies on the same Business Day as that on which such
primary notices were distributed.
Section 13.3. Computations. Where the character or amount of any
asset or liability or item of income or expense is required to be determined, or
any consolidation or other accounting computation is required to be made, for
the purpose of this Agreement, such determination or calculation shall, at any
time and to the extent applicable and except as otherwise specified in this
Agreement, be made in accordance with generally accepted accounting principles
in the United States applied on a basis consistent with those in effect as at
the date of the Company's audited financial statements referred to in Section
8.4. If there should be any material change in generally accepted accounting
principles in the United States after the date hereof which materially affects
the financial covenants in this Agreement, the parties hereto agree to negotiate
in good faith appropriate revisions of such covenants (it being understood,
however, that such covenants shall remain in full force and effect in accordance
with their existing terms pending the execution by the Company and the Banks of
any such amendment).
Section 13.4. Assignments; Participations. Each Bank may assign, or
sell participations in, its Loans and its Commitment to one or more other
Persons in accordance with this Section 13.4 (and the Company consents to the
disclosure of any information obtained by any Bank in connection herewith to any
actual or prospective Assignee or Participant).
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Section 13.4.1. Assignments. Any Bank may with the written consents
of the Company and the Agent (which consents will not be unreasonably
withheld or delayed) at any time assign and delegate to one or more
commercial banks or other financial institutions (any Person to whom an
assignment and delegation is made being herein called an "Assignee") all
or any fraction of such Bank's Loans and Commitment (which assignment
and delegation shall be of a constant, and not a varying, percentage of
such assigning Bank's Loans and Commitment); each such assignment of a
Bank's Commitment shall be in the minimum amount of $10,000,000 or in
integral multiples of $1,000,000 in excess thereof; provided, that any
such Assignee will comply, if applicable, with the provisions contained
in the first sentence of Section 6.4(b) and shall be deemed to have
made, on the date of the effectiveness of such assignment and
delegation, the representation and warranty set forth in the second
sentence of Section 6.4(b); and provided, further, that the Company and
the Agent shall be entitled to continue to deal solely and directly with
such assigning Bank in connection with the interests so assigned and
delegated to an Assignee until such assigning Bank and/or such Assignee
shall have:
(i) given written notice of such assignment and
delegation, together with payment instructions, addresses and
related information with respect to such Assignee, substantially
in the form of Exhibit I, to the Company and the Agent;
(ii) provided evidence satisfactory to the Company and the
Agent that, as of the date of such assignment and delegation, the
Company will not be required to pay any costs, fees, taxes or
other amounts of any kind or nature with respect to the interest
assigned in excess of those payable by the Company with respect
to such interest prior to such assignment;
(iii) paid to the Agent for the account of the Agent a
processing fee of $2,500; and
(iv) provided to the Agent evidence reasonably satisfactory
to the Agent that the assigning Bank has complied with the
provisions of the last sentence of Section 12.6.
Upon receipt of the foregoing items and the consents of the Company and
the Agent, (x) the Assignee shall be deemed automatically to have become
a party hereto and, to the extent that rights and obligations hereunder
have been assigned and delegated to such Assignee, such Assignee shall
have the rights and obligations of a Bank hereunder and under the other
instruments and documents executed in connection herewith and (y) the
assigning Bank, to the extent that rights and obligations hereunder have
been assigned and delegated by it, shall be released from its
obligations hereunder. The Agent may from time to time (and upon the
request of the Company or any Bank after any change therein shall)
distribute a revised Schedule I indicating any changes in the Banks
party hereto or the respective Percentages of such Banks. Within five
Business Days after the Company's receipt of notice from the Agent of
the effectiveness of any such assignment and delegation, the Company
shall execute and deliver to the Agent (for delivery to the relevant
Assignee) new Notes in favor of such Assignee and, if the assigning Bank
has
41
<PAGE> 47
retained Loans and a Commitment hereunder, replacement Notes in favor of
the assigning Bank (such Notes to be in exchange for, but not in payment
of, the Notes previously held by such assigning Bank). Each such Note
shall be dated the date of the predecessor Notes. The assigning Bank
shall promptly mark the predecessor Notes "exchanged" and deliver them
to the Company. Any attempted assignment and delegation not made in
accordance with this Section 13.4.1 shall be null and void.
The foregoing consent requirement shall not be applicable in the
case of, and this Section 13.4.1 shall not restrict, any assignment or
other transfer by any Bank of all or any portion of such Bank's Loans to
(i) any Federal Reserve Bank (provided, that such Federal Reserve Bank
shall not be considered a "Bank" for purposes of this Agreement) or (ii)
any Affiliate of such Bank (provided, that the assigning or transferring
Bank shall give notice of such assignment or transfer to the Agent and
the Company).
Section 13.4.2. Participations. Any Bank may at any time sell to
one or more commercial banks or other Persons (any such commercial bank
or other Person being herein called a "Participant") participating
interests in any of its Loans, its Commitment or any other interest of
such Bank hereunder; provided, however, that
(a) no participation contemplated in this Section 13.4.2 shall
relieve such Bank from its Commitment or its other obligations
hereunder;
(b) such Bank shall remain solely responsible for the performance
of its Commitment and such other obligations hereunder and such
Bank shall retain the sole right and responsibility to enforce
the obligations of the Company hereunder, including the right to
approve any amendment, modification or waiver of any provision of
this Agreement (subject to Section 13.4.2(d) below);
(c) the Company and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement;
(d) no Participant, unless such Participant is an affiliate of
such Bank, or is itself a Bank, shall be entitled to require such
Bank to take or refrain from taking any action hereunder, except
that such Bank may agree with any Participant that such Bank will
not, without such Participant's consent, take any actions of the
type described in the third sentence of Section 13.1;
(e) the Company shall not be required to pay any amount under
Sections 4.1, 6.4 or 7.1 that is greater than the amount which
the Company would have been required to pay had no participating
interest been sold;
(f) no Participant may further participate any interest in any
Committed Loan (and each participation agreement shall contain a
restriction to such effect). The Company acknowledges and agrees
that, to the extent permitted by applicable law, each Participant
shall be considered a Bank for purposes of Sections 7.1, 7.4,
13.5 and 13.6 and by its acceptance of a participation herein,
each Participant
42
<PAGE> 48
agrees to be bound by the provisions of Section 6.2(b) as if
such Participant were a Bank; and
(g) such Bank shall have provided to the Agent evidence
reasonably satisfactory to the Agent that such Bank has complied
with the provisions of the last sentence of Section 12.6.
Section 13.5. Costs, Expenses and Taxes. The Company agrees to
pay on demand (a) all out-of-pocket costs and expenses of the Agent (including
the fees and out-of-pocket expenses of counsel for the Agent (and of local
counsel, if any, who may be retained by said counsel)), in connection with the
preparation, execution, delivery and administration of this Agreement, the Notes
and all other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith and (b) all out-of-pocket costs
and expenses (including reasonable attorneys' fees and legal expenses and
allocated costs of staff counsel) incurred by the Agent and each Bank in
connection with the enforcement of this Agreement, the Notes or any such other
instruments or documents. Each Bank agrees to reimburse the Agent for such
Bank's pro rata share (based upon its respective Percentage) of any such costs
or expenses incurred by the Agent on behalf of all the Banks and not paid by the
Company other than any fees and out-of-pocket expenses of counsel for the Agent
which exceed the amount which the Company has agreed with the Agent to
reimburse. In addition, the Company agrees to pay, and to hold the Agent and the
Banks harmless from all liability for, any stamp or other Taxes which may be
payable in connection with the execution and delivery of this Agreement, the
borrowings hereunder, the issuance of the Notes or the execution and delivery of
any other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith. All obligations provided for in
this Section 13.5 shall survive repayment of the Loans, cancellation of the
Notes or any termination of this Agreement.
Section 13.6. Indemnification. In consideration of the execution
and delivery of this Agreement by the Agent and the Banks, the Company hereby
agrees to indemnify, exonerate and hold each of the Banks, the Agent, the
Affiliates of each of the Banks and the Agent, and each of the officers,
directors, employees and agents of the Banks, the Agent and the Affiliates of
each of the Banks and the Agent (collectively herein called the "Bank Parties"
and individually called a "Bank Party") free and harmless from and against any
and all actions, causes of action, suits, losses, liabilities, damages and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements (collectively herein called the "Indemnified Liabilities"),
incurred by the Bank Parties or any of them as a result of, or arising out of,
or relating to (i) this Agreement, the Notes or the Loans or (ii) the direct or
indirect use of proceeds of any of the Loans or any credit extended hereunder,
except for any such Indemnified Liabilities arising on account of such Bank
Party's gross negligence or willful misconduct, and if and to the extent that
the foregoing undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. All obligations provided for in this Section 13.6 shall survive repayment
of the Loans, cancellation of the Notes or any termination of this Agreement.
Section 13.7. Regulation U. Each Bank represents that it in good
faith is not relying, either directly or indirectly, upon any margin stock (as
such term is defined in
43
<PAGE> 49
Regulation U promulgated by the Board of Governors of the Federal Reserve
System) as collateral security for the extension or maintenance by it of any
credit provided for in this Agreement.
Section 13.8. Extension of Termination Dates; Removal of Banks;
Substitution of Banks. (a) Not more than 60 days nor less than 45 days prior to
the then-effective Termination Date, the Company may, at its option, request all
the Banks then party to this Agreement to extend their scheduled Termination
Dates by an additional 364 days by means of a letter, addressed to each such
Bank and the Agent, substantially in the form of Exhibit J. Each such Bank
electing (in its sole discretion) so to extend its scheduled Termination Date
shall execute and deliver not earlier than the 30th day nor later than the 20th
day prior to the then-effective Termination Date counterparts of such letter to
the Company and the Agent, who shall notify the Company, in writing, of the
Banks' decisions no later than 15 days prior to the existing Termination Date,
whereupon (unless Banks with an aggregate Percentage in excess of 25% decline to
extend their respective scheduled Termination Dates, in which event the Agent
shall notify all the Banks thereof and no such extension shall occur) such
Bank's scheduled Termination Date shall be extended, effective only as of the
date that is such Bank's then-current scheduled Termination Date, to the date
that is 364 days after such Bank's then-current scheduled Termination Date. Any
Bank that declines or fails to respond to the Company's request for such
extension shall be deemed to have not extended its scheduled Termination Date.
(b) With respect to any Bank (i) on account of which the Company
is required to make any deductions or withholdings or pay any additional
amounts, as contemplated by Section 6.4, (ii) on account of which the Company is
required to pay any additional amounts, as contemplated by Section 7.1, (iii)
for which it is illegal to make a LIBOR Rate Loan, as contemplated by Section
7.3 or (iv) which has declined to extend such Bank's scheduled Termination Date
and Banks with an aggregate Percentage in excess of 75% have elected to extend
their respective Termination Dates, the Company may in its discretion, upon not
less than 30 days' prior written notice to the Agent and each Bank, remove such
Bank as a party hereto. Each such notice shall specify the date of such removal
(which shall be a Business Day and, if such Bank has any outstanding Bid Loans,
shall (unless otherwise agreed by such Bank) be on or after the last day of the
Loan Period for the Bid Loan of such Bank having the latest maturity date),
which shall thereupon become the scheduled Termination Date for such Bank.
(c) In the event that any Bank does not extend its scheduled
Termination Date pursuant to subsection (a) above or is the subject of a notice
of removal pursuant to subsection (b) above, then, at any time prior to the
Termination Date for such Bank (a "Terminating Bank"), the Company may, at its
option, arrange to have one or more other commercial banks or financial
institutions (which may be a Bank or Banks and each of which shall herein be
called a "Successor Bank") with the approval of the Agent (such approval not to
be unreasonably withheld) succeed to all or a percentage of the Terminating
Bank's outstanding Loans, if any, and rights under this Agreement and assume all
or a like percentage (as the case may be) of such Terminating Bank's undertaking
to make Loans pursuant hereto and other obligations hereunder (as if (i) in the
case of any Bank electing not to extend its scheduled Termination Date pursuant
to subsection (a) above, such Successor Bank had extended its scheduled
Termination Date pursuant to such subsection (a) and (ii) in the case of any
Bank that is the subject of a notice of removal pursuant to sub-section (b)
above, no such notice of removal had been given by the
44
<PAGE> 50
Company); provided, that prior to replacing any Terminating Bank with any
Successor Bank, the Company shall have given each Bank which has agreed to
extend its Termination Date an opportunity to increase its Commitment by all or
a portion of the Terminating Banks' Commitments. Such succession and assumption
shall be effected by means of one or more agreements supplemental to this
Agreement among the Terminating Bank, the Successor Bank, the Company and the
Agent. On and as of the effective date of each such supplemental agreement, each
Successor Bank party thereto shall be and become a Bank for all purposes of this
Agreement and to the same extent as any other Bank hereunder and shall be bound
by and entitled to the benefits of this Agreement in the same manner as any
other Bank.
(d) On the Termination Date for any Terminating Bank, such
Terminating Bank's Commitment shall terminate and the Company shall pay in full
all of such Terminating Bank's Loans (except to the extent assigned pursuant to
subsection (c) above) and all other amounts payable to such Bank hereunder
(including any amounts payable pursuant to Section 7.4 on account of such
payment); provided, that if an Event of Default or Unmatured Event of Default
exists on the date scheduled as any Terminating Bank's Termination Date, payment
of such Terminating Bank's Loans shall be postponed to (and, for purposes of
calculating facility fees under Section 4.4, utilization fees under Section 4.5
and determining the Required Banks (except as provided below), but for no other
purpose, such Terminating Bank's Commitment shall continue until) the first
Business Day thereafter on which (i) no Event of Default or Unmatured Event of
Default exists (without regard to any waiver or amendment that makes this
Agreement less restrictive for the Company, other than as described in clause
(ii) below) or (ii) the Required Banks (which for purposes of this subsection
(d) shall be determined based upon the respective Percentages and aggregate
Commitments of all Banks other than any Terminating Bank whose scheduled
Termination Date has been extended pursuant to this proviso) waive or amend the
provisions of this Agreement to cure all existing Events of Default or Unmatured
Events of Default or agree to permit any borrowing hereunder notwithstanding the
existence of any such event. In the event that CUSA or its Affiliates shall
become a Terminating Bank, the Required Banks with the consent of the Company
(which consent shall not be unreasonably withheld) shall appoint another Bank or
other Person as Agent, which shall have all of the rights and obligations of the
Agent upon the effective date of and pursuant to an agreement supplemental
hereto among the Company and the Banks, and thereupon CUSA, as Agent, shall be
relieved from its obligations as Agent hereunder, it being understood that the
provisions of Section 12 shall inure to the benefit of CUSA as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement. If
no such successor Agent shall be appointed within 30 days of the Termination
Date of the Agent, then the Agent shall, on behalf of the Banks, appoint a
successor Agent in accordance with the provisions set forth in Section 12.8 for
a resigning Agent.
(e) To the extent that all or a portion of any Terminating Bank's
obligations are not assumed pursuant to subsection (c) above, the Aggregate
Commitment shall be reduced on the applicable Termination Date and each Bank's
percentage of the reduced Aggregate Commitment shall be revised pro rata to
reflect such Terminating Bank's absence. The Agent shall distribute a revised
Schedule I indicating such revisions promptly after the applicable Termination
Date. Such revised Schedule I shall be deemed conclusive in the absence of
demonstrable error.
45
<PAGE> 51
(f) The Agent agrees to use reasonable commercial efforts to
assist the Company in locating one or more commercial banks or other financial
institutions to replace any Terminating Bank prior to such Terminating Bank's
Termination Date.
Section 13.9. Captions. Section captions used in this Agreement
are for convenience only and shall not affect the construction of this
Agreement.
Section 13.10. Governing Law; Severability. THIS AGREEMENT AND EACH
NOTE SHALL BE A CONTRACT MADE UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. All obligations of the Company and the
rights of the Agent, the Banks and any other holders of the Notes expressed
herein or in the Notes shall be in addition to and not in limitation of those
provided by applicable law. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 13.11. Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts and by the different parties on separate
counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Agreement.
When counterparts of this Agreement executed by each party shall have been
lodged with the Agent (or, in the case of any Bank as to which an executed
counterpart shall not have been so lodged, the Agent shall have received
telegraphic, telex or other written confirmation of execution of a counterpart
hereof by such Bank), this Agreement shall become effective as of the date
hereof and the Agent shall so inform all of the parties hereto.
Section 13.12. Further Assurances. The Company agrees to do such
other acts and things, and to deliver to the Agent and each Bank such additional
agreements, powers and instruments, as the Agent or any Bank may reasonably
require or deem advisable to carry into effect the purposes of this Agreement or
to better assure and confirm unto the Agent and each Bank their respective
rights, powers and remedies hereunder.
Section 13.13. Successors and Assigns. This Agreement shall be
binding upon the Company, the Banks and the Agent and their respective
successors and assigns, and shall inure to the benefit of the Company, the Banks
and the Agent and the respective successors and assigns of the Banks and the
Agent. Subject to Section 9.9, the Company may not assign any of its rights or
delegate any of its duties under this Agreement without the prior written
consent of all of the Banks.
Section 13.14. Waiver of Jury Trial. THE COMPANY, THE AGENT AND
EACH BANK HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP
46
<PAGE> 52
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Section 13.15. No Fiduciary Relationship. The Company
acknowledges that neither the Agent nor any Bank has any fiduciary relationship
with, or fiduciary duty to, the Company arising out of or in connection with
this Agreement, the Notes or the transactions contemplated hereby, and the
relationship between the Agent and the Banks, on the one hand, and the Company,
on the other, in connection herewith or therewith is solely that of creditor and
debtor. This Agreement does not create a joint venture among the parties.
47
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
INTERNATIONAL LEASE FINANCE
CORPORATION
By: /s/ ALAN H. LUND
--------------------------------------
Name: ALAN H. LUND
Title: EXECUTIVE VICE PRESIDENT
By: /s/ PAMELA S. HENDRY
--------------------------------------
Name: PAMELA S. HENDRY
Title: VICE PRESIDENT AND TREASURER
Address: 1999 Avenue of the Stars,
39th Floor
Los Angeles, California 90067
Attention: Pamela S. Hendry
Telephone: 310-788-1999
Facsimile: 310-788-1990
Telex: 69-1400 INTERLEAS BVHL
48
<PAGE> 54
Agent: CITICORP USA, INC., in its individual
corporate capacity and as Agent
By: /s/ ROBERT A. DANZIGER
--------------------------------------
Name: ROBERT A. DANZIGER
Title: Attorney-In-Fact
By:
--------------------------------------
Name:
Title:
Address: 2 Penns Way, Suite 200
New Castle, DE 19720
Attention: Christian Laughton
Telephone: 302-894-6005
Facsimile: 302-894-6120
49
<PAGE> 55
Banks: CITIBANK, N.A.
By: /s/ ARTHUR E. DEFFAA
--------------------------------------
Name: Arthur E. Deffaa
Title: Managing Director
Global Aviation
Address: 399 Park Avenue, 12th Floor
New York, NY 10043
Attention: Mr. Tom Hollohan
Telephone: 212-559-4243
Facsimile: 212-793-1246
THE CHASE MANHATTAN BANK
By: /s/ RICHARD C. SMITH
--------------------------------------
Name: Richard C. Smith
Title: Vice President
Address: 270 Park Avenue, 38th Floor
New York, NY 10017
Attention: Mr. Dick Smith
Telephone: 213-270-5435
Facsimile: 213-270-5100
COMMERZBANK AG, LOS ANGELES BRANCH
By: /s/ CHRISTIAN JAGENBERG
--------------------------------------
Name: Christian Jagenberg
Title: SVP and Manager
By: /s/ WERNER SCHMIDBAUER
--------------------------------------
Name: Werner Schmidbauer
Title: Vice President
Address: 633 West 5th St., Suite 6600
Los Angeles, CA 90071
Attention: Mr. Werner Schmidbauer
Telephone: 213-683-5413
Facsimile: 213-623-0039
50
<PAGE> 56
SOCIETE GENERALE
By: /s/ MAUREEN KELLY
--------------------------------------
Name: Maureen Kelly
Title: Director
Address: 2029 Century Park East
Suite 2900
Los Angeles, CA 90067
Attention: Ms. Maureen Kelly
Telephone: 310-788-7110
Facsimile: 310-551-1537
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ MICHAEL C. IRWIN
--------------------------------------
Name: Michael C. Irwin
Title: Vice President
Address: 1251 Avenue of the Americas
New York, NY 10020-1104
Attention: Mr. Michael Irwin
Telephone: 212-782-4316
Facsimile: 212-782-6445
CREDIT LYONNAIS
By: /s/ PHILLIPPE SOUSTRA
--------------------------------------
Name: Phillippe Soustra
Title: Senior Vice President
Address: 1301 Avenue of the Americas
New York, NY 10019-6022
Attention: Mr. Brian Bolotin
Telephone: 212-261-3815
Facsimile: 212-261-7368
51
<PAGE> 57
DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN
ISLAND BRANCHES
By: /s/ SUSAN A. MAROS
--------------------------------------
Name: Susan A. Maros
Title: Director
By: /s/ GAYMA Z. SHIVNARA
--------------------------------------
Name: Gayma Z. Shivnara
Title: Vice President
Address: 31 West 52nd Street
New York, NY 10019
Attention: Ms. Susan Maros
Telephone: 212-469-8104
Facsimile: 212-469-8366
DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
By: /s/ LLOYD C. STEVENS
--------------------------------------
Name: Lloyd C. Stevens
Title: Vice President
By: /s/ RAJIV GUPT
--------------------------------------
Name: Rajiv Gupt
Title: Associate
Address: 75 Wall Street
New York, NY 10005-2889
Attention: Mr. Lloyd Stevens
Telephone: 212-429-2229
Facsimile: 212-429-2524
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ CORY M. HELFAND
--------------------------------------
Name: Cory M. Helfand
Title: Vice President
Address: 1 First National Plaza
16th Floor
Chicago, IL 60670-0084
Attention: Mr. Richard Wilson
Telephone: 312-732-2882
Facsimile: 312-732-6222
52
<PAGE> 58
FLEET BANK
By: [SIG]
--------------------------------------
Name: [Illegible]
Title: Vice President
Address: Mail Stop NY, NY S02T
1185 Avenue of the Americas
New York, NY 10017
Attention: Mr. Charles Sabino
Telephone: 212-819-6085
Facsimile: 212-819-6212
BAYERISCHE HYPO- UND VEREINSBANK AG, NEW
YORK BRANCH
By: /s/ PAMELA J. GILLONS
--------------------------------------
Name: Pamela J. Gillons
Title: Associate Director
By: /s/ STEVEN ATWELL
--------------------------------------
Name: Steven Atwell
Title: Director
Address: 150 East 42nd Street
32nd Floor
New York, NY 10006-1404
Attention: Ms. Yoram Dankner
Telephone: 212-672-5446
Facsimile: 212-672-5530
ROYAL BANK OF CANADA
By: /s/ MICHAEL J. MADNICK
--------------------------------------
Name: Michael J. Madnick
Title: Senior Manager
Address: One Liberty Plaza
New York, NY 10006-1404
Attention: Mr. Mike Madnik
Telephone: 212-428-6203
Facsimile: 212-428-6459
53
<PAGE> 59
ABN AMRO BANK
By: /s/ CARLA S. WAGGONS
--------------------------------------
Name: Carla S. Waggons
Title: Assistant Vice President
Address: 135 S. LaSalle Street
Chicago, IL 60674-9135
Attention: Mr. John Lewis
Telephone: 312-904-2946
Facsimile: 312-606-8428
THE BANK OF NEW YORK
By: /s/ JONATHAN ROLLINS
--------------------------------------
Name: Jonathan Rollins
Title: Assistant Vice President
Address: 10990 Wilshire St., Suite 1125
Los Angeles, CA 90024
Attention: Mr. Jonathan Rollins
Telephone: 310-996-8658
Facsimile: 310-996-8667
BANK OF NOVA SCOTIA
By: /s/ ROBERT REYNOLDS
--------------------------------------
Name: Robert Reynolds
Title: Relationship Manager
Address: 580 California Street,
Suite 2100
San Francisco, CA 94104
Attention: Mr. Robert Lucchese
Telephone: 415-986-1100
Facsimile: 415-397-0791
54
<PAGE> 60
BANKBOSTON
By: /s/ LAWRENCE C. BIGELOW
--------------------------------------
Name: Lawrence C. Bigelow
Title: Managing Director
Address: P.O. 2016, Mail Location
01-10-08
Boston, MA 02106
Attention: Mr. Larry Bigelow
Telephone: 617-434-8868
Facsimile: 617-434-1096
BAYERISCHE LANDESBANK GIROZENTRALE,
CAYMAN ISLANDS BRANCH
By: /s/ ALEXANDER KOHNERT
--------------------------------------
Name: Alexander Kohnert
Title: First Vice President
By: /s/ JAMES H. BOYLE
--------------------------------------
Name: James H. Boyle
Title: Second Vice President
Address: 560 Lexington Avenue, 17th
Floor
New York, NY 10022
Attention: Mr. Jim Boyle
Telephone: 212-310-9817
Facsimile: 212-310-9868
55
<PAGE> 61
BANCA NAZIONALE DEL LAVORO S.P.A. - NEW
YORK BRANCH
By: /s/ MIGUEL MEDIDA
--------------------------------------
Name: Miguel Medida
Title: Vice President
By: /s/ LEONARDO VALENTINI
--------------------------------------
Name: Leonardo Valentini
Title: First Vice President
Address: 25 West 51st Street
New York, NY 10019
Attention: Mr. Giulio Giovine
Telephone: 212-314-0239
Facsimile: 212-765-2978
CARIPLO-CASSA DI RISPARMIO DELLE PROVINCIE
LOMBARDE S.P.A.
By: /s/ ANTHONY GIOBBI
--------------------------------------
Name: Anthony Giobbi
Title: Asst. Vice President
By: /s/ MARIA ELENA GREEK
--------------------------------------
Name: Maria Elena Greek
Title: Asst. Vice President
Address: 10 East 53rd Street, 36th Floor
New York, NY 10022
Attention: Mr. Anthony Giobbi
Telephone: 212-527-8737
Facsimile: 212-527-8777
DG BANK
By: /s/ STEPHANIE GAENSSLEN
--------------------------------------
Name: Stephanie Gaensslen
Title: Asst. Vice President
Address: 609 Fifth Avenue
New York, NY 10017
Attention: Ms. Stephanie Gaensslen
Telephone: 212-745-1583
Facsimile: 212-745-1556
56
<PAGE> 62
FUJI BANK, LTD.
By: /s/ MASAHITO FUKUDA
--------------------------------------
Name: Masahito Fukuda
Title: Joint General Manager
Address: 333 S. Hope Street, Suite 3900
Los Angeles, CA 90071-1406
Attention: Mr. Steve Brennan
Telephone: 213-253-4174
Facsimile: 213-253-4178
UBS AG, STAMFORD BRANCH
By: /s/ DENISE M. CLERKIN
--------------------------------------
Name: Denise M. Clerkin
Title: Associate Director
Loan Portfolio Support, US
By: /s/ RICHARD T. CONWAY
--------------------------------------
Name: Richard T. Conway
Title: Associate Director
Loan Portfolio Support, US
Address: 677 Washington Boulevard
Stamford, CT 06901
Attention: Ms. Marie Mulcahy
Telephone: 203-719-3836
Facsimile: 203-719-3092
WESTDEUTSCHE LANDESBANK
By: /s/ RAYMOND K. HIND
--------------------------------------
Name: Raymond K. Hind
Title: Vice President
Address: 633 West Fifth Street, Suite
6750
Los Angeles, CA 90024
Attention: Mr. Bob Edmonds
Telephone: 213-623-1401
Facsimile: 213-623-4706
57
<PAGE> 63
ARAB BANK PLC
By: /s/ NOFATT S. BAIBOR
--------------------------------------
Name: Nofatt S. Baibor
Title: EVP, Regional Manager
Address: 520 Madison Avenue, 2nd Floor
New York, NY 10022
Attention: Mr. John Adams
Telephone: 212-715-9765
Facsimile: 212-593-4632
BANCO DI NAPOLI
By: /s/ CLAUDE P. MAPES
--------------------------------------
Name: Claude P. Mapes
Title: First Vice President
By: /s/ VITO SPADA
--------------------------------------
Name: Vito Spada
Title: Executive Vice President
Address: 4 East 54th Street
New York, NY 10171-0026
Attention: Mr. Franco Di Mario
Telephone: 212-872-2415
Facsimile: 212-872-2426
BANK OF HAWAII
By: /s/ ROBERT M. WHEELER III
--------------------------------------
Name: Robert M. Wheeler III
Title: Vice President
Address: P.O. Box 2900
Honolulu, HI 96846-6000
Attention: Mr. Robert Wheeler
Telephone: 808-537-8237
Facsimile: 808-537-8301
58
<PAGE> 64
BANK OF MONTREAL
By: /s/ BRIAN L. BANKE
--------------------------------------
Name: Brian L. Banke
Title: Director
Address: 430 Park Avenue
New York, NY 10022
Attention: Mr. Brian L. Banke
Telephone: 212-605-1643
Facsimile: 212-605-1454
BANCO CENTRAL HISPANOAMERICANO S.A.
By: /s/ LOUIS FERREIRA
--------------------------------------
Name: Louis Ferreira
Title: Vice President
Address: 50 Broadway, 2nd Floor
New York, NY 10004
Attention: Mr. Sen Louie
Telephone: 212-361-5145
Facsimile: 212-361-5149
BANCA COMMERCIALE ITALIANA,
LOS ANGELES FOREIGN BRANCH
By: /s/ E. BOMBIERI
--------------------------------------
Name: E. Bombieri
Title: V.P. & Manager
By: /s/ J. WITYAK
--------------------------------------
Name: J. Wityak
Title: V.P.
Address: 555 S. Flower Street
Los Angeles, CA 90071
Attention: Mr. Jack Wityak
Telephone: 213-624-0440
Facsimile: 213-624-0457
59
<PAGE> 65
BANQUE NATIONALE DE PARIS
By: /s/ C. BETTLES
--------------------------------------
Name: C. Bettles
Title: Sr. V.P. & Manager
By: TJALLING TERPSTRA
--------------------------------------
Name: Tjalling Terpstra
Title: V.P.
Address: 725 S. Figueroa Street
Suite 2090
Los Angeles, CA 90017
Attention: Mr. Tjalling Terpstra
Telephone: 213-688-6425
Facsimile: 213-488-9602
FIRST HAWAIIAN BANK
By: /s/ TRAVIS RUETENIK
--------------------------------------
Name: Travis Ruetenik
Title: Corporate Banking Officer
Address: 999 Bishop Street, 11th Floor
Honolulu, HI 96813
Attention: Mr. Travis Ruetenik
Telephone: 808-525-7074
Facsimile: 808-525-6372
THE INDUSTRIAL BANK OF JAPAN
By: /s/ H. W. JACK
--------------------------------------
Name: H. W. Jack
Title: Senior Deputy General Manager
Address: 350 S. Grand Avenue, Suite 1500
Los Angeles, CA 90071
Attention: Mr. Craig Papayanis
Telephone: 213-893-6441
Facsimile: 213-488-9840
60
<PAGE> 66
MELLON BANK
By: /s/ DAVID B. WIRL
--------------------------------------
Name: David B. Wirl
Title: Assistant Vice President
Address: One Mellon Bank Center
Pittsburgh, PA 15258-0001
Attention: Mr. Dean Pace
Telephone: 213-553-9531
Facsimile: 213-553-9970
NATEXIS BANQUE
By: /s/ GILLES CHARMEY
--------------------------------------
Name: Gilles Charmey
Title: Vice President
By: /s/ XANE GUYARD
--------------------------------------
Name: Xane Guyard
Title: Vice President
Address: 45 Rue Saint-Dominique
75700 Paris France
Attention: Mr. Gilles Charmey
Telephone: 011-331-48-00-21-28
Facsimile: 011-331-45-55-45-09
61
<PAGE> 67
NORDDEUTSCHE LANDESBANK GIROZENTRALE, NEW
YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH
By: /s/ STEPHEN K. HUNTER
--------------------------------------
Name: Stephen K. Hunter
Title: SVP
By: /s/ STEPHANIE FINNEN
--------------------------------------
Name: Stephanie Finnen
Title: VP
Address: 1270 Avenue of the Americas
14th Floor
New York, NY 10020
Attention: Ms. Stephanie Finnen
Telephone: 212-332-8606
Facsimile: 212-332-8660
THE SANWA BANK LTD.
By: /s/ STEPHEN C. SMALL
--------------------------------------
Name: Stephen C. Small
Title: Vice President & Area Manager
Address: 55 East 52nd Street
New York , NY 10022
Attention: Mr. Steve Small
Telephone: 212-339-6201
Facsimile: 212-754-1304
62
<PAGE> 68
STANDARD CHARTERED
By: /s/ ROBERT L. GILBERT
--------------------------------------
Name: Robert L. Gilbert
Title: Vice President
By: /s/ PAUL S. KNOX
--------------------------------------
Name: Paul S. Knox
Title: Regional Executive
Address: 7 World Trade Center,
27th Floor
New York, NY 10048
Attention: Mr. Robert Gilbert
Telephone: 212-667-0493
Facsimile: 212-667-0251
UNIBANK
By: /s/ THOMAS P. HICKEY
--------------------------------------
Name: Thomas P. Hickey
Title: Vice President
By: [SIG]
--------------------------------
Name: [Illegible]
Title: Assistant Vice President
Address: 20 West 55th Street
New York, NY 10019
Attention: Mr. Tom Hickey
Telephone: 212-603-6953
Facsimile: 212-603-1685
WELLS FARGO BANK
By: /s/ EDITH LIM
--------------------------------------
Name: Edith Lim
Title: Vice President
Address: 707 Wilshire Blvd., 16th Floor
Los Angeles, CA 90017
Attention: Ms. Edith Lim
Telephone: 213-614-3903
Facsimile: 213-614-2305
63
<PAGE> 1
EXHIBIT 10.3
DATED 19TH JANUARY 1999
(1) THE BANKS AND FINANCIAL INSTITUTIONS NAMED HEREIN
(as Lenders)
(2) HALIFAX PLC
(as Agent)
(3) HALIFAX PLC
(as Security Trustee)
(4) SIERRA LEASING LIMITED
(as Borrower)
(5) AIRCRAFT SPC-9, INC.
(as Parent)
(6) INTERNATIONAL LEASE FINANCE CORPORATION
(as Guarantor)
(7) INTERNATIONAL LEASE FINANCE CORPORATION
(as Subordinated Lender)
________________________________________________
AIRCRAFT FACILITY AGREEMENT
in respect of a term facility in the
maximum principal amount of US$4,327,260,000
for the financing of approximately seventy-five (75)
Airbus Aircraft
________________________________________________
WILDE SAPTE
1 Fleet Place
London EC4M 7WS
Tel. 0171 246 7000
Fax. 0171 246 7777
CGA/CET/051297/AF341927.26
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE NO.
- ------ ------- --------
<S> <C>
1. DEFINITIONS.........................................................................2
2. AVAILABILITY.......................................................................34
3. UTILISATION OF THE FACILITY........................................................40
4. REPAYMENT AND PREPAYMENT...........................................................50
5. GUARANTEE AND INDEMNITY............................................................64
6. REPRESENTATIONS AND WARRANTIES.....................................................68
7. UNDERTAKINGS AND COVENANTS.........................................................73
8. SUBORDINATION......................................................................86
9. TRIGGER EVENTS.....................................................................89
10. DEFAULT............................................................................93
11. PROCEEDS ACCOUNT...................................................................96
12. APPLICATION OF SUMS RECEIVED BY THE LENDERS........................................97
13. INDEMNITIES.......................................................................101
14. CHANGE IN CIRCUMSTANCES...........................................................109
15. MITIGATION AND CONTEST RIGHTS.....................................................113
16. FEES AND EXPENSES.................................................................117
17. CHANGE OF AGENT AND SECURITY TRUSTEE..............................................118
18. ASSIGNMENTS AND TRANSFERS.........................................................119
19. SET-OFF AND PRO RATA PAYMENTS.....................................................123
20. RIGHTS CUMULATIVE, WAIVERS, SEVERABILITY..........................................125
21. FURTHER ASSURANCE.................................................................126
22. BAYERISCHE HYPO-UND VEREINSBANK AG................................................126
23. NOTICES...........................................................................126
24. GOVERNING LAW AND JURISDICTION....................................................129
25. MISCELLANEOUS.....................................................................130
26. CONFIDENTIALITY...................................................................131
27. COUNTERPARTS AND DELIVERY BY FACSIMILE............................................132
SCHEDULE 1 - THE LENDERS - PART I - THE BRITISH LENDERS..............................133
SCHEDULE 1 - PART II - THE FRENCH LENDERS............................................134
SCHEDULE 1 - PART III - THE GERMAN LENDERS...........................................135
SCHEDULE 2 - FORM OF TRANSFER CERTIFICATE............................................137
SCHEDULE 3 - UTILISATION NOTICE......................................................143
SCHEDULE 4 - PART I - Details of Proposed Aircraft and Proposed Delivery
Schedule................................................................145
SCHEDULE 4 - PART II - Sample Loan/Lease Profiles as a Percentage of
Aircraft Cost...........................................................150
SCHEDULE 5 - GUARANTOR COVENANTS.....................................................151
SCHEDULE 6 - CONDITIONS PRECEDENT AND SUBSEQUENT TO A UTILISATION....................155
PART I..................................................................155
PART II.................................................................158
PART III................................................................161
SCHEDULE 7 - ENGLISH PROCESS AGENTS..................................................163
SCHEDULE 8 - INSURANCE...............................................................164
SCHEDULE 9 - FORM OF CERTIFICATE TO BE GIVEN ON EACH QUARTER DATE....................167
SCHEDULE 10 - BLENDED LASU RATES......................................................168
APPENDIX A - FORM OF LOAN SUPPLEMENT.................................................172
APPENDIX B - FORM OF PARTIAL PURCHASE AGREEMENT ASSIGNMENT...........................173
(INCLUDING AIRFRAME WARRANTIES).........................................173
APPENDIX C - FORM OF ENGLISH LAW AIRCRAFT MORTGAGE...................................174
APPENDIX D - PART I FORM OF ASSIGNMENT OF GENERAL TERMS AGREEMENT RE
ENGINE WARRANTIES.......................................................175
PART II FORM OF ASSIGNMENT OF GENERAL TERMS AGREEMENT RE
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE NO.
- ------ ------- --------
<S> <C>
ENGINE WARRANTIES IN RESPECT OF ENGINES MANUFACTURED BY
UNITED TECHNOLOGIES CORPORATION, PRATT & WHITNEY GROUP..................176
PART III FORM OF RR ENGINE WARRANTY AGREEMENT...........................177
APPENDIX E - FORM OF BFE BILL OF SALE................................................178
APPENDIX F - FORM OF AIRCRAFT BILL OF SALE...........................................180
APPENDIX G - FORM OF SUB-BORROWER CHARGE OVER SHARES.................................182
APPENDIX H - FORM OF SUB-BORROWER GUARANTEE..........................................183
APPENDIX I - FORM OF SUB-BORROWER DEBENTURE..........................................184
APPENDIX J - FORM OF ACCESSION DEED..................................................185
APPENDIX K - FORM OF BORROWER DEBENTURE..............................................190
APPENDIX L - FORM OF CHARGE OVER SHARES OF INTERMEDIATE LESSEE.......................191
APPENDIX M - FORM OF INTERMEDIATE LESSEE DEBENTURE...................................192
APPENDIX N - FORMS OF LEASE SECURITY ASSIGNMENT AND INTERMEDIATE LEASE SECURITY
ASSIGNMENT..............................................................193
APPENDIX O - FORM OF REPLACEMENT BILL OF SALE........................................195
APPENDIX P - FORM OF LETTER COMPRISING NOTICE OF CHARGE AND AIRCRAFT
MORTGAGE AND QUIET ENJOYMENT COVENANT...................................196
</TABLE>
<PAGE> 4
THIS AIRCRAFT FACILITY AGREEMENT is made the 19th day of January 1999
BETWEEN:-
(1) HALIFAX PLC (Lead Manager), a banking institution established under the
laws of England, whose registered office is at Trinity Road, Halifax,
West Yorkshire HX1 2RG (herein together with their successors, permitted
assigns and permitted transferees called the "BRITISH LENDERS");
(2) SOCIETE GENERALE (Lead Manager), a banking institution established under
the laws of France, whose principal place of business is at Tour Societe
Generale, 17 Cours Valmy 92972 Paris - La Defense 7, Cedex, France
(herein together with their successors, permitted assigns and permitted
transferees called the "FRENCH LENDERS");
(3) COMMERZBANK AG (Lead Manager) a banking institution established under
the laws of Germany and whose principal place of business is at Neue
Mainzer Strasse 32-36, 60311, Frankfurt, Germany acting through its
office at 633 West Fifth Street, Suite 6600, Los Angeles, CA90071,
United States of America, BAYERISCHE HYPO-UND VEREINSBANK AG (Co-Lead
Manager), a banking institution established under the laws of Germany
and having its principal place of business at Am Tucherpark 1, 80538,
Munich, Germany and KREDITANSTALT FUR WIEDERAUFBAU, (Parallel Lender) a
public corporation established under the laws of Germany and having its
principal place of business at Palmengartenstrasse 5-9, 60325 Frankfurt
am Main (herein together with their successors, permitted assigns and
permitted transferees called the "GERMAN LENDERS");
(the British Lenders, the French Lenders and the German Lenders being
herein together called the "LENDERS" and severally a "LENDER")
(4) HALIFAX PLC, a banking institution established under the laws of
England, whose registered office is at Trinity Road, Halifax, West
Yorkshire HX1 2RG in its capacity as Agent for and on behalf of itself
and the Lenders (herein in such capacity called the "AGENT");
(5) HALIFAX PLC, a banking institution established under the laws of
England, whose registered office is at Trinity Road, Halifax, West
Yorkshire HX1 2RG in its capacity as security trustee for and on behalf
of itself and the Lenders (herein in such capacity called the "SECURITY
TRUSTEE");
(6) SIERRA LEASING LIMITED, a company incorporated under the laws of Bermuda
and having its registered office at 29 Richmond Road, Hamilton HM-AX,
Bermuda (herein called the "BORROWER");
(7) AIRCRAFT SPC-9, INC., a company incorporated under the laws of
California and having its registered office at c/o International Lease
Finance Corporation, 1999 Avenue of the Stars, 39th Floor, Los Angeles,
CA 90067 (herein called the "PARENT");
(8) INTERNATIONAL LEASE FINANCE CORPORATION, a corporation incorporated
under the laws of the State of California and having its principal place
of business at 1999 Avenue of the Stars, 39th Floor, Los Angeles, CA
90067 as guarantor (herein in such capacity called the "GUARANTOR");
<PAGE> 5
(9) INTERNATIONAL LEASE FINANCE CORPORATION, a corporation incorporated
under the laws of the State of California and having its principal place
of business at 1999 Avenue of the Stars, 39th Floor, Los Angeles,
CA90067 as subordinated lender (herein in such capacity called the
"SUBORDINATED LENDER").
WHEREAS:
This Agreement sets out the terms upon which the Lenders will make available to
the Borrower the Facility described herein to enable the Borrower to purchase
the Aircraft.
NOW IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
1.1 In this Agreement (including the Recitals, the Schedules and the Annexes
hereto) except where the context otherwise requires or there is express
provision to the contrary, the following words and expressions shall
have the following meanings:-
"ACCELERATION EVENT" means a Termination Event in respect of which the
Agent has served a notice in accordance with the provisions of and
having the effect set out in Clause 10.2 (Acceleration Rights);
"ACCESSION DEED" means a deed of accession to this Agreement to be
entered into by the relevant Sub-Borrower and/or Intermediate Lessee in
the form of Appendix J;
"ADVANCE" means, in respect of a Utilisation, the aggregate of the sums
to be advanced by each of the Lenders to the Borrower in respect of that
Utilisation;
"AFFECTED LENDER" shall have the meaning given thereto in Clauses 4.12
(Deductions and Withholdings), 14.1 (Increased Costs), 14.2 (Market
Disruption) 14.3 (Illegality) and 15.2 (Prepayment of Affected Loans and
Replacement of Affected Lender);
"AGREEMENT" means this aircraft facility agreement;
"AIG" means American International Group, Inc. a corporation duly
organised and existing under the laws of Delaware whose principal place
of business is at 70 Pine Street, New York, N.Y. 10270, USA;
"AIG GROUP COMPANY" means AIG and any person of which or in which AIG
owns, directly or indirectly, 50% or more of:-
(a) the combined voting power of all classes of stock having general
voting power under ordinary circumstances to elect a majority of
the board of directors of such person, if it is a corporation;
(b) the capital interest or profits interest of such person, if it
is a partnership, limited liability company, joint venture or
similar entity; or
(c) the beneficial interest of such person, if it is a trust,
association or other unincorporated organisation;
<PAGE> 6
"AIRCRAFT" means, as the context may require, any or all of the Eligible
Aircraft financed hereunder by the Borrower pursuant to a Utilisation
Notice (and, save where the context otherwise requires, includes any or
all of the Replacement Aircraft) comprising, with respect to each
individual aircraft, the Airframe together with the relevant Engines
(whether or not any of the relevant Engines may from time to time be
installed on the Airframe) together with the relevant Technical Records;
"AIRCRAFT OPERATIVE DOCUMENTS" means, in respect of an Aircraft, each
of:
(i) the relevant Loan Supplement, the relevant Utilisation Notice,
the relevant Bill of Sale, the relevant BFE Bill of Sale, the
relevant Purchase Agreement (to the extent that it relates to
the purchase of that Aircraft and the Warranties relating to
that Aircraft), the relevant Engine Agreement (to the extent
that it relates to the Engine Warranties relating to that
Aircraft), the relevant Intermediate Lease (if any), the
relevant Accession Deed (if any) and each of the Aircraft
Security Documents (but excluding the Lenders' Agreement); and
(ii) (a) any other document, instrument or memorandum annexed to
any of the documents referred to in (i) above,
(b) any notice or acknowledgement required pursuant to the
terms of any of the documents referred to in (i) above;
and
(c) any document, instrument or memorandum (x) which is
executed and delivered in connection with a
restructuring in accordance with the terms of this
Agreement, of any or all of the arrangements
contemplated by any of the documents referred to in (i)
above or (y) which the Guarantor, the Borrower, the
relevant Intermediate Lessee or the relevant
Sub-Borrower agrees constitutes an Aircraft Operative
Document or (z) which is entered into in substitution
for or which amends or augments or varies all or any
part of any of the documents referred to in this
definition (including this part (ii)(c)(z)) in each case
in accordance with the terms of this Agreement;
"AIRCRAFT PURCHASE PRICE" means, in respect of an Aircraft, the final
contract price for that Aircraft (including any Buyer Furnished
Equipment) on delivery, after deduction of all credit memoranda in each
case which are expressed to be capable of being applied against the
purchase price of that Aircraft as set out in the relevant purchase
agreement by the Seller and/or the Manufacturer and/or the relevant
Engine Manufacturer and exclusive of any capitalised interest, together
with the final contract price for the post-delivery modifications (if
any) to be carried out on such Aircraft that are invoiced on or prior to
delivery;
"AIRCRAFT SECURITY DOCUMENTS" means, in respect of an Aircraft, each of:
(i) this Agreement, the Borrower Debenture, the relevant Lease
Security Assignment (if any), the relevant Intermediate Lease
Security Assignment (if any), the relevant Mortgage, the
relevant Sub-Borrower Guarantee (if any), the relevant
Assignment of General Terms Agreements Re Engine Warranties, the
<PAGE> 7
relevant Partial Purchase Agreement Assignment, the Charge Over
Shares of Borrower, the relevant Charge Over Shares of
Sub-Borrower (if any), the relevant Sub-Borrower Debenture (if
any), the relevant Intermediate Lessee Debenture (if any), the
relevant Charge Over Shares of Intermediate Lessee (if any), the
relevant Notice of Charge (if any);
(ii) (a) any other instrument, document or memorandum annexed to
any of the documents referred to in (i) above,
(b) any notice or acknowledgement required pursuant to the
terms of any of the documents referred to in (i) above;
and
(c) any document, instrument or memorandum (w) which is
executed and delivered in connection with or following a
restructuring of any or all of the arrangements
contemplated by any of the documents referred to in (i)
above or (x) which the Guarantor or the Borrower or any
Sub-Borrower or any Intermediate Lessee agrees
constitutes an Aircraft Security Document or (y) which
secures the obligations of any one or more of the
Obligors under any of the Aircraft Operative Documents
or (z) which is entered into in substitution for or
which amends or augments or varies all or any part of
any of the documents referred to in this definition
(including this part (ii)(c)(z)) in each case in
accordance with the terms of this Agreement;
"AIRFRAME" means, in respect of an Aircraft, the airframe more
particularly identified in Schedule 1 to the relevant Mortgage including
all Parts installed in or on the airframe at the Delivery Date (or
which, having been removed therefrom, remain the property of the
Borrower or, if applicable, the relevant Sub-Borrower), and all
substitutions, renewals and replacements of such Parts from time to time
made in or to or installed in or on the said airframe including any
Parts which are for the time being detached from the airframe but remain
the property of the Borrower or, if applicable, the relevant
Sub-Borrower;
"ALTERNATIVE UTILISATION" means, in relation to a Eligible Aircraft, a
Utilisation which is part of a leveraged or tax-based financing of that
Eligible Aircraft;
"ASSIGNMENT OF GENERAL TERMS AGREEMENT RE ENGINE WARRANTIES" means, in
respect of an Aircraft (other than where such Aircraft is powered by
Engines manufactured by Rolls-Royce plc), the deed of assignment of the
relevant Engine Agreement in so far as it relates to the Engine
Warranties in respect of the Engines relating to that Aircraft to be
entered into between the Guarantor and the Borrower or a Sub-Borrower
(as the case may be), and including if applicable the Lessee as a party
or subject to its rights, in the form agreed by the relevant Engine
Manufacturer substantially in the form of Appendix D Part I or, in the
case of Engines manufactured by United Technologies Corporation, Pratt &
Whitney Group, Appendix D Part II;
"ASSUMED FINANCED AMOUNT" means, in relation to an Aircraft, the amount
applicable to that Aircraft in the column headed "Assumed Financed
Amount" in Schedule 4 Part I;
<PAGE> 8
"AVAILABILITY PERIOD" means the period from the date hereof up to and
including March 31, 2002 or such later date as the parties hereto may
agree, subject to earlier termination as provided for in this Agreement;
"AVIATION AUTHORITY" means, in respect of an Aircraft, any Government
Entity which under the laws of the State of Registration may from time
to time:-
(i) have control or supervision of civil aviation in the State of
Registration; or
(ii) have jurisdiction over the registration, airworthiness or
operation of, or other similar matters relating to, that
Aircraft;
"BANKING DAY" means a day (other than a Saturday, Sunday or holiday
scheduled by law) on which banks are open for the transaction of
domestic and foreign exchange business and otherwise for the transaction
of business of the nature required by this Agreement or the other
Transaction Documents, as applicable, in London, Paris, Frankfurt,
Luxembourg, Los Angeles and New York City and also, in relation to a day
on which a payment is required, in the place where such payment is to be
made in accordance with this Agreement or any of the other Transaction
Documents, as applicable;
"BFE BILL OF SALE" means, in respect of an Aircraft, the bill of sale
executed or to be executed by the Guarantor in favour of the Seller
substantially in the form of Appendix E pursuant to which title to the
Buyer Furnished Equipment is transferred from the Guarantor to the
Seller;
"BILL OF SALE" means, in respect of an Aircraft, the bill of sale
executed or to be executed by the Seller in favour of the Borrower or
any Sub-Borrower (as the case may be) substantially in the form set out
in Appendix F evidencing the transfer of title to that Aircraft or any
confirmation of sale if title to the Aircraft is to pass by way of
physical delivery of the Aircraft from the Seller to the Borrower or any
Sub-Borrower;
"BORROWER ACCOUNTS" means each of the Borrower Maintenance Reserve
Account, the Borrower Rental Account and the Borrower Security Deposit
Account and "BORROWER ACCOUNT" shall mean any of them;
"BORROWER CONSTITUTIONAL DOCUMENTS" means the certificate of
incorporation, the memorandum of association and bye-laws of the
Borrower;
"BORROWER DEBENTURE" means the document so entitled of even date
herewith between the Borrower and the Security Trustee in the form set
out in Appendix K;
"BORROWER MAINTENANCE RESERVE ACCOUNT" means the existing Dollar account
in the name of the Borrower with Wells Fargo Bank or Bank of America in
California or with such other financial institution as may be approved
by the Security Trustee (such approval not to be unreasonably withheld);
"BORROWER RENTAL ACCOUNT" means the existing Dollar account in the name
of the Borrower with Wells Fargo Bank or Bank of America in California
or with such other financial institution as may be approved by the
Security Trustee (such approval not to be unreasonably withheld);
<PAGE> 9
"BORROWER SECURITY DEPOSIT ACCOUNT" means the existing Dollar account in
the name of the Borrower with Wells Fargo Bank or Bank of America in
California or with such other financial institution as may be approved
by the Security Trustee (such approval not to be unreasonably withheld);
"BRITISH CREDITS" shall, in respect of an Advance, have the meaning
given to that term in the relevant Loan Supplement;
"BUSINESS DAY" means a day (other than a Saturday or Sunday or holiday
scheduled by law) on which banks are open for the transaction of
domestic and foreign exchange business and otherwise for the transaction
of business of the nature required by this Agreement or the other
Transaction Documents, as appropriate, in London, Paris, Frankfurt,
Luxembourg, Los Angeles, New York City and Bermuda and, when used in
respect of an Aircraft of which a Sub-Borrower is or is to be the owner,
the city in which such Sub-Borrower has its principal place of business;
"BUYER FURNISHED EQUIPMENT" means, in respect of an Aircraft, the buyer
furnished equipment relating to that Aircraft supplied by the Guarantor
to the Seller prior to the Delivery Date or, as the case may be, during
any post delivery modification period relating to the relevant Aircraft;
"CANCELLATION NOTICE" shall have the meaning given to such term in
Clause 9.3.1(g) (Third Trigger Event);
"CHANGE IN LAW" means, in each case after the date of this Agreement,
(i) the introduction, abolition, withdrawal or variation of any
applicable law, regulation, practice or concession or official
directive, ruling, request, notice, guideline, statement of policy or
practice statement by the Bank of England, the Banque de France, the
Deutsche Bundesbank, the Federal Reserve Bank of New York, the European
Union, European Central Bank or any central bank, tax, fiscal,
governmental, international, national or other competent authority or
agency (whether or not having the force of law but in respect of which
compliance by banks or other financial institutions in the relevant
jurisdiction is generally considered to be mandatory), or (ii) any
change in any interpretation, or the introduction or making of any new
or further interpretation, or any new or different interpretation by any
court, tribunal, governmental, revenue, international, national, fiscal
or other competent authority, or (iii) the compliance by banks or other
financial institutions with any new or different request or direction
(in each case whether or not having the force of law but in respect of
which compliance by banks or other financial institutions in the
relevant jurisdiction is generally considered to be mandatory) from any
central bank, fiscal, governmental, revenue, international, national,
monetary or other authority; PROVIDED always that in respect of a
Lender, any such implementation, introduction, abolition, withdrawal or
variation, change in interpretation or new or different interpretation
in relation to any applicable law or regulation and/or practice,
concession, directive, ruling, request, notice, guideline, statement of
policy or practice statement having effect in the jurisdiction in which
the relevant Lender is organised, has its principal place of business or
has its Lending Office shall not constitute a Change in Law if, prior to
the date of this Agreement, such implementation, introduction,
abolition, withdrawal or variation, change in interpretation or new or
different interpretation had been announced or proposed generally to
banks and other financial institutions in the jurisdiction in which the
relevant Lender is organised or has its principal place of business or
has its Lending Office by way of the publication of any Act of
Parliament, statute or
<PAGE> 10
statutory instrument or the publication or delivery or issue of any
notice, directive or guideline applicable to banks generally by the
relevant central bank, a European Union institution or other applicable
authority, government, department, committee or agency (which under the
laws of the jurisdiction in which the relevant Lender has its Lending
Office, is organised or has its principal place of business for the time
being has control or supervision of banking regulations);
"CHARGE OVER SHARES OF BORROWER" means the agreement so entitled having
the same date as this Agreement and made between the Parent and the
Security Trustee and relating to the shares of the Borrower;
"CHARGE OVER SHARES OF INTERMEDIATE LESSEE" means any deed of charge
entered into from time to time between the Borrower or any relevant
Sub-Borrower (as the case may be) and the Security Trustee in relation
to the shares of any Intermediate Lessee substantially in the form of
Appendix L;
"CHARGE OVER SHARES OF SUB-BORROWER" means any deed of charge entered
into from time to time between the Borrower and the Security Trustee in
relation to the shares of any Sub-Borrower substantially in the form of
Appendix G;
"CHARGES OVER SHARES" means together the Charge Over Shares of Borrower,
each Charge Over Shares of Intermediate Lessee and each Charge Over
Shares of Sub-Borrower;
"COFACE" means the export credit agency of the French Republic,
represented by Compagnie Francaise d'Assurance pour le Commerce
Exterieur;
"COMMITMENT" means, in relation to a Lender, at any time the amount
described as such set out opposite the name of such Lender in Schedule 1
or, as the case may be, the Schedule to the relevant Transfer
Certificate, as the same may be cancelled or reduced pursuant to the
terms of this Agreement (including the terms of Clauses 2.5.2 and 2.5.3
(Reduction and Cancellation of the Facility)) and as further reduced or
increased pursuant to any Transfer Certificate less the amount of such
Lender's Relevant Proportion of any Advances made before such time;
"COMPULSORY ACQUISITION" means, in respect of an Aircraft or an Engine,
requisition of title or other compulsory acquisition of title (but
excluding requisition for use or hire) of such Aircraft or Engine, as
the case may be, by a Government Entity;
"CONTRACTUAL RATE" means, in relation to a Loan, the single blended rate
for the aggregate of Tranche A and Tranche B of such Loan as stated in
clause 4 of the relevant Loan Supplement and, provided that the relevant
Aircraft is delivered within the same calendar month as its Scheduled
Delivery Month, such single blended rate shall be the relevant blended
rate set out in Column 9 of Schedule 10;
"DEFAULT INTEREST PERIOD" means, in relation to the determination of
Default Rate LIBOR, each period (not exceeding six months) as the Agent
selects in its absolute discretion, the first such period commencing on
the date on which the overdue payment was due and each subsequent period
commencing on the last day of the preceding period for so long as the
relevant default continues;
<PAGE> 11
"DEFAULT RATE" means
(a) in relation to any amount of principal or interest in respect of
a Loan:
(i) in the case of the British Credits and the French
Credits, the rate of interest per annum equal to the
aggregate of one per cent. (1%) per annum and the higher
of (1) the relevant Contractual Rate and (2) Default
Rate LIBOR; or
(ii) in the case of the German Credits, the rate of interest
per annum equal to the aggregate of one per cent. (1%)
per annum and the higher of (1) the relevant Contractual
Rate and (2) as applicable, (y) Default Rate LIBOR or
(z) (if the German Credits or part thereof is at the
relevant time funded in any currency other than Dollars)
the funding cost incurred by the German Lenders; and
(b) in relation to any other amount arising under any Transaction
Document, the aggregate of Default Rate LIBOR and one per cent.
per annum;
"DEFAULT RATE LIBOR" means:
(a) the rate per annum which is certified by the Agent to be the
rate (rounded upwards to the nearest one sixteenth of one per
cent. (1/16%)) for deposits in Dollars in an amount
substantially equal to the sum in default for a period
comparable to the Default Interest Period which appears on the
Telerate/Dow Jones Market Service Page 3750 (or its successor or
replacement page) at or about 11.00 a.m. London time on the
first day of the relevant Default Interest Period; or
(b) if such rate does not appear on Telerate/Dow Jones Market
Service Page 3750 (or its successor or replacement page) Default
Rate LIBOR for the relevant Default Interest Period shall be the
rate per annum, certified by the Agent as the arithmetic mean
(rounded upwards to the nearest one sixteenth of one per cent.
(1/16%)) of the respective rates per annum notified to the Agent
at which the Reference Banks are offered Dollar deposits by
prime banks in the London Interbank Euro Currency Market in an
amount substantially equal to the sum in default and for a
period having a duration equal to or as close as practicable to
the Default Interest Period at or about 11.00 a.m. (London time)
on the first day of the relevant Default Interest Period
provided that (a) if one of the Reference Banks does not provide
such rates, Default Rate LIBOR in relation to such Default
Interest Period shall be determined on the basis of the rate
notified by the Reference Bank providing such rate, and (b) if
neither of the Reference Banks provides such a rate, then
Default Rate LIBOR in relation to such Default Interest Period
shall be the rate per annum certified by the Agent (acting upon
the instructions from each Lender) as the arithmetic mean
(rounded upwards to the nearest one sixteenth of one per cent.
(1/16%)) of the cost to each of the Lenders of funding (in
Dollars) an amount substantially equal to that Lender's Relevant
Proportion of the sum in default for a period having a duration
equal to or as close as practicable to such Default Interest
Period at or about 11.00 a.m. (London time) on the first day of
such Default Interest Period;
<PAGE> 12
"DELIVERY DATE" means, in respect of an Aircraft, the date upon which
that Aircraft is delivered to the Borrower, or, as the case may be, a
Sub-Borrower by the Seller which date shall be the date of the delivery
of the relevant Bill of Sale;
"DOLLARS" and "US$" means the lawful currency for the time being of the
United States of America;
"ECGD" means Her Britannic Majesty's Secretary of State acting by the
Export Credits Guarantee Department;
"ECGD REFERENCE BANKS" means with respect to sub-paragraph (v) of the
definition of Make-Whole Amount:
(i) in the case of a prepayment in accordance with Clauses 4.3
(Voluntary Prepayment), 4.4 (Prepayment following a Total Loss),
4.5 (Prepayment on Final Disposition), 4.6 (Prepayment on a
Sub-Borrower Sale), Clause 4.8 (Prepayment if not leased), the
three reference banks nominated under Clauses 4.3 (Voluntary
Prepayment), 4.4 (Prepayment following a Total Loss), 4.5
(Prepayment on Final Disposition), 4.6 (Prepayment on a
Sub-Borrower Sale) and Clause 4.8 (Prepayment if not leased) (as
the case may be); and
(ii) in the case of prepayments in accordance with Clause 4.10
(Mandatory Prepayment Event) or of a declaration by the Agent of
a Termination Event under Clause 10.2 (Acceleration Rights),
those reference banks as the Lead Manager of the British Credits
may select;
"ELIGIBLE AIRCRAFT" means, as the context may require (a) any or all of
the Airbus A319, A320, A321, A330 and A340 Aircraft purchased pursuant
to any Purchase Agreement including the Aircraft referred to in Schedule
4 Part I during the period from the date hereof to March 31, 2002 or (b)
such other A319, A320, A321, A330 and A340 Airbus aircraft as may be
agreed between the Borrower and the Agent (acting upon the instructions
of the Majority Lenders) or such other Airbus aircraft as may be agreed
between the Borrower and the Agent (acting upon the unanimous
instructions of the Lenders and the Export Credit Agencies), subject
always to Clause 2.7.4 (Amount);
"ENGINE" or "ENGINES" means, in respect of an Aircraft, (a) each of the
engines described in Schedule 1 to the relevant Mortgage, whether or not
from time to time during the term of the relevant Loan installed on the
Airframe or any other airframe (for so long as it remains property of
the Borrower or Sub-Borrower) but which, having been removed from the
Airframe, remains the property of the Borrower or, if applicable, the
relevant Sub-Borrower (as the case may be), or (b) any other Replacement
Engine substituted therefor which becomes the property of the Borrower
or the relevant Sub-Borrower (as the case may be), including, if
applicable, any other Engine which may from time to time be installed
upon or attached to the Airframe and which becomes the property of the
Borrower or, if applicable, the relevant Sub-Borrower, and (c) insofar
as the same belong to the Borrower or, if applicable, the relevant
Sub-Borrower, any and all Parts of whatever nature from time to time
relating to an engine referred to in (a) and (b) above whether or not
installed on or attached to such engine and (d) insofar as the same
belong to the Borrower or the relevant Sub-Borrower (as the case may
be), all substitutions,
<PAGE> 13
replacements or renewals from time to time made on or to any item
referred to in (a), (b) and (c);
"ENGINE AGREEMENT" means each of:
(a) The General Terms Agreement 6-3987 dated June 22, 1984 between
CFM International S.A. and the Guarantor;
(b) The General Terms Agreement 6-5792 dated November 1, 1985
between General Electric Company and the Guarantor;
(c) The General Terms Agreement dated December 9, 1992 between IAE
International Aero Engines AG and the Guarantor;
(d) The PW4168 powered A330 Contract dated May 23, 1996 between
United Technologies Corporation, Pratt & Whitney Group and the
Guarantor; and
(e) The Terms of Business Agreement DEG2596 (MG 381) dated October
3, 1997 between Rolls Royce plc and the Guarantor,
including, in each case, any relevant amendment, modification, letter
agreements and supplements thereto;
"ENGINE MANUFACTURERS" means each of CFM International S.A., General
Electric Company, IAE International Aero Engines AG, United Technologies
Corporation, Pratt & Whitney Group and Rolls Royce plc, and their
successors and assigns;
"ENGINE WARRANTIES" means, in respect of the Engines relating to an
Aircraft, the warranties, including the conditions and limitations
applicable thereto, contained in:
(i) exhibit B to the Engine Agreement between CFM International S.A.
and the Guarantor;
(ii) exhibit B to the Engine Agreement between General Electric
Company and the Guarantor;
(iii) clause 4 of the Engine Agreement between IAE International Aero
Engines AG and the Guarantor;
(iv) the engine sales warranty and service policy benefits set out in
the Engine Agreement between United Technologies Corporation,
Pratt & Whitney Group and the Guarantor or, as the case may be;
(v) the Rolls Royce Trent Warranty pursuant to the DEG2596 (MG 381)
Agreement dated October 3, 1997 between the Guarantor and Rolls
Royce plc;
(vi) together with, in each case, the patent indemnities set forth in
the relevant Engine Agreement and any and all rights of the
Guarantor under the relevant Engine Agreement to compel
performance of the same and the right to claim damages in
respect thereof but only insofar as such warranties, indemnities
and rights arise in respect of the Engines relating to the
relevant Aircraft;
<PAGE> 14
"EXISTING AIRCRAFT" shall have the meaning given to such term in Clause
4.7 (Substitution of Aircraft);
"EXPENSES" means any reasonable out-of-pocket costs and expenses
(including the agreed or, if not agreed, the reasonable legal fees and
expenses of United Kingdom, Bermuda and California counsel, or other
counsel in another jurisdiction of organisation of a Sub-Borrower or
Intermediate Lessee, acting for the Representatives, the Lenders and the
Export Credit Agencies as a group and, after a Third Trigger Event or
Termination Event, any other counsel appointed by the Lenders, the
Representatives and the Export Credit Agencies as a group and, after a
Third Trigger Event or Termination Event, insurance fees and expenses
(if any and to the extent approved by the Borrower, such approval not to
be unreasonably withheld), and after an Acceleration Event remarketing
fees and all other advisers' fees and expenses, but, in any event,
excluding all Taxes) as well as any Value Added Tax thereon, which may
be reasonably incurred by the Security Trustee, the Agent, the Lenders
and the Export Credit Agencies as a group in connection with the
execution and delivery of the Transaction Documents or in connection
with the performance, enforcement, attempted enforcement or preservation
of their respective rights and duties hereunder or thereunder PROVIDED
always that the reference to such out-of-pocket costs and expenses being
"reasonably" incurred and to legal fees and expenses being "reasonable"
shall not apply when such out-of-pocket costs and expenses are incurred
or sustained, after a Termination Event, in connection with the
enforcement or preservation or attempted enforcement or preservation of
rights;
"EXPORT CREDIT AGENCIES" means each of COFACE, ECGD and HERMES;
"FAA" mean the Federal Aviation Administration (or its successor) of the
United States of America;
"FACILITY" means the term loan facility made available by the Lenders to
the Borrower pursuant to this Agreement;
"FACILITY AMOUNT" shall have the meaning given to that term in Clause
2.1 (Facility);
"FACILITY DOCUMENTS" means each of:
(i) this Agreement, the Charge Over Shares of Borrower, the Borrower
Debenture, Sub-Borrower/Intermediate Lessee Regular Jurisdiction
Letter Agreement and the other documents, instruments and
agreements relating thereto referred to in Clause 2.9.1(B)
(Conditions Precedent) and the Borrower Constitutional Documents
(but excluding the Lenders' Agreement); and
(ii) (a) any other document, instrument or memorandum annexed to
any of the documents referred to in (i) above; and
(b) any notice or acknowledgement required pursuant to the
terms of any of the documents referred to in (i) above;
and
(c) any document, instrument or memorandum (x) which is
executed and delivered in connection with a
restructuring in accordance with the terms of this
Agreement of any or all of the arrangements
<PAGE> 15
contemplated by any of the documents referred to in (i)
above or (y) which the Guarantor or any of the Borrower
or any Sub-Borrower agrees constitutes a Facility
Document or (z) which is entered into in substitution
for or which amends or augments or varies or novates all
or any part of any of the documents referred to in this
definition (including this part (ii)(c)(z)) in each case
in accordance with the terms of this Agreement;
"FINAL DISPOSITION" means, in relation to an Aircraft:-
(a) the sale by the Borrower or the relevant Sub-Borrower (including
in each case a sale by a Receiver after an Acceleration Event on
behalf of the Borrower or the relevant Sub-Borrower, appointed
under the Borrower Debenture or the relevant Sub-Borrower
Debenture (as the case may be)) or by the Security Trustee as
mortgagee against immediate payment in cash or for other
consideration, whether through an agent on its behalf or
otherwise, of all its right, title and interest in and to such
Aircraft (including, without limitation, a sale to the relevant
Lessee, the Guarantor and/or to any other person other than to
the Borrower or a Sub-Borrower or a person who becomes the
Borrower or a Sub-Borrower in accordance with this Agreement and
whether pursuant to the terms of the relevant Lease or otherwise
howsoever); or
(b) completion by delivery of such Aircraft to the purchaser or
lessee, as the case may be, of a sale, lease or other
disposition by or on behalf of the Borrower or the relevant
Sub-Borrower, (including in each case a sale by a Receiver after
an Acceleration Event on behalf of the Borrower or the relevant
Sub-Borrower, appointed under the Borrower Debenture or the
relevant Sub-Borrower Debenture (as the case may be)), or by the
Security Trustee as mortgagee, pursuant to a conditional sale,
hire purchase, full pay-out finance lease or other arrangement
involving the retention by or on behalf of the Borrower or any
Sub-Borrower or the Security Trustee as mortgagee of title to,
or a security or similar interest in, such Aircraft;
"FINAL DISPOSITION PROCEEDS" means, in relation to an Aircraft, the
aggregate amount of:-
(a) all consideration (whether cash or otherwise) received and
retained by or on behalf of the Borrower or the relevant
Sub-Borrower or (after an Acceleration Event) the Security
Trustee as mortgagee upon or as a result of the Final
Disposition of such Aircraft;
(b) any cash received and retained as a result of the sale by the
Borrower or the relevant Sub-Borrower or (after an Acceleration
Event) the Security Trustee as mortgagee of its right, title and
interest in and to any agreement for the Final Disposition of
such Aircraft in a manner contemplated by paragraph (b) of the
definition of Final Disposition or any non-cash consideration
received by either of them as a result of the Final Disposition
of such Aircraft (as the case may be);
(c) if a Final Disposition proceeds to completion, any
non-refundable deposit (not otherwise included under clause (a)
or (b) above) in relation to such Final Disposition paid to or
for the account of the Borrower or the relevant Sub-
<PAGE> 16
Borrower or (after an Acceleration Event) the Security Trustee
as mortgagee by a person acquiring or proposing to acquire such
Aircraft under a contract or offer to purchase or otherwise
acquire it which has been withdrawn, terminated or cancelled or
has lapsed; and
(d) if an Acceleration Event has occurred any non-refundable deposit
paid to or for the account of the Borrower or the relevant
Sub-Borrower or (after such Acceleration Event) the Security
Trustee as mortgagee by a person acquiring or proposing to
acquire such Aircraft under a contract or offer to purchase or
otherwise acquire it which has been withdrawn, terminated or
cancelled or has lapsed;
"FINANCIAL INDEBTEDNESS" shall have the meaning given to such term in
paragraph 1 of Schedule 5;
"FIRST TRIGGER EVENT" means the long term debt obligations of the
Guarantor being rated below A- if and as rated by Standard & Poor's
Corporation or A3 if and as rated by Moody's Investor Service, Inc., or
an equivalent by an alternative service of equivalent recognition (if
neither Standard & Poor's Corporation nor Moody's Investor Service, Inc.
has assigned any rating);
"FRENCH CREDITS" shall, in respect of an Advance, have the meaning given
to that term in the relevant Loan Supplement;
"FURTHER UTILISATION" has the meaning given to it in Clause 2.10 (Master
Opinions);
"GENERAL TERMS AGREEMENT" means, in relation to any of the Aircraft, the
General Terms Agreement dated November 10, 1988 between the Seller and
the Guarantor;
"GERMAN CREDITS" shall, in respect of an Advance, have the meaning given
to that term in the relevant Loan Supplement;
"GOVERNMENT ENTITY" means (i) any national, state or local government;
or (ii) any board, commission, department, division, instrumentality,
courts or agency or political sub-division thereof, howsoever
constituted;
"GUARANTEED OBLIGATIONS" means any and all monies, liabilities and
obligations (whether actual or contingent, whether now existing or
hereafter arising, whether or not for the payment of money, and
including any obligation or liability to pay damages and including any
interest which, but for the application of bankruptcy or insolvency
laws, would have accrued on the amounts in question), which are now or
which may at any time and from time to time hereafter be due, owing,
payable or incurred or be expressed to be due, owing, payable or
incurred from or by any or all of the Obligors to the Agent, the
Security Trustee and/or any of the Lenders under or in connection with
any of the Transaction Documents and references to "GUARANTEED
OBLIGATIONS" includes references to any part thereof;
"HERMES" means the export credit agency of Germany, represented by
Hermes Kreditversicherungsaktiengesellschaft;
"HOME COUNTRIES" means the United Kingdom, the French Republic and
Germany and "HOME COUNTRY" shall mean anyone of them;
<PAGE> 17
"HOME COUNTRY AIRCRAFT" means an Aircraft which is leased to a TO Lessee
incorporated in a Home Country;
"HVB-LUX" means Hypovereinsbank Luxembourg Societe Anonyme of 4 rue
Alphonse Weicker, L-2099, Luxembourg;
"INDEMNITEE" means each of the Agent, the Security Trustee and each
Lender together with their respective officers and employees;
"INSURANCES" means, in relation to an Aircraft, any and all contracts or
policies of insurance and reinsurance complying with the provisions of
Schedule 8 or an indemnity from a Government Entity as indemnitor, as
appropriate, and required to be effected and maintained in accordance
with this Agreement;
"INTEREST PERIOD" means, in respect of a Loan, each period commencing
from (and including) the Utilisation Date of the relevant Aircraft or as
the case may be, a Repayment Date to (but excluding) the next subsequent
Repayment Date;
"INTERMEDIATE LEASE" means, in respect of an Aircraft, the lease to be
entered into between the Borrower or a Sub-Borrower or another
Intermediate Lessee (as the case may be) as lessor and an Intermediate
Lessee as lessee;
"INTERMEDIATE LEASE SECURITY ASSIGNMENT" means, in respect of an
Aircraft, the security assignment relating to the Intermediate Lease in
each case for that Aircraft to be entered into between the Borrower or,
as the case may be, any Sub-Borrower or another Intermediate Lessee and
the Security Trustee substantially in the form of Appendix N;
"INTERMEDIATE LESSEE" means, in respect of the delivery of a specific
Aircraft, such person (other than the Borrower or a Sub-Borrower) as the
Guarantor or the Borrower may determine in accordance with the
provisions of Clause 3.3.1 (Sub-Borrowers/Intermediate Lessees) shall
enter into a Lease as lessor with the relevant Lessee or with another
Intermediate Lessee;
"INTERMEDIATE LESSEE ACCOUNTS" means, in respect of an Intermediate
Lessee, collectively the Intermediate Lessee Maintenance Reserve
Account, the Intermediate Lessee Rental Account and the Intermediate
Lessee Security Deposit Account;
"INTERMEDIATE LESSEE DEBENTURE" means, in respect of an Intermediate
Lessee, a debenture to be granted by such Intermediate Lessee in favour
of the Security Trustee, in the form of Appendix M;
"INTERMEDIATE LESSEE MAINTENANCE RESERVE ACCOUNT" means, in respect of
an Intermediate Lessee the Dollar account with Wells Fargo Bank or Bank
of America in California, Bank of Ireland in Ireland or such other
financial institution as may be approved by the Security Trustee (such
approval not to be unreasonably withheld) in the jurisdiction of
organisation of the Intermediate Lessee outside the United Kingdom;
"INTERMEDIATE LESSEE RENTAL ACCOUNT" means, in respect of an
Intermediate Lessee such Dollar account with Wells Fargo Bank or Bank of
America in California, Bank of Ireland in Ireland or such other
financial institution as may be approved by the Security Trustee
<PAGE> 18
(such approval not to be unreasonably withheld) in the jurisdiction of
organisation of the Intermediate Lessee outside the United Kingdom;
"INTERMEDIATE LESSEE SECURITY DEPOSIT ACCOUNT" means, in respect of an
Intermediate Lessee, such Dollar account with Wells Fargo Bank or Bank
of America in California, Bank of Ireland in Ireland or such other
financial institution as may be approved by the Security Trustee (such
approval not to be unreasonably withheld) in the jurisdiction of
organisation of the Intermediate Lessee outside the United Kingdom;
"IRREGULAR JURISDICTION" means any jurisdiction other than a Regular
Jurisdiction;
"LEAD MANAGERS" means each of Halifax plc (in its capacity as lead
manager for the British Lenders), Societe Generale (in its capacity as
lead manager for the French Lenders) and Commerzbank AG (in its capacity
as lead manager for the German Lenders) and "LEAD MANAGER" shall mean
any one of them;
"LEASE" means, in respect of an Aircraft, any lease agreement relating
to that Aircraft to be entered into (including by novation or
assignment) between the Borrower, a Sub-Borrower or an Intermediate
Lessee (as the case may be) as lessor and the relevant Lessee as lessee;
"LEASE SECURITY ASSIGNMENT" means, in respect of an Aircraft, the
security assignment relating to the Lease in each case for that Aircraft
to be entered into between the Borrower or, as the case may be, any
Sub-Borrower or, as the case may be, any Intermediate Lessee and the
Security Trustee substantially in the form of Schedule 2 to the relevant
Mortgage;
"LENDERS' AGREEMENT" means the agreement so entitled of even date
herewith and made between the Agent, the Security Trustee and each of
the Lenders;
"LENDING OFFICE" means, in relation to a Lender, its branch or office at
the address specified against its name in Schedule 1 or specified in the
Transfer Certificate whereby such Lender becomes a party hereto or such
other branch or office determined in accordance with the provisions of
this Agreement;
"LESSEE" means, in respect of an Aircraft, the Borrower's, the relevant
Sub-Borrower's or the relevant Intermediate Lessee's customer who is the
lessee of that Aircraft;
"LIBOR" means, in respect of an Interest Period or other relevant
period:
(a) the rate per annum which is conclusively (save for manifest
error) certified by the Agent to be the rate (rounded upwards to
the nearest one sixteenth of one per cent. (1/16%)) for deposits
of Dollars in an amount substantially equal to the relevant
Advance or other relevant amount for a period equal to, or as
close as practicable to, the relevant Interest Period or other
relevant period which appears on the Telerate/Dow Jones Market
Service Page 3750 (or its successor or replacement page) at or
about 11.00 a.m. (London time) two (2) London Banking Days prior
to the commencement of the relevant Interest Period or other
relevant period; or
(b) if such rate does not appear on the Telerate/Dow Jones Market
Service Page 3750 (or its successor or replacement page), LIBOR
for the relevant Interest
<PAGE> 19
Period or other relevant period shall be the rate per annum,
conclusively (save for manifest error) certified by the Agent as
the arithmetic mean (rounded upwards if necessary to the nearest
one sixteenth of one per cent. (1/16%)), of the respective rates
per annum notified to the Agent at which the Reference Banks are
offered Dollar deposits by prime banks in the London Interbank
Euro Currency Market in an amount substantially equal to the
relevant Advance or other relevant amount and for a period
having a duration equal to or as close as practicable to such
Interest Period or such other relevant period, as the case may
be, at or about 11.00 a.m. (London time) two (2) London Banking
Days prior to the commencement of such Interest Period or other
relevant period provided that if any Reference Bank fails to
provide a rate, LIBOR in relation to such Interest Period or
such other relevant period shall be determined on the basis of
the rate notified by each Reference Bank which does provide such
a rate and (ii) if no Reference Bank provides a rate, then LIBOR
in relation to such Interest Period or other relevant period
shall be the rate per annum certified by the Agent (acting on
instructions from each Lender) to be the arithmetic mean
(rounded upwards to the nearest one sixteenth of one percent.)
of the cost to each Lender of funding (in Dollars) an amount
substantially equal to that Lender's Relevant Proportion of the
Advance or other relevant amount for a period having a duration
equal to or as close as practicable to such Interest Period or
other relevant period at or about 11.00 a.m. (London time) on
the first day of such Interest Period or other relevant period;
"LIEN" means, in relation to an Aircraft, any encumbrance or security
interest whatsoever, howsoever created or arising including any right of
ownership, security, mortgage, pledge, charge, lease, lien, statutory
right in rem, hypothecation, title retention arrangement, attachment,
levy, claim, right of detention or security interest whatsoever,
howsoever created or arising or any right or arrangement having a
similar effect to any of the above;
"LOAN" means, in respect of an Advance, together the British Credits,
the French Credits and the German Credits or (as the context may
require) the aggregate principal amount of the British Credits, the
French Credits and the German Credits owing to the Lenders in respect of
the relevant Advance from time to time;
"LOAN SUPPLEMENT" means, in respect of an Aircraft, the loan supplement
relating to that Aircraft to be entered into between the Borrower and
the Agent (for itself and as agent for the Security Trustee and the
Lenders) substantially in the form set out in Appendix A;
"LONDON BANKING DAY" means a day (other than a Saturday, Sunday or
holiday scheduled by law) on which banks are open for general interbank
business in London (including dealing in Dollar deposits);
"LOSSES" means any losses, demands, liabilities, claims, actions,
proceedings, penalties, fines, damages, adverse judgments, orders or
other sanctions (in each case exclusive of loss of profit or income);
"MAINTENANCE RESERVES" means, in respect of an Aircraft, the maintenance
reserves, if any, payable from time to time by the Lessee to the
Borrower, Sub-Borrower or the Intermediate Lessee (as the case may be)
then held by the Borrower, the Intermediate Lessee or the Sub-Borrower
(as the case may be) and unutilised;
<PAGE> 20
"MAINTENANCE RESERVE ACCOUNTS" means each of the Borrower Maintenance
Reserve Account, each Sub-Borrower Maintenance Reserve Account and each
Intermediate Lessee Maintenance Reserve Account and "MAINTENANCE RESERVE
ACCOUNT" means any of them;
"MAJORITY LENDERS" means (i) in relation to any decision, discretion,
action or inaction under any of the Transaction Documents in respect of
which any Lead Manager either must follow the instructions of the
relevant Export Credit Agency under the relevant Support Agreement or,
in its good faith opinion, believes the consent of the relevant Export
Credit Agency to be necessary, the relevant Lead Manager(s) and (ii) in
relation to any other decision, discretion, action or inaction under any
of the Transaction Documents that is provided to be made by the Majority
Lenders, the simple majority of group votes (that is to say, two to
one), of the British Lenders, the French Lenders and the German Lenders
(each such group of Lenders having one vote), it being understood that
the vote of any one such group of Lenders shall be determined by a
simple majority (fifty-one per cent. (51%)) vote of the Lenders in that
group based upon the proportion (expressed as a percentage) which the
participation of each Lender in such group in the British Credits, the
French Credits or, as the case may be, the German Credits which have
been committed or, as the case may be, drawn down at the date such
calculation is required to be made bears to the aggregate of the
commitments or, as the case may be, participations of all of the Lenders
in such group with respect to or, as the case may be, in the British
Credits, the French Credits or, as the case may be, the German Credits
on such date;
"MAKE-WHOLE AMOUNT" means the aggregate of all sums payable by the
Borrower to the Lenders, the Agent and the Security Trustee in respect
of the applicable Loan under this Agreement and each of the other
Aircraft Operative Documents (other than payments of principal and
interest due hereunder and Expenses) including, with respect to the
applicable Loan:
(i) all amounts payable by the Borrower pursuant to the indemnities
contained in Clauses 4.12 (Deductions and Withholdings), 13
(Indemnities), 14 (Change in Circumstances), 15 (Mitigation and
Contest Rights), (provided that any provision of this Agreement
which requires payment of the Make-Whole Amount shall not
require double payment of any amount described in this paragraph
(i) to the extent that such amount is also payable under any of
the aforementioned Clauses);
(ii) an amount equal to such amount as the Lead Manager of the
British Credits shall certify as being equal to the aggregate
instalments of the guarantee fee (in an amount equal to one half
of one per cent. (0.5%) per annum of the British Credits
outstanding throughout the immediately preceding Interest
Period) which would, but for a prepayment required in accordance
with this Agreement or the declaration by the Agent of a
Termination Event under Clause 10.2 (Acceleration Rights), as
the case may be, have fallen due after the date of such
prepayment or declaration discounted at the rate of interest
equal to LIBOR for the period of six months as at the date of
prepayment or declaration, as the case may be (it being
understood that the repayment of the British Credits to the
British Lenders is being guaranteed by ECGD and that the British
Lenders finance the fee payable to ECGD in respect of such
guarantee from the payments of interest due under Clause 4
(Repayment and Prepayment) and that the rate of interest
pursuant to Clause 4 (Repayment and Prepayment) has been
<PAGE> 21
calculated on the basis of, inter alia, the obligations of the
British Lenders to make such payments);
(iii) an amount equal to the aggregate of:
(a) on account of the "LASU" rate support mechanism in
relation to the French Credits, an amount equal to the
French Lenders' indemnity payment due to the financial
institution (nominated by the French governmental
authorities to be involved in the "LASU" rate support
programme) in relation to the cost of breaking or
liquidating any funding or hedging arrangements put in
place by that financial institution at any time as a
result of the French Lenders' undertaking to it pursuant
to the LASU rate support programme, such indemnity being
determined by such financial institution on the
following basis:-
(i) the outstanding principal of each Loan is
sub-divided into tranches of principal having
separate maturity dates corresponding to the
then remaining Repayment Dates for each tranche;
(ii) the financial institution nominated by the
French governmental authorities determines the
applicable market placement rate for Dollars in
relation to the relevant maturity date for each
tranche of principal and the difference (if
positive) between the "LASU" rate and that rate
accorded to that tranche shall be applied to
each relevant tranche for the period between the
date of prepayment in accordance with Clause 4
(Prepayment and Repayment) or the declaration by
the Agent of a Termination Event under Clause
10.2 (Acceleration Rights) and the maturity date
corresponding to the relevant tranche;
(iii) each amount which results from the calculation
made pursuant to sub-paragraph (ii) will be net
present valued utilising the applicable market
placement rate for Dollars and the aggregate of
each amount as net present valued will represent
the costs of breaking or liquidating the funding
or hedging arrangements referred to in this
sub-paragraph (iii); and
(b) the unamortised amount of the French Lenders'
Reimbursement Exposure to the Up-front Premium and for
this purpose "FRENCH LENDER'S REIMBURSEMENT EXPOSURE"
means, in relation to the Up-front Premium, the relevant
amount set out against each Repayment Date (amortising
the Up-front Premium to zero over the ten-year period
for repayment of the French Credits) contained in the
Schedule described as the "Amortisation of the COFACE
Up-front Premium" to be provided by the Agent as soon as
practicable after
<PAGE> 22
the date hereof and "UP-FRONT PREMIUM" means, in
relation to that portion of the French Credits which is
supported by COFACE, an amount equal to the premium
stipulated by COFACE two (2) Business Days prior to the
Utilisation Date or as soon as practicable thereafter
and which is paid to COFACE on, or as soon as
practicable, after the Utilisation Date;
(it being understood that the whole of the credit insurance
premium owing to COFACE is payable up-front and is to be funded
during the term of the French Credits at the interest rate for
the French Credits and that, in the event that the French
Credits or any part thereof is prepaid in accordance with Clause
4 (Repayment and Prepayment) or in respect thereof a Termination
Event is declared under Clause 10.2 (Acceleration Rights), such
up-front credit insurance premium is not refundable pro rata
temporis by COFACE),
(iv) an amount, described as the credit insurance premium of HERMES,
equal to the present value of one half of one per cent. (0.5%)
per annum in relation to the principal then outstanding for the
German Credits with respect to a period equal to the average
remaining life of those Repayment Instalments which would have
fallen due under Clause 3.6.4 (Repayment Schedules) but for a
prepayment in accordance with Clause 4 (Repayment and
Prepayment) or the declaration by the Agent of a Termination
Event under Clause 10.2 (Acceleration Rights), such present
value being determined by discounting at a rate directed to the
German Lenders by the Ministry of Economics of the Federal
Republic of Germany for the period corresponding to the average
remaining life of the interest owing under the German Credits,
(it being understood that the repayment of the German Credits to
the German Lenders is being insured by HERMES and that the
German Lenders finance the credit insurance premium payable to
HERMES in respect of such credit insurance from the payments of
interest due under Clause 4 (Repayment and Prepayment) and that
the rate of interest pursuant to Clause 4 (Repayment and
Prepayment) has been calculated on the basis of, inter alia, the
obligations of the German Lenders to make such payments);
(v) an amount, representing the loss to ECGD of losing the benefit
of receiving the fixed rate interest payment stream in relation
to the British Credits under the interest make-up arrangement
between the Agent, the Lenders and ECGD, calculated as being
equal to:
(a) the premium quoted to ECGD by the relevant ECGD
Reference Bank (after disregarding the highest and
lowest quotations from the ECGD Reference Banks); or
(b) if only two of the ECGD Reference Banks provide
quotations, the average of the premia quoted to ECGD; or
(c) if only one of the ECGD Reference Banks provides a
quotation, the premium quoted to ECGD by that ECGD
Reference Bank,
<PAGE> 23
on or about the date of a prepayment in accordance with
Clause 4 (Repayment or Prepayment) or the declaration by
the Agent of a Termination Event, as the case may be,
that the relevant ECGD Reference Bank(s) would require
on entering into an arrangement with ECGD under which
ECGD would:
(y) receive a stream of fixed rate interest payments
less an amount equal to one half of one percent
(0.5%) per annum, but otherwise identical in
timing and amount to that which, but for such
prepayment, purchase or declaration would have
been payable by the Borrower under Clause 4
(Repayment and Prepayment) and calculated as if
all amounts payable in relation to the British
Credits in accordance with Clause 4 (Repayment
and Prepayment) (whether on, before or after the
date of the relevant prepayment, purchase or
declaration, as the case may be) had been, or
(as the case may be) would be, paid in full when
due; and
(z) pay a corresponding stream of floating rate
interest payments calculated on the basis of a
rate of interest equal to six month LIBOR for
US$ deposits of the appropriate amount and
maturity plus such margin as shall be agreed
from time to time between the British Lenders
and ECGD,
PROVIDED that, if none of the ECGD Reference Banks have
quoted a premium that it requires from ECGD for entering
into the above arrangement such amount shall be zero;
(vi) an amount equal to the aggregate of any breakage loss or
swap breakage costs incurred by each German Lender
calculated as the difference between its cost of funding
its respective portion of the German Credits and the
proceeds of redeploying an amount equal to its portion
of the outstanding principal of the German Credits, it
being understood that the Ministry of Economics of the
Federal Republic of Germany have the right, on the
Utilisation Date and/or on any Repayment Date, to direct
each German Lender to fund all or part of its portion of
the German Credits either on a floating (six month
LIBOR) or a fixed rate basis throughout the tenor of the
German Credits or for a shorter period,
it being understood that:
(x) the methods by which the amounts referred to in sub-paragraphs
(ii) to (vi) inclusive are calculated shall, subject to any
Change in Law, be the method by which any of the Export Credit
Agencies (or any governmental ministries or financial
institution involved in the "LASU" rate support programme) will
calculate such amounts at the relevant time; and
(y) all amounts referred to in sub-paragraphs (ii) to (vi) inclusive
shall be determined at the relevant time by, as the case may be,
the Agent, each of the Lenders or the relevant Export Credit
Agency and each of them shall have certified to the Agent such
amounts as are necessary to compensate it and provide reasonable
details of the actual computation of the relevant
<PAGE> 24
compensation amount, which certification and details shall be
given to the Agent who shall in turn make available the same to
the Borrower;
"MANUFACTURER" means Airbus Industrie G.I.E. currently of 1 Rond Point
Maurice Bellonte, Blagnac 31707, France together with its successors and
assigns;
"MASTER OPINIONS" means the legal opinions required to be given with
respect to the applicable Obligors pursuant to sub-paragraphs (a), (b),
(c), (d) of paragraph 3 of Part I to Schedule 6 on or before the first
Utilisation under this Agreement, and the legal opinions required to be
given pursuant to paragraph 4 of Part I to Schedule 6 with respect to a
relevant Sub-Borrower or Intermediate Lessee concerning its Accession
Deed and the Aircraft Security Documents to which it is a party at the
time it accedes to this Agreement, and any replacement opinion given
hereunder in respect thereof;
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
validity of any of the obligations of any Obligor under this Agreement
and the other Transaction Documents to which it is a party;
"MORTGAGE" means, in respect of an Aircraft, the first priority mortgage
and the deed of assignment of the Warranties in each case relating to
that Aircraft to be entered into between the Borrower or, as the case
may be, a Sub-Borrower and the Security Trustee substantially in the
form of Appendix C;
"NOTICE OF CHARGE" means, in respect of an Aircraft, a notice of charge
from the Security Trustee, the Intermediate Lessee (if any) and the
Borrower or Sub-Borrower (as the case may be) to the Lessee and the
Sub-Lessee (if any) in the form of Appendix P;
"OBLIGORS" means any or all of the Parent, the Borrower, each
Sub-Borrower, each Intermediate Lessee and, where the context so
permits, the Guarantor, and "OBLIGOR" means any one of them;
"PART" means, in relation to an Aircraft, each module, appliance, part,
accessory, instrument, furnishing and other item of equipment of
whatsoever nature (including the Buyer Furnished Equipment), other than
a complete Engine or engine, which at any time of determination is
incorporated or installed in or attached to the relevant Airframe or any
relevant Engine, in each case title to which is vested in the Borrower
or the relevant Sub-Borrower (as the case may be) or, having been
removed therefrom, title to which remains vested in the Borrower or the
relevant Sub-Borrower (as the case may be);
"PARTIAL PURCHASE AGREEMENT ASSIGNMENT" means, in relation to an
Aircraft, the partial purchase agreement assignment to be entered into
(subject to the consent of the Seller) between the Guarantor and the
Borrower or, as the case may be, the relevant Sub-Borrower substantially
in the form set out in Appendix B in respect of the right to take title
to that Aircraft under the relevant Purchase Agreement, and including
with respect to the warranties the Lessee as a party or subject to its
rights;
"PERMITTED LIENS" means, in relation to an Aircraft:
(a) any Lien affecting that Aircraft for Taxes or other governmental
or statutory charges or levies not yet assessed or, if assessed,
not yet due and payable or, if due and payable, which the
Borrower, the relevant Sub-Borrower, the relevant
<PAGE> 25
Intermediate Lessee or the relevant Lessee or the relevant
Sub-Lessee is disputing or contesting in good faith by
appropriate proceedings (and when required in order to pursue
such proceedings, an adequate bond has been provided) so long as
such proceedings, or the continued existence of such Lien, do
not at that time involve any likelihood of the sale, forfeiture
or loss of the Aircraft or any relevant Engine or Part; or
(b) any Lien affecting the Aircraft for the fees or charges of any
airport or air navigation authority arising in the ordinary
course of business by statute or by operation of law, in each
case for amounts the payment of which either is not yet due and
payable or, if due and payable, is being disputed or contested
in good faith by appropriate proceedings (and when required in
order to pursue such proceedings, an adequate bond has been
provided) so long as such proceedings, or the continued
existence of such Lien, do not at that time involve any
likelihood of the sale, forfeiture or loss of the Airframe or,
any relevant Engine or Part; or
(c) any Lien affecting that Aircraft for the fees or charges of any
supplier, mechanic, workman, repairer, employee or like lien
arising in the ordinary course of business by contract or by
statute or by operation of law, in each case for amounts (i) the
payment of which is not yet due and payable, or (ii) which are
not overdue for payment having regard to the custom of the
relevant trade, in circumstances where no enforcement action
against the Aircraft has yet been taken by the relevant
lienholder or (iii) if due and payable is being disputed or
contested in good faith with the relevant lienholder by
appropriate proceedings (and when required in order to pursue
such proceedings, an adequate bond has been provided) so long as
such proceedings, or the continued existence of such Lien, do
not at that time involve any likelihood of the sale, forfeiture
or loss of the Airframe or, any relevant Engine or Part; or
(d) any Lien affecting that Aircraft (other than a Lien for Taxes)
arising out of judgments or awards against the Borrower or the
relevant Sub-Borrower or the relevant Intermediate Lessee or the
relevant Lessee or the relevant Sub-Lessee with respect to which
at the time the period for an appeal has not expired or an
appeal is being presented in good faith and with respect to
which within forty (40) days thereafter there shall have been
secured a stay of execution pending such appeal (and when
required in order to pursue such proceedings, an adequate bond
has been provided) so long as such judgment or award, or the
continued existence of such Lien, does not at that time involve
any likelihood of the sale, forfeiture or loss of the Airframe,
any relevant Engine or Part; or
(e) any Lien created pursuant to any of the Transaction Documents
for the relevant Aircraft; or
(f) a debt, liability or other obligation (whether financial or
otherwise) imposed on the Borrower, the relevant Sub-Borrower or
the relevant Intermediate Lessee (as the case may be) or any
person claiming through or under the Borrower as purchaser of
that Aircraft, pursuant to the relevant Partial Purchase
Agreement Assignment; or
<PAGE> 26
(g) Liens permitted, or (so long as no Third Trigger Event has
occurred and is continuing) which are the responsibility of the
Lessee, under the relevant Lease including any assignment of the
relevant Warranties and Engine Warranties thereunder and the
rights of any Sub-Lessee or charterer of the Aircraft (including
of any Engine or Part) or any other person under an agreement or
arrangements permitted by the provisions of the relevant Lease;
or
(h) the rights of insurers; or
(i) the interests of a voting or owner trustee, as applicable, in
connection with the relevant Sub-Borrower or the relevant
Intermediate Lessee in the United States; or
(j) any Lien bonded against by the Borrower, any Sub-Borrower, any
Intermediate Lessee (unless, in each case, a Third Trigger Event
has first occurred and is continuing), any Lessee or any
Sub-Lessee, or other similar third party security (which does
not itself result in a Lien on the Aircraft or any part thereof)
is provided with respect to such Lien by any such person
provided that, after the occurrence and continuation of a Third
Trigger Event, any such bonding or other similar third party
security as against any Lessee or any Sub-Lessee is first
approved by the Security Trustee, acting reasonably; or
(k) any other Lien created with the prior written consent of the
Security Trustee;
"POST-DELIVERY MODIFICATION PERIOD" means the period of one hundred and
eighty (180) days following the Delivery Date of an Aircraft;
"PROCEEDS" means, in relation to an Aircraft:-
(a) any and all amounts received or recovered under this Agreement;
(b) any Final Disposition Proceeds and any Sub-Borrower Sale
Proceeds;
(c) any and all other proceeds of enforcement of the Aircraft
Security Documents relating to such Aircraft;
(d) any Total Loss Proceeds;
(e) any Requisition Proceeds; and
(f) any and all other amounts (other than in respect of fees)
received by the Agent, the Security Trustee or any Lender from
any of the Obligors (whether directly or through the Borrower)
pursuant to the provisions of the Transaction Documents;
"PROCEEDS ACCOUNT" means, in relation to each Aircraft, the Dollar
account of the Security Trustee with Halifax plc designated by the
Security Trustee to which any Proceeds will be credited or such other
account as the Security Trustee may designate from time to time by
notice to the other parties hereto;
<PAGE> 27
"PROHIBITED COUNTRY" means, in relation to an Aircraft, any state,
country or jurisdiction which is subject from time to time to any United
Nations Sanctions Order, US Export Controls (after obtaining applicable
consents), the United Kingdom Export of Goods (Control) Order 1992 or
any statutory modification or re-enactment thereof or any similar or
corresponding legislation then in effect in France, Spain or Germany,
the effect of which after obtaining applicable consents or licences
prohibits the Guarantor or its applicable Subsidiary from exporting to
and/or consigning for use A319/A320/A321/A330/A340 aircraft (as the case
may be) in such country;
"PURCHASE AGREEMENT" means, in relation to an Aircraft each of:
(a) the A320 aircraft purchase agreement between the Seller and the
Guarantor dated November 10, 1988;
(b) the A319 aircraft purchase agreement between the Seller and the
Guarantor dated December 10, 1992;
(c) the A321 aircraft purchase agreement between the Seller and the
Guarantor dated February 14, 1990;
(d) the A319/A320/A321 aircraft purchase agreement between the
Seller and the Guarantor dated August 29, 1997;
(e) the A330-200 aircraft purchase agreements between the Seller and
the Guarantor dated November 10, 1988 and August 29, 1997;
(f) the A340-300 aircraft purchase agreement between the Seller and
the Guarantor dated November 10, 1988;
pursuant to which the Seller agreed to sell and the Guarantor agreed to
purchase, inter alia, the Aircraft together with the exhibits thereto
and all applicable change orders, letter agreements and other amendments
or supplements thereto;
"QUARTER DATE" means each March 31, June 30, September 30 and December
31 in each year;
"RECEIVER" means any receiver or receiver and manager appointed after an
Acceleration Event by the Agent, the Security Trustee or the Majority
Lenders pursuant to any Aircraft Security Document;
"REFERENCE BANKS" means Halifax plc, Societe Generale, Citibank N.A. and
Commerzbank AG;
"REGULAR JURISDICTION" means Bermuda, the United States of America, the
Cayman Islands and Ireland or any other jurisdiction in which a
Sub-Borrower or an Intermediate Lessee has already been established and
such entity has acceded to this Agreement prior to the date of the
relevant Utilisation Notice;
"RELEVANT EVENT" means any event which with any one or more of the lapse
of time, the giving of notice, or the making of a determination, would
become a Termination Event
<PAGE> 28
were a notice to be given by the Agent to the Borrower pursuant to
Clause 10.2 (Acceleration Rights);
"RELEVANT PROPORTION" means, with respect to any Lender and a Loan, at
any time, the proportion which such Lender's share of the British
Credits, the French Credits or the German Credits (as the case may be)
bears to the total amount of the Loan at such time;
"RENTALS" means, in respect of an Aircraft, the rentals payable by the
Lessee to the Borrower, the Sub-Borrower or the Intermediate Lessee (as
the case may be) pursuant to the relevant Lease;
"RENTAL ACCOUNTS" means each of the Borrower Rental Account, each
Sub-Borrower Rental Account and each Intermediate Lessee Rental Account
and "RENTAL ACCOUNT" means any of them;
"REPAYMENT DATE" means, in relation to a Loan, each repayment date as
set forth in Column 1 of Schedule 2 to the relevant Loan Supplement
PROVIDED always that if any Repayment Date would otherwise fall on a day
which is not a Banking Day, such Repayment Date shall be deemed to fall
on the immediately succeeding Banking Day unless such Repayment Date
falls in the calendar month next succeeding that in which it would
otherwise have fallen, in which case it shall fall on the immediately
preceding Banking Day;
"REPAYMENT INSTALLMENT" means, in relation to a Loan, with respect to
each Repayment Date, the principal amount due and payable on such
Repayment Date, as determined in accordance with Clause 4.2 (Repayment
of Principal) together with interest thereon payable pursuant to Clause
4.1 (Payment of Interest) all as set out in schedule 2 to the relevant
Loan Supplement;
"REPLACEMENT AIRCRAFT" has the meaning set forth in Clause 4.7
(Substitution of Aircraft);
"REPLACEMENT BILL OF SALE" means a bill of sale substantially in the
form set out in Appendix O as contemplated by Clause 4.7.5 (Substitution
of Aircraft);
"REPLACEMENT ENGINE" means an engine of an Engine Manufacturer, of the
same or an improved model and suitable for use on the Airframe and
having a utility at least equal to the Engine in respect of which a
Total Loss or transfer of title has occurred;
"REPRESENTATIVES" means the Agent and the Security Trustee;
"REQUIRED INSURED VALUE" means, in relation to an Aircraft, at any time
of determination 110% of the principal amount outstanding in respect of
the relevant Loan at such time;
"REQUISITION PROCEEDS" means, in relation to an Aircraft, any monies
and/or other compensation received directly by the Borrower, the
relevant Sub-Borrower or the relevant Intermediate Lessee (if any)
and/or the Security Trustee in its capacity as mortgagee in respect of
the Compulsory Acquisition of such Aircraft;
"RR ENGINE WARRANTY AGREEMENT" means, in the case of an Aircraft powered
by Engines manufactured by Rolls-Royce plc, the engine warranty
agreement relating to such
<PAGE> 29
Aircraft and Engines to be entered into by Rolls-Royce plc as Engine
Manufacturer, the Guarantor, the relevant Lessee, the Security Trustee
and the Borrower or, as appropriate, relevant Sub-Borrower substantially
in the form of Appendix D Part III;
"SCHEDULED DELIVERY DATE" means, in respect of an Aircraft, the date
nominated in the relevant Utilisation Notice for the delivery of that
Aircraft from the Seller to the Borrower or the Sub-Borrower (as the
case may be);
"SCHEDULED DELIVERY MONTH" means, in respect of any Aircraft, the month
in which that Aircraft is scheduled to be delivered as set out in
Schedule 4 Part I as the same may be varied by any notice delivered by
the Borrower to the Agent under Clause 2.5.1 (Reduction and Cancellation
of the Facility);
"SECOND TRIGGER EVENT" means the long term debt obligations of the
Guarantor being rated below BBB+ if and as rated by Standard & Poor's
Corporation or BAA1 if and as rated by Moody's Investor Service Inc., or
an equivalent by an alternative service of equivalent recognition (if
neither Standard & Poor's Corporation nor Moody's Investor Service, Inc.
has assigned any rating) or the placing of the Guarantor on
"creditwatch" to fall below BBB+ (if and as rated by Standard and Poor's
Corporation) or BAA1 (if and as rated by Moody's Investor Service Inc.);
"SECURED OBLIGATIONS" means together any and all monies, liabilities and
obligations (whether actual or contingent, whether now existing or
hereafter arising, whether or not for the payment of money, and
including any obligation or liability to pay damages and including any
interest which, but for the application of bankruptcy or insolvency
laws, would have accrued on the amounts in question) which are now or
which may at any time and from time to time hereafter be due, owing,
payable or incurred or expressed to be due, owing, payable or incurred
from or by the Borrower or any of the other Obligors to any one or more
of the Lenders, the Agent and/or the Security Trustee under any of the
Transaction Documents;
"SECURITY DEPOSIT" means, in respect of an Aircraft, any security
deposit payable by the Lessee to the relevant Borrower, Sub-Borrower or
Intermediate Lessee (as the case may be) then held by the Borrower, the
Intermediate Lessee or the Sub-Borrower (as the case may be) and
unutilised;
"SECURITY DEPOSIT ACCOUNTS" means each of the Borrower Security Deposit
Account, each Sub-Borrower Deposit Account and each Intermediate Lessee
Deposit Account and "SECURITY DEPOSIT ACCOUNT" shall mean any of them;
"SECURITY PERIOD" means the period commencing on the date hereof and
ending on the date upon which the Secured Obligations (exclusive of
indemnities in respect of which no claims have been, or to the knowledge
of the Security Trustee will be, asserted) shall have been paid in full;
"SELLER" means AVSA S.A.R.L., a French societe a responsabilite limitee,
duly organised and existing under the laws of the Republic of France and
currently having its registered office at 2 Rond Point Maurice-Bellonte
31700 Blagnac, France together with its successors and assigns;
<PAGE> 30
"STATE OF REGISTRATION" means, in relation to an Aircraft, any state or
territory in which that Aircraft may for the time being be registered
pursuant to a Lease, Sub-Lease or pursuant to this Agreement (as the
case may be);
"SUB-BORROWER" means, in respect of the delivery of a specific Aircraft,
such person, as the Guarantor or the Borrower may determine or, as the
case may be, approved by the Agent (acting on the instructions of the
Majority Lenders) in accordance with the provisions of Clause 3.3
(Sub-Borrowers/Intermediate Lessees) who shall take title to that
Aircraft and being in each case, except for shares held by directors,
trustees or nominees in order to meet local nationality or other local
requirements and which do not have a Material Adverse Effect on the
relevant Charge over Shares of Sub-Borrower, a wholly owned direct
subsidiary of the Borrower;
"SUB-BORROWER ACCOUNTS" means, in respect of a Sub-Borrower,
collectively the Sub-Borrower Maintenance Reserve Account, the
Sub-Borrower Rental Account and the Sub-Borrower Security Deposit
Account;
"SUB-BORROWER DEBENTURE" means, in respect of a Sub-Borrower, a
debenture to be granted by such Sub-Borrower in favour of the Security
Trustee in the form of Appendix I;
"SUB-BORROWER GUARANTEE " means, if title to the Aircraft is taken by a
Sub-Borrower, each guarantee and indemnity to be entered into between
the Sub-Borrower and the Security Trustee as the context requires in
respect of all the Secured Obligations;
"SUB-BORROWER/INTERMEDIATE LESSEE REGULAR JURISDICTION LETTER AGREEMENT"
means the letter agreement dated the date of this Agreement entered into
between the Guarantor, the Borrower and the Agent in relation to the
settlement of pro forma documentation (including the form of Charge over
Shares of Intermediate Lessee and form of Intermediate Lessee Debenture)
with respect to a Sub-Borrower or an Intermediate Lessee organised in
any of the Regular Jurisdictions (other than Bermuda);
"SUB-BORROWER MAINTENANCE RESERVE ACCOUNT" means, in respect of a
Sub-Borrower the Dollar account with Wells Fargo Bank or Bank of America
in California or such other account outside the United Kingdom with
another financial institution approved by the Security Trustee (such
approval not to be unreasonably withheld);
"SUB-BORROWER RENTAL ACCOUNT" means, in respect of a Sub-Borrower, such
Dollar account with Wells Fargo Bank or Bank of America in California or
such other account outside the United Kingdom with another financial
institution approved by the Security Trustee (such approval not to be
unreasonably withheld);
"SUB-BORROWER SALE" means, in relation to a Sub-Borrower, the sale by
the Borrower (including in each case a sale after an Acceleration Event
by a Receiver on behalf of the Borrower, appointed under the Borrower
Debenture), or by the Security Trustee against immediate payment in cash
or for other consideration, whether through an agent on its behalf or
otherwise, of all the Borrower's right, title and interest in and to the
shares in such Sub-Borrower (including a sale to the relevant Lessee,
the Guarantor and/or any other person other than the Parent, the
Borrower or a Sub-Borrower or person who becomes the Parent, the
Borrower or the Sub-Borrower in accordance with this Agreement and
whether pursuant to the terms of the relevant Lease or otherwise
howsoever);
<PAGE> 31
"SUB-BORROWER SALE PROCEEDS" means, in relation to a Sub-Borrower, the
aggregate amount of:-
(a) all consideration (whether cash or otherwise) received and
retained by or on behalf of the Borrower (including a sale after
an Acceleration Event by a Receiver on behalf of the Borrower
appointed under the Borrower Debenture or the Security Trustee)
upon or as a result of the Sub-Borrower Sale of the shares in
such Sub-Borrower;
(b) any cash received and retained as a result of the sale by the
Borrower (including a sale after an Acceleration Event by a
Receiver on behalf of the Borrower appointed under the Borrower
Debenture or the Security Trustee) of its right, title and
interest in and to any agreement for the Sub-Borrower Sale of
the shares in such Sub-Borrower or any non-cash consideration
received by either of them as a result of the Sub-Borrower Sale
of the shares in such Sub-Borrower;
(c) if a Sub-Borrower Sale proceeds to completion, any
non-refundable deposit (not otherwise included under clause (a)
or (b) above) in relation to such Sub-Borrower Sale paid to or
for the account of the Borrower (including a sale after an
Acceleration Event by a Receiver on behalf of the Borrower
appointed under the Borrower Debenture or the Security Trustee)
by a person acquiring or proposing to acquire the shares in such
Sub-Borrower under a contract or offer to purchase or otherwise
acquire it which has been withdrawn, terminated or cancelled or
has lapsed;
(d) if an Acceleration Event has occurred, any non-refundable
deposit paid to or for the account of the Borrower (including a
sale after an Acceleration Event by a Receiver on behalf of the
Borrower appointed under the Borrower Debenture or the Security
Trustee) by a person acquiring or proposing to acquire the
shares in such Sub-Borrower under a contract or offer to
purchase or otherwise acquire it which has been withdrawn,
terminated or cancelled or has lapsed;
"SUB-BORROWER SECURITY DEPOSIT ACCOUNT" means, in respect of a
Sub-Borrower, such Dollar account with Wells Fargo Bank or Bank of
America in California or such other account outside the United Kingdom
with another financial institution approved by the Security Trustee
(such approval not to be unreasonably withheld);
"SUB-LEASE" means, in respect of an Aircraft, any sub-lease agreement
entered into between a Lessee and a Sub-Lessee;
"SUB-LESSEE" means, in respect of an Aircraft the sub-lessee as
permitted by the terms of the relevant Lease;
"SUBORDINATED LIABILITIES" means all present and future amounts,
liabilities and obligations payable or owing by any Obligor (other than
the Guarantor) to the Subordinated Lender or the Guarantor whatsoever
(whether actual or contingent, jointly or severally or otherwise
howsoever) other than any amounts, liabilities or obligations payable or
owing by any Obligor (other than the Guarantor) to the Subordinated
Lender by virtue of any right of subrogation or indemnity arising as a
result of the making of a
<PAGE> 32
payment by the Guarantor under Clause 5 (Guarantee and Indemnity) of all
or any part of any amount demanded under Clause 5 (Guarantee and
Indemnity) (in which case the provisions of Clause 5.7 (Preservation
Rights) shall apply) but including (a) all amounts owing under all
intercompany loan arrangements between the Subordinated Lender and the
Borrower or any other Obligor (other than the Guarantor) by reason of
the Subordinated Lender (i) paying or being deemed to have been paid the
balance of the Aircraft Purchase Price for each Aircraft pursuant to
Clause 2.4 (Purpose), and (ii) making payments of principal and of
interest on each Loan at the direction of the Borrower in or towards
satisfaction of the Borrower's obligations under Clause 4 (Repayment and
Prepayment) and (iii) paying any other amounts in or towards
satisfaction of any other obligation of the Borrower or any other
Obligor (other than the Guarantor) under the Transaction Documents, and
(b) any dividend payable on or other distribution in respect of, shares
of the Borrower, any Sub-Borrower or any Intermediate Lessee (including
any payment of surplus);
"SUBSIDIARY" means any person of which or in which the Guarantor and its
other Subsidiaries own directly or indirectly more than 50% of:-
(a) the combined voting power of all classes of stock having general
voting power under ordinary circumstances to elect a majority of
the board of directors of such person, if it is a corporation;
(b) the capital interest or profits interest of such person, if it
is a partnership, limited liability company, joint venture or
similar entity; or
(c) the beneficial interest of such person, if it is a trust,
association or other unincorporated organisation;
"SUBSTANTIVE LAW CHANGE" means, in each case after the date of this
Agreement, the introduction, abolition, withdrawal or variation of any
applicable law or regulation or any change in any interpretation, or the
introduction or making of any new or further interpretation, by any
court, tribunal, governmental, revenue, international, national, fiscal
or other competent authority such as to affect any Master Opinion and so
rendering it materially incorrect or misleading;
"SUPPORT AGREEMENTS" means, in relation to a Utilisation, together (i)
the Support Agreement to be entered into between ECGD and the British
Lenders and (ii) the Promesse de Garantie and the Police d'Assurance
Credit to be entered into between COFACE and the French Lenders and
(iii) the Finanzkreditgarantie-Erklarung to be entered into between
HERMES and the German Lenders;
"TAX" means all present and future taxes, charges, imposts, duties,
levies, deductions, withholdings or fees of any kind whatsoever, or any
amount payable on account of or as security for any of the foregoing,
payable at the instance of or imposed by any statutory, governmental,
international, state, federal, provincial, local or municipal authority,
agency, body or department whatsoever, or European Union institution,
together with any penalties, additions, whether fines, surcharges or
interest relating thereto; and "TAXES" and "TAXATION" shall be construed
accordingly;
"TAX LIABILITY" means, in respect:
<PAGE> 33
(a) any liability or any increase in the liability of that person to
make any payment or payments of or in respect of Tax;
(b) the loss or setting off against income, profits or gains or
against any liability to make a payment or payments of or in
respect of Tax of any relief, allowance, deduction or credit in
respect of Tax (a "RELIEF") which would otherwise have been
available to that person; and
(c) the loss or setting off against any liability to make a payment
or payments of or in respect of Tax of a right to repayment of
Tax which would otherwise have been available to that person,
and in any case falling within (b) or (c) above the amount that is to be
treated as a Tax Liability shall be determined as follows:
(i) in a case which falls within (b) above and where the Relief that
was the subject of the loss or setting off was or would have
been a deduction from or offset against Tax, the Tax Liability
shall be the amount of that Relief;
(ii) in a case which falls within (b) above and which involves the
loss of a Relief which would otherwise have been available as a
deduction from or offset against gross income, profits or gains
the Tax Liability shall be the amount of Tax which would (on the
basis of the Tax rates current at the date of the loss and
assuming that the person has sufficient gross income, profits or
gains to utilise the Relief) have been saved but for the loss of
the Relief;
(iii) in a case which falls within (b) above and which involves the
setting off of a Relief which would otherwise have been
available as a deduction from or offset against gross income,
profits or gains, the Tax Liability shall be the amount of Tax
which has been or will be saved in consequence of the setting
off;
(iv) in a case which falls within (c) above, the Tax Liability shall
be the amount of the repayment that would have been obtained but
for the loss or setting off;
and for the purposes of this definition any question of whether or not
any relief, allowance, deduction, credit or right to repayment of Tax
has been lost or set off, and, if so, the date on which that loss or set
off took place, shall be certified by the relevant Lender or, as the
case may be, the Representative;
"TECHNICAL RECORDS" means, in respect of an Aircraft, all technical
data, manuals, computer records, logbooks and other records required to
be maintained pursuant to any law or regulation or any requirement for
the time being of the applicable Aviation Authority and relating to that
Aircraft or, any relevant Engine or Part;
"TERMINATION EVENT" means each of the events set out in Clause 10.1
(Termination Events);
"THIRD TRIGGER EVENT" means the long term debt obligations of the
Guarantor becoming rated below BBB- if and as rated by Standard & Poor's
Corporation or BAA3 if and as rated by Moody's Investor Service, Inc.,
or an equivalent by an alternative service of equivalent
<PAGE> 34
recognition (if neither Standard & Poor's Corporation nor Moody's
Investor Service, Inc. has assigned any rating) or ceasing to be rated
by any agency;
"TO LESSEE" shall have the meaning given thereto in Clause 7.2.2;
"TOTAL COMMITMENTS" means the aggregate from time to time of all of the
Commitments;
"TOTAL LOSS" means any of the following in relation to the Aircraft or
the Airframe and "TOTAL LOSS DATE" means the date set forth in
parenthesis at the end of each sub-clause:
(a) destruction, damage beyond repair or being rendered permanently
unfit for normal use for any reason (the date such event occurs
or, if not known, one hundred and eighty (180) days after the
date on which the Aircraft or Airframe was last heard of);
(b) constructive, compromised, arranged or agreed total loss (the
date on which the insurers make payment of the full amount of
the total loss proceeds on the basis of a total loss);
(c) requisition for title, or other compulsory acquisition of title
for any reason (exclusive of requisition for use or hire) (the
date on which the same takes effect);
(d) sequestration, confiscation, forfeiture, seizure, restraint,
detention, hijacking or theft for any reason, in any case
resulting in loss of possession by the Borrower, any
Sub-Borrower, any Intermediate Lessee, the Lessee and the
Sub-Lessee for a period being in excess of one hundred and
eighty (180) consecutive days (the earlier of the date on which
the insurers make payment of the total loss proceeds on the
basis of the total loss and the expiry of such one hundred and
eighty (180) day period);
(e) requisition for use by a Government Entity (other than a
Government Entity in the state of registration or in the
jurisdiction in which the Lessee, a Sub-Lessee, Intermediate
Lessee, the relevant Sub-Borrower or the Borrower has its
principal place of business) for more than one hundred and
eighty (180) consecutive days (the earlier of the date on which
the insurers make payment on the basis of a total loss proceeds
and the expiry of such one hundred and eighty (180) day period);
or
(f) the completion or closing of any sale of the Aircraft in
connection with overdue and unpaid Eurocontrol charges (the date
on which the completion or closing of such sale occurs).
"TOTAL LOSS PROCEEDS" means the proceeds of the hull Insurances in
respect of an Aircraft or any compensation for a Compulsory Acquisition
of an Aircraft, with respect to a Total Loss;
"TRANCHE A" shall, in relation to a Utilisation, have the meaning given
thereto in Clause 3.6 (Repayment Schedules);
"TRANCHE B" shall, in relation to a Utilisation, have the meaning given
thereto in Clause 3.6 (Repayment Schedules);
<PAGE> 35
"TRANSACTION" means the transaction contemplated by the Transaction
Documents;
"TRANSACTION DOCUMENTS" means, collectively the Facility Documents and
the Aircraft Operative Documents in respect of each Aircraft financed
(from time to time) under the Facility;
"TRANSFER CERTIFICATE" means a certificate in the form set out in
Schedule 2;
"TRANSFEREE" shall have the meaning given thereto in Clause 18.3
(Transfer Certificates);
"TRANSFEROR" shall have the meaning given to such term in Clause 18.3
(Transfer Certificates);
"UNUTILISED FACILITY" means, at any time, the lesser of (i) the Total
Commitments and (ii) Four billion three hundred twenty seven million two
hundred and sixty thousand Dollars (US$4,327,260,000) as such amount may
have been reduced by (a) the amount of each Advance made before such
time and (b) the amount of each reduction made to the Facility Amount
pursuant to Clause 2.5.2 or 2.5.3 (Reduction and Cancellation of the
Facility);
"UTILISATION" means each utilisation of the Facility pursuant to Clause
3 (Utilisation of the Facility) or, as the context may require, the
amount referred to in a Utilisation Notice as being that part of the
Facility Amount in Dollars allocated by the Borrower for financing of
the Aircraft referred to in that Utilisation Notice;
"UTILISATION DATE" means, in relation to a Utilisation, the Banking Day
upon which the Advance relating to that Utilisation is made available to
the Borrower in accordance with Clause 3.7 (Disbursement of the Loan) or
under Clause 3.7.6 (Disbursement of the Loan), and otherwise subject to
the terms and conditions of this Agreement;
"UTILISATION DOCUMENTATION" means, in respect of a Utilisation, all
documents entered into by the relevant parties to give effect to the
financing of the Aircraft the subject matter of the Utilisation as
specified in Paragraph 2 Part I of Schedule 6;
"UTILISATION NOTICE" means any notice given by the Borrower pursuant to
Clause 3.1 (Utilisation Notices) and substantially in the form of
Schedule 3;
"VALUE ADDED TAX" means value added tax as provided for in the United
Kingdom Value Added Tax Act 1994 and legislation (whether delegated or
otherwise) supplemental thereto or in any primary or subordinate
legislation promulgated by the European Union or any body or agency
thereof and any Tax similar or equivalent to value added tax imposed by
any country other than the United Kingdom and any similar or turnover
tax replacing or introduced in addition to any of the same;
"WARRANTIES" means each of:
(a) the benefit of the rights with respect to the Aircraft under
clause 12 (Warranties and Service Life Policy) of the General
Terms Agreement;
(b) the rights with respect to the Aircraft under clause 13 (Patent
Indemnity) of the General Terms Agreement; and
<PAGE> 36
(c) to the extent actually assigned by the Guarantor in its absolute
discretion to the Borrower or relevant Sub-Borrower, as the case
may be, the rights with respect to the Aircraft under the
Product Support Agreement (Exhibit E) applicable to the Purchase
Agreement;
"1994 FACILITY AGREEMENT" means the aircraft facility agreement dated
28th January 1994 and made between (1) the banks and financial
institutions named therein, (2) National Westminster Bank Plc (as
Agent), (3) National Westminster Bank Plc (as Security Agent), (4) Bravo
Leasing Limited, (5) ILFC (Bermuda) 4, Ltd., (6) ILFC (Bermuda) 5, Ltd.,
(7) ILFC (Bermuda) 6, Ltd and (8) International Lease Finance
Corporation as amended and supplemented from time to time; and
"1995 FACILITY AGREEMENT" means the aircraft facility agreement dated
14th December, 1994 between (1) the banks and financial institutions
named therein, (2) National Westminster Bank Plc (as Agent), (3)
National Westminster Bank Plc (as Security Agent), (4) Encore Leasing
Limited, (5) ILFC (Bermuda) 7, Ltd., (6) ILFC Ireland 2 Limited, (7)
ILFC (Bermuda) 5, Ltd., (8) ILFC Ireland 3 Limited, (9) ILFC (Bermuda)
6, Ltd and (10) International Lease Finance Corporation as amended and
supplemented from time to time.
1.2 Any and all other words and expressions defined in this Agreement shall,
unless the context otherwise requires or there is express provision to
the contrary, have the same meanings when used in any of the other
Transaction Documents.
1.3 Clause headings and the table of contents are inserted for convenience
of reference only and shall be ignored in the interpretation of this
Agreement.
1.4 In this Agreement and each of the other Transaction Documents unless the
context otherwise requires:-
(a) references to Clauses, Articles, Schedules and Appendices are to
be construed as references to the Clauses of, Articles of,
Schedules to, and Appendices to this Agreement, each of the
other Transaction Documents, as applicable, and references to
this Agreement, each of the Transaction Documents including
their respective Schedules and Appendices;
(b) references to (or to any specified provision of) this Agreement,
each of the other Transaction Documents or any other document
shall be construed as references to this Agreement, that other
Transaction Document, that document or that provision as in
force for the time being and as amended, supplemented, novated
or substituted from time to time in accordance with the terms
hereof or thereof;
(c) references to any law or enactment shall be deemed to include
references to such law or enactment as re-enacted, amended,
extended, consolidated or replaced and any orders, decrees,
proclamations, regulations, instruments or other subordinate
legislation made thereunder;
(c) words importing the plural shall include the singular and vice
versa;
(d) words importing any gender shall be construed as including every
gender;
<PAGE> 37
(e) references to a person shall be construed as including
references to an individual, company, corporation, firm,
partnership, consortium, joint venture, association,
organisation, authority or other unincorporated body of persons,
trust or any state or government or international organisation
or agency, European Union institution, committee or department,
or any instrumentality, agency or political sub-division thereof
or authority, board or body created or constituted thereby (in
each case, whether or not having separate legal personality);
(f) the words "other" and "otherwise" shall not be construed ejusdem
generis with any foregoing words where a wider construction is
possible;
(g) the Borrower, each of the other Obligors, the Agent, the
Security Trustee, and each of the Lenders shall include their
respective successors and permitted assigns and permitted
transferees; and
(h) the words "including" and "in particular" shall be construed as
being by way of illustration or emphasis only and shall not be
construed as, nor shall they take effect as, limiting the
generality of any foregoing words.
2. AVAILABILITY
2.1 FACILITY
Subject to the terms and conditions of this Agreement and in reliance on
the representations and warranties of the Borrower, each Sub-Borrower,
the Parent, each Intermediate Lessee and the Guarantor set out in Clause
6 (Representations and Warranties), the Lenders hereby grant and
undertake to make available to the Borrower a loan facility in the
maximum principal amount equal to the lesser of (i) the aggregate of
eighty-five per cent. (85%) of the Aircraft Purchase Price for each of
the Eligible Aircraft and (ii) Four billion three hundred twenty seven
million two hundred and sixty thousand Dollars (US$4,327,260,000) (the
"FACILITY AMOUNT").
2.2 AVAILABILITY PERIOD
The Facility shall be available for drawdown at any time during the
Availability Period on the terms and subject to the conditions of this
Agreement.
2.3 NUMBER AND COMPOSITIONS OF ADVANCES
2.3.1 The Facility shall be available in multiple Advances, each in respect of
one Eligible Aircraft.
2.3.2 The maximum amount of an Advance in respect of an Aircraft shall be the
lesser of:-
(a) the Unutilised Facility at the time when the Advance is made;
and
(b) eighty-five per cent. of the Aircraft Purchase Price relating to
that Aircraft.
<PAGE> 38
2.3.3 Subject to the terms and conditions of this Agreement and the relevant
Loan Supplement, the British Lenders, the French Lenders and the German
Lenders shall participate in each Advance through their respective
Lending Offices in certain proportions, to be determined as follows:-
(a) if the Eligible Aircraft and Engine type for each Utilisation is
as specified in Schedule 4, the proportions of each Advance to
be provided by the British Lenders, the French Lenders and the
German Lenders shall be as set out in the columns headed
"Assumed British Lenders' Portion", "Assumed French Lenders'
Portion" and "Assumed German Lenders' Portion" (respectively) in
Schedule 4; and
(b) if the Eligible Aircraft type or the Engine type in respect of
any Utilisation is not as specified in Schedule 4, the
proportions of the relevant Advance to be provided by the
British Lenders, the French Lenders and the German Lenders shall
be determined by agreement pursuant to Clause 3.2.2 (Loan
Supplements) between the Lead Managers and the Export Credit
Agencies and the Agent shall notify the Borrower thereof.
2.4 PURPOSE
2.4.1 Each Advance shall be used by the Borrower solely for the purpose of
financing the acquisition, and contributing towards the Aircraft
Purchase Price, of an Eligible Aircraft. The balance of the Aircraft
Purchase Price for each Aircraft in excess of the relevant Advance shall
be paid or shall have been paid directly to the Seller on or before the
relevant Delivery Date in accordance with the relevant Purchase
Agreement, which payment shall be funded or (to the extent that the
relevant payment has already been made) deemed to have been funded by
the Subordinated Lender, whose rights in respect of the relevant payment
shall form part of the Subordinated Liabilities.
2.4.2 If a Sub-Borrower is to take title to an Aircraft, the Borrower will
fund the Sub-Borrower's purchase of the Aircraft by way of an
inter-company loan.
2.5 REDUCTION AND CANCELLATION OF THE FACILITY
2.5.1 The availability of Utilisations has been predicated on the basis that
each of the Eligible Aircraft will be delivered during the Scheduled
Delivery Month for such Eligible Aircraft specified in Schedule 4 Part I
and accordingly the Borrower shall promptly, following receipt of notice
from or agreement with, the Seller, notify the Agent of any change in
the Scheduled Delivery Month for an Eligible Aircraft. Upon receipt by
the Agent of such notice, and provided that the new Scheduled Delivery
Month falls within the Availability Period, the Scheduled Delivery Month
for the relevant Eligible Aircraft shall be amended accordingly and
thereafter Schedule 4 Part I shall be read and construed as so amended.
2.5.2 If the Borrower fails to provide a Utilisation Notice with respect to an
Eligible Aircraft before the relevant Delivery Date, the Facility Amount
shall be reduced by an amount equal to the Assumed Financed Amount for
that Eligible Aircraft.
2.5.3 Without prejudice to the provisions of Clause 2.5.2, the Borrower may at
any time and from time to time give notice to the Agent that it wishes
to cancel the Facility in relation to any one or more of the Eligible
Aircraft. Following receipt of such notice by the Agent,
<PAGE> 39
the Facility Amount shall be reduced by an amount equal to the Assumed
Financed Amount for that Eligible Aircraft specified in the Borrower's
notice and the Borrower shall not thereafter be entitled to serve a
Utilisation Notice or receive an Advance in respect of any such Eligible
Aircraft.
2.5.4 Any reduction in the Facility Amount pursuant to Clauses 2.5.2 or 2.5.3
shall reduce the Commitments of the British Lenders, the French Lenders
and the German Lenders by the amount specified in the columns in
Schedule 4 Part I entitled "Assumed British Lenders Proportion",
"Assumed French Lenders Proportion" and "Assumed German Lenders
Proportion" in relation to each relevant Eligible Aircraft and the
Commitment of each Lender shall be reduced by such proportion of the
reduction in the Commitment of the British Lenders, the French Lenders
or, as the case may be, the German Lenders as is equal to the proportion
which the Commitment of such Lender bears to the aggregate Commitments
of the British Lenders, the French Lenders or, as the case may be, the
German Lenders. Schedule 4 Part I shall be amended to reflect any
additions of Airbus aircraft referred to in the definition of Eligible
Aircraft.
2.5.5 Upon the expiry of the Availability Period, the Unutilised Facility (if
any) then remaining shall be cancelled.
2.6 CURRENCY
The Advances shall be made available wholly in Dollars.
2.7 AMOUNT
2.7.1 The British Lenders severally agree to advance the British Credits to
the Borrower in an aggregate amount not exceeding one billion one
hundred and twenty-three million Dollars (US$1,123,000,000).
2.7.2 The French Lenders severally agree to advance the French Credits to the
Borrower in an aggregate amount not exceeding one billion nine hundred
and seventy-five million dollars (US$1,975,000,000).
2.7.3 The German Lenders severally agree to advance the German Credits to the
Borrower in an aggregate amount not exceeding one billion two hundred
and twenty-nine million, two hundred and sixty thousand Dollars
(US$1,229,260,000).
2.7.4 Subject to the provisions of Clauses 2.7.1, 2.7.2 and 2.7.3, the
Borrower shall be entitled to finance, pursuant to this Agreement, the
acquisition of Eligible Aircraft from the Seller which differ from those
set out in Schedule 4, provided always that the total of all Advances
shall not exceed the Facility Amount.
2.8 SEVERAL OBLIGATIONS
2.8.1 The obligation of each Lender to make its Commitment or any part thereof
available and to perform its obligations in respect of any Utilisation
are several and not joint. The failure of any Lender to perform its
obligations under this Agreement or any Loan Supplement shall neither:-
<PAGE> 40
(i) result in any of the Agent, the Security Trustee or any other
Lender assuming any additional obligation or liability
whatsoever; or
(ii) relieve the Agent, the Security Trustee or any of the Lenders
from their respective obligations under any Transaction
Document.
PROVIDED that:
(a) if a Lender fails to fund its Relevant Proportion of an Advance
two (2) Business Days prior to the Scheduled Delivery Date, the
relevant Lead Manager shall use all reasonable endeavours to
persuade the relevant Lender to fund its Relevant Proportion of
such Advance; and
(b) if, notwithstanding the reasonable endeavours of the relevant
Lead Manager, a Lender fails to fund its Relevant Proportion of
an Advance by 5pm (New York time) on the Scheduled Delivery Date
and such Advance has nevertheless been made available to the
Borrower either by the relevant Lead Manager (acting in its
absolute discretion) through the Agent or by the Agent with the
agreement of the relevant Lead Manager and unless the Lenders
fails to fund its Advance in the interim (which it will be
obligated to do), the Borrower shall on the date which is three
(3) Business Days after receipt by the Borrower of the Agent's
first written demand, pay (without any Make-Whole Amount and
Expenses (if any)) to the Agent an amount equal to the
defaulting Lender's Relevant Proportion of the relevant Advance
by way of prepayment and if appropriate the Agent shall in turn
remit the prepayment to the relevant Lead Manager.
Neither the foregoing nor any other provision hereof shall not be
construed as relieving a defaulting Lender from liability for failure to
perform its obligations hereunder and the Borrower shall have all rights
and remedies available at law or in equity with respect to any Lender's
failure to perform its obligations hereunder.
2.8.2 Nothing contained in any Transaction Documents shall constitute a
partnership, association, joint venture or other entity between any two
or more of the Lenders or Representatives.
2.9 CONDITIONS PRECEDENT PRIOR TO FIRST UTILISATION
2.9.1 The obligations of each of the Lenders, the Agent and the Security
Trustee under this Agreement shall be subject to the following
conditions precedent having been fulfilled to the satisfaction of, or
waived in writing by, the Agent that the Agent shall have received:
(A) on or before the date of this Agreement:-
(a) evidence of the corporate existence of the Borrower;
(b) a definitive draft of a legal opinion from Appleby,
Spurling & Kempe, Bermudan counsel to the Lenders;
(c) a definitive draft of a legal opinion from Buchalter
Nemer, Fields & Younger, Californian counsel to the
Lenders;
<PAGE> 41
(d) a definitive draft of a legal opinion from in-house
counsel to the Guarantor;
(e) a definitive draft of a legal opinion from Wilde Sapte,
English counsel to the Lenders;
(B) no later than five (5) Business Days before the first
Utilisation:
(a) a certificate signed by a director of the Borrower
setting out the specimen signature of those persons
authorised to sign the Transaction Documents to which
the Borrower is or is to be a party and attaching and
certifying as true copies of the originals, copies of:
(i) the Borrower's Constitutional Documents;
(ii) the resolutions of the board of directors of the
Borrower approving the execution and performance
by the Borrower of each Transaction Document to
which the Borrower will or may be a party; and
(iii) a power of attorney appointing those persons
authorised to sign on behalf of the Borrower
each Transaction Document to which the Borrower
is, or may, be a party;
(b) a secretary's or an assistant secretary's certificate of
the Guarantor setting out the specimen signature of
those persons authorised to sign the Transaction
Documents to which the Guarantor is a party and
attaching thereto, and certifying as true copies of the
originals:-
(i) the articles of incorporation and bylaws of the
Guarantor; and
(ii) the resolutions of the board of directors of the
Guarantor approving the entry into by the
Guarantor of the Transaction Documents to which
the Guarantor is or will be a party;
(c) a certificate of the secretary or assistant secretary of
the Parent setting out the specimen signature of those
persons authorised to sign the Transaction Documents to
which the Parent is a party and attaching thereto, and
certifying as true copies of the originals:-
(i) the articles of incorporation and by-laws of the
Parent; and
(ii) the resolutions of the board of the Parent
approving the entry into by the Parent of the
Facility Documents to which the Parent is or is
to be a party and the entry into by the Parent
of each of the Aircraft Operative Documents to
which the Parent is or will be a party;
<PAGE> 42
(d) extracts of the General Terms Agreement and the Engines
Agreements containing the Warranties and the Engine
Warranties respectively;
(e) a duly executed original of the Charge Over Shares of
the Borrower, together with certified copies of the
minute books, and the share register (if any) of the
Borrower and the originals of the share certificates of
the Borrower as referred to therein and duly executed
originals of the letters of resignation, irrevocable
proxy and undated share transfer forms referred to
therein;
(f) a duly executed original of the Borrower Debenture;
(g) a certificate of tax exemption in respect of the
Borrower from the appropriate Bermudan authorities;
(h) Bermuda Monetary Authority consent in respect of the
Charge Over Shares of the Borrower; and
(i) evidence that each of the Borrower Accounts have been
opened and that ten Dollars has been deposited in each
such Borrower Account.
2.10 MASTER OPINIONS
2.10.1 It is acknowledged and agreed between the parties hereto (including any
subsequent acceding parties to any of the Transaction Documents) that,
subject to Clause 2.10.3, when a Utilisation further to the first
Utilisation (a "FURTHER UTILISATION") is proposed to be drawn by the
Borrower for the purpose of financing the acquisition of an Eligible
Aircraft by the Borrower or, as the case may be, a Sub-Borrower on the
basis of Utilisation Documentation that is in the same form (mutatis
mutandis) as that which is the subject of the relevant Master Opinion,
then, provided that no Second Trigger Event has occurred and is
continuing and that the Borrower has given its certificate in accordance
with the provisions of Clause 3.1.1(B) in relation to such Further
Utilisation, subject to paragraph 4 of Part I to Schedule 6, it will not
be a condition precedent to that Further Utilisation by the Borrower
that further legal opinions in relation to the Utilisation Documentation
which relates to that Further Utilisation be provided on or before the
relevant Utilisation Date.
2.10.2 Subject to Clause 2.10.3, the Borrower and the Agent shall each use all
reasonable endeavours to procure that its respective counsel which are
to be the providers of the Master Opinions confirm in their relevant
Master Opinion that in relation to any Further Utilisation that if the
Utilisation Documentation which relates to the relevant Further
Utilisation ("FURTHER UTILISATION DOCUMENTATION") is in the same form
(mutatis mutandis) as the previous Utilisation which was the subject of
the relevant Master Opinion and the Borrower gives its certificate in
accordance with Clause 3.1.1(B) in relation to such Further Utilisation
Documentation, then the relevant Master Opinion (but subject to the
assumptions, reservations and qualifications therein contained) shall be
deemed to relate to such Further Utilisation Documentation. Each of the
Master Opinions shall be periodically reaffirmed or updated and reissued
in accordance with the provisions of Clause 7.1(s) (Undertakings and
Covenants).
<PAGE> 43
2.10.3 If, with respect to a Further Utilisation:
(a) there is a breach in the Guarantor's representation and warranty
contained in Clause 6.1(n) (Guarantor's Representations and
Warranties) which pursuant to Clause 6.3 (Repetition) is deemed
to be repeated on the date of the relevant Utilisation Notice;
or
(b) the Borrower is unable to or fails to provide a certificate
which complies in full with Clause 3.1.1(B) (Utilisation
Notices); or
(c) the provider of any Master Opinion ("PROVIDER") at any time from
the date of the relevant Utilisation Notice to (but including)
the date on which the filing or the registration of the relevant
Mortgage is completed in the jurisdiction of the Borrower or a
Sub-Borrower (as the case may be), notifies either
Representative that if the Provider were to issue a legal
opinion in the terms of its Master Opinion in relation to the
Further Utilisation, such opinion would be materially incorrect
or misleading as to the legality, validity or enforceability of
the relevant Loan, any of the material rights of the Lenders
and/or Representatives thereunder or of a material element of
the relevant security package as contemplated by the Aircraft
Security Documents in relation to the relevant Loan; or
(d) any of the Utilisation Documentation proposed to be used for the
purposes of such Further Utilisation is not in the same form
(mutatis mutandis) as that which is the subject of a Master
Opinion;
then, in any such case, the relevant Master Opinion shall not apply and,
without prejudice to Clause 14.3 (Illegality), the Borrower shall take
all such steps within its control as are reasonably required to enable
the Provider to issue, on the instructions of the Agent, its revised
opinion (the Expense of which shall be borne by the Borrower) in form
and substance satisfactory to the Agent. Until a new relevant opinion is
issued, the inapplicability of the relevant Master Opinion shall
constitute a failure of a condition precedent for that Utilisation (if
it has not then been made) and for future Utilisations in relation to
which the relevant Master Opinion would (but for the operation of this
Clause 2.10.3) have applied for the purposes of Clause 2.10.1, by giving
notice in writing to that effect to the Borrower.
2.10.4 Without prejudice to the provisions of Clause 7.1(s) (Undertakings and
Covenants), if, in its good faith opinion, the Agent has reason to
believe that a Substantive Law Change has occurred since the date of the
applicable Master Opinion that would result in Clause 14.3 (Illegality)
becoming applicable, the Agent may at any time request in writing the
Provider of the applicable Master Opinion to provide it with a revised
opinion as to the portion of the Master Opinion affected by any such
Substantive Law Change in a form and substance satisfactory to the
Agent, and if such a Substantive Law Change has occurred and if the
Provider so provides such a revised opinion, the Borrower shall pay the
Expense of such revised opinion. Subject to Clause 14.3 (Illegality)
upon such occurrence, the Agent shall be entitled to obtain the re-issue
of all Master Opinions affected by such revised opinion in replacement
of the existing Master Opinions and the Borrower shall pay the Expense
of such replacement Master Opinions so that they relate to all affected
Aircraft previously delivered (covered by the original Master Opinions)
as well as to Further Utilisations.
<PAGE> 44
3. UTILISATION OF THE FACILITY
3.1 UTILISATION NOTICES
3.1.1 In order to effect a Utilisation under this Agreement the Borrower shall
serve a Utilisation Notice upon the Agent;
(A) identifying:
(i) the proposed Utilisation Date which shall be a Business
Day within the Availability Period not less than five
(5) Business Days (or such shorter period as the
Majority Lenders, in any particular case, may agree)
after the date of service of such notice PROVIDED that
if a Sub-Borrower and/or an Intermediate Lessee is to be
used in the structure for such Utilisation, the proposed
Utilisation Notice shall be served upon the Agent at
least twenty (20) Business Days prior to the proposed
Utilisation Date unless (i) the proposed Sub-Borrower or
Intermediate Lessee shall be established in a Regular
Jurisdiction in which case the proposed Utilisation
Notice shall be served upon the Agent at least ten (10)
Business Days prior to the proposed Utilisation Date, or
(ii) the proposed Sub-Borrower or Intermediate Lessee
has already acceded to this Agreement prior to the date
of the Utilisation Notice, in which case the Utilisation
Notice shall be served on the Agent not less than five
(5) Business Days prior to the proposed Utilisation
Date;
(ii) the amount of the proposed Advance;
(iii) the relevant Eligible Aircraft (including its
manufacturer's serial number, the proposed registration
mark and the type and serial numbers of the Engines to
be installed);
(iv) if known, the identity of the proposed Lessee of the
Aircraft and the jurisdiction in which the Aircraft
shall be registered and the principal place of business
of the Lessee;
(v) subject to Clause 3.1.3, whether a Sub-Borrower and/or
an Intermediate Lessee (as the case may be) will be in
the structure and whether such Sub-Borrower or
Intermediate Lessee will be established in a Regular
Jurisdiction or an Irregular Jurisdiction. If a
Sub-Borrower and/or an Intermediate Lessee (as the case
may be) is required, the Borrower shall provide such
details as it is then possible for the Borrower to
provide as to the identity and jurisdiction of
incorporation of such Sub-Borrower and/or an
Intermediate Lessee (as the case may be), and shall
request the consent of the Lead Managers and the
Borrower thereto in accordance with Clause 3.3.1
(Sub-Borrowers/Intermediate Lessees) if such
Sub-Borrower or Intermediate Lessee is to be established
in an Irregular Jurisdiction;
<PAGE> 45
(vi) the Aircraft Purchase Price;
(vii) the total amount of the Loan; and
and having attached thereto a certified copy of the latest draft (if
any) (or, if the same is then available, a certified copy of the
executed version) of the proposed Lease. A Utilisation Notice shall
become irrevocable if not revoked on or before the fifth (5th) Business
Day prior to the proposed Utilisation Date; and
(B) certifying (by the signature of an officer or a director of the
Borrower) in the case of any Utilisation after the first
Utilisation that:
(i) the board minutes of the Borrower and any other relevant
Obligor which have previously been the subject of a
Master Opinion in respect of a previous Utilisation each
remain in effect for the relevant Utilisation or are
each in the same form as board minutes which have
previously been the subject of a Master Opinion;
(ii) the resolutions contained in the minutes referred to in
Clause 3.1.1(B)(i) were duly passed in accordance with
the Borrower Constitutional Documents or, as the case
may be, the constitutional documents of each other
relevant Obligor and such resolutions will remain in
full force and effect as of the relevant Utilisation
Date and any later date on which any Aircraft Security
Document is to be entered into in connection with such
Utilisation; and
(iii) the Transaction Documents in respect of such Utilisation
will be signed by one of the officers or directors or
attorneys in fact of the Borrower and of each other
relevant Obligor as was authorised to sign the
Transaction Documents in respect of a previous
Utilisation which are the subject of a Master Opinion
and the appointments of such officers or directors or
attorneys in fact or his or her authority to sign the
Transaction Documents in respect of the relevant
Utilisation on behalf of the Borrower or any other
relevant Obligor has not been or will not be terminated
or restricted prior to the due execution of all the
Transaction Documents in respect of the relevant
Utilisation to which the Borrower or, as the case may
be, such other Obligor is or is to be party.
3.1.2 The Borrower may not issue a Utilisation Notice:-
(a) if a Relevant Event or Termination Event has occurred and is
continuing or would result from the drawdown of the relevant
Advance;
(b) in respect of any Eligible Aircraft if the delivery of such
Eligible Aircraft to the intended Lessee or Sub-Lessee would
cause the Borrower to breach Clause 7.2.2 (Leasing and Insurance
Covenants of Borrower, Sub-Borrower and Intermediate Lessee);
<PAGE> 46
(c) if the Borrower intends that the Eligible Aircraft which the
Borrower proposes to be the subject of the relevant Utilisation
will be registered in a Prohibited Country, or the jurisdiction
of the principal place of business of the intended TO Lessee
will be a Prohibited Country, or the jurisdiction of the
principal place of business of the intended TO Lessee will be
the United States of America.
3.1.3 The Borrower may issue a Utilisation Notice even if the relevant
Eligible Aircraft will not be the subject of a Lease or Intermediate
Lease on the Delivery Date, provided that the provisions of Clause
7.2.1(b), (c) and (d) (Leasing and Insurance Covenant of Borrower,
Sub-Borrower and Intermediate Lessee) shall apply to any such Lease or
Intermediate Lease.
3.1.4 The Agent shall:
(a) send to each Lender a copy of each Utilisation Notice received
from the Borrower which complies with Clause 3.1.1;
(b) procure the preparation and circulation to the Lenders and the
Borrower of the relevant Utilisation Documentation at least
three (3) Business Days prior to the proposed Utilisation Date;
(c) if a Sub-Borrower that has not previously acceded to the
Agreement is to take title to the Aircraft, procure a definitive
draft of an opinion from its legal counsel in the jurisdiction
of organisation of such Sub-Borrower at least three (3) Business
Days prior to the proposed Utilisation Date regarding the due
execution and validity of the relevant Accession Deed, of the
relevant Aircraft Security Documents and of other documents as
the Representatives may require pursuant to Clause 3.3.3(b)
(Sub-Borrowers and Intermediate Lessees); and
(d) if an Intermediate Lessee that has not previously acceded to the
Agreement is to be incorporated in a structure in relation to a
particular Utilisation, procure a definitive draft of an opinion
from its legal counsel in the jurisdiction of organisation of
such Intermediate Lessee regarding the due execution and
validity of the relevant Accession Deed, of the relevant
Aircraft Security documents and of other documents as the
Representatives may require pursuant to Clause 3.3.3(b)
(Sub-Borrowers and Intermediate Lessees).
3.1.5 The Borrower may, at any time on or prior to the Utilisation Date,
notify the Agent of any change to the registration mark of the Aircraft
or to the identity of the Lessee (including notification that there will
not be a Lessee), and any such notification shall not affect the
validity of the Utilisation Notice.
3.1.6 The Borrower shall provide the Agent with a certified copy of the
executed Lease (if any) and shall provide the Agent with written
confirmation of the Aircraft Purchase Price in each case, as soon as the
same becomes available from the Seller and in any event not less than
three (3) Business Days prior to the proposed Utilisation Date.
<PAGE> 47
3.2 LOAN SUPPLEMENTS
3.2.1 The Agent shall prepare the Loan Supplement for each Utilisation by
adding the following information to the form set out in Appendix A:-
(a) in clause 1.2, the type and serial number of the relevant
Aircraft;
(b) in clause 2.1(a), the amount of the Advance;
(c) in clause 2.1(b), the amount of the British Credits;
(d) in clause 2.1(c), the amount of the French Credits;
(e) in clause 2.1(d), the amount of the German Credits;
(f) in clause 4, the applicable blended rate for the relevant Loan
(as agreed pursuant to Clause 3.2.2);
(g) in clause 5, the proposed Utilisation Date; and
(h) in Parts A, B and C of schedule 2, part I, the assumed
repayments (calculated in accordance with Clause 3.6) for the
British Lenders, the French Lenders and the German Lenders
(respectively) and in schedule 2, part II a summary of the
aggregate amount payable by the Borrower on each Repayment Date.
3.2.2 Not less than three (3) Business Days before the proposed Utilisation
Date the Agent and the Lead Managers shall (i) confirm the proportions
of the relevant Advance to be provided by the British Lenders, the
French Lenders and the German Lenders respectively as set out for the
relevant Aircraft in Schedule 4 Part I and (ii) confirm the applicable
interest rate to be provided for in the relevant Loan Supplement. The
Agent shall provide an execution version of the Loan Supplement to the
Borrower at least two (2) Business Days prior to the Utilisation Date.
3.2.3 The Agent, the Borrower and any Sub-Borrower or any Intermediate Lessee
(as applicable) shall, not less than one Business Day prior to the
proposed Utilisation Date, execute a Loan Supplement and the other
Utilisation Documents in respect of that Utilisation and the Security
Trustee and each Lender hereby authorises and instructs the Agent to
execute each Loan Supplement on its behalf.
3.2.4 The Agent shall notify the Borrower if at any time the Agent has
determined that all the conditions precedent to funding a particular
Utilisation will not be satisfied or waived and in such event will
provide to the Borrower a description of the items which remain to be
fulfilled.
3.3 SUB-BORROWERS/INTERMEDIATE LESSEES
3.3.1 In respect of the financing of a particular Eligible Aircraft pursuant
to the Facility, or the substitution of an Existing Aircraft with a
Replacement Aircraft, subject always, in each case, to the provisions of
Clause 3.7.4 (Disbursement of the Loan), the Borrower shall be entitled:
<PAGE> 48
(a) to cause a Sub-Borrower (which is or is to be established in a
Regular Jurisdiction) to take title to that Eligible Aircraft
and/or that an Intermediate Lessee (which is or is to be
established in a Regular Jurisdiction) be incorporated into the
structure;
(b) to request that a Sub-Borrower (which is or is to be established
in an Irregular Jurisdiction) take title to that Eligible
Aircraft and/or that an Intermediate Lessee (which is or is to
be established in an Irregular Jurisdiction) be incorporated
into the structure.
Any such request under paragraph (b) shall be made by the Borrower in
the relevant Utilisation Notice and the Agent (acting on the
instructions of the Majority Lenders) shall approve a request under
Clause 3.3.1(b) in principle or otherwise no later than ten (10)
Business Days prior to the proposed Utilisation Date. If the proposed
Sub-Borrower or Intermediate Lessee has already acceded to this
Agreement prior to the date of the relevant Utilisation Notice, or is
organised in a Regular Jurisdiction, the approval of the Agent shall not
be required.
3.3.2 Each such Sub-Borrower and/or such Intermediate Lessee shall be a
company or trust capable of providing representations and warranties and
covenants having substantially the same effect as those given by the
Borrower in Clauses 6 (Representations and Warranties) and 7
(Undertakings and Covenants) and each shall be a wholly owned direct
Subsidiary of the Borrower, in the case of the Sub-Borrower or a wholly
owned direct Subsidiary of a Sub-Borrower or the Borrower in the case of
the Intermediate Lessee (in each case, except for shares held by
directors, trustees or nominees in order to meet local nationality or
other local requirements and which do not have a Material Adverse Effect
on any of the Charges over Shares, in favour of the Security Trustee).
The Borrower shall use one Intermediate Lessee in any one jurisdiction
unless the Borrower has a reason to do otherwise.
3.3.3 If a Sub-Borrower or an Intermediate Lessee has not already acceded to
this Agreement and is to be incorporated into the structure then on or
prior to the relevant Advance being made:
(a) each such Sub-Borrower and/or each such Intermediate Lessee
shall accede to this Agreement by executing an Accession Deed
and such other Transaction Documents as the Agent in its good
faith opinion considers appropriate so that any such
Sub-Borrower shall become a party to this Agreement and such of
the other Transaction Documents as may be appropriate as if
named therein as a party;
(b) if the Sub-Borrower or Intermediate Lessee is or will be
organised in an Irregular Jurisdiction, each of the applicable
Obligors and any such Sub-Borrower organised in an Irregular
Jurisdiction and/or any such Intermediate Lessee organised in an
Irregular Jurisdiction shall enter into such other documents and
provide such security as the Security Trustee may, in its good
faith opinion (after taking legal advice from counsel to the
Lenders in the jurisdiction of the relevant Sub-Borrower and/or
the relevant Intermediate Lessee), require in order to ensure
that (i) the Representatives and each of the Lenders are in a
position, having a substantially similar effect (including as to
their security position) with respect to such Sub-Borrower
and/or Intermediate
<PAGE> 49
Lessee as they are in with respect to other Sub-Borrowers or
other Intermediate Lessees, as the case may be, under the
Transaction Documents and (ii) the rights of the Representatives
and the Lenders are not materially different than with respect
to any Sub-Borrower and/or Intermediate Lessee of a Regular
Jurisdiction under the Transaction Documents, it being
acknowledged and agreed for the purpose of determining the
foregoing matters that (i) any trustee in a United States
owner/voting trust will be party to the Transaction Documents
not in its individual capacity but solely as trustee, (ii)
common law jurisdictions are acceptable and (iii) with respect
to civil jurisdictions, the Borrower and the Agent shall
negotiate in good faith, to the extent necessary, alternative
security to that available in common law jurisdictions which is
acceptable to the Security Trustee, acting upon the instruction
of the Majority Lenders;
(c) upon receipt by the Agent of the Accession Deed signed on behalf
of the Borrower, Guarantor, Obligors and by the proposed
Intermediate Lessee or Sub-Borrower (as the case may be), the
Agent shall sign the same for itself and on behalf of the
Lenders and shall as promptly as practicable give notice of such
execution to all of the parties to the Accession Deed; and.
(d) upon execution of any such Accession Deed, it shall take effect
in accordance with, but subject to, the terms hereof and
thereof.
3.4 CONDITIONS PRECEDENT TO EACH ADVANCE
Each Advance shall be subject to the conditions precedent set out in
Parts I and II of Schedule 6.
3.5 CONDITIONS SUBSEQUENT
Each Advance shall be subject to the conditions subsequent set out in
Part III of Schedule 6.
3.6 REPAYMENT SCHEDULES
3.6.1 Each Advance:
(a) shall be divided into two tranches, of which the first tranche
("TRANCHE A") shall be sixty-two point five per cent. of the
Aircraft Purchase Price and the second tranche ("TRANCHE B")
shall be twenty-two point five per cent. of the Aircraft
Purchase Price; and
(b) shall amortise as shown in column (5) in Schedule 4 Part II so
that the amount outstanding in respect of the Advance (expressed
as a percentage of the Aircraft Purchase Price) from time to
time is (i) on the Delivery Date of the relevant Aircraft or on
a Repayment Date, the percentage shown opposite the Delivery
Date or the relevant Repayment Date number in column (5) in
Schedule 4 Part II and (ii) in the case of any date other than
the Delivery Date or a Repayment Date, the amount (expressed as
a percentage of the Aircraft
<PAGE> 50
Purchase Price) shown opposite the Repayment Date number
immediately preceding such date in column (1) or, in the case of
any date preceding the first Repayment Date, the amount
(expressed as a percentage of the Aircraft Purchase Price)
specified opposite the Delivery Date.
3.6.2 The contents of Schedule 4 are provided for illustration purposes only
and are not intended to represent the initial amounts, or the
amortisation, of any particular Advance. The repayment profile of each
Advance shall be as provided for in the relevant Loan Supplement.
3.6.3 The repayment profiles shown in schedule 2 of the Loan Supplement shall
be calculated on the basis of twenty equal repayments of principal on a
semi-annual basis (except for the first repayment of principal) together
with interest calculated on the relevant Loan outstanding on the
relevant Repayment Date at the Contractual Rate.
3.6.4 Each Repayment Instalment and the principal and interest amounts thereof
determined in accordance with Clause 3.6 and set out in schedule 2 to
the relevant Loan Supplement will be calculated on the assumption that
(a) the Utilisation Date will occur on the date specified in the
relevant Loan Supplement, (b) the interest rate for the relevant Loan is
the rate per annum specified in the Loan Supplement and (c) the total
amount of the relevant Loan to be made available to the Borrower on the
Utilisation Date will be the Advance. If any such assumption proves to
be incorrect, the Agent shall prepare a substitute schedule 2 to the
relevant Loan Supplement to replace the existing schedule 2 on the same
basis as the initial schedule 2 but with reference to the actual
Utilisation Date, the actual rate of interest applicable to the relevant
Loan and the actual amount drawn down in respect of the relevant
Advance. Such substitute schedule 2 shall be signed by the Agent (for
itself and on behalf of the Lenders and the Security Trustee) and the
Borrower in substitution for, and shall for all purposes become,
schedule 2 to the relevant Loan Supplement. Thereafter all payments of
principal and interest in respect of the relevant Loan shall be made in
accordance with the substitute schedule 2 to the relevant Loan
Supplement.
3.7 DISBURSEMENT OF THE LOAN
3.7.1 On the terms and subject to the conditions of this Agreement, the
Lenders severally agree to advance each Loan to the Borrower on the date
set forth in the Utilisation Notice as set out below:-
(a) the British Lenders severally agree to advance the British
Credits to the Borrower;
(b) the French Lenders severally agree to advance the French Credits
to the Borrower; and
(c) the German Lenders severally agree to advance the German Credits
to the Borrower.
3.7.2 Each Loan shall be made available in Dollars by payment to the Seller
(to such account as the Seller may have specified to the Agent) on
behalf of the Borrower.
3.7.3 All payments by the Lenders in respect of the Loan shall be effected on
the Delivery Date and as between the British Lenders, the French Lenders
and the German Lenders, in the
<PAGE> 51
proportions described in Clause 2.3.3 (Number and Composition of
Advances) and provided for in the relevant Loan Supplement.
3.7.4 Subject to Parts I, II and III to Schedule 6 and Clause 3.7.6, the Loan
shall be made available by each of the British Lenders, the French
Lenders and the German Lenders in their respective proportions by
payment to the relevant Lead Manager of its Relevant Proportion of the
Loan and the Lead Managers shall make the Loan available by one
disbursement, through the Agent by 10.00 (New York time), on the date
requested by the Borrower if:
(a) such date is the Delivery Date and is a Banking Day which falls
during the Availability Period; and
(b) the Agent shall have received a Utilisation Notice.
3.7.5 Each of the Lead Managers shall send a facsimile to the Agent two (2)
Business Days prior to the proposed Utilisation Date attaching a copy of
its payment instructions regarding the disbursement of the British
Credits, the French Credits and the German Credits (as the case may be).
3.7.6 If, at the Borrower's request (in order that an Aircraft may be
delivered outside banking hours New York time) and on receipt by the
Agent of the documents required pursuant to Schedule 6 which appear on
their face to be in order, the Agent itself delivers or arranges each
Lead Manager severally to deliver to the Seller an unconditional and
irrevocable undertaking to pay to the Seller an amount equal to the
relevant Loan (in the case of an undertaking given by the Agent) or (in
the case of such an undertaking of each Lead Manager in respect of a
relevant Loan) an amount equal to the British Credits, the French
Credits or the German Credits (as the case may be) respectively, on the
Delivery Date or (if the Aircraft is to be delivered after the close of
New York banking hours on the Delivery Date or the Delivery Date is
scheduled to be a day other than a day on which banks in New York are
open for business) on the Business Day next succeeding the Delivery Date
then, notwithstanding the provisions of Clause 3.7.5, the relevant Loan
shall be deemed to have been advanced on the date of such undertaking is
delivered and released to the Seller. The Agent shall have no obligation
to give such an undertaking to the Seller unless the Agent shall first
have received either (i) amounts equal to the British Credits, the
French Credits and the German Credits or (ii) corresponding undertakings
from each Lead Manager in respect of the British Credits, the French
Credits and the German Credits and each Lead Manager shall first have
received corresponding undertakings from each relevant Lender in respect
of that Lender's Relevant Proportion of the Loan.
3.8 NON-INVASIVE FEATURES
3.8.1 None of the Transaction Documents (except after the occurrence and
during the continuation of a Third Trigger Event or a Termination Event)
shall be registered, recorded or otherwise filed in any jurisdiction
other than the jurisdiction of organisation of the Parent, the Borrower,
the relevant Sub-Borrower or relevant Intermediate Lessee. Unless and
until a Third Trigger Event or a Termination Event shall have occurred
and be continuing (but without prejudice to (a) the provisions of Clause
9.2 (Second Trigger Event) with respect to Advances made during the
continuance of a Second Trigger Event in relation to Aircraft then
subject to a Lease or an Intermediate Lease and (b) the negative
<PAGE> 52
pledge provisions contained in clause 4 of the Borrower Debenture, of
each Sub-Borrower Debenture and of each Intermediate Lessee Debenture
and in clause 3.8 of each Mortgage), the Borrower, any relevant
Sub-Borrower or any relevant Intermediate Lessee shall alone and without
any requirement for consent from the Security Trustee or any other
person (but without prejudice to Clause 7.4 (Guarantor Covenants)), have
all rights, powers, privileges, remedies and other benefits in respect
of the Leases, Intermediate Leases and Sub-Leases, and the Warranties
and the Engine Warranties, including to amend, supplement, waive or
otherwise modify, enforce, extend or terminate a Lease, an Intermediate
Lease or a Sub-Lease or to enter into or consent to a new Lease,
Intermediate Lease or Sub-Lease or to use, release or modify any
Security Deposit, Maintenance Reserves or other support or security,
and, subject to the provisions of this Agreement, sell or otherwise
transfer any Aircraft or any Sub-Borrower.
3.8.2 Each of the Representatives and the Lenders covenant with the Borrower,
any Sub-Borrower and any Intermediate Lessee that, notwithstanding any
other provision of the Transaction Documents, at any time so long as no
Acceleration Event shall have occurred, not to take any action or cause
to be taken any action, or permit any person claiming by, through or on
behalf of it to take any action or cause any action, that would
interfere with the possession, use, operation and quiet enjoyment of and
other rights with respect to any Aircraft and all rents, revenues,
profits and income therefrom, including, the right to enforce
manufacturers' warranties, the right to apply or obtain insurance
proceeds for damage to the Aircraft to the repair of the Aircraft and
the right to engage in pooling, leasing and similar actions, in each
case in accordance with the terms of this Agreement.
3.8.3 The Security Trustee agrees to release any Lien it may have upon any
Engine upon the Borrower providing the Security Trustee with evidence
reasonably satisfactory to it that a Replacement Engine has been
obtained or upon the Total Loss payment being received (or Replacement
Aircraft being provided) or in a case where the Airframe, but not such
Engine, was the subject of a Total Loss.
3.8.4 The Security Trustee agrees that it will cooperate with the Borrower in
changing the state of registration of any Aircraft at the Borrower's
cost and as the Borrower may request provided that such request does not
conflict with the Borrower's obligations under this Agreement.
3.8.5 The Security Trustee agrees that it will not claim, and upon the request
of the Borrower the Security Trustee will confirm in writing that it
does not claim, any right, title or interest in any engine or part
(including any audio visual, telephonic, entertainment or similar
equipment) that is installed on an Aircraft which does not constitute an
Engine or Part.
3.9 ALTERNATIVE UTILISATIONS
3.9.1 The Borrower may, from time to time and by notice to the Agent, request
that a Utilisation in respect of an Eligible Aircraft be an Alternative
Utilisation, in which case the Borrower shall provide to the Agent such
information as the Agent may reasonably request concerning:-
(a) the financial structure of the proposed Alternative Utilisation
including the tenor, the proposed amortisation schedule and
details of the proposed owner of the relevant Aircraft;
<PAGE> 53
(b) the proposed security structure, including details of all Liens
to be created in respect of the Aircraft or any other property
in favour of any relevant party; and
(c) the documents proposed to be entered into in relation to such
Alternative Utilisation.
3.9.2 The Agent and the Lenders shall consider in good faith but without
obligation any request for an Alternative Utilisation provided that the
proposed structure confers on the Lenders, the Representatives and the
Export Credit Agencies rights which are not materially different from
their rights under the Transaction Documents in respect of any other
Utilisation (including their respective rights under the relevant
Aircraft Security Documents and the Support Agreements and rights of
cross-acceleration and cross-collateralisation of Loans), and the
Borrower acknowledges that (a) no Lender or Representative shall have
any obligation to participate in any Alternative Utilisation except to
the extent expressly agreed in any agreement entered into by such Lender
or Representative in connection with such Alternative Utilisation and
(b) an Export Credit Agency may be unable to support an Alternative
Utilisation which utilises tax benefits in its home jurisdiction.
3.10 TAX LEASE
The Agent and the Lenders will also consider in good faith, any tax
lease proposed by the Borrower (under which the Borrower or Sub-Borrower
would, under California law, still be the beneficial owner of the
Aircraft) that does not involve an Alternative Utilisation but which may
involve a Lien on the Aircraft, and if approved by the Majority Lenders
such tax lease shall be permitted hereunder and the representations,
warranties and covenants in the Transaction Documents shall be deemed
modified accordingly.
4. REPAYMENT AND PREPAYMENT
4.1 PAYMENT OF INTEREST
4.1.1 The Borrower shall pay interest on each Loan for each Interest Period at
the fixed rates per annum specified in the relevant Loan Supplement.
4.1.2 Following receipt by the Agent of the Utilisation Notice, not less than
two (2) Business Days before the Utilisation Date, the Agent shall
confirm to the Guarantor, the Borrower and each Lender the blended rate
applicable to the relevant Loan on the basis of the amount requested in
the relevant Utilisation Notice.
4.1.3 Interest shall accrue from the Utilisation Date and shall be calculated
on the outstanding unpaid principal amount of each Loan on the basis of
a year of three hundred and sixty (360) days and the actual number of
days elapsed and shall be payable in arrears on each Repayment Date.
<PAGE> 54
4.2 REPAYMENT OF PRINCIPAL
4.2.1 The Borrower shall repay each Loan in twenty (20) consecutive
semi-annual repayments. Each Repayment Instalment shall comprise
principal and accrued unpaid interest and the principal portion thereof
shall:-
(a) in the case of the British Credits be the aggregate of the
amounts set out opposite the relevant Repayment Date in column 4
of Section A of Schedule 2, Part I to the relevant Loan
Supplement;
(b) in the case of the French Credits be the aggregate of the
amounts set out opposite the relevant Repayment Date in column 4
of Section B of Schedule 2, Part I to the relevant Loan
Supplement; and
(c) in the case of the German Credits be the aggregate of the
amounts set out opposite the relevant Repayment Date in Column 4
of Section C of Schedule 2, Part I to the relevant Loan
Supplement;
it being understood that the first Repayment Date in relation to each
Loan shall be the first Business Day succeeding the second Quarter Date
following the Delivery Date for the relevant Aircraft.
4.2.2 The principal amount outstanding in respect of each Loan shall amortise
to zero in a straight line profile.
4.3 VOLUNTARY PREPAYMENT
4.3.1 The Borrower may voluntarily prepay one or more of the Loans at any time
PROVIDED that:-
(a) the Agent shall have received from the Borrower not less than
seven (7) Business Days' notice (which once given shall be
irrevocable) of its intention to make such prepayment specifying
the date on which such prepayment is to be made;
(b) any such prepayment shall be made in Dollars; and
(c) the Borrower shall pay to the Agent (i) the unpaid principal
balance of each relevant Loan being prepaid, (ii) all interest
on each relevant Loan being prepaid which has accrued to the
date of actual prepayment and is unpaid and (iii) the Make-Whole
Amount and (iv) Expenses (if any) in respect of each relevant
Loan being prepaid as certified in writing by the Agent (which
certificate shall be conclusive save for manifest error)
providing reasonable details of the computation of such
Make-Whole Amount made in accordance with the provisions of
Clause 4.3.2 and of the Expenses (if any);
and the Agent shall no later than six (6) Business Days prior to the
date on which such prepayment is to be made inform each of the Lead
Managers of its receipt of the Borrower's notice of prepayment.
<PAGE> 55
4.3.2 On the request in writing of the Borrower for a conclusive determination
of the Make-Whole Amount in respect of a ten (10) Business Day period in
which any prepayment under this Clause 4.3 (Voluntary Prepayment), or
Clauses 4.4 (Prepayment following a Total Loss), 4.5 (Prepayment on
Final Disposition), 4.6 (Prepayment on a Sub-Borrower Sale), 4.8
(Prepayment if not Leased) or 4.9 (Prepayment if Post-Delivery
Modifications not Completed Within Post-Delivery Modification Period)
may be made by the Borrower, the Agent shall, within ten (10) Business
Days of such request, provide the Borrower with a certificate of its
conclusive determination of the Make-Whole Amount (consistent with
paragraphs (x) and (y) of the definition of Make-Whole Amount and
subject to any necessary rate adjustment referred to below in this
Clause 4.3.2) applicable to each Business Day in a period of ten (10)
Business Days commencing on the date of such certificate; and no later
than one (1) Business Day after the Agent's receipt of such request, the
Agent shall arrange for the Lead Manager of the British Credits to
provide a list of banks to the Borrower from which the Borrower shall be
entitled to nominate three reference banks for the purposes of ECGD's
computation of any loss under sub-paragraph (v) of the definition of the
Make-Whole Amount but if the Borrower fails to make a choice within two
(2) Business Days of its receipt of such list of banks the Lead Manager
of the British Credits may select such banks as it may think fit; it
being understood, however, that the computation relating to the
Make-Whole Amount, in so far as it relates to the French Credits and the
German Credits, shall be subject to an adjustment as at the date of
actual prepayment an account of any movement of rates between the date
of certification and the date of actual prepayment.
4.3.3 No amount prepaid may be re-borrowed.
4.3.4 The Borrower shall pay all amounts due under Clause 4.3.1(c) into the
Proceeds Account.
4.3.5 Upon irrevocable receipt in full of the amounts set out in Clause 4.2.1
or Clause 4.3.1 by the Agent, the Security Trustee shall immediately
release all the Aircraft Security Documents relating to each relevant
Loan (including, with respect to any Sub-Borrower or Intermediate
Lessee) and the title to the relevant Aircraft shall immediately be
transferred by the Borrower or the relevant Sub-Borrower or the shares
in the relevant Sub-Borrower shall immediately be transferred by the
Borrower to the Guarantor or to another person which is not a party to
any of the Transaction Documents. If the Borrower repays or prepays all
the Loans in accordance with Clause 4.2.1 or Clause 4.3.1 and the
Secured Obligations (exclusive of indemnities in respect of which no
claims have been, or to the knowledge of the Security Trustee will be,
asserted) have been paid in full, the Security Trustee shall release all
the Aircraft Security Documents.
4.4 PREPAYMENT FOLLOWING A TOTAL LOSS
4.4.1 Subject to Clause 4.7 (Substitution of Aircraft), if at any time a Total
Loss occurs in relation to an Aircraft the Borrower shall, on or prior
to the expiry of the period of two hundred and ten (210) days commencing
on the Total Loss Date or, if earlier, the date upon which the Security
Trustee receives the Total Loss Proceeds (in this Clause 4.4 the "TOTAL
LOSS PAYMENT DATE"), either:-
(a) pay to the Agent the aggregate of (i) the unpaid principal
balance of the relevant Loan being prepaid, (ii) all interest on
the relevant Loan being prepaid accrued to the actual date of
actual prepayment and is unpaid and (iii) the Make-Whole Amount
and Expenses (if any) in respect of each relevant Loan
<PAGE> 56
being prepaid as certified in writing by the Agent (which
certificate shall be conclusive save for manifest error)
providing reasonable details of the computation of such
Make-Whole Amount made in accordance with the provisions of
Clause 4.3.2 and of the Expenses (if any); or
(b) substitute the relevant Aircraft (or Sub-Borrower) in accordance
with Clause 4.7 (Substitution of Aircraft),
and until such repayment or substitution (and, in the case of a
substitution, thereafter) the Borrower shall continue to make all
payments of principal and interest in respect of the relevant Loan in
accordance with this Agreement and the relevant Loan Supplement.
4.4.2 The Borrower shall pay all amounts due under Clause 4.4.1(a) into the
Proceeds Account and immediately upon irrevocable receipt of such funds,
the Security Trustee shall release the relevant Mortgage and the
Borrower Debenture or relevant Sub-Borrower Debenture (as the case may
be) in so far as it relates to the relevant Aircraft.
4.4.3 If, at any time prior to the Total Loss Payment Date, an Obligor regains
possession of the Airframe after any event within the definition of
Total Loss, and, provided the Aircraft is repaired as soon as
practicable thereafter, the Borrower shall have the right to notify the
Agent to continue the Aircraft under this Facility as if the event
giving rise to the Total Loss had never occurred.
4.5 PREPAYMENT ON FINAL DISPOSITION
4.5.1 Subject to Clause 4.7 (Substitution of Aircraft), if the Borrower, or,
as the case may be, a Sub-Borrower wishes to sell an Aircraft, the
Borrower shall, on or before the date of completion of the Final
Disposition, either:-
(a) pay to the Agent the aggregate of (i) the unpaid principal
balance of the relevant Loan being prepaid (ii) all interest on
the relevant Loan being prepaid accrued to the actual date of
prepayment that is unpaid and (iii) the Make-Whole Amount and
Expenses (if any) in respect of each relevant Loan being prepaid
as certified in writing by the Agent (which certificate shall be
conclusive save for manifest error) providing reasonable details
of the computation of such Make-Whole Amount made in accordance
with the provisions of Clause 4.3.2 and of the Expenses (if
any); or
(b) substitute the relevant Aircraft (or Sub-Borrower) in accordance
with Clause 4.7 (Substitution of Aircraft),
and until such repayment or substitution (and, in the case of a
substitution, thereafter) the Borrower shall continue to make all
payments of principal and interest in respect of the relevant Loan in
accordance with the terms of this Agreement and the relevant Loan
Supplement.
4.5.2 The Borrower shall pay all amounts due under Clause 4.5.1(a) into the
Proceeds Account and immediately upon irrevocable receipt of such funds,
the Security Trustee shall release the relevant Mortgage and the
Borrower Debenture or relevant Sub-Borrower Debenture (as the case may
be) in so far as it relates to the relevant Aircraft.
<PAGE> 57
4.6 PREPAYMENT ON A SUB-BORROWER SALE
4.6.1 Subject to Clause 4.7 (Substitution of Aircraft), if the Borrower wishes
to sell the shares in a Sub-Borrower, the Borrower shall, on or before
the date of completion of the Sub-Borrower Sale, either:-
(a) pay to the Agent the aggregate of (i) the unpaid principal
balance of the relevant Loan being prepaid (ii) all interest on
the relevant Loan accrued to the actual date of prepayment that
is unpaid and (iii) the Make-Whole Amount and Expenses (if any)
in respect of each relevant Loan being prepaid as certified in
writing by the Agent (which certificate shall be conclusive save
for manifest error) providing reasonable details of the
computation of such Make-Whole Amount made in accordance with
the provisions of Clause 4.3.2 and of the Expenses (if any); or
(b) substitute the relevant Aircraft (or Sub-Borrower) in accordance
with Clause 4.7 (Substitution of Aircraft),
and until such repayment or substitution (and, in the case of a
substitution, thereafter) the Borrower shall continue to make all
payments of principal and interest in respect of the relevant Loan in
accordance with the terms of this Agreement and the relevant Loan
Supplement.
4.6.2 The Borrower shall pay all amounts due under Clause 4.6.1(a) into the
Proceeds Account and immediately upon irrevocable receipt of such funds,
the Security Trustee shall release the Mortgage in relation to the
Aircraft owned by the Sub-Borrower, the relevant Sub-Borrower Debenture
and the relevant Charge over Shares of Sub-Borrower.
4.7 SUBSTITUTION OF AIRCRAFT
4.7.1 Subject to no Relevant Event or Termination Event having occurred and
continuing, if a Total Loss or a Final Disposition occurs in respect of
an Aircraft, or the Borrower sells the shares in a Sub-Borrower, the
Borrower or any Sub-Borrower (as the case may be) may substitute for
such Aircraft or, as the case may be, the relevant Aircraft owned by
such Sub-Borrower (the "EXISTING AIRCRAFT") one or more other Airbus
aircraft (the "REPLACEMENT AIRCRAFT") (including by use of a
Sub-Borrower) subject always to the provisions of this Clause 4.7.
4.7.2 The Borrower shall give the Security Trustee written notice of its
intention to substitute an Existing Aircraft at least twenty (20)
Business Days prior to such substitution and, upon receipt of such
notice, the Security Trustee shall give a copy of it to the Lead
Managers. Such notice shall specify the age of the Replacement Aircraft
since delivery by the Manufacturer and whether a Sub-Borrower or an
Intermediate Lessee is to be incorporated into the structure.
4.7.3 Each Replacement Aircraft shall be an Airbus aircraft of the same or
different type not more than five years older than the Existing Aircraft
and of at least the same fair market value (in the aggregate if more
than one Replacement Aircraft are being substituted for an Existing
Aircraft). If a Replacement Aircraft is one year old or less, then its
fair market value will be deemed to be its Aircraft Purchase Price, and
if a Replacement Aircraft is
<PAGE> 58
more than one year old and the Borrower and the Security Trustee (acting
reasonably) are unable to agree the fair market value of such
Replacement Aircraft, the Security Trustee may by written notice request
the Borrower to appoint an independent aircraft appraiser to assess the
fair market value of such Replacement Aircraft without reference to the
amount of gross sale proceeds payable to or received by the Borrower or
a Sub-Borrower (as the case may be) for the Existing Aircraft or the
shares in the Sub-Borrower (as the case may be). The assessment of any
such appraiser appointed by the Borrower shall be conclusive and binding
on the Borrower and the Security Trustee.
4.7.4 The Borrower shall enter into or shall procure that the relevant
Sub-Borrower (if any) or relevant Intermediate Lessee (if any) enters
into all such documents as are required in order for the Replacement
Aircraft to be an Aircraft including the Aircraft Security Documents in
substitution for the Existing Aircraft and for the Loan in respect of
the Existing Aircraft to relate to the Replacement Aircraft.
4.7.5 The effectiveness of the substitution of the Replacement Aircraft shall
be subject to receipt by the Agent of the following conditions precedent
in form and substance satisfactory to the Agent:
(a) evidence satisfactory to the Security Trustee (including a legal
opinion from counsel to the Lenders in the jurisdiction in which
transfer of the Replacement Aircraft takes place) that the
Borrower or the relevant Sub-Borrower (as the case may be) has
obtained title to the Replacement Aircraft free and clear of any
Liens other than Permitted Liens including a certified copy of a
Replacement Bill of Sale for the Replacement Aircraft, free of
any Liens, other than Permitted Liens;
(b) a Mortgage, if applicable, or an alternative security
satisfactory to the Security Trustee, acting upon the
instructions of the Majority Lenders with respect to the
Replacement Aircraft to be executed by the Borrower or the
Sub-Borrower (as the case may be) and the Security Trustee;
(c) the relevant legal opinions from counsel to the Lenders as
provided in paragraph 4 of Part I to Schedule 6.
(d) a legal opinion from counsel to the Lenders in the jurisdiction
in which the Borrower or the relevant Sub-Borrower (as the case
may be) is organised concerning the filing or registration and
perfection in that jurisdiction of the Mortgage (or alternative
security) with respect to the Replacement Aircraft, the Charge
over Shares of Sub-Borrower (if any) and any other Aircraft
Security Documents which will be entered into by the Borrower
and/or the relevant Sub-Borrower (if any) and the validity of
the replacement Sub-Borrower Guarantee;
(e) evidence of insurance having been effected in respect of the
Aircraft with the Security Trustee named as a contract party and
(to the extent possible under AVN67B, or such other endorsement
as may be applicable) loss payee;
(f) if applicable, copies of the certificate of registration of the
Replacement Aircraft and airworthiness issued by the Aviation
Authority;
<PAGE> 59
(g) evidence that the existing Support Agreements relating to the
Existing Aircraft shall have been amended or replaced to such
extent (if any) as may be necessary to reflect its substitution
by the Replacement Aircraft;
(h) if a Sub-Borrower or Intermediate Lessee is introduced upon a
substitution into the structure, the following documents:
(i) Accession Deed (if such person has not previously
acceded to the Transaction Documents);
(ii) Sub-Borrower Guarantee (if applicable);
(iii) Sub-Borrower Debenture (if applicable);
(iv) Intermediate Lessee Debenture (if applicable);
(v) Charge Over Shares of Sub-Borrower (if applicable);
(vi) Charge Over Shares of Intermediate Lessee (if
applicable);
(vii) Lease Security Assignment (if applicable);
(viii) Intermediate Lease Security Agreement (if applicable);
and
(i) evidence to the Security Trustee that the Sub-Borrower Accounts
or the Intermediate Lessee Accounts (as the case may be) have
been opened and that US$10 has been deposited in each of the
Sub-Borrower Accounts or Intermediate Lessee Accounts (as the
case may be) as a condition precedent to the release of the
Mortgage over the Existing Aircraft.
4.7.6 TIMING OF SUBSTITUTION
(A) If a substitution is proposed as a result of the Total Loss of an
Existing Aircraft, such substitution shall occur within two hundred and
ten (210) days of the Total Loss Date for that Aircraft. In the event
that the Security Trustee receives Total Loss Proceeds in respect of an
Existing Aircraft prior to the expiration of such two hundred and ten
(210) day period, at the Borrower's request, such Total Loss Proceeds
shall be held for or by the Security Trustee in an interest bearing
account at the cost of the Borrower in the jurisdiction chosen by the
Borrower, until such substitution is effected, whereupon they will be
released with such interest to the Borrower. If such substitution is not
effected as provided above within such two hundred and ten (210) day
period such Total Loss Proceeds and such interest shall be applied to
the prepayment of the amounts set out in Clause 4.4.1 (Prepayment
following a Total Loss).
(B) If a substitution is proposed as a result of a transfer of an Aircraft
or of a Sub-Borrower, the substitution of the Replacement Aircraft for
the Existing Aircraft or substitution by the shares of a replacement
Sub-Borrower, (as the case may be) shall occur prior to or at the same
time as transfer of title in the Existing Aircraft or title in the
shares of the existing Sub-Borrower shall pass to the transferee.
<PAGE> 60
(C) The Security Trustee shall release the relevant Aircraft Mortgage, the
Borrower Debenture or the Sub-Borrower Debenture (as the case may be)
and the relevant Sub-Borrower Charge Over Shares (if applicable) in so
far as they relate to the Existing Aircraft immediately upon
substitution of the shares of a replacement Sub-Borrower or a
Replacement Aircraft for the existing Sub-Borrower or for the Existing
Aircraft (as the case may be);
(D) The Borrower undertakes to indemnify the Security Trustee for any
Expenses incurred by the Security Trustee under this Clause 4.7.6.
4.7.7 As soon as a substitution has occurred, the Existing Aircraft shall no
longer be an Aircraft under the Transaction Documents and the
Replacement Aircraft shall be an Aircraft under the Transaction
Documents and the Transaction Documents shall be construed accordingly.
The Loan in respect of the Existing Aircraft shall relate to the
Replacement Aircraft and shall amortise in accordance with schedule 2 to
the relevant Loan Supplement. If the shares in a Sub-Borrower are sold
by the Borrower, such Sub-Borrower shall no longer be a Sub-Borrower
under the Transaction Documents.
4.7.8 The Borrower shall pay for the cost of obtaining the appraisals referred
to in Clause 4.7.3 and shall pay all Expenses incurred by the relevant
parties in connection with the execution of and any amendment of the
Transaction Documents required as a result of the provisions of this
Clause 4.7.
4.8 PREPAYMENT IF NOT LEASED
4.8.1 Without prejudice to Clause 4.8.2, if an Aircraft is not delivered to a
Lessee pursuant to a Lease within one hundred and eighty (180) days
after the relevant Delivery Date, the Borrower shall, on the first
Banking Day following the expiry of such one hundred and eighty (180)
day period, pay into the Proceeds Account the aggregate of (i) the
unpaid principal balance of the relevant Loan being prepaid (ii) all
interest on the relevant Loan accrued to the actual date of prepayment
that is unpaid (iii) Expenses (if any) and (iv) the Make-Whole Amount in
respect of the relevant Loan being prepaid as certified in writing by
the Agent (which certificate shall be conclusive save for manifest
error) providing reasonable details of the computation of such
Make-Whole Amount made in accordance with the provisions of Clause 4.3.2
and of the Expenses (if any); and immediately upon irrevocable receipt
of such funds payable under this Clause 4.8.1 in the Proceeds Account,
the Security Trustee shall release the relevant Mortgage and the
Borrower Debenture or relevant Sub-Borrower Debenture (as the case may
be) in so far as it relates to the relevant Aircraft.
4.8.2 The Borrower may, subject to paragraphs (a), (b), (c) and (d) of Clause
7.2.1 (Leasing and Insurance Covenants of Borrower, Sub-Borrower and
Intermediate Lessee), lease an Aircraft to a Subsidiary of the Guarantor
incorporated outside the United States of America to avoid having to
prepay the relevant Loan pursuant to Clause 4.8.1.
4.9 PREPAYMENT IF POST-DELIVERY MODIFICATIONS NOT COMPLETED WITHIN
POST-DELIVERY MODIFICATION PERIOD
If any post delivery modifications in respect of an Aircraft are not
carried out within the relevant Post-Delivery Modification Period, the
Borrower shall, on the first Banking Day following the expiry of the
relevant Post-Delivery Modification Period repay into the
<PAGE> 61
Proceeds Account the proportion of the relevant Loan relating to such
post delivery modifications together with all interest accrued and
unpaid thereon, Expenses (if any) and the Make-Whole Amount as certified
in writing by the Agent (which shall be conclusive save for manifest
error) providing reasonable details of the computation of such
Make-Whole Amount made in accordance with the provisions of Clause 4.3.2
and of the Expenses (if any).
4.10 MANDATORY PREPAYMENT EVENT
4.10.1 A mandatory prepayment event in respect of a particular Loan shall exist
if:
(a) the conditions set out in sub-paragraphs (a) or (b) of paragraph
(A) of Part III to Schedule 6 have not been fulfilled; or
(b) the Borrower has failed to comply with the provisions of Clause
9.1.1 (First Trigger Event) in relation to such Loan within the
period stipulated in Clause 9.1.2.
If the mandatory prepayment event shall occur and be continuing the
Security Trustee may, without having to resort to any legal procedure,
demand immediate repayment of the relevant Loan, whereupon the same
shall become immediately due and payable together with all interest
accrued thereon, Expenses (if any) and the Make-Whole Amount (as
certified in writing by the Agent (which shall be conclusive save for
manifest error)); and immediately upon irrevocable receipt of such funds
payable under this Clause 4.10.1 in the Proceeds Account, the Security
Trustee shall release the relevant Mortgage and the Borrower Debenture
or relevant Sub-Borrower Debenture (as the case may be), in so far as
each relates to the relevant Aircraft. Failure to pay the amounts
referred to in this Clause 4.10.1 shall constitute a Termination Event
in accordance with Clause 10.1(a) (Termination Events).
4.10.2 A mandatory prepayment event shall exist in relation to all Loans if the
Borrower has failed to comply with the provisions of Clause 9.3.1 (Third
Trigger Event) within the period stipulated in Clause 9.3.3. If the
mandatory prepayment event shall occur and be continuing the Security
Trustee may, without having to resort to any legal procedure, demand
immediate repayment of all Loans which are then outstanding, whereupon
the same shall become immediately due and payable together with all
interest accrued thereon, Expenses (if any) and the Make-Whole Amount in
respect of each Loan (as certified in writing by the Agent (which shall
be conclusive save for manifest error)). Failure to pay the amount
referred to in this Clause 4.10.2 shall constitute a Termination Event
in accordance with Clause 10.1(a) (Termination Events).
4.10.3 The Borrower shall pay sums due under this Clause 4.10 into the Proceeds
Account.
4.11 OVERDUE PAYMENTS
4.11.1 If the Borrower fails to pay on the due date any sum payable by the
Borrower to a Lender or Representative under any Transaction Document
(or fails to pay on demand any sum which is expressed to be payable on
demand) the Borrower shall pay interest to the Agent for the account of
the relevant Lender or Representative on such unpaid amount from (and
including) the due date or, as the case may be, the date of demand to
(but excluding) the
<PAGE> 62
date of actual payment (after as well as before judgement) at the
Default Rate for each Default Interest Period.
4.11.2 Interest at the Default Rate for each Default Interest Period shall be
calculated on the basis of a year of three hundred and sixty (360) days
and the actual number of days elapsed and shall accrue from day to day
and be due and payable on the last day of each Default Interest Period
and, if not paid, shall, to the extent permitted by applicable law, be
compounded on such date.
4.11.3 The payment of interest by the Borrower pursuant to Clause 4.11.1 shall
in no way preclude any Lender or Representative from making any other
claim or pursuing any other right or remedy that may be available to it
or otherwise prejudice any such claim, right or remedy.
4.12 DEDUCTIONS AND WITHHOLDINGS
4.12.1 All sums payable to the Agent, the Security Trustee and the Lenders
pursuant to or in connection with any Transaction Document shall be paid
in full without any set-off or counterclaim whatsoever and free and
clear of all deductions or withholdings of or on account of Tax
whatsoever imposed by Bermuda, the United States of America or the
jurisdiction of incorporation of a Sub-Borrower (or, if different, the
jurisdiction from which it makes any payment) save only as may be
required by law.
4.12.2 Without limiting the Borrower's obligations under this Clause 4.12 each
party which is organised under the laws of a jurisdiction outside the
United States shall in the case of each initial Lender, and each of the
Representatives, on or prior to the date of its execution and delivery
of this Agreement and, in the case of each Transferee, on the date of
execution of each Transfer Certificate pursuant to which it becomes a
Lender and in each tax year thereafter, provide the Borrower with the
United States of America Internal Revenue Service form 1001, 4224, 8709
or W-8, or any successor or other form prescribed by the Internal
Revenue Service of the United States of America (the "INTERNAL REVENUE
SERVICE FORMS") as appropriate (subject to having received the relevant
form from the Borrower) certifying that such party is exempt or
otherwise to obtain an exemption from United States withholding tax on
all payments pursuant to this Agreement or in connection with any
Transaction Document.
4.12.3 If any deduction or withholding is required by law and is imposed by
Bermuda, the United States of America or the jurisdiction of
incorporation of a Sub-Borrower (or, if different, the jurisdiction from
which it makes any payment) in respect of any payment due (other than
payments covered by Clause 4.12.4) to the Agent, the Security Trustee or
any Lender pursuant to or in connection with any Transaction Document,
the Borrower or the Guarantor or any other Obligor shall:-
(a) (if the payment is to be made by the Borrower or the Guarantor
or any other Obligor), ensure that the deduction or withholding
is made and that it does not exceed the minimum legal
requirement therefor;
(b) (if the payment is to be made by the Borrower or the Guarantor
or any other Obligor), pay or procure the payment of the full
amount deducted or withheld to the relevant Taxation or other
authority in accordance with the applicable law;
<PAGE> 63
(c) (if the payment is to be made by the Borrower or the Guarantor
or any other Obligor), increase (subject to Clause 4.12.5) the
payment in respect of which the deduction or withholding is
required so that the net amount received by the relevant Lender
or Representative (as the case may be) after the deduction or
withholding has been made (and after taking account of any
further deduction or withholding which is required to be made as
a consequence of the increase) shall equal the amount which that
Lender, Representative or Export Credit Agency would have been
entitled to receive in the absence of any requirement to make a
deduction or withholding;
(d) (if the payment is to be made by any person other than the
Borrower or the Guarantor or any other Obligor), the Borrower
shall pay (subject to Clause 4.12.5) directly to the Agent for
the account of the relevant Representative or the relevant
Lender or the relevant Export Credit Agency (as the case may be)
such sum (a "COMPENSATING SUM") as will, after taking into
account any deduction or withholding which the payer is obliged
to make from the compensating sum, enable the relevant
Representative, Lender or the relevant Export Credit Agency (as
the case may be) to receive, on the due date for payment, a net
sum equal to the sum which it would have received in the absence
of any requirement to make a deduction or withholding; and
(e) (if the payment is to be made by the Borrower or the Guarantor
or any other Obligor), promptly deliver to the Agent or procure
the delivery of appropriate receipts evidencing the deduction or
withholding which has been made
PROVIDED that where the Guarantor makes any payment on behalf of the
Borrower and/or any other Obligor in applying Clause 4.12.3(d) above,
any withholding or deduction arising as a result of the payment being
due from any of the Obligors and any deduction or withholding arising as
a result of the payment being made by the Guarantor in its capacity as
guarantor of the Guaranteed Obligations (as defined in the Agreement)
will be taken into account in determining the compensating sum.
4.12.4 If a Representative is obliged to make any deduction or withholding from
any payment to a Lender (an "AGENCY PAYMENT") which relates to an amount
received by that Representative on a payment from the Borrower, the
Guarantor or the Sub-Borrower hereunder, for the account of that Lender
pursuant to this Agreement or any of the Aircraft Operative Documents
and such deduction or withholding is on account of a Tax imposed by
Bermuda, the United States of America or the jurisdiction of
incorporation of a Sub-Borrower, the Borrower or the Guarantor or any
other Obligor shall, subject to Clause 4.12.5, pay directly to the
Lender such sum (a "COMPENSATING SUM") as will, after taking into
account any deduction or withholding which the Borrower is obliged to
make from the compensating sum, enable the Lender to receive, on the due
date for payment of the agency payment, an amount equal to the agency
payment which the Lender would have received in the absence of any
requirement to make a deduction or withholding.
4.12.5 The Borrower shall not be obliged to make payment to pay an increased
amount pursuant to Clause 4.12.3(c) or a compensating sum pursuant to
(and as defined in) Clause 4.12.3(d) or Clause 4.12.4 on account of any
Tax or Tax Liability to the extent that such Tax or Tax Liability:-
<PAGE> 64
(a) is imposed by the United States of America or Bermuda and does
not arise as a result of a Change in Law occurring after the
date of this Agreement;
(b) arises from any action or omission which constitutes wilful
misconduct, fraud or reckless disregard with knowledge of the
probable consequences thereof on the part of such Indemnitee;
(c) is caused by such Indemnitee's breach of any express
representation made by it in any Transaction Document or of any
express obligation under any Transaction Document (but excluding
any such breach or failure in consequence (directly or
indirectly) of a breach by the Borrower or any other Obligor of
any representation or warranty contained in or of their
respective obligations under any Transaction Document);
(d) comprises a Tax on the overall net income, profit or capital
gains of any Indemnitee (or, in the case of any Indemnitee
acting through a branch outside the main jurisdiction in which
it is resident for Tax purposes, comprises a Tax on the overall
net income, profit or capital gains of that Indemnitee in the
jurisdiction to which that Indemnitee's interest in the
Transaction is properly attributable for Tax purposes)
attributable to any sums receivable by any Indemnitee pursuant
to any Transaction Document;
(e) comprises any penalty, addition to Tax, fine or interest on or
in respect of a Tax or Tax Liability which would not have arisen
but for avoidable delay or failure by such Indemnitee in the
filing of Tax returns which such Indemnitee was obliged to file
by any law of the jurisdiction of incorporation or, in the case
of a Lender, the jurisdiction in which its Lending Office is
located, and which such Indemnitee ought reasonably to have been
aware it was so obliged to file in connection with the
Transaction or the payment of Taxes other than any such delay or
failure in consequence (directly or indirectly) of a request by
the Borrower or any Obligor or a delay of or failure by the
Borrower or any Obligor duly and punctually to perform any of
their respective obligations under the Transaction Documents or
in consequence of any event or circumstance outside the
reasonable control of such Indemnitee or otherwise caused
(directly or indirectly) by the Borrower or any Obligor;
(f) is imposed by a jurisdiction other than the main jurisdiction in
which such Indemnitee is resident for Tax purposes to the extent
that it gives rise to a corresponding credit which such
Indemnitee has retained and utilised against any Tax Liability
imposed in the main jurisdiction in which such Indemnitee is so
resident;
(g) would not have arisen but for:-
(i) any failure by such Indemnitee to file any relevant Tax
return or Tax computation which such Indemnitee was
obliged to file by any law of the jurisdiction of
incorporation or, in the case of a Lender, the
jurisdiction in which its Lending Office is located or
any documents which such Lender is obliged to file as a
result of any applicable law, regulation, practice,
concession, official directive, ruling, request, notice,
guideline, statement of policy or practice
<PAGE> 65
statement by the Bank of England, the Banque de France,
the Deutsche Bundesbank, the European Central Bank, the
Federal Reserve Bank of New York, the European Union or
any central bank, Tax, fiscal, governmental, local,
international, national or other competent authority or
agency (whether or not having the force of law but in
respect of which compliance by banks or other financial
institutions or other persons in the relevant
jurisdiction is customary) and in each case which such
Indemnitee ought reasonably to have been aware it was so
obliged to file in connection with the Transaction
except for any such failure caused (directly or
indirectly) by any action or inaction of the Borrower or
any Obligor or any event or circumstance outside the
reasonable control of such Indemnitee; or
(ii) any failure (subject to the same exceptions and
exclusions as set out in Clause 4.12.5(g)(i)) to file or
provide the Borrower or the relevant Lessee with any Tax
claims, forms (including the Internal Revenue Service
Forms), affidavits, declarations or other like documents
which the Borrower or the relevant Lessee has reasonably
requested such Indemnitee in writing to file or provide
(any such request containing sufficient detail to enable
such Indemnitee to comply with the terms thereof)
unless:-
(aa) except with respect to the Internal Revenue
Service Forms, such Indemnitee determines acting
in good faith but nevertheless in its sole
discretion that it is unable to file or provide
or that it would be illegal or contrary to any
applicable law, official regulation, practice,
concession, directive, ruling, request, notice,
guideline, statement of policy or practice
statement by the Bank of England, the Banque de
France, the Deutsche Bundesbank, the European
Central Bank, the Federal Reserve Bank of New
York, the European Union or any central bank,
Tax, fiscal, governmental, local, international,
national or other competent authority or agency
(whether or not having the force of law but in
respect of which compliance by banks or other
financial institutions or other persons in the
relevant jurisdiction is customary) for such
Indemnitee so to do or so to do would or may
result in the breach of any agreement or
confidentiality undertaking or the disclosure of
any information about such Indemnitee's Tax
affairs which such Indemnitee considers (in its
bona fide opinion) to be of a confidential
nature; or
(bb) in the case of the Internal Revenue Service
Forms, such failure is due to a Change in Law
occurring subsequent to the date on which any of
the Internal Revenue Service Forms was
originally required to be provided; or
<PAGE> 66
(h) is on or arises from any transfer by a Lender of
any of its rights, benefits and/or obligations
hereunder other than pursuant to Clause 15.2
(Prepayment of Affected Loans and Replacement of
Affected Lender).
4.12.6 TAX BENEFIT
If a Lender or Representative (except to the extent that an Export
Credit Agency becomes a Lender) determines, in its absolute discretion,
that it has received, realised, utilised and retained a Tax benefit by
reason of any deduction or withholding in respect of which the Borrower
has made an increased payment or paid a compensating sum under this
Clause 4.12, such Lender or Representative shall, provided it has
received all amounts which are then due and payable by the Borrower, and
each of the Obligors under the Transaction Documents or, to the extent
that the Tax benefit exceeds the amounts then due and payable, has
set-off such amounts against the Tax benefit, pay to the Borrower (to
the extent that the Lender or Representative can do so without
prejudicing the amount of such benefit or repayment and the right of
such Lender or Representative to obtain any other benefit, relief or
allowance which may be available to it) such amount, if any, as such
Lender or Representative in its bona fide opinion shall determine will
leave such Lender or Representative in no worse position than such
Lender or Representative would have been in if the deduction or
withholding had not been required (and taking into account any set-off
as referred to above) PROVIDED that:
(a) each Lender and Representative shall have an absolute discretion
as to the time at which and the order and manner in which it
realises or utilises any Tax benefit and shall not be obliged to
arrange its business or its Tax affairs in any particular way in
order to be eligible for any Tax benefit;
(b) no Lender or Representative shall be obliged to disclose any
information regarding its business, Tax affairs or Tax
computations;
(c) if any Lender or Representative has made a payment to the
Borrower pursuant to this Clause 4.12 on account of any Tax
benefit and it subsequently transpires that such Lender or
Representative did not receive that Tax benefit, or received a
lesser Tax benefit or has lost or been denied such Tax benefit,
the Borrower shall pay on written demand to such Lender or
Representative such sum as such Lender or Representative may
determine as being necessary to restore the after-Tax position
of the Lender or Representative to that which it would have been
had no adjustment under this proviso (c) been necessary; and
(d) the Lender or Representative shall not be obliged to make any
payment under this Clause 4.12 if, by doing so, it would
contravene the terms of any applicable law or any notice,
direction or requirement of any governmental or regulatory
authority (whether or not having the force of law but in respect
of which compliance by banks or other financial institutions or
other persons in the relevant jurisdiction is generally
customary).
4.13 CURRENCY OF PAYMENT
All amounts payable to the Agent, the Security Trustee and/or the
Lenders pursuant to or in connection with this Agreement or any of the
Aircraft Operative Documents shall,
<PAGE> 67
unless otherwise provided in the relevant notice or demand for payment,
be paid in Dollars to the Agent (where appropriate, for the account of
the relevant Lender or the Security Trustee).
4.14 PERFORMANCE PROCEDURE
4.14.1 On each date on which an amount is due from the Borrower in connection
with any Loan pursuant to this Agreement or any of the Aircraft
Operative Documents, the Borrower shall no later than 1.00 pm (New York
time) on such due date make such amount available to the Agent by
payment in Dollars in same day funds (or such other funds as may from
time to time be customary for the settlement in New York City of
international banking transactions in Dollars) to the Agent's account
with First Chicago International, New York Branch, Account Title:
Halifax Plc Treasury, Account No. 1043132 (or to such other account in
New York City as the Agent may upon not less than five (5) Banking Days'
written notice from time to time designate), or, if the payment is to be
made in a currency other than Dollars, to such account as may from time
to time be nominated in writing by the Agent by not less than five (5)
Banking Days' notice.
4.14.2 Upon receipt by the Agent of an amount referred to in Clause 4.14.1 the
Agent shall if such amount is received by 1.00 pm (New York time) on the
due date make available on such due date (and otherwise on the next
Banking Day) to the relevant Lead Manager such portion of the amount so
received as represents the aggregate of the entitlement of the British
Lenders, the French Lenders or the German Lenders (as the case may be)
of such amount in such funds as are received by the Agent by payment to
such account as the relevant Lead Manager may have specified in writing.
4.14.3 Without prejudice to the provisions of Clause 4.14.2, the Agent shall
not be obliged to make available to any Lead Manager or any Lender any
sum which it is expecting to receive for the account of such Lead
Manager or such Lender pursuant to this Agreement or any of the Aircraft
Operative Documents until it has been able to establish that it has
received that sum from the Borrower. If and to the extent that the Agent
does pay such sum to a Lead Manager but it subsequently transpires that
the Agent had not received the relevant sum:-
(a) the relevant Lead Manager shall on request by the Agent refund
such sum to the Agent; and
(b) the relevant Lead Manager shall on request by the Agent pay to
the Agent the amount (as certified by the Agent) which will
indemnify the Agent against any funding or other cost, loss,
expense or liability as a result of making available or paying
out that sum before receiving it; and
(c) each Lender shall indemnify the relevant Lead Manager in respect
of its Relevant Proportion of the amounts referred to in
paragraphs (a) and (b) above.
4.14.4 If any amount falls due to be paid to the Agent or any Lender pursuant
to or in connection with this Agreement or any of the other Transaction
Documents on a day which is not a Banking Day, then it shall be due and
payable on the immediately succeeding Banking Day unless such Repayment
Date falls in the calendar month next succeeding that in which it would
otherwise have fallen in which case it shall fall on the immediately
preceding Banking Day and the amount shall not be adjusted.
<PAGE> 68
5. GUARANTEE AND INDEMNITY
5.1 GUARANTEE AND INDEMNITY
5.1.1 In consideration of the Lenders agreeing to make available the Facility
to the Borrower, the Guarantor:-
(a) as primary obligor and not as surety only, hereby
unconditionally and irrevocably guarantees to each
Representative and each Lender the due and punctual observance
and performance by any or all of the Obligors of all of the
Guaranteed Obligations;
(b) hereby unconditionally covenants with and undertakes to each
Representative and each Lender that in the event of a default by
any or all of the Obligors in the observance or performance for
whatever reason of any of their respective Guaranteed
Obligations, the Guarantor shall on demand perform such
Guaranteed Obligation, or cause such Guaranteed Obligation to be
performed, punctually as if such Guaranteed Obligation were
performed by the relevant Obligor; and
(c) as a primary obligation, undertakes to indemnify each
Representative and each Lender on demand and on a full indemnity
basis from and against any and all Losses including, without
duplication, any Make-Whole Amount or Expenses incurred or
sustained by any Representative and/or any Lender as a result of
the whole or any part of the Guaranteed Obligations being or
becoming void, voidable, unenforceable or ineffective as against
any or all of the Obligors for any reason whatsoever
irrespective of whether such reason or any related fact or
circumstance was known or ought to have been known to either of
the Representatives, any of the Lenders or any of their
respective officers, employees, agents or advisers.
5.1.2 Any demand under Clause 5.1.1 shall be in writing and may be made by the
relevant Lender or Representative or by the Agent on its behalf and
shall not be made before the last day of the relevant grace period of
five (5) Business Days or ten (10) Business Days referred to in Clause
10.1(a) (Termination Events) and the Guarantor shall not be in default
hereunder for its failure to pay or perform such Guaranteed Obligation,
as demanded hereunder, unless and until expiration of the applicable
grace period in Clause 10.1(a) (Termination Events).
5.2 PRINCIPAL DEBTOR
As a separate and alternative stipulation in addition to its liabilities
in Clause 5.1, the Guarantor hereby agrees that any part of the
Guaranteed Obligations which is expressed to be performed by any or all
of the Obligors under the Transaction Documents but which may not be
recoverable from, or capable of performance by, the Guarantor on the
footing of a guarantee (whether by reason of the dissolution of any or
all of the Obligors or any reconstruction or amalgamation in which or as
a consequence of which any or all of the Obligors loses its separate
corporate identity or any other fact or circumstance whatsoever and
whether or not such fact or circumstance was known or ought to have been
known to
<PAGE> 69
either Representative and/or any of the Lenders or any of their
respective officers, employees, agents or advisers) shall nevertheless
be recoverable from, or capable of performance by, the Guarantor as
provided in Clause 5.1 above as if it were the principal debtor.
5.3 LIABILITY FOR INTEREST
In addition to its liabilities under Clauses 5.1 and 5.2 above, the
Guarantor hereby agrees to pay or cause to be paid to the Agent on
demand (i) interest (including compound interest and both before and
after judgement) on the amount or any part thereof for the time being
unpaid and due to either Representative and/or the Lenders under this
Clause 5, together with any interest which, but for the application of
bankruptcy or insolvency laws, would have accrued on the amounts in
question, from the date of demand on the Guarantor for payment until
payment is made at the Default Rate (unless interest at the Default Rate
continues to be charged to any or all of the Obligors in respect of that
same amount under the Transaction Documents and is thereby payable by
the Guarantor pursuant to Clause 5.1 or 5.2), and (ii) all legal and
other costs, charges and expenses (on a full indemnity basis) incurred
by or on behalf of either Representative and/or any of the Lenders
following an Acceleration Event in enforcing or endeavouring to enforce
the payment of any sums due under this Clause 5.
5.4 CONTINUING GUARANTEE
The Guarantor's obligations under this Clause 5 shall constitute a
continuing guarantee and accordingly:
(a) shall not be discharged by any partial payment or performance by
any Obligor or any other person in respect of the Guaranteed
Obligations;
(b) shall extend to cover the balance due at any time from any
Obligor to any Lender or Representative in respect of any
Guaranteed Obligations;
(c) shall be in addition to and not in substitution for or
derogation of any other security which any Lender or
Representative may at any time hold in respect of the Guaranteed
Obligations; and
(d) shall not be discharged or in any way affected by any action
taken or not taken by any Lender or Representative.
5.5 WAIVER OF DEFENCES
5.5.1 Any Lender or Representative may, from time to time, whether before or
after any demand for payment under Clause 5.1.1 and without discharging
or in any way affecting the Guarantor's liability hereunder, do all or
any of the following:
(a) terminate or amend any Transaction Document (in accordance with
the terms thereof) in any manner whatsoever;
(b) grant to any Obligor or to any other person any time or
indulgence;
<PAGE> 70
(c) deal with, exchange, renew, vary, release, modify or abstain
from perfecting or enforcing any securities, guarantees or
rights which any Lender or Representative may now or hereafter
have from or against any Obligor in respect of the Guaranteed
Obligations or otherwise in respect of the Transaction
Documents;
(d) compound with, discharge or vary the liability of any Obligor or
concur in, accept or vary any compromise, arrangement or
settlement with any Obligor or concur in or vary any deed of
arrangement or deed of assignment for the benefit of creditors
of any Obligor;
(e) omit to prove or fail to maintain any right of proof for or to
claim or enforce payment of any dividend or composition; and
(f) take or omit to take any security from any Obligor or any other
person or guarantor in respect of the Guaranteed Obligations or
otherwise in respect of the Transaction Documents.
5.5.2 The Guarantor waives and agrees not to enforce or claim the benefit of
any right it has or may from time to time have as surety under any
applicable law which is or may be inconsistent with any of the
provisions of this Clause 5.
5.6 IMMEDIATE RECOURSE: NO OBLIGATION TO TAKE ACTION
No Lender or Representative shall be obliged, before making a demand
under or taking steps to enforce this Agreement:
(a) to take action or obtain judgment against any Obligor or any
other person in any court or tribunal; or
(b) to make or file any claim in a bankruptcy or liquidation of any
Obligor or any other person; or
(c) to exercise diligence against any Obligor or any other person
under any Transaction Document.
5.7 PRESERVATION OF RIGHTS
From the date or dates upon which any demand is properly made against
the Guarantor under this Agreement, until such time as each
Representative and the Lenders have received payment of the Guaranteed
Obligations in full (exclusive of indemnities in respect of which no
claims have been, or to the knowledge of the Security Trustee will be,
asserted) the Guarantor shall not:-
(a) claim any set-off or counterclaim against any one or more of the
Obligors in respect of any payment by the Guarantor under this
Clause 5 or in respect of any outstanding actual or contingent
liability between the Guarantor any one or more of the Obligors;
or
(b) make or enforce any claim or right (including a right of
subrogation or contribution) against any one or more of the
Obligors or prove in competition
<PAGE> 71
with either Representative and/or any of the Lenders, in the
event of the liquidation or winding-up of any one or more of the
Obligors in respect of any payment by the Guarantor under this
Clause 5 or in respect of any outstanding actual or contingent
liability between the Guarantor and any one or more of the
Obligors; or
(c) in competition with either Representative and/or the Lenders,
claim the benefit of any security or guarantee now or hereafter
held by either Representative and/or the Lenders, for any money
or liabilities due or incurred by any one or more of the
Obligors to each Representative and/or the Lenders, or any share
therein.
5.8 SECURITIES REALISED ACCOUNT
For the purpose of enabling each Representative and/or the Lenders to
sue any one or more of the Obligors or to prove in the liquidation or
insolvency of any one or more of the Obligors or in any similar
proceedings for any monies due but unpaid by any one or more of the
Obligors to either Representative and/or the Lenders under any of the
Transaction Documents, each Representative or the Lenders may at any
time and for such time as it may think fit place any monies received or
recovered under this Clause 5 after an Acceleration Event to the credit
of a securities realised account or accounts (subject to the accrual
thereon of interest at market rates as conclusively determined by the
Agent which interest shall be credited to the relevant account) without
any obligation on the part of the Representative or the Lenders to apply
the same or any part thereof in or towards the discharge of the
indebtedness and liabilities of the Guarantor. Upon each Representative
or the Lenders (as the case may be) reasonably considering the further
retention of such monies to be unnecessary, the amount standing to the
credit of the relevant account or accounts shall be paid to the
Guarantor.
5.9 REINSTATEMENT
Where any discharge (whether in respect of the obligations of any
Obligor, any security for such obligations or otherwise) is made in
whole or in part or any arrangement is made on the faith of any payment,
security or other disposition which is avoided or must be repaid on
insolvency, administration, liquidation or otherwise without limitation,
the liability of the Guarantors under this Clause 5 shall continue as if
there had been no such discharge or arrangement. Each Representative and
each Lender shall be entitled to concede or compromise any claim that
any such payment, security or other disposition is liable to avoidance
or repayment.
5.10 ADDITIONAL SECURITY
The Guarantor's obligations under this Clause 5 are in addition to and
shall not be prejudiced by any other guarantee or security for the
Guaranteed Obligations now or hereafter held by any Lender or
Representative and it shall not be necessary for any Lender or
Representative before claiming payment under this Clause 5, to resort to
or seek to enforce any other guarantee or security in respect of the
Guaranteed Obligations.
<PAGE> 72
6. REPRESENTATIONS AND WARRANTIES
6.1 GUARANTOR'S REPRESENTATIONS AND WARRANTIES
To induce the Lenders and the Representatives to enter into the
Transaction Documents, the Guarantor represents and warrants to the
Lenders and the Representatives that:-
(a) it is a corporation duly incorporated and validly existing and
in good standing under the laws of the State of California (or
any jurisdiction in which it may subsequently be incorporated)
and has full power, authority and legal right to own its
property and carry on its business as presently conducted;
(b) it has the power and capacity to execute and deliver, and to
perform its obligations under the Transaction Documents to which
it is or will be a party and all necessary action has been taken
to authorise the execution, delivery and performance of the
same;
(c) it has taken all necessary legal action to authorise the person
or persons who execute and deliver the Transaction Documents to
which it is or will be a party to execute and deliver the same
and thereby bind the Guarantor to all the terms and conditions
hereof and thereof and to act for and on behalf of the Guarantor
as contemplated hereby and thereby;
(d) the Transaction Documents to which it is or will be a party
constitute (or will when executed constitute) legal, valid and
binding obligations of the Guarantor enforceable in accordance
with their respective terms subject only to the qualifications
set out in the legal opinions to be provided to the Lenders in
accordance with the provisions of Clause 2.8 (Several
Obligations) (in respect of the Transaction Documents) and
Clause 3.1.4 (Utilisation Notices) and Schedule 6 (in respect of
the relevant Aircraft Operative Documents);
(e) the execution and delivery of, the performance of its
obligations under, and compliance with the provisions of, the
Transaction Documents to which it is or will be a party will not
(i) contravene any existing applicable law to which the
Guarantor is subject, (ii) conflict with, or result in any
breach of any of the terms of, or constitute a default under,
any document, instrument or agreement to which the Guarantor is
a party or is subject or by which it or any of its assets may be
bound which would be reasonably expected to have a material
adverse effect on its financial condition or its payment
obligations under the Transaction Documents, (iii) contravene or
conflict with any provision of its constitutional documents, or
(iv) result in the creation or imposition of, or oblige it to
create, any Lien on or over any of its assets (other than the
Liens created pursuant to the Transaction Documents);
(f) every consent, registration, licence and qualification required
by the Guarantor to enable it to carry on its business has been
duly obtained or made and is in full force and effect and there
has been no default in the observance or performance of any of
the conditions or restrictions (if any) imposed on, or in
connection with, any such consent, registration, licence or
qualification, in each case, which would be reasonably expected
to have a material adverse effect on
<PAGE> 73
its financial condition or its payment obligations under the
Transaction Documents;
(g) every consent, registration, licence and qualification required
by the Guarantor to authorise, or required by it in connection
with, the execution, delivery, legality, validity, priority,
enforceability, admissibility in evidence or effectiveness of
the Transaction Documents to which it is or will be a party has
been duly obtained or made and is in full force and effect and
there has been no default in the observance or performance of
any of the conditions or restrictions (if any) imposed on, or in
connection with, any such consent, licence, registration or
qualification, in each case, which would be reasonably expected
to have a material adverse effect on the financial condition of
the Guarantor or its payment obligations under the Transaction
Documents or the legality, validity, priority, enforceability,
admissibility in evidence or effectiveness of such Transaction
Documents;
(h) no litigation, arbitration or administrative proceeding is
taking place, pending or, to the actual knowledge of its
officers, threatened against it, or against any of its assets,
which in any such case would be reasonably expected to have a
material adverse effect on its financial condition or its
payment obligations under the Transaction Documents;
(i) the Guarantor has not taken any action nor, to its knowledge or
the knowledge of its officers, have any steps been taken or
legal proceedings been started for any insolvency-related
winding-up, dissolution or re-organisation or for the
appointment of a receiver or administrative receiver, or an
administrator, trustee or similar officer of it or of any or all
of its assets;
(j) the obligations of the Guarantor under the Transaction Documents
to which it is or will be a party are, or will when the same are
executed be, direct, general and unconditional obligations of
the Guarantor and rank at least pari passu with all other
present and future unsecured and unsubordinated obligations of
the Guarantor save for obligations mandatorily preferred by law;
(k) no Relevant Event or Termination Event has occurred and is
continuing;
(l) the audited consolidated financial statements of the Guarantor
for the period ending on December 31, 1997 have been prepared in
accordance with generally accepted accounting principles and
standards applicable in the United States of America and in
conjunction with the notes thereto, fairly present the financial
position of the Guarantor and its Subsidiaries as at December
31, 1997;
(m) the Guarantor or a Subsidiary of the Guarantor is the legal and
beneficial owner of the entire share capital of the Parent;
(n) there have been no amendments or supplements to the articles of
incorporation and bylaws of the Guarantor from the form of those
documents last seen by the Agent that could reasonably be
expected to have a Material Adverse Effect; and
<PAGE> 74
(o) except as otherwise disclosed in writing to the Agent, the board
resolutions supplied by the Guarantor to the Agent pursuant to
the provisions of Clause 2.9 (Conditions Precedent) of this
Agreement remain in full force and effect and have not been
amended, supplemented, varied or revoked, in whole or in part
since it was entered into and the authority therein given to the
persons therein named to agree and execute on behalf of the
Guarantor the Transaction Documents remains in full force and
effect and has not been revoked, amended, supplemented or
varied, in whole or in part.
6.2 REPRESENTATIONS AND WARRANTIES OF THE BORROWER, EACH SUB-BORROWER, THE
PARENT AND EACH INTERMEDIATE LESSEE
To induce each of the Lenders and the Representatives to enter into the
Transaction Documents, the Borrower, each Sub-Borrower, each
Intermediate Lessee and the Parent represents and warrants to the
Lenders and the Representatives separately and severally that:-
(a) it is duly organised and validly existing under the laws of
Bermuda (in the case of the Borrower), the State of California
(in the case of the Parent) and the jurisdiction referred to in
paragraph 2.1(d) of the relevant Accession Deed (in the case of
each Sub-Borrower and each Intermediate Lessee), or in each case
in the jurisdiction in which it may subsequently be
incorporated, and has full power, authority and legal right to
own its property and carry on its business as presently
conducted;
(b) it has the power and capacity to execute and deliver, and to
perform its obligations under the Transaction Documents to which
it is or will be a party and all necessary action has been taken
to authorise the execution, delivery and performance of the
same;
(c) it has taken all necessary legal action to authorise the person
or persons who execute and deliver the Transaction Documents to
which it is or will be a party to execute and deliver the same
and thereby bind it to all the terms and conditions hereof and
thereof and to act for and on behalf of it as contemplated
hereby and thereby;
(d) the Transaction Documents to which it is or will be a party
constitute or will when executed constitute its legal, valid and
binding obligations enforceable in accordance with their terms
subject only to the qualifications set out in the legal opinions
to be provided to the Lenders in accordance with the provisions
of Clause 2.9 (Conditions Precedent) (in respect of the
Aircraft) and Schedule 6 (in respect of the Aircraft Operative
Documents);
(e) the execution and delivery by it of, the performance of its
obligations under, and compliance with the provisions of, the
Transaction Documents to which it is or will be a party will not
(i) contravene any existing applicable law to which it is
subject, (ii) conflict with, or result in any breach of any of
the terms of, or constitute a default under, any document,
instrument or agreement to which it is a party or is subject or
by which it or any of its assets may be bound, (iii) contravene
or conflict with any provision of its constitutional documents,
or (iv) result in the creation or imposition of, or oblige it to
create, any Lien on or
<PAGE> 75
over any of its assets other than those created pursuant to the
Transaction Documents;
(f) every consent, registration, licence and qualification required
by it to enable it to carry on its business has been duly
obtained or made and is in full force and effect and there has
been no default in the observance or performance of any of the
conditions or restrictions (if any) imposed on, or in connection
with, any such consent, registration, licence and/or
qualification in each case which could have a material adverse
effect on its ability to perform its obligations under any of
the Transaction Documents to which it is or will be a party;
(g) except as provided in the parenthetical proviso in Clause 7.1(f)
(General Covenants of the Borrower, Sub-Borrower and
Intermediate Lessee), and except for those that are not
customary practice in applicable jurisdictions to obtain or make
at such time, every consent, registration, licence and
qualification required by it to authorise, or required by it in
connection with, the execution, delivery, legality, validity,
priority, enforceability, admissibility in evidence or
effectiveness of the Transaction Documents to which it is or
will be a party has been duly obtained or made and is in full
force and effect and there has been no default in the observance
or performance of any of the conditions or restrictions (if any)
imposed on, or in connection with, any such consent, licence,
registration and/or qualification, in each case, which could
have a material adverse effect on its ability to perform its
obligations under this Agreement or the legality, validity,
priority, enforceability, admissibility in evidence or
effectiveness of such Transaction Documents;
(h) no litigation, arbitration or administrative proceeding is
taking place, pending or, to the actual knowledge of its
officers, threatened against it, or against any of its assets,
which in any such case could have a material adverse effect on
its ability to perform its obligations under any of the
Transaction Documents to which it is or will be a party;
(i) it has not taken any action nor, to its knowledge or the
knowledge of its officers, have any steps been taken or legal
proceedings been started for any insolvency-related winding-up,
dissolution or re-organisation or for the appointment of a
receiver or administrative receiver, or an administrator,
trustee or similar officer of it or of any or all of its assets;
(j) its obligations under the Transaction Documents to which it is
or will be a party are, or will when the same are executed be,
its direct, general and unconditional obligations and rank at
least pari passu with all other present and future unsecured and
unsubordinated obligations save for obligations mandatorily
preferred by law;
(k) no Relevant Event or Termination Event has occurred and is
continuing;
(l) it has not, prior to entering into the Transaction Documents
engaged in any business or transaction or entered into any
contract or agreement with any person or otherwise created or
incurred any liability to, or acquired any asset from, any
person, other than any such transactions, contracts, agreements
or liabilities or acquisitions of assets as (i) have been
necessary solely in order for
<PAGE> 76
it to establish itself as a company duly incorporated and
validly existing under the laws of its state of incorporation or
(ii) have occurred pursuant to any other Transaction Document or
(iii) have been necessary to enable the Parent to become the
legal and beneficial owner of the shares in the Borrower, any
Sub-Borrower or any Intermediate Lessee or to enable the
Borrower to become the legal and beneficial owner of the shares
in any Sub-Borrower or any Intermediate Lessee;
(m) except as otherwise permitted hereunder, there have been no
amendments or supplements to its memorandum of association and
by-laws or, as the case may be, articles of association from the
form of those documents last seen by the Agent and the
memorandum of association and by-laws or, as the case may be,
articles of association in the form last seen by the Agent
remain in full force and effect;
(n) except as otherwise disclosed in writing to the Agent, the board
resolutions and, if applicable, power of attorney supplied by it
to the Agent pursuant to the provisions of Clause 2.9
(Conditions Precedent) of this Agreement or pursuant to Schedule
6 (as the case may be) remain in full force and effect and have
not been amended, supplemented, varied or revoked, in whole or
in part since they were entered into and the authority therein
given to the persons therein named to agree and execute on its
behalf the Transaction Documents remains in full force and
effect and has not been revoked, amended, supplemented or
varied, in whole or in part;
(o) except as otherwise disclosed in writing to the Agent, no Second
Trigger Event or Third Trigger Event has occurred and is
continuing;
(p) the Parent further represents that it is the legal and
beneficial owner of the entire issued share capital of the
Borrower; and
(q) it is the sole legal and beneficial owner of all of the shares
(except for shares held by directors, trustees or nominees in
order to meet local nationality or other local requirement and
which do not have a Material Adverse Effect on the relevant
Charge Over Shares) comprised in the Existing Securities (as
defined in each of the Charges over Shares to which it is a
party) being the entire issued shares in the capital of the
Borrower (in the case of the Parent), each Sub-Borrower (in the
case of the Borrower) and the relevant Intermediate Lessees (in
the case of the Borrower and the Sub-Borrower), that the
Existing Securities (as defined in each of the Charges over
Shares to which it is a party) are fully paid up and are not
subject to any options and none of the Charged Property (as
defined in each of the Charges over Shares to which it is a
party) is subject to any Lien other than as created pursuant to
the relevant Charge over Shares.
6.3 REPETITION
The representations and warranties set out in Clauses 6.1 and 6.2 shall
be deemed to be repeated by the relevant party on each date the Borrower
serves a Utilisation Notice pursuant to Clause 3.1.1 (Utilisation
Notices) and on each Utilisation Date in each case in relation to the
Eligible Aircraft which is the subject of the relevant Utilisation
Notice in
<PAGE> 77
respect thereof as though made on each such date with reference to the
facts and circumstances then existing on such date.
7. UNDERTAKINGS AND COVENANTS
7.1 GENERAL COVENANTS OF BORROWER, SUB-BORROWER AND INTERMEDIATE LESSEE
Until all of the Secured Obligations (exclusive of indemnities in
respect of which no claims have been, or to the knowledge of the
Security Trustee will be, asserted) have been paid in full, the
Borrower, each Sub-Borrower and each Intermediate Lessee hereby
undertakes and covenants with each of the Lenders and the
Representatives separately and severally that from the date of this
Agreement:
(a) except as provided in Clause 18.1 (Transfers by Obligors), it
shall remain duly incorporated and validly existing under the
laws of Bermuda (in the case of the Borrower) and the laws of
the jurisdiction stated in paragraph 2.1(d) of the relevant
Accession Deed (in the case of each Sub-Borrower and each
Intermediate Lessee);
(b) at all times, it shall comply and procure the compliance with
all laws and regulations applicable to it and which are
necessary in relation to the conduct of its business generally,
and it shall obtain, maintain in full force and effect and
comply in all material respects with, any present or future
authorisations (governmental or otherwise), approvals, licences
and consents and do, or cause to be done, all other acts and
things, in each case, which may from time to time be necessary
for the continued due performance of its obligations under the
Transaction Documents;
(c) it shall inform the Agent of any Relevant Event or Termination
Event promptly upon becoming aware of the same and shall provide
the Agent with full details of any steps which it is taking, or
is considering taking, in order to remedy or mitigate the effect
of any Relevant Event or Termination Event or otherwise in
connection therewith;
(d) it shall pay and discharge all material Taxes and governmental
charges prior to the date on which the same become overdue
unless, and only to the extent that, such Taxes and charges
shall be contested in good faith by appropriate proceedings,
pending determination of which payment may lawfully be withheld,
and there shall be set aside adequate reserves with respect to
any such Taxes or charges so contested (if required in
accordance with generally accepted accounting principles);
(e) it shall comply with its constitutional documents and neither
the Parent nor the Borrower nor any Sub-Borrower shall amend any
provision of the constitutional documents of the Borrower, any
Sub-Borrower or any Intermediate Lessee respectively except as
provided in Clause 18.1 (Transfers by Obligors), or with the
consent of the Security Trustee (not to be unreasonably
withheld);
<PAGE> 78
(f) promptly, upon being requested so to do by either
Representatives take all such steps and enter into and execute
all such documents of whatsoever nature in order to enable the
relevant Representative to effect any registration, recording,
filing, notarisation or any other action in respect of any of
the Transaction Documents, in each case, which is required by
law or reasonably requested by either Representative (provided
always that notwithstanding any other provision of the
Transaction Documents the Borrower, the relevant Sub-Borrower or
the relevant Intermediate Lessee shall not be required to do any
act or thing or take any step in connection with the
registration, recording or filing of any instrument creating or
evidencing a Lien over an Aircraft in the register of the
Aviation Authority where such Aircraft is registered, or any
other registration, recording or filing outside the jurisdiction
of organisation of the Borrower or, if applicable, any
Sub-Borrower or any Intermediate Lessee or the Parent, or any
actions with respect to the Lessee or any Sub-Lessee (other than
any registration, recording or filing of a Lien over an Aircraft
within the jurisdiction of organisation of the Borrower or, if
applicable, any Sub-Borrower or any Intermediate Lessee) or with
respect to its jurisdiction of organisation or principal place
of business, unless a Third Trigger Event or Termination Event
has occurred and is continuing) to ensure the validity,
enforceability or priority of the liabilities and obligations of
the Borrower, the relevant Sub-Borrower or the relevant
Intermediate Lessee or the rights of each Representative and/or
each of the Lenders under any of the Transaction Documents;
(g) not, without the prior written consent of the Agent, conduct any
business other than the acquisition, leasing and sale of the
Aircraft and the transactions contemplated by the Transaction
Documents to which it is a party and such activities and matter
incidental to any of the foregoing;
(h) not, without the prior written consent of the Security Trustee
acting on the instructions of the Majority Lenders incur any
liability to any person, other than:
(i) a liability for Tax or other charges arising under
applicable law to a Government Entity; or
(ii) a liability to the Subordinated Lender in respect of the
Subordinated Liabilities; or
(iii) a liability to a Lessee under a Lease or a liability to
an Intermediate Lessee under an Intermediate Lease or a
liability to a Sub-Lessee under a Sub-Lease; or
(iv) any liability under the Transaction Documents; or
(v) any liability that is an ordinary operating cost or
overhead expense or is otherwise in the ordinary course
of its permitted business;
(i) ensure that at all times its obligations under the Transaction
Documents rank at least pari passu with its obligations owed to
all its unsecured creditors save for obligations mandatorily
preferred by law;
<PAGE> 79
(j) duly observe and perform all of its obligations under each of
the Transaction Documents to which it is, from time to time, a
party;
(k) it shall not create or acquiesce in the creation or permit to
exist any Lien (other than any Permitted Lien) on or affecting
the Aircraft, the Insurances, the Warranties, the Engine
Warranties in relation to any Aircraft (or any relevant Engine
or Part);
(l) not (without the prior written consent of the Security Trustee,
which consent shall be exercisable at the discretion of the
Security Trustee acting on the instructions of the Majority
Lenders) issue any shares (other than to comply with nationally
or other local requirements as described in Clause 3.3.2
(Sub-Borrowers/Intermediate Lessees) to the Guarantor or any
Subsidiary on terms that any such shares are immediately charged
to the Security Trustee on terms substantially the same as those
contained in the Charge Over Shares of the Borrower, the
relevant Charge Over Shares of Sub-Borrower or the relevant
Charge Over Shares of Intermediate Lessee (as the case may be)
or on such terms as may otherwise be agreed by the Security
Trustee) or pay any dividends on any shares issued by it or
redeem any shares except as permitted by Clause 8.1
(Subordination);
(m) deliver to the Agent sufficient copies for distribution to each
of the Lenders of its audited annual financial statements for
each of its financial years (which shall be prepared in
accordance with generally accepted accounting principles and
practices in the United States of America for those Obligors
incorporated in the United States of America or Bermuda (other
than principles and practices related to consolidation of
accounts) and which shall present fairly the profits and losses
of the Borrower, the relevant Sub-Borrower or the relevant
Intermediate Lessee (as the case may be) for the relevant
financial year at the end of such financial year) as soon as
practicable and not later than one hundred and eighty (180) days
after the end of the financial year to which they relate;
(n) it shall procure that at all times a majority of the members of
its board of directors shall be officers or employees of the
Guarantor, a Subsidiary, AIG or an AIG Group Company (unless
such requirement is contrary to local requirements in its
jurisdiction of incorporation and such requirement is not likely
to have a Material Adverse Effect on the relevant Charge over
Shares, in which case, it shall comply with the requirements of
its jurisdiction of incorporation) and it shall procure further
that no member of its board of directors shall be replaced or
substituted (other than by another officer or employee of the
Guarantor, a Subsidiary, AIG or an AIG Group Company) without
the prior written consent of the Security Trustee (which consent
shall be exercisable in the reasonable discretion of the
Security Trustee) unless such substitution is required in order
to comply with the requirement of its jurisdiction of
incorporation and such substitution is not likely to have a
Material Adverse Effect on the relevant Charge over Shares;
(o) inform the Representatives:
<PAGE> 80
(i) of any proposed Final Disposition of an Aircraft or sale
of a Sub-Borrower, no less than seven (7) Business Days
before the proposed date for completion of such Final
Disposition; and
(ii) promptly after it becomes aware of the Total Loss of any
Aircraft or of any occurrence which, with the lapse of
time, would or would be likely to constitute a Total
Loss of any Aircraft, the Borrower, the relevant
Sub-Borrower or the relevant Intermediate Lessee (as the
case may be) shall provide such details of such Total
Loss or other occurrence as each Representative may
reasonably request;
(p) inform the Representative promptly after it becomes aware of
any:
(i) Lien which has arisen over or in respect of any of the
Aircraft or any Part thereof other than any Permitted
Lien; or
(ii) any steps being taken by the holders of any Lien
(including any Permitted Lien) to exercise or enforce
that Lien or any rights in respect thereof;
(q) it shall not voluntarily wind itself up except in connection
with its solvent liquidation into another Obligor pursuant to
Clause 18.1 (Transfers by Obligors);
(r) the Borrower shall remain a wholly owned Subsidiary of the
Parent, each Sub-Borrower shall remain a wholly owned Subsidiary
of the Borrower and each Intermediate Lessee shall remain a
wholly owned Subsidiary of the Borrower or a Sub-Borrower (as
the case may be), subject always to the provisions of Clause 3.3
(Sub-Borrower/Intermediate Lessees);
(s) the Borrower shall pay the Expenses of, and where applicable,
instruct its counsel to render to the Agent on June 30 1999,
June 30 2000, June 30 2001 and March 31 2002 (i) "bring-down"
opinions as of June 30 1999, June 30 2000 and June 30 2001,
with respect to each of the Master Opinions to the effect that
there has been no Substantive Law Change since the date of the
applicable Master Opinion that would cause the counsel rendering
such opinion to change its Master Opinion or, if such a
Substantive Law Change has occurred, a revised opinion as to the
portion of the opinion affected by any such Substantive Law
Change and (ii) reissued Master Opinions as of March 31, 2002.
7.2 LEASING AND INSURANCE COVENANTS OF BORROWER, SUB-BORROWER AND
INTERMEDIATE LESSEE
7.2.1 Until all of the Secured Obligations (exclusive of indemnities in
respect of which no claims have been, or to the knowledge of the
Security Trustee will be, asserted) have been paid in full, the
Borrower, each Sub-Borrower and each Intermediate Lessee hereby
undertakes and covenants with each of the Lenders and the
Representatives separately and severally from the date of this Agreement
that it shall:
<PAGE> 81
(a) ensure that each Lease is in English;
(b) not deliver an Aircraft to a TO Lessee (as defined in Clause
7.2.2) directly under a Lease or indirectly under a Sub-Lease
which is incorporated or has its principal place of business in
the United States of America within two years after the Delivery
Date of that Aircraft (unless the Export Credit Agencies agree
to a shorter period in their sole discretion);
(c) ensure at the time such Lease is entered into that such Aircraft
is not registered in or leased to a Lessee or a Sub-Lessee whose
principal place of business is in a Prohibited Country;
(d) ensure that no Aircraft is subject to any instalment sale
agreement, conditional sale agreement or other lease-purchase
agreement conferring upon the bailee any ownership right, title
or interest to or in the relevant Aircraft, including, without
limitation, by means of a purchase option at a nominal price,
without obtaining the prior written approval of the Security
Trustee, acting on the instructions of the Majority Lenders;
(e) ensure that if a Lease contains, or any Aircraft is subject to,
a purchase option, such purchase option shall be at a price that
is either for fair market value or at a fixed price at or above
one hundred and ten per cent. of the outstanding principal under
the relevant Loan at the time of Final Disposition (which
purchase price is acknowledged and agreed as not being nominal
within the meaning or otherwise in violation of Clause
7.2.1(d));
(f) each Aircraft shall, unless in or imminently scheduled for major
maintenance or modification or as otherwise agreed between the
Borrower or a Sub-Borrower (as the case may be) and the Security
Trustee, be registered in the jurisdiction of incorporation of:
(i) the Borrower or a Sub-Borrower, whichever is the owner
of the Aircraft (including in the name of an owner trust
in the United States of America); or
(ii) an Intermediate Lessee; or
(iii) a Lessee; or
(iv) any Sub-Lessee,
in each case with the interests of the Borrower or relevant
Sub-Borrower as owner noted on the register of the relevant
Aviation Authority to the extent permitted by applicable law;
(g) the Borrower shall (at its own cost) take all steps, or procure
that all steps are taken, which are required by law in the State
of Registration and the jurisdiction in which the Lessee or any
Sub-Lessee has its principal place of business to protect and
perfect the Borrower's or the Sub-Borrower's (as the case may
be) legal and beneficial ownership interest in the Aircraft;
<PAGE> 82
(h) ensure that each Lease provides (y) for the relevant Aircraft to
be maintained in accordance with the maintenance programme
described in the relevant Lease and approved by the relevant
Aviation Authority and (z) that all airworthiness directives
issued by the relevant Aviation Authority are complied with, as
stated in such airworthiness directive to the extent required
during the term of the relevant Lease;
(i) ensure that each Lease provides that, in relation to each
Aircraft, all documentation regarding repairs, maintenance,
overhauls and modifications is maintained in accordance with the
requirements of the relevant Aviation Authority;
(j) subject to the rights of the Security Trustee upon the
occurrence and continuation of a Second Trigger Event, ensure
that the terms of any Lease, in so far as they relate to
operations, maintenance and insurance shall be no less
favourable than, or substantially similar in substance to, those
customarily used by the Guarantor for the leasing of similar
aircraft in its portfolio to lessees of similar credit standing,
similar geographic location and under similar circumstances.
7.2.2 The Borrower and (as the case may be) each Sub-Borrower shall not and
shall not permit an Intermediate Lessee, to deliver an Aircraft to a
Lessee (if it is a technical operator of aircraft) or a Sub-Lessee (if
the Lessee is not a technical operator of aircraft and the Sub-Lessee is
a technical operator of aircraft) ("TO LESSEE") directly under a Lease,
indirectly under a Sub-Lease or substitute an Aircraft under Clause 4.7
(Substitution of Aircraft) if such delivery or substitution would breach
either or both of the limits specified in paragraphs (a) and (b) below,
namely:-
(a) if that TO Lessee is the first TO Lessee of such Aircraft and,
as a result of delivery of that Aircraft to that TO Lessee or as
a result of such substitution (if the substitute aircraft has
never been previously leased or sub-leased), either:-
(i) more than eleven (11) Aircraft; or
(ii) more than twenty five per cent. of the Aircraft then
financed under the Facility (determined by number and
not by value),
whichever is higher, would be Home Country Aircraft; or
(b) if, as a result of delivery of that Aircraft to that TO Lessee
or as a result of such substitution, more than nineteen (19)
Aircraft would be leased to TO Lessees (whether as first or
subsequent TO Lessees) incorporated in any one Home Country (it
being understood that, in aggregate, up to fifty-seven (57)
Aircraft may be Home Country Aircraft so long as no single Home
Country accounts for more than nineteen (19) of such Home
Country Aircraft).
7.2.3 The limits set out in paragraphs (a) and (b) of Clause 7.2.2 shall not:
(a) prevent the delivery of an Aircraft to a TO Lessee in breach of
any such limit following the repossession of such Aircraft by,
or the delivery or redelivery of such Aircraft to, the Borrower,
any Sub-Borrower or any Intermediate Lessee
<PAGE> 83
(as the case may be) as a result of the termination of the
leasing of such Aircraft under a previous Lease Agreement prior
to its scheduled expiry date (other than by reason of the
exercise by the relevant Lessee of a voluntary right of early
termination); or
(b) require the prepayment of a Loan in respect of a Home Country
Aircraft if any such limit is breached as a result of (i) the
prepayment of a Loan in respect of another Aircraft which is not
a Home Country Aircraft (by reason of the Final Disposition or
Total Loss of such Aircraft or a Sub-Borrower Sale in relation
to such Aircraft or for any other reason), or (ii) the
termination or expiry of the leasing of another Aircraft which
is not a Home Country Aircraft.
7.2.4 In determining, for the purposes of Clause 7.2.2(a), whether or not a TO
Lessee is the first TO Lessee of an Aircraft:-
(a) no account shall be taken of a previous Lessee or Sub-Lessee of
that Aircraft:-
(i) under a Lease with a Subsidiary contemplated by Clause
4.8.2 (Prepayment if not leased) and entered into to
avoid an obligation to prepay the relevant Loan under
Clause 4.8.1 (Prepayment if not leased); or
(ii) subject to paragraph (b) below, under a Lease or
Sub-Lease which terminates on or before delivery of the
relevant Aircraft occurs thereunder;
(b) a previous Lessee or Sub-Lessee of that Aircraft under a Lease
or a Sub-Lease which terminates less than six months or before
the date on which delivery of the relevant Aircraft is scheduled
to occur by reason of a default or failure to satisfy any
condition precedent by such Lessee or Sub-Lessee by reason of
the bankruptcy of, or other circumstances affecting (including a
failure to perform by), such Lessee or Sub-Lessee shall be
treated as having been a previous TO Lessee of the relevant
Aircraft PROVIDED that this paragraph (b) shall not operate so
as to permit (in addition to those Aircraft actually delivered
to a TO Lessee as a first TO Lessee) more than eight Aircraft to
be Home Country Aircraft which would not, but for this paragraph
(b), have been permitted under Clause 7.2.2(b); and
(c) in the case of a Replacement Aircraft, the TO Lessee of the
Existing Aircraft which it replaced shall be treated as having
been a previous TO Lessee of that Replacement Aircraft.
7.2.5 If the total number of seventy five (75) Eligible Aircraft is increased,
the limits on numbers of Home Country Aircraft specified in paragraphs
(a)(i) and (b) of Clause 7.2.2 (namely eleven (11), nineteen (19) and
fifty-seven (57)) shall be deemed to be increased to fifteen per cent.,
twenty-five per cent. and seventy-five per cent. (respectively) of the
increased total number of Eligible Aircraft (in each case rounded up or
down to the nearest whole number).
7.2.6 The Borrower, the relevant Sub-Borrower or the relevant Intermediate
Lessee (as the case may be) shall deliver to the Agent a certified true
copy of:
<PAGE> 84
(a) each Lease (and each side letter or other document amending or
supplementing the terms of any Lease) from time to time entered
into by the Borrower, the relevant Sub-Borrower or the relevant
Intermediate Lessee (as the case may be) in respect of an
Eligible Aircraft; and
(b) each legal opinion (if any) provided to the Borrower, the
relevant Sub-Borrower or the relevant Intermediate Lessee (as
the case may be) in connection with any such Lease (or in
connection with any amendment thereto) from legal counsel in the
jurisdiction in which the relevant Lessee is incorporated or in
which the Aircraft is or will be registered,
in each case within thirty (30) days after the later of (i) the relevant
Utilisation Date and (ii) the date on which such Lease (or the relevant
side letter or other document) was entered into or, as the case may be,
the date on which such legal opinion was provided to the Borrower, the
relevant Sub-Borrower or the relevant Intermediate Lessee (as the case
may be).
7.2.7 The Borrower, the relevant Sub-Borrower or the relevant Intermediate
Lessee (as the case may be) shall maintain, or procure that the relevant
Lessee or the relevant Sub-Lessee (as the case may be) maintains, hull
and third party liability insurance policies in respect of each Aircraft
in accordance with the terms of Schedule 8.
7.2.8 The Borrower, the relevant Sub-Borrower or the relevant Intermediate
Lessee (as the case may be) shall deliver to the Agent (i) a certificate
evidencing the insurance (and, if applicable, reinsurance) policies
required by Clause 7.2.7 on or before the Delivery Date of the relevant
Aircraft and (in the case of a replacement certificate) promptly after
receipt thereof and (ii) any insurance broker's and reinsurance broker's
(if applicable) letter of undertaking.
7.2.9 The Borrower or the relevant Sub-Borrower (as the case may be) shall
deliver a notice to the Agent and the Export Credit Agencies as soon as
practicable after the Delivery Date of each Aircraft specifying the
stated country of origin of each item of Buyer Furnished Equipment
installed on each Aircraft.
7.2.10 Each of the Borrower, the relevant Sub-Borrower or the relevant
Intermediate Lessee (as the case may be) and the Security Trustee shall,
immediately following the delivery of an Aircraft to a Lessee or a
Sub-Lessee (as the case may be) execute a Notice of Charge and the
Security Trustee shall serve such Notice of Charge on the Lessee or if
not the technical operator of the relevant Aircraft to the first
technical operator of the relevant Aircraft and, if the Borrower so
requests, to any other permitted sub-lessee.
7.2.11 CHANGE OF TITLE HOLDER OF AIRCRAFT OR INTRODUCTION OF AN INTERMEDIATE
LESSEE
(A) In respect of the leasing of an Aircraft at any time during the Security
Period (provided that no Relevant Event or Termination Event has
occurred and is continuing), the Borrower shall be entitled by giving
notice (a "STRUCTURAL CHANGE NOTICE") to the Agent and the Security
Trustee:
<PAGE> 85
(a) to cause itself or a Sub-Borrower (which is established in a
Regular Jurisdiction) to take title to that Aircraft and/or to
incorporate an Intermediate Lessee (which is established in a
Regular Jurisdiction) into the structure; or
(b) to request that a Sub-Borrower (which is or is to be established
in an Irregular Jurisdiction) take title to that Aircraft and/or
that an Intermediate Lessee (which is or is to be established in
an Irregular Jurisdiction) be incorporated into the structure.
(B) Any such Structural Change Notice that constitutes a request under
Clause 7.2.11(A)(b) shall be served at least twenty (20) Business Days
prior to the proposed transfer of title to the Aircraft or such lesser
period as the Agent (acting reasonably) shall agree and the Agent
(acting on the instructions of the Majority Lenders) shall approve such
request in principle or otherwise no later than ten (10) Business Days
prior to the proposed transfer of title.
(C) If the proposed Sub-Borrower or Intermediate Lessee has already acceded
to this Agreement prior to the date of the relevant Structural Change
Notice, or is in a Regular Jurisdiction, the approval of the Agent shall
not be required. Any such other Structural Change Notice that applies to
a person that has not acceded to this Agreement shall be served at least
ten (10) Business Days prior to the proposed transfer of title to the
Aircraft or such lesser period as the Agent shall agree. All other
Structural Change Notices shall be served at least five (5) Business
Days prior to the proposed transfer of title to the Aircraft.
(D) Each such Sub-Borrower and/or such Intermediate Lessee shall be a
company or trust capable of providing representations and warranties and
covenants having substantially the same effect as those given by the
Borrower in Clauses 6 (Representations and Warranties) and 7
(Undertakings and Covenants) and each shall be a wholly owned direct
Subsidiary of the Borrower, in the case of a Sub-Borrower, or a wholly
owned direct Subsidiary of a Sub-Borrower or the Borrower, in the case
of an Intermediate Lessee (in each case, except for shares held by
directors, trustees or nominees in order to meet local nationality or
other local requirements and which do not have a Material Adverse Effect
on any of the Charges over Shares, in favour of the Security Trustee).
The Borrower shall use one Intermediate Lessee in any one jurisdiction
unless the Borrower has a reason to do otherwise.
(E) If a Sub-Borrower or an Intermediate Lessee has not already acceded to
this Agreement and is to be incorporated into the structure then on or
prior to the Security Trustee releasing the relevant Aircraft Security
Documents (insofar as they relate to the Aircraft) granted by the
Borrower or the relevant Sub-Borrower (as the case may be) whichever is
the title holder to the Aircraft:
(a) each such Sub-Borrower and/or each such Intermediate Lessee
shall accede to this Agreement by executing an Accession Deed
and such other Transaction Documents as the Agent in its good
faith opinion considers appropriate so that any such
Sub-Borrower shall be deemed to be a party to this Agreement and
such of the other Transaction Documents as may be appropriate as
if named therein as a party;
(b) if the Sub-Borrower or Intermediate Lessee is or will be
organised in an Irregular Jurisdiction, each of the applicable
Obligor parties to this Agreement
<PAGE> 86
and any such Sub-Borrower organised in an Irregular Jurisdiction
and/or such Intermediate Lessee organised in an Irregular
Jurisdiction shall enter into such other documents and provide
such security as the Security Trustee may, in its good faith
opinion (after taking legal advice from counsel to the Lenders
in the jurisdiction of the relevant Sub-Borrower and/or relevant
Intermediate Lessee), require in order to ensure that (i) the
Representatives and each of the Lenders are in a position having
a substantially similar effect (including as to their security
position) with respect to such Sub-Borrower and/or such
Intermediate Lessee as they are in with respect to other
Sub-Borrowers or other Intermediate Lessees, as the case may be,
under the Transaction Documents and (ii) the rights of the
Representatives and the Lenders is not materially different than
with respect to any Sub-Borrower and/or Intermediate Lessee of a
Regular Jurisdiction under the Transaction Documents, it being
acknowledged and agreed for the purpose of determining the
foregoing matters that (i) any trustee in a United States
owner/voting trust will be party to the Transaction Documents
not in its individual capacity but solely as trustee, (ii)
common law jurisdictions are acceptable and (iii) with respect
to civil jurisdictions, the Borrower and the Agent shall
negotiate in good faith, to the extent necessary, alternative
security to that available in common law jurisdictions which is
acceptable to the Security Trustee, acting upon the instruction
of the Majority Lenders;
(c) upon receipt by the Agent of the Accession Deed signed on behalf
of the Borrower, Guarantors, Obligors and by the proposed
Intermediate Lessee or Sub-Borrower (as the case may be), the
Agent shall sign the same for itself and on behalf of the
Lenders and shall as promptly as practicable give notice of such
execution to all of the parties to the Accession Deed;
(d) upon execution of any such Accession Deed it shall take effect
in accordance with, but subject to, the terms hereof and
thereof.
(F) The effectiveness of the change of title holder to the Aircraft or the
introduction of an Intermediate Lessee shall be subject to receipt by
the Agent of the following conditions precedent in form and substance
satisfactory to the Agent:
(a) evidence satisfactory to the Security Trustee (including a legal
opinion from counsel to the Lenders in the jurisdiction in which
transfer of title to the Aircraft takes place) that the Borrower
or the relevant Sub-Borrower (as the case may be) has obtained
title to the Aircraft free and clear of any Liens other than
Permitted Liens including a certified copy of the Bill of Sale
to the Borrower or the relevant Sub-Borrower (as the case may
be);
(b) a legal opinion from counsel to the Lenders in the jurisdiction
in which the Borrower or the relevant Sub-Borrower, as the case
may be, is organised concerning the assignment of the Mortgage,
the filing or registration and perfection in that jurisdiction
of the Mortgage (or alternative security) with respect to the
Aircraft, the Charge over Shares of Sub-Borrower (if any) and
any other Aircraft Security Documents which will be entered into
by the Borrower or the relevant Sub-Borrower (as the case may
be) and the validity of the relevant Sub-Borrower's guarantee
and indemnity (if any) in favour of the Security Trustee;
<PAGE> 87
(c) the relevant legal opinions from counsel to the Lenders as
provided in paragraph 4 of Part I to Schedule 6;
(d) evidence of insurance having been effected in respect of the
Aircraft with the Security Trustee named as a contract party and
(to the extent possible under AVN67B, or such other endorsement
as may be applicable) loss payee;
(e) if applicable, copies of the certificate of registration of the
Replacement Aircraft and airworthiness issued by the Aviation
Authority;
(f) if a Sub-Borrower or Intermediate Lessee is introduced into the
structure, the following signed documents:
(i) Accession Deed (if such person has not previously
acceded to the Transaction Documents);
(ii) the assignment of the Mortgage (if applicable) or
alternative security satisfactory to the Security
Trustee, acting upon the instructions of the Majority
Lenders;
(iii) the assignment of the Warranties (to the extent
assignable);
(iv) the assignment of the Engine Warranties (to the extent
assignable);
(v) Sub-Borrower Guarantee (if applicable);
(vi) Sub-Borrower Debenture (if applicable);
(vii) Intermediate Lessee Debenture (if applicable);
(viii) Charge Over Shares of Sub-Borrower (if applicable);
(ix) Charge Over Shares of Intermediate Lessee (if
applicable);
(x) Lease Security Assignment (if applicable);
(xi) Intermediate Lease Security Agreement (if applicable);
(xii) Notice of Charge as amended to record change of title
holder or the introduction of an Intermediate Lessee as
the case may be;
(g) evidence to the Security Trustee that the Sub-Borrower Accounts
or the Intermediate Lessee Accounts (as the case may be) have
been opened and that US$10 has been deposited in each of the
Sub-Borrower Accounts or Intermediate Lessee Accounts (as the
case may be).
7.3 PARENT COVENANTS
Until all of the Secured Obligations (exclusive of indemnities in
respect of which no claims have been, or to the knowledge of the
Security Trustee will be, asserted) have been
<PAGE> 88
paid in full, the Parent hereby undertakes and covenants with each of
the Lenders, the Agent and the Security Trustee separately and severally
that from the date of this Agreement:-
(a) except as provided in Clause 18.1 (Transfers by Obligors), it
shall remain duly incorporated and validly existing under the
laws of the State of California and shall not, without the prior
written consent of the Security Trustee (which shall not be
unreasonably withheld), make any amendment to the constitutional
documents of the Borrower;
(b) at all times, it shall comply and procure the compliance with
all laws and regulations applicable to it and which are
necessary in relation to the conduct of its businesses
generally, and it shall obtain, maintain in full force and
effect and comply in all material respects with, any present or
future authorisations (governmental or otherwise) approvals,
licences and consents and do, or cause to be done, all other
acts and things, in each case which may from time to time be
necessary for the continued due performance of its obligations
under the Transaction Documents;
(c) it shall inform the Agent of any Relevant Event or Termination
Event promptly upon becoming aware of the same and shall provide
the Agent with full details of any steps which it is taking, or
is considering taking, in order to remedy or mitigate the effect
of any Relevant Event or any Termination Event or otherwise in
connection therewith;
(d) it shall pay and discharge all Taxes and governmental charges
which if unpaid would have a Material Adverse Effect prior to
the date on which the same become overdue unless, and only to
the extent that, such Taxes and charges shall be contested in
good faith by appropriate proceedings, pending determination of
which payment may lawfully be withheld, and there shall be set
aside adequate reserves with respect to any such Taxes or
charges so contested (if required in accordance with generally
accepted accounting principles);
(e) it shall comply with its constitutional documents and shall not
amend any provision of its constitutional documents except as
provided in Clause 18.1 (Transfers by Obligors) or with the
consent of the Security Trustee (not to be unreasonably
withheld);
(f) it shall promptly, upon being requested so to do by the Agent
and/or the Security Trustee take all such steps and enter into
and execute all such documents and/or agreements of whatsoever
nature in order to enable the Agent or, as the case may be, the
Security Trustee to effect any registration, recording, filing,
notarisation or any other action in respect of any of the
Transaction Documents, in each case, which are required by law
or reasonably requested by the Agent, or as the case may be, the
Security Trustee (provided always that notwithstanding any of
the provisions of the Transaction Documents the Parent shall not
be required to do any act or thing or take any step in
connection with the registration, recording or filing of any
instrument creating or evidencing a Lien over an Aircraft in the
register of the Aviation Authority where such Aircraft is
registered, or any other registration, recording
<PAGE> 89
or filing outside California or any actions with respect to a
Lessee or Sub-Lessee or with respect to its jurisdiction of
organisation or principal place of business unless a Third
Trigger Event or Termination Event has occurred and is
continuing) to ensure the validity, enforceability or priority
of the liabilities and obligations of any or all of the Obligors
or the rights of the Borrower, the Agent, the Security Trustee
and/or each of the Lenders under any of the Transaction
Documents;
(g) the only business of the Parent shall be the legal ownership of
the issued shares in the Borrower, and entering into the Charge
Over Shares of the Borrower and the documents incidental thereto
and the transactions contemplated by the Transaction Documents
to which it is, or is to be, a party and such activities and
matters incidental to any of the foregoing and the Parent
covenants that it shall not, without the prior written consent
of the Security Trustee (such consent to be exercisable in the
absolute discretion of the Security Trustee) engage in any other
business or transaction;
(h) it shall not, without the prior written consent of the Security
Trustee acting on the instructions of the Majority Lenders incur
any liability to any person, other than (a) any Subordinated
Liabilities, and (b) such liabilities with respect to Taxes,
ordinary operating costs and overhead expenses or as have arisen
or may arise in the ordinary course of carrying on its business
as referred to in Clause 7.3(g);
(i) it shall ensure that at all times its obligations under the
Transaction Documents rank at least pari passu with its
obligations owed to all its unsecured creditors save for
obligations mandatorily preferred by law;
(j) it shall duly observe and perform all of the covenants,
obligations and conditions which are required to be observed and
performed on its part under each of the Aircraft Operative
Documents to which it is, or is to be, a party;
(k) it shall not create any Lien on or with respect to the Charged
Property (as that term is defined in the Charge Over Shares of
the Borrower);
(l) it shall not (without the prior written consent of the Security
Trustee acting on the instructions of the Majority Lenders),
issue any shares (other than to comply with nationally or other
local requirements as described in Clause 3.3.2
(Sub-Borrowers/Intermediate Lessees) or to the Guarantor or a
Subsidiary of the Guarantor) and the Parent shall not (other
than pursuant to the Charge Over Shares of the Borrower) sell,
transfer or dispose of, encumber or create any Lien over or
alter the rights attaching to any of its shares in the Borrower
which are owned by the Parent or pay any dividends on any shares
issued by it or redeem any shares except as permitted by Clause
8 (Subordination); and
(m) it shall procure that at all times a majority of the members of
its board of directors shall be officers or employees of the
Guarantor, a Subsidiary, AIG or an AIG Group Company and it
shall procure further that no member of its board of directors
shall be replaced or substituted (other than by another officer
or employee of the Guarantor, a Subsidiary, AIG or an AIG Group
Company)
<PAGE> 90
without the prior written consent of the Security Trustee (which
consent shall be exercisable in the absolute discretion of the
Security Trustee).
7.4 GUARANTOR COVENANTS
Until all of the Secured Obligations (exclusive of indemnities in
respect of which no claims have been, or to the knowledge of the
Security Trustee will be, asserted) have been paid in full, the
Guarantor hereby undertakes and covenants with each of the Lenders, the
Agent and the Security Trustee separately and severally from the date of
this Agreement in the terms set out in Schedule 5 and that:
(a) subject to the provisions of Clause 9 (Trigger Events) it shall
ensure that the Borrower, each Sub-Borrower and each
Intermediate Lessee enter into Leases and Sub-Leases in respect
of any Aircraft whose terms in respect of maintenance, insurance
and operations are substantially similar in substance to those
which are customarily used by the Guarantor for the leasing of
similar aircraft in its portfolio and leased to lessees of
similar credit standing, similar geographic location and under
similar circumstances; and shall administer such Leases and
Sub-Leases in a manner consistent with those standards applied
by it with respect to its other owned and/or financed aircraft;
(b) subject to the provisions of Clause 9 (Trigger Events), the
Guarantor shall procure that, when an Aircraft is not the
subject of a Lease, the Borrower, each Sub-Borrower and each
Intermediate Lessee shall manage such Aircraft in respect of
maintenance and insurance consistently with other similar
aircraft owned and not leased by the Guarantor or any
Subsidiary;
(c) the Guarantor shall ensure that:
(a) the Parent remains a wholly owned direct or indirect
Subsidiary of the Guarantor;
(b) that the Borrower remains a wholly owned direct
Subsidiary of the Parent;
(c) each Sub-Borrower remains a wholly owned direct
Subsidiary of the Borrower (subject to the provisions of
Clause 3.3.2 (Sub-Borrower/Intermediate Lessees)); and
(d) that each Intermediate Lessee remains a wholly owned
direct Subsidiary of the Borrower or a Sub-Borrower
(subject to the provisions of Clause 3.3.2
(Sub-Borrower/Intermediate Lessees)).
(d) promptly after all post-delivery modifications covered by an
Advance in respect of an Aircraft have been completed, the
Guarantor shall provide a written notice to the Security Trustee
confirming that such post-delivery modifications have been
completed, and the Security Trustee shall, in turn, give a copy
of such notice to the Lead Managers. If post-delivery
modifications covered by an Advance in respect of an Aircraft
are not carried out within the Post-Delivery Modification
Period, the provisions of Clause 4.9 (Prepayment if
<PAGE> 91
Post-Delivery Modifications not completed within Post-Delivery
Modification Period) shall apply.
8. SUBORDINATION
8.1 Until all Secured Obligations (exclusive of indemnities in respect of
which no claims have been, or to the knowledge of the Security Trustee
will be, asserted) have been paid in full, the Subordinated Lender
hereby agrees with each of the Lenders, the Agent and the Security
Trustee that the rights and remedies of the Subordinated Lender in
respect of any of the Subordinated Liabilities shall, except as provided
in Clauses 8.2 and 8.4, be subject and subordinate as provided in this
Clause 8 to all rights and claims, now or hereafter existing, which the
Agent, the Security Trustee or any Lender may have pursuant to or in
connection with any Transaction Document.
8.2 Whilst and so long as no Third Trigger Event or Termination Event has
occurred and is continuing and no Acceleration Event has occurred, and
no Relevant Event would result therefrom, the Subordinated Lender shall
be entitled from time to time to make demand on the Borrower or any
other Obligor (other than the Guarantor) in respect of, and receive
(free from the Lien of any Aircraft Security Document) from the Borrower
or any other Obligor (other than the Guarantor), amounts up to (but not
exceeding) such amounts (comprising all or any part of the Subordinated
Liabilities) as are actually received or otherwise held by or for the
credit of such Obligor.
8.3 The Subordinated Lender shall not file or join in any petition to
commence any insolvency or bankruptcy proceedings against any Obligor
(other than the Guarantor) until all amounts owing by the Borrower to
the Lenders, the Agent and the Security Trustee under or in connection
with the Transaction Documents have been satisfied in full.
8.4 Whilst and so long as no Third Trigger Event or Termination Event has
occurred and is continuing or no Acceleration Event has occurred, the
rights of the Subordinated Lender to the payment of any amount of the
Subordinated Liabilities shall rank pari passu to all rights and claims,
now or hereafter existing, which the Agent, the Security Trustee or any
Lender may have pursuant to or in connection with any Transaction
Document and there are no restrictions whatsoever on the payment (free
from the Lien of any Aircraft Security Document) or other actions in
respect of any Subordinated Liabilities save as otherwise set out in
Clauses 5 (Guarantee and Indemnity), 9.2 (Second Trigger Event), 9.3
(Third Trigger Event) and 10 (Termination Event) PROVIDED THAT:-
(a) the Subordinated Lender shall not at any time assign or transfer
to any person the whole or any part of the Subordinated
Liabilities without the prior written consent of the Security
Trustee acting upon the instructions of the Majority Lenders,
other than to an AIG Group Company that agrees to be bound by
the provisions of this Clause 8 by executing an Accession Deed
on terms acceptable to the Security Trustee and simultaneously
provides a legal opinion addressed to the Security Trustee (such
opinion to be satisfactory to the Security Trustee, acting
reasonably) as to the binding nature of such Accession Deed on
the acceding party, which transfers shall not require such
consent, or
<PAGE> 92
(b) obtain or otherwise have the benefit of any Lien for or in
respect of the Subordinated Liabilities other than on the terms
reasonably specified by the Agent.
8.5 The Subordinated Lender hereby agrees with the Lenders, the Agent and
the Security Trustee that upon and following the occurrence of a Third
Trigger Event or Termination Event and for so long as either continues
or upon the occurrence of an Acceleration Event and until all amounts
owing to the Lenders, the Agent and the Security Trustee under or in
connection with the Transaction Documents have been satisfied in full
the Subordinated Lender shall not:
(a) sue upon or collect or receive payment of any moneys (whether
principal, interest or otherwise) now or hereafter comprising
all or any part of the Subordinated Liabilities;
(b) assign or transfer to any person the whole or any part of the
Subordinated Liabilities, other than to an AIG Group Company
that agrees to be bound by the provisions of this Clause 8,
which transfers shall not require such consent;
(c) obtain or otherwise have the benefit of any Lien for or in
respect of any of the Subordinated Liabilities;
(d) exercise or assert any right of set-off or counterclaim against
any Obligor (other than the Guarantor) in respect of all or any
part of the Subordinated Liabilities;
(e) take any other action whereby the subordination of the
Subordinated Liabilities or any part thereof to the rights and
claims of the Lenders, the Agent and the Security Trustee
pursuant to and in connection with any Transaction Document
might be terminated, impaired or adversely affected;
(f) make any demand in respect of or attempt to obtain repayment of
any of the Subordinated Liabilities.
8.6 In any bankruptcy or insolvency proceeding of any Obligor (other than
the Guarantor) any amount payable to the Subordinated Lender in respect
of any amount of the Subordinated Liabilities shall be subordinated to
the claims of the Lenders, the Agent and the Security Trustee against
any Obligor (other than the Guarantor) until such claims have been
satisfied in full in cash and the Subordinated Lender shall promptly pay
to the Security Trustee (on behalf of the Lenders) any amount received
by it on account of any of the Subordinated Liabilities in breach of
this Clause 8.6.
8.7 This Agreement, inter alia, is a continuing agreement of subordination
and shall apply notwithstanding any intermediate payment in whole or in
part of all amounts owing to the Lenders, the Agent and the Security
Trustee under or in connection with the Transaction Documents. The
Subordinated Lender shall not by virtue of any payment or distribution
or other benefit in respect of the Subordinated Liabilities and received
by any Lender, the Agent or the Security Trustee be entitled to exercise
any right of subrogation until all amounts owing by the Borrower to the
Lenders, the Agent and the Security Trustee under or in connection with
the Transaction Documents have been satisfied in full.
<PAGE> 93
8.8 The Subordinated Lender undertakes that upon and following the
occurrence of a Third Trigger Event or Termination Event and for so long
as either continues or upon an Acceleration Event it shall promptly pay
over to the Security Trustee an amount equal to any sums it receives
thereafter from any Obligor (other than the Guarantor) in contravention
of this Clause 8.
8.9 The Subordinated Lender acknowledges that upon and at any time after the
occurrence of an Acceleration Event, any Proceeds shall be applied in
accordance with Clause 12.7 (Application of Proceeds following an
Acceleration Event).
8.10 None of the Obligors (other than the Guarantor) shall, without the prior
written consent of the Security Trustee acting on the Instructions of
the Majority Lenders:
(a) secure all or any part of the Subordinated Liabilities;
(b) redeem, purchase or otherwise acquire any of the Subordinated
Liabilities other than to the extent permitted by Clause 8.2 or
8.4;
(c) repay any of the Subordinated Liabilities otherwise than in
accordance with this Agreement; or
(d) take any action whereby the subordination of the Subordinated
Liabilities or any part thereof to the rights and claims of the
Lenders and the Representatives pursuant to and in connection
with any Transaction Document might be terminated, impaired or
adversely affected.
9. TRIGGER EVENTS
9.1 FIRST TRIGGER EVENT
9.1.1 If a First Trigger Event occurs, upon the request of the Security
Trustee (acting on the instructions of the Majority Lenders), the
Borrower shall provide or shall pay or cause to be paid:
(a) an amount equal to each Security Deposit then held by the
Borrower, each Sub-Borrower and each Intermediate Lessee into
the relevant Security Deposit Account. The Borrower, the
relevant Sub-Borrower and the relevant Intermediate Lessee shall
procure that a separate ledger entry in the relevant Security
Deposit Account is maintained in relation to each Aircraft (if
applicable). All Security Deposits received by the Borrower,
each Sub-Borrower and each Intermediate Lessee after the
occurrence of a First Trigger Event shall be paid into the
relevant Security Deposit Account;
(b) an amount equal to the Maintenance Reserves then held by the
Borrower, each Sub-Borrower and each Intermediate Lessee into
the relevant Maintenance Reserve Account. All Maintenance
Reserves received by the Borrower, each Sub-Borrower and each
Intermediate Lessee after the occurrence of a First Trigger
Event shall be paid into the relevant Maintenance Reserve
Account. The Borrower, the relevant Sub-Borrower and the
relevant Intermediate Lessee
<PAGE> 94
shall procure that a separate ledger is maintained in relation
to each Aircraft (if applicable) in the relevant Maintenance
Reserve Account; and
the Borrower, the relevant Sub-Borrower and the relevant Intermediate
Lessee shall not remove any sums standing to the credit of either the
relevant Security Deposit Account or the relevant Maintenance Reserve
Account for the purpose of co-mingling such sums with the general funds
of the Guarantor and/or its Subsidiaries (but shall otherwise have sole
and absolute control over such sums until the occurrence and
continuation of a Third Trigger Event).
9.1.2 If the payments set out in Clause 9.1.1 are not made in relation to a
particular Loan to the applicable accounts within ninety (90) days of
the Security Trustee's request, the Security Trustee may, acting on the
instructions of the Majority Lenders demand immediate repayment of the
relevant Loan, whereupon the same shall become immediately due and
payable and the Borrower shall prepay the amount referred to in Clause
4.10 (Mandatory Prepayment Event) relating to the First Trigger Event.
9.1.3 If a First Trigger Event ceases by the credit rating of the Guarantor
for long term debt rising above A- (as applicable) if and as rated by
Standard and Poor's Corporation and A3 if and as rated by Moody's
Investor Service Inc., or an equivalent by an alternative service of
equivalent recognition (if neither Standard and Poor's Corporation nor
Moody's Investor Service Inc. has assigned any rating) the Borrower's
obligation to deposit the amounts set out in Clause 9.1.1 shall cease.
9.2 SECOND TRIGGER EVENT
Upon the occurrence of a Second Trigger Event and for so long as it
continues, the Lenders shall be under no further obligation to make
further Advances to the Borrower unless:
(a) the Aircraft which the Borrower proposes is to be the subject of
the proposed further Utilisation, is subject to a Lease or an
Intermediate Lease; and
(b) the Security Trustee, acting on the instructions of the Majority
Lenders, is satisfied as to the level of Rentals, Security
Deposit (if any) and Maintenance Reserves (if any) payable under
the Lease or an Intermediate Lease; and
(c) if the Lenders make the Advance requested pursuant to the
relevant Utilisation Notice, the Borrower shall pay or shall
procure the payment of (i) an amount equal to the relevant
Maintenance Reserves then held by it and pay all future
Maintenance Reserves received by it into the Borrower
Maintenance Reserves Account and an amount equal to the relevant
Security Deposit then held by it and pay all future Security
Deposits received by it into the Borrower Security Deposit
Account if the relevant Aircraft is to be leased by the
Borrower, (ii) an amount equal to the relevant Maintenance
Reserves then held by it and pay all future Maintenance Reserves
received by it into the relevant Sub-Borrower Maintenance
Reserves Account and the relevant Security Deposit then held by
it and pay all future Security Deposits received by it into the
relevant Sub-Borrower Security Deposit Account if the Aircraft
is to be leased by a Sub-Borrower and (iii) an amount equal to
the relevant Maintenance Reserves then held by it and pay all
future Maintenance Reserves received by it into the
<PAGE> 95
relevant Intermediate Lessee Maintenance Reserve Account and an
amount equal to the relevant Security Deposit then held by it
and pay all future Security Deposits received by it into the
relevant Intermediate Lessee Security Deposit Account if the
relevant Aircraft is to be leased by an Intermediate Lessee. The
Borrower the relevant Sub-Borrower and the relevant Intermediate
Lessee shall ensure that a separate ledger is maintained in
relation to each Aircraft (if applicable) in the relevant
Maintenance Reserve Account.
9.3 THIRD TRIGGER EVENT
9.3.1 Upon the occurrence of a Third Trigger Event:
(a) the provisions of Clause 8 (Subordination) (other than the
provisions of Clauses 8.3, 8.6, 8.7 and 8.10 which shall apply
in any event) shall apply to the Subordinated Liabilities;
(b) the provisions of clause 7.1 of the Borrower Debenture, each
Sub-Borrower Debenture and each Intermediate Lessee Debenture
shall apply to all Debts and Credit Balances (as such terms are
defined in the Borrower Debenture, each Sub-Borrower Debenture
and each Intermediate Lessee Debenture (as the case may be)) and
the sums standing to the credit of either the relevant Security
Deposit Account or the relevant Maintenance Reserve Account
shall not be withdrawn without the prior consent of the Security
Trustee, such consent not to be withheld if the Security Trustee
is satisfied that such withdrawal is for the purposes of
administering the relevant Lease or maintaining the relevant
Aircraft;
(c) the Borrower, each Sub-Borrower and each Intermediate Lessee
shall or shall procure that all Rentals and other amounts
relating to the use or requisition or hull insurance of an
Aircraft payable under the relevant Lease received by the
Borrower, each Sub-Borrower and each Intermediate Lessee on or
after the occurrence of a Third Trigger Event shall be paid into
the relevant Rental Account, and the sums standing to the credit
of the relevant Rental Account shall not be withdrawn without
the prior consent of the Security Trustee, such consent not to
be withheld if such withdrawal is for the purpose of paying any
Secured Obligation. The Borrower, the Intermediate Lessee or the
Sub-Borrower (as the case may be) shall ensure that a separate
ledger entry in the relevant Rental Account is maintained in
respect of each Aircraft;
(d) the Borrower and each Sub-Borrower shall enter into a Lease
Security Assignment in accordance with the provisions of clause
3.2 of each Mortgage and each Intermediate Lessee shall enter
into an Intermediate Lease Security Assignment in accordance
with the provisions of paragraph 2.1(g) of the relevant
Accession Deed;
(e) if, notwithstanding the occurrence of such Third Trigger Event,
the Security Trustee elects not to give a Cancellation Notice,
the Borrower, each Sub-Borrower and each Intermediate Lessee
shall enter into a Lease Security Assignment and, as the case
may be, an Intermediate Lease Security Assignment on the
Delivery Date of each further Aircraft financed pursuant to
<PAGE> 96
the Facility and delivered following the occurrence of such
Third Trigger Event;
(f) if an Aircraft is not leased to a Lessee, then:
(i) unless the Security Trustee otherwise agrees (in its
sole discretion), the relevant Aircraft shall be
registered in the name of the Borrower, or a
Sub-Borrower or an Intermediate Lessee in the United
States, the United Kingdom, Bermuda or Ireland and to
the extent permitted by applicable law, the relevant
Aircraft Mortgage shall be registered in the aircraft
mortgage register with the Aviation Authority;
(ii) the Borrower shall ensure that the relevant Aircraft has
a valid certificate of airworthiness issued by the
Aviation Authority and that the Aircraft has been
maintained in accordance with the maintenance programme
approved by that Aviation Authority (including the
Manufacturer's maintenance planning document) unless the
Aircraft is then undergoing or scheduled for imminent
major maintenance or major modifications or is in
storage and would not be eligible for an airworthiness
certificate from the relevant Aviation Authority; in
which event the Borrower shall if requested by the
Security Trustee transfer title to a US owner/voting
trust so that the Aircraft is US registered for the
duration of the major maintenance or major modifications
or is in storage even though the Aircraft may not be
eligible for an FAA certificate of airworthiness during
such major maintenance or major modifications or is in
storage; and
(g) the Agent acting on the instructions of the Majority Lenders
shall be entitled to give a written notice to the Borrower
(copied to the Guarantor) declaring that a Third Trigger Event
has occurred, in which case if the Agent so specifies in the
notice (whereupon such notice will be deemed a "CANCELLATION
NOTICE") the right of the Borrower to serve a Utilisation Notice
or to require any Advance to be made in relation to any
Utilisation shall be suspended until the rating of the Guarantor
for long term debt rises in accordance with Clause 9.3.4 or the
additional security referred to in paragraph (h)(i) below is
provided whereupon the Unutilised Facility shall become
available for further Utilisation on the terms and subject to
the conditions of this Agreement; and
(h) the Security Trustee, acting on the instructions of the Majority
Lenders, shall be entitled to notify the Guarantor that, in
order to keep the Facility in effect, the Majority Lenders
require that the Guarantor shall provide additional security to
the Lenders in form and substance satisfactory to the Majority
Lenders, including:
(i) a letter of credit issued by an institution acceptable
to the Majority Lenders or a guarantee and indemnity
from a third party acceptable to the Majority Lenders of
all or part of the Guarantor's obligations in respect of
principal and interest under the Transaction Documents
which letter of credit or guarantee and indemnity shall
be in a form and substance satisfactory to the Majority
Lenders; and
<PAGE> 97
(ii) adequate security in the form of existing bonds and cash
reserves for the payment of any Permitted Liens which
are being contested in accordance with the definition of
Permitted Lien;
(iii) the perfection of the Liens created by the Aircraft
Security Documents and the receipt of satisfactory legal
opinion from counsel in the state of registration of the
Aircraft and, if different, in the state in which the
Intermediate Lessee, the Lessee or a Sub-Lessee (as the
case may be) has its principal place of business as to
the recognition in those relevant jurisdictions of the
Liens created by the Aircraft Security Documents so
perfected in the jurisdiction of incorporation of the
parties to the Aircraft Security Documents (other than
the Security Trustee).
9.3.2 If the Borrower provides the additional security referred to in
paragraph h(i) above in form and substance satisfactory to the Majority
Lenders within one hundred and twenty (120) days of the Security
Trustee's request no Second Trigger Event or Third Trigger Event shall
be in effect, the Borrower shall be entitled to issue further
Utilisation Notices and the provisions of Clause 3 (Utilisation of the
Facility) shall apply to such Utilisation Notices.
9.3.3 If the Borrower does not provide such additional security within one
hundred and twenty (120) days, the provisions of Clause 4.10 (Mandatory
Prepayment) shall apply in relation to the relevant Third Trigger Event.
9.3.4 If a Third Trigger Event ceases by the credit rating of the Guarantor
for long term debt rising to or above BBB- (if and as rated by Standard
& Poor's Corporation) and BAA3 (if and as rated by Moody's Investor
Service, Inc.) or an equivalent by an alternative service of an
equivalent recognition (if neither Standard and Poor's Corporation nor
Moody's Investor Service Inc. has assigned any rating) the Borrower's
obligation to provide the additional security set out in Clause 9.3.1(d)
and (h) shall cease and the Borrower shall thereafter be entitled to
issue further Utilisation Notices and the provisions of Clause 3
(Utilisation of the Facility) shall apply to such Utilisation Notices;
and the Security Trustee shall promptly (if requested by the Borrower)
release, reassign and return such additional security granted pursuant
to Clause 9.3.1(d) and (h) including (if the Borrower so requests) any
Lease Security Assignments previously perfected and any Mortgages
registered in the jurisdiction of organisation or principal place of
business of the relevant Lessee. The Borrower shall pay or reimburse the
Security Trustee for its Expenses incurred in respect of such release,
reassignment and return.
10. DEFAULT
10.1 TERMINATION EVENTS
A Termination Event shall occur if:-
(a) NON-PAYMENT: the Borrower or the Guarantor fails to pay any
Repayment Instalment payable by it hereunder within five (5)
Business Days of the due date (other than in the case of the
Guarantor following a demand made under and in accordance with
Clause 5 (Guarantee and Indemnity), in which case no further
grace period shall apply) or, in the case of other amounts due
under any
<PAGE> 98
Transaction Document on demand, the Borrower or the Guarantor
fails to make such payment within ten (10) Business Days after
the due date thereof (other than in the case of the Guarantor
following a demand made under and in accordance with Clause 5
(Guarantee and Indemnity) in which case no further grace period
shall apply); or
(b) BREACH: the Borrower, any Sub-Borrower, any Intermediate Lessee,
the Parent or the Guarantor fails to observe or perform its
obligations under any of the Transaction Documents and, but only
if such default is capable of remedy, such default shall
continue for more than thirty (30) days after receipt of notice
thereof from the Agent without being remedied to the
satisfaction of the Agent or if at the end of such thirty (30)
day period such failure has not been so remedied but the
Borrower, the Parent, the relevant Intermediate Lessee, the
relevant Sub-Borrower or the Guarantor (as the case may be) has
demonstrated to the reasonable satisfaction of the Agent that
there is a reasonable prospect of remedying such failure and the
Borrower, the Parent, the relevant Intermediate Lessee, the
relevant Sub-Borrower or the Guarantor (as the case may be) is
acting in good faith is using all reasonable efforts to remedy
such failure within such other period as the Agent agrees acting
reasonably; or
(c) REPRESENTATION: any representation or warranty made by the
Borrower, any Sub-Borrower, any Intermediate Lessee, the Parent
or the Guarantor in writing herein or in any of the Transaction
Documents or in any certificate furnished by any of them under
or in connection with any of the Transaction Documents shall
prove to have been misleading or incorrect in any material
respect on the date when made with reference to the facts and
circumstances then subsisting and, which in the opinion of the
Agent would materially and adversely affect the interests or
rights of the Lenders, the Agent or the Security Trustee
hereunder or thereunder and such material adverse effect is
incapable of being remedied, or, if capable of being remedied
within thirty (30) days after notice from the Security
Trustee/Agent; or
(d) INSURANCE: the required Insurances or governmental indemnities,
(as the case may be) in respect of the relevant Aircraft cease
to be in full force and effect as to the Security Trustee, the
Borrower, the relevant Sub-Borrower or the relevant Intermediate
Lessee; or
(e) REPUDIATION OF GUARANTEE: any of the terms contained in Clause 5
are repudiated by the Guarantor;
(f) INSOLVENCY: the Borrower, the Guarantor, any Sub-Borrower, the
Parent or any Intermediate Lessee (in this Clause 10.1(f), the
"PARTY") shall (i) admit in writing its inability to pay its
debts generally as they become due, (ii) file a voluntary
petition in bankruptcy or a voluntary petition or an answer
seeking reorganisation in a proceeding under any bankruptcy laws
(as now or hereafter in effect) or an answer admitting the
material allegations of a petition filed against the Party shall
by voluntary petition, answer or consent, seek relief under the
provisions of any other now existing or future bankruptcy or
other similar law providing for the reorganisation or winding-up
of corporations, or providing for an agreement, composition,
extension or adjustment with its creditors, (iii) make a general
assignment for the benefit of creditors, or (iv)
<PAGE> 99
consent to the appointment of a receiver, administrator,
administrative receiver, trustee, liquidator or the like of
itself or substantially all of its property; or
(g) APPOINTMENT OF TRUSTEE ETC: proceedings or a case shall commence
or be commenced, without the application or consent of the
Borrower, the Guarantor, the relevant Sub-Borrower, the relevant
Intermediate Lessee or the Parent (in this Clause 10.1(g), the
"PARTY"), in any court of competent jurisdiction, which shall
not be struck out within sixty (60) days of commencement and
which seeks (i) the liquidation, reorganisation, dissolution,
winding-up, or composition or readjustment of debts of the
Party, (ii) appointment of a trustee, receiver, administrator,
administrative receiver, custodian, liquidator or the like of
the Party or substantially all of the property or assets of the
Party, or (iii) similar relief in respect of the Party under any
law providing for the relief of debtors, or any order for relief
against the Party shall be entered in an involuntary case under
such bankruptcy law; or
(h) ANALOGOUS EVENTS: any event analogous to any of the events
specified in Clause 10.1(f) or 10.1(g) in any jurisdiction shall
occur; or
(i) CHANGE OR CESSATION OF BUSINESS: the Borrower, any Sub-Borrower,
any Intermediate Lessee and/or the Guarantor:-
(i) materially changes the nature or scope of its aircraft
operating leasing and aircraft trading business or
aircraft operating leasing ceases to be a core activity
of its business; or
(ii) suspends a substantial part of its aircraft operating
leasing and aircraft trading business operations (other
than suspensions of a temporary nature resulting from
(i) a strike or (ii) a similar event not within the
control of the Borrower, the relevant Sub-Borrower, the
relevant Intermediate Lessee or the Guarantor, as the
case may be) which it now conducts directly; or
(iii) ceases, or threatens to cease, to carry on all or a
substantial part of its aircraft operating leasing and
aircraft trading business; or
(j) CROSS ACCELERATION OF FINANCIAL INDEBTEDNESS: any Financial
Indebtedness of the Guarantor (other than Financial Indebtedness
of the Guarantor to a Subsidiary of the Guarantor) exceeding one
per cent. of the Financial Indebtedness of the Guarantor in
aggregate (or the equivalent thereof, as determined by the Agent
by reference to prevailing market exchange rates from time to
time, in any other currency):-
(i) is not paid when due (or within any applicable grace
period relating thereto) on stated final maturity; or
(ii) is declared to be due or otherwise becomes due and
payable before its stated maturity by reason of a
default by the Guarantor or an event of default
(howsoever described) under the document relating to
that Financial Indebtedness; or
<PAGE> 100
(k) CROSS ACCELERATION OF ECA FACILITIES: a "LOAN EVENT OF
TERMINATION" (as that term is defined in the 1994 Facility
Agreement and the 1995 Facility Agreement) shall occur and be
continuing or any other termination event (howsoever described)
shall occur and be continuing in respect of any other loan
facility to the Guarantor or any Subsidiary which is supported
by the Export Credit Agencies, and in each case a declaration of
acceleration shall have been made in respect thereof; or
(l) UNINSURED USE: the Borrower, any Sub-Borrower or any
Intermediate Lessee uses or operates or knowingly permits or
causes to be used or operated any Aircraft outside the cover
provided by any of the Insurances (including governmental
indemnities, as the case may be) except in the case of
repossessing the Aircraft in connection with a hijacking, act of
war, impoundment (other than for unpaid charges) or similar
event to ferry the Aircraft to a jurisdiction where such
Insurances (or governmental indemnities) will be in effect.
10.2 ACCELERATION RIGHTS
Without prejudice to any other rights of the Lenders (whether under the
Transaction Documents or otherwise), at any time after the occurrence of
a Termination Event and thereafter for so long as any Termination Event
is continuing, the Agent may (acting upon the instructions of the
Majority Lenders) give a written notice (an "ACCELERATION NOTICE") to
the Borrower declaring that a Termination Event has occurred, in which
case:-
(a) each Loan shall be cancelled forthwith whereupon the same shall
be cancelled and the Commitment of each Lender in respect of
each Aircraft shall be reduced to zero; and/or
(b) the principal amount of each Loan then outstanding and all
interest accrued thereon, Expenses (if any) and the Make-Whole
Amount in respect of each Loan (which shall be specified in such
notice) shall become immediately due and payable and the
Borrower shall immediately pay the same; and/or
(c) each of the Representatives may enforce its rights and those of
the Lenders under all or any of the Transaction Documents and
under applicable law.
11. PROCEEDS ACCOUNT
11.1 On or before the occurrence of any event which will result in the
payment of any Proceeds or promptly thereafter the Security Trustee
shall open the Proceeds Account in respect of each Aircraft and shall
promptly notify all parties to this Agreement of such details of such
account as they may require in order to comply with their obligations
under Clause 11.3. Such account shall be held in the name of the
Security Trustee and all monies from time to time standing to the credit
thereof shall be the property of the Security Trustee and no party
hereto other than the Security Trustee shall have any proprietary
interests in such account or any such monies.
11.2 Any sum received by any party hereto which is required by any provision
hereof to be paid to the Security Trustee for credit to the Proceeds
Account shall be received by such party
<PAGE> 101
on trust for the Security Trustee PROVIDED that in respect of any Total
Loss Proceeds, Requisition Proceeds, Final Disposition Proceeds or
Sub-Borrower Sale Proceeds received by the Borrower or a Sub-Borrower
prior to a Termination Event such amounts shall not be received in trust
or be paid to the Proceeds Account but the Borrower or such Sub-Borrower
shall pay as provided herein the amounts set out in Clauses 4.4.1
(Prepayment following a Total Loss), 4.5.1(a) (Prepayment on Final
Disposition) and 4.6.1(a) (Prepayment on Sub-Borrower Sale) to the
Security Trustee for credit to the Proceeds Account.
11.3 Each Representative and each Lender shall from time to time pay any
Proceeds (other than any such amounts as may be received by way of
distribution from the Proceeds Account) to the Security Trustee promptly
upon receipt thereof for application in accordance with the terms of
this Agreement.
11.4 All Proceeds received by the Security Trustee (otherwise than by way of
distribution from the Proceeds Account) shall, if received in Dollars,
be promptly credited to the Proceeds Account.
11.5 If any Proceeds are received by the Security Trustee (otherwise than by
way of distribution from the Proceeds Account) in any currency other
than Dollars, then they shall be applied in purchase of Dollars at the
spot rate of exchange available to the Security Trustee (in the ordinary
course of business) in the London foreign exchange market on the date of
receipt (or, if it is not practicable to effect such purchase on such
date, the immediately following day on which banks in London are
generally open for the transaction of such foreign exchange business),
and the net amount of Dollars so purchased (after the deduction by the
Security Trustee of any reasonable costs of exchange incurred by it in
connection with such purchase) shall be credited to the Proceeds
Account.
11.6 Each Representative or Lender hereto agrees for the benefit of the
others that it shall promptly pay, without any set-off or counterclaim
and free and clear of and without any withholding or deduction
whatsoever (except as required by compulsion of law) to the Security
Trustee, in the currency of receipt, all Proceeds received by it for
application by the Security Trustee in accordance with the terms of this
Agreement (but if any such deduction or withholding is required by law
then the party affected by such requirement (the "AFFECTED PARTY")
agrees that it shall consult in good faith with the parties to this
Agreement who may be affected thereby with a view to mitigating the
effect of any such deduction or withholding provided that the affected
party shall not be obliged to incur any additional expense, nor to take
any course of action other than it would do in relation to any
counterparty to any of its similar contracts who would be affected by
the same or any similar legal requirement).
11.7 Interest shall accrue from day to day on the amounts of all Proceeds
received by the Security Trustee and from time to time standing to the
credit of the Proceeds Account at the rate or rates and for such
interest periods and in the manner which the Security Trustee shall
reasonably select from time to time. Any such interest shall be credited
to the Proceeds Account at the end of each interest period so agreed.
<PAGE> 102
12. APPLICATION OF SUMS RECEIVED BY THE LENDERS
12.1 APPLICATION OF PRINCIPAL AND INTEREST PRIOR TO THE OCCURRENCE OF AN
ACCELERATION EVENT
Upon receipt by the Agent of the amounts referred to in Clause 4.14.1
(Performance Procedure) in respect of the relevant Loan, the Agent shall
make the same available in accordance with the provisions of Clause
4.14.2 (Performance Procedure) to each of the Lead Managers in the
proportions specified in the relevant Loan Supplement for application by
each Lead Manager in or towards the payment of interest and principal
outstanding to the relevant Lenders in respect of the Loan relating to
such Aircraft such application by each Lead Manager to be in accordance
with the terms agreed between that Lead Manager, the relevant Lenders
and the relevant Export Credit Agency.
12.2 APPLICATION OF AMOUNTS RECEIVED IN RESPECT OF INDEMNITY OBLIGATIONS
Any and all monies received by the Agent or, as the case may be, the
Security Trustee, from the Borrower, in respect of any indemnity
obligations of the Borrower, shall be paid by the Agent or, as the case
may be, the Security Trustee, promptly upon receipt thereof to the
relevant Lender or, as the case may be, the relevant Representative in
respect of whom the indemnity claim was made up to the total amount
owing to that relevant Lender or the relevant Representative in respect
of that indemnity claim.
12.3 APPLICATION OF INSURANCE PROCEEDS (OTHER THAN IN RESPECT OF A TOTAL
LOSS)
(a) Any insurance proceeds in respect of any loss of or damage to an
Aircraft not amounting to a Total Loss of such Aircraft which
are received by the Security Trustee pursuant to Schedule 8,
together with such amount of interest as may have accrued
thereon, shall be paid over to the relevant Sub-Borrower or the
Borrower or to the relevant Lessee or Sub-Lessee, as instructed
by the Borrower or the relevant Sub-Borrower, as the case may be
and as soon as practicable thereafter, the Borrower or such
Sub-Borrower shall furnish evidence reasonably satisfactory to
the Security Trustee that all damage has been properly repaired.
(b) Any insurance proceeds received in respect of a Total Loss of an
Engine shall be paid to the Borrower or the relevant
Sub-Borrower, or as it may instruct, and the Borrower or
relevant Sub-Borrower shall as soon as reasonably practicable
thereafter obtain title to a Replacement Engine.
(c) Any monies paid under liability insurances shall be paid to the
person, firm or company to which the liability (or alleged
liability) covered by such insurances was incurred or if the
liability (or alleged liability) to such persons has been
previously discharged, such monies shall be paid to the person
who has discharged such liability in reimbursement of the monies
so expended by it in satisfaction of such liability or alleged
liability.
12.4 APPLICATION OF TOTAL LOSS PROCEEDS
(a) If any Total Loss Proceeds in respect of a Total Loss of an
Aircraft are received prior to the occurrence of an Acceleration
Event and such Aircraft has been substituted in accordance with
the provisions of Clause 4.7 (Substitution of
<PAGE> 103
Aircraft) such Total Loss Proceeds together with interest thereon as
provided in Clause 4.7.6(a) (Timing of Substitution) shall be paid
promptly following receipt by the Security Trustee to the Borrower or
the relevant Sub-Borrower or their respective designee nominated in
writing to the Security Trustee.
(b) If any Total Loss Proceeds in respect of a Total Loss of an
Aircraft are received prior to the occurrence of an Acceleration
Event and such Aircraft has not been and will not be so
substituted, such Total Loss Proceeds, together with such amount
of interest as may have accrued thereon shall be applied
promptly following receipt by the Security Trustee in the
following order:-
(i) in reimbursement of the Representatives and the Lenders
of any and all Expenses incurred by them as a group and
approved by the Guarantor (acting reasonably) in
collecting such Total Loss Proceeds together with
interest thereon at LIBOR from the date of payment of
such Expenses;
(ii) an amount of up to the total amount of principal and
interest outstanding in respect of the Loan relating to
such Aircraft to each of the Lead Managers in the
proportions specified in the Loan Supplement relating to
the relevant Aircraft for application by each Lead
Manager in or towards payment of interest and principal
outstanding to the relevant Lenders in respect of the
Loan relating to such Aircraft, such application by each
Lead Manager to be in accordance with the terms agreed
between that Lead Manager, the relevant Lenders and the
relevant Export Credit Agency;
(iii) the Make-Whole Amount to each of the Representatives and
each of the Lead Managers on behalf of the Lenders;
(iv) any balance shall be paid to the Borrower.
(c) If the Total Loss Proceeds are received after the occurrence of
an Acceleration Event, the Total Loss Proceeds, together with
such amount of interest as may have accrued thereon whilst held
in the Security Trustee's bank account, shall be applied in
accordance with Clause 12.7 below.
12.5 APPLICATION OF REQUISITION PROCEEDS
(a) If any Requisition Proceeds (other than as a result of a Total
Loss of an Aircraft) or similar proceeds in respect of an Engine
are received prior to the occurrence of an Acceleration Event
such Requisition Proceeds, together with such amount of interest
as may have accrued thereon, shall be paid promptly following
receipt by the Security Trustee to the Borrower or any relevant
Sub-Borrower.
(b) If the Requisition Proceeds (other than as a result of a Total
Loss of an Aircraft) or similar proceeds in respect of an Engine
are received after the occurrence of an Acceleration Event the
Requisition Proceeds shall be applied in accordance with Clause
12.7 below subject to the Lessee's or the Sub-
<PAGE> 104
Lessee's quiet enjoyment rights to any of such Requisition
Proceeds or similar proceeds.
12.6 APPLICATION OF SUB-BORROWER SALE PROCEEDS AND FINAL DISPOSITION PROCEEDS
(a) If any Final Disposition Proceeds in respect of a Final
Disposition of an Aircraft or any Sub-Borrower Sale Proceeds in
respect of a Sub-Borrower Sale (as the case may be) are received
prior to the occurrence of an Acceleration Event and such
Aircraft has been substituted in accordance with Clause 4.7
(Substitution of Aircraft) such Final Disposition Proceeds or
such-Sub-Borrower Sale Proceeds (as the case may be), together
with such amount of interest as may have accrued thereon, shall
be paid promptly following receipt by the Security Trustee to
the Borrower or the relevant Sub-Borrower or their respective
designee nominated in writing to the Security Trustee.
(b) If any Final Disposition Proceeds in respect of a Final
Disposition of an Aircraft or any Sub-Borrower Sale Proceeds in
respect of a Sub-Borrower Sale (as the case may be) are received
prior to the occurrence of an Acceleration Event, such Final
Disposition Proceeds or Sub-Borrower Sale Proceeds (as the case
may be), together with such amount of interest as may have
accrued thereon, shall be applied promptly following receipt by
the Security Trustee in the following order:-
(i) in reimbursement of the Representatives and the Lenders
of any and all Expenses incurred by them as a group and
approved by the Guarantor acting reasonably in
collecting such Final Disposition Proceeds or
Sub-Borrower Sale Proceeds (as the case may be) together
with interest thereon at LIBOR from the date of payment
of such Expenses;
(ii) an amount of up to the total amount of principal and
interest outstanding in respect of the Loan relating to
such Aircraft to each of the Lead Managers in the
proportions specified in the Loan Supplement relating to
the relevant Aircraft for application by each Lead
Manager in or towards payment of interest and principal
outstanding to the relevant Lenders in respect of the
Loan relating to such Aircraft, such application by each
Lead Manager to be in accordance with the terms agreed
between that Lead Manager, the relevant Lenders and the
relevant Export Credit Agency;
(iii) the Make-Whole Amount to each Representative and each of
the Lead Managers on behalf of the Lenders;
(iv) any balance shall be paid to the Borrower.
(c) If the Final Disposition Proceeds or Sub-Borrower Sale Proceeds
(as the case may be) are received after the occurrence of an
Acceleration Event, the Final Disposition Proceeds or
Sub-Borrower Sale Proceeds (as the case may be), together with
such amount of interest as may have accrued thereon whilst held
in the Security Trustee's bank account, shall be applied in
accordance with Clause 12.7.
<PAGE> 105
12.7 APPLICATION OF PROCEEDS FOLLOWING AN ACCELERATION EVENT
Any Proceeds in the Proceeds Account relating to an Aircraft or
otherwise received by the Security Trustee at the time of an
Acceleration Event, or at any time thereafter, together with such amount
of interest as may have accrued thereon shall be applied by the Security
Trustee forthwith or, as the case may be, forthwith upon receipt by the
Security Trustee as follows:-
(a) first, in or towards reimbursing each of the Representatives,
and/or any Receiver for any Expenses for which the
Representatives, and/or any Receiver shall not previously have
been reimbursed or indemnified together with interest thereon at
LIBOR from the date of payment of such Expenses and in or
towards payment of any debts or claims which are by statute
payable in preference to the amounts due to the Representatives
and/or the Lenders (but only to the extent such debts or claims
have such preference);
(b) second, an amount of up to the total principal and interest
outstanding in respect of the Loan relating to the relevant
Aircraft to each of the Lead Managers in the proportions
specified in the Loan Supplement relating to such Aircraft for
application by each Lead Manager in or towards the payment of
interest and principal outstanding to the relevant Lenders in
respect of the Loan relating to such Aircraft, such application
by each Lead Manager to be in accordance with the terms agreed
between that Lead Manager, the relevant Lenders and the relevant
Export Credit Agency;
(c) third, the Make-Whole Amount to each of the Representatives and
each of the Lead Managers on behalf of the Lenders;
(d) fourth, any remaining Proceeds relating to the Aircraft shall be
distributed first, to the persons, in the order and in respect
of the matters referred to in sub-clauses (a), (b) and (c) of
this Clause 12.7 in relation to each of the other Aircraft;
(e) fifth, once all of the amounts referred to in sub-clauses (a) to
(d) inclusive above have been satisfied and discharged in full,
any balance shall be paid to the Subordinated Lender;
(f) sixth, once all of the amounts referred to in sub-clauses (a) to
(e) inclusive above have been satisfied and discharged in full,
any balance shall be paid to the Borrower.
12.8 APPLICATION BY LEAD MANAGERS
Any application by a Lead Manager of funds received from the Security
Trustee by way of distribution from the Proceeds Account pursuant to any
provision of this Clause 12 shall be effected in accordance with the
terms agreed between that Lead Manager, the relevant Lenders and the
relevant Export Credit Agency, and each Lead Manager shall inform each
other party hereto, upon such party's request, of the effect of such
application on the remaining principal and interest due on the relevant
national portion of the relevant Loan.
<PAGE> 106
13. INDEMNITIES
13.1 OPERATIONAL INDEMNITY
13.1.1 The Borrower shall indemnify each Indemnitee (within ten (10) Business
Days of demand accompanied by supporting particulars in reasonable
detail from the applicable Indemnitee) for, each Loss and each Expense
which may from time to time be imposed on, incurred or suffered by or
asserted against any Indemnitee (whether or not such Loss or Expense is
also indemnified or insured against by any other person, but subject to
Clause 13.6 (No Double Counting)) resulting from the financing of the
Borrower's or any Sub-Borrower's acquisition and ownership of any
Aircraft or from the leasing by the Borrower, any Sub-Borrower or any
Intermediate Lessee to the relevant Lessee of, or the leasing by the
relevant Lessee to any other person of, any Aircraft, or in connection
with or arising directly or indirectly out of or in any way connected
with the manufacture, acceptance, purchase, delivery, any delay in or
postponement of delivery, non-delivery, ownership, possession, charter,
use, leasing, sub-leasing, presence, operation, condition, storage,
packing, freight, shipping, transportation, modification, alteration,
maintenance, insurance, overhaul, replacement, refurbishment,
remarketing, management, sale, registration, de-registration,
redelivery, servicing or repair of any Aircraft or in connection with or
arising from any Indemnitee having or being deemed to have any interest
in any Aircraft, whether or not such claim may be attributable to any
defect in any Aircraft and regardless of when the same shall arise and
whether or not such Aircraft is in the possession or control of the
Borrower or any other person.
13.1.2 The Indemnities contained in Clause 13.1.1 shall not extend to any Loss
or Expense of any Indemnitee to the extent that such Loss or Expense:-
(a) is caused by the wilful misconduct, fraud or reckless disregard
with knowledge of the probable consequences on the part of such
Indemnitee;
(b) is a Loss or Expense for which such Indemnitee has received and
is entitled to retain a payment pursuant to another provision of
any Transaction Document or an insurance payment pursuant to the
Insurances;
(c) is required to be paid or borne by such Indemnitee pursuant to
the terms of any Transaction Document;
(d) is caused by such Indemnitee's breach of any express
representation made by it in any Transaction Document or of any
express obligation under any Transaction Document (but excluding
any such breach in consequence (directly or indirectly) of a
breach by the Borrower or any other Obligor of any
representation or warranty contained in or of their respective
obligations under any Transaction Document); or
(e) is upon or is caused by any voluntary transfer of an Indemnitee
of any of its rights, benefits or obligation hereunder other
than pursuant to Clause 15.2 (Prepayment of Affected Loans and
Replacement of Affected Lender).
13.1.3 All payments by way of indemnity under Clause 13.1.1 shall be made in
the currency of the relevant Loss or Expense.
<PAGE> 107
13.1.4 If a written claim is made against an Indemnitee which is the subject of
an indemnity by the Borrower under this Clause 13.1, such Indemnitee
shall promptly notify the Borrower. The Borrower (including a Lessee or
Sub-Lessee on any Obligor's behalf) at its sole cost and expense, except
as provided herein, shall have the right to control, investigate and
prosecute the entire defence and compromise of any Loss or Expense for
which indemnification is sought (provided that such compromise imposes
no additional payment obligations on an Indemnitee, which is not
otherwise indemnified under this Clause 13); PROVIDED, if reasonably
requested by the Borrower in writing within thirty (30) days following
receipt by the Borrower of such notice or thereafter if the Borrower
shall have acknowledged its duty to indemnify such Indemnitee hereunder,
such Indemnitee shall, at the expense of the Borrower, in good faith
contest in the name of such Indemnitee the validity, applicability and
amount of such Loss in appropriate administrative and judicial
proceedings. If the Borrower (or a Lessee or Sub-Lessee) shall, at its
sole expense, assume the defence of any Loss, each Indemnitee shall
cooperate with it at the Borrower's expense, in defending such Loss.
Each Indemnitee shall supply the Borrower (or a Lessee or Sub-Lessee)
with such information as is requested and as is necessary or advisable
for the Borrower (or a Lessee or Sub-Lessee) to control or participate
in any proceeding. The Borrower shall not have the right to control,
investigate, prosecute and comprise such Loss so long as a Termination
Event shall have occurred and be continuing provided, however, that the
Borrower (or a Lessee or Sub-Lessee) shall have the right to control,
investigate, prosecute and compromise such Loss in all cases when
required by the terms of the insurance or insurer applicable thereto. An
Indemnitee may participate at its own expense and with its own counsel
in any judicial proceedings defended by the Borrower (or a Lessee or
Sub-Lessee) pursuant to the preceding provisions so long as such
participation does not, in the reasonable opinion of the Borrower when
the Borrower (or a Lessee or Sub-Lessee) has chosen to assume the
defence of any Loss, materially impair such defence. So long as the
Borrower (or a Lessee or Sub-Lessee) shall have acknowledged in writing
its duty to indemnify an Indemnitee hereunder, no such Indemnitee shall
enter into a settlement or other compromise with respect to any such
Loss without the prior written consent of the Borrower.
13.1.5 Upon the making of any claim for any Loss by an Indemnitee pursuant to
this Clause 13.1, and PROVIDED that the Borrower either pays such Loss
or, if such Indemnitee has not been required to make any payment in
respect thereof, the Borrower confirms its indemnification obligations
with respect thereto in writing, the Borrower, without any further
action, shall be subrogated to any claims, rights and remedies the
Indemnitee may have relating thereto (except claims under such
Indemnitee's own insurance policies). Each Indemnitee agrees, at the
Borrower's expense, to give such further assurances or agreements and to
cooperate with the Borrower to permit the Borrower to pursue such Loss,
if any, to the extent reasonably requested by the Borrower. In the event
that the Borrower shall have paid an amount to an Indemnitee pursuant to
this Clause 13.1.5, and such Indemnitee subsequently shall be reimbursed
in respect of such indemnified amount from any other person, such
Indemnitee shall, so long as no Termination Event has occurred and is
continuing, promptly pay the Borrower, but not before the Borrower shall
have made all payments then due to such Indemnitee pursuant to this
Clause 13.1.5, an amount equal to the sum of (a) the amount of such
reimbursement, including interest actually received attributable
thereto, net of taxes required to be paid by such Indemnitee as a result
of any refund received and (b) any tax benefit realised by such
Indemnitee as a result of the deductibility for tax purposes of any
payment by such Indemnitee made pursuant to this sentence.
<PAGE> 108
13.1.6 If any Export Credit Agency were to become a Lender, the provisions of
Clause 13.1.4 shall not apply to such Export Credit Agency.
13.2 DOCUMENTARY TAXES
13.2.1 Subject to Clause 13.2.2, the Borrower shall pay, and shall indemnify
each Indemnitee within ten (10) Business Days of demand accompanied with
supported particulars in reasonable detail for, all present and future
stamp, documentary or similar duties or registration taxes or fees or
charges, including any penalties, additions, fines or interest relating
thereto at any time payable in respect of any of the Transaction
Documents and/or the Support Agreements to a Government Entity in
Bermuda, the United States or the jurisdiction of organisation of a
Sub-Borrower or an Intermediate Lessee or any transaction hereunder or
thereunder imposed by Bermuda, the United States of America or the
jurisdiction of incorporation of the Sub-Borrower or after an
Acceleration Event has occurred, by the jurisdiction in which
enforcement of the applicable Transaction Document is sought and shall
indemnify within ten (10) Business Days on demand accompanied with
supporting particulars in reasonable detail each Indemnitee against any
liability arising by reason of any delay or omission by the Borrower to
pay on written demand any such duties, taxes, fees or charges.
13.2.2 The Borrower shall not have any obligation under Clause 13.2.1 in
respect of any duty, tax, fee or charge to the extent the same is:
(a) imposed on or as a result of any transfer (including any partial
transfer or agreement to transfer) by a Lender, the Agent or the
Security Trustee other than where such transfer (i) takes place
at the request of the Borrower or the Guarantor or, (ii) is not
undertaken voluntarily (and, for the avoidance of doubt, the
provisions concerning voluntary transfer set out in Clause 18
(Assignments and Transfers) shall apply for the purposes of this
Clause 13.2); or
(b) imposed as a result of any action or omission of the relevant
Indemnitee which constitutes wilful misconduct, fraud or
reckless disregard with knowledge of the probable consequences
on the part of such Indemnitee; or
(c) imposed as a result of a Representative or Lender bringing a
document into the United Kingdom otherwise than, after a
Termination Event, for the purposes of enforcement of the
Representatives' or the Lenders' rights under any of the
Aircraft Operative Documents; or
(d) is caused by the relevant Indemnitee's breach of any express
representation made by it in any Transaction Document or of any
express obligations under any of the Transaction Document (but
excluding any such breach in consequence (directly or
indirectly) of a breach by the Borrower or any other Obligor of
any representation or warranty contained in or of their
respective obligations under any Transaction Document).
13.2.3 If any duty, tax, fee or charge referred to in Clause 13.2.1 arises and
no such means referred to in Clause 15.3.1 (Mitigation of Documentary
Taxes) is agreed as a result of the
<PAGE> 109
consultation procedure referred to in Clause 15.3.1 then (provided no
Relevant Event has occurred and is continuing), the Borrower may, having
given notice in writing to the Agent and the relevant Lender (in this
Clause 13.2.3 the "AFFECTED LENDER") require such Affected Lender to
transfer its rights, benefits and obligations pursuant to Clause 18
(Assignment and Transfers) or prepay to the Agent (for the account of
the Affected Lender) an amount equal to all amounts outstanding (whether
of principal, interest, Expenses (if any) and the Make-Whole Amount) in
respect of the Affected Lender's Relevant Proportion of each Loan
affected by such circumstances.
13.3 FUNDING INDEMNITIES
13.3.1 If for any reason other than a breach by the relevant Lender of its
obligations hereunder:-
(a) the Utilisation Date for a Loan is postponed or cancelled for
any reason whatsoever; or
(b) a Loan is not advanced (including pursuant to the provisions of
Clause 3.7.6 (Disbursement of the Loan)) to the Borrower on the
Delivery Date as a result of any condition precedent provided
for herein to be fulfilled by an Obligor not being fulfilled to
the satisfaction of the Agent,
then the Borrower shall indemnify the Security Trustee, the Agent and
each Lender within five (5) Business Days of demand accompanied with
supporting particulars in reasonable detail (which demand, at the
Borrower's request in expectation of delivery of the Aircraft, the
Security Trustee will delay making on the Borrower for a period not
exceeding ten (10) Business Days after the Scheduled Delivery Date)
against all Losses and Expenses which the Security Trustee, the Agent or
any Lender may suffer, sustain or incur as a consequence thereof (and,
in the case of postponement, as a consequence of remaining in readiness
for and acting in accordance with such postponed Utilisation Date) in
respect of funds borrowed or mobilised by the Security Trustee, the
Agent or such Lender in connection with the financing or funding of the
relevant Loan, the liquidation or redeployment of any deposits taken or
made and funding costs in relation to any interest exchange or other
hedging arrangements entered into in connection with its participation
in the relevant Loan or any part thereof or in connection with any
foreign exchange business transacted for such purpose, the substitute
investment (for the then current Interest Period) of such funds with a
return lower than the cost of such funds or the prepayment of such funds
to the source from which they were borrowed or mobilised, INCLUDING, if
delivery of the Aircraft does occur after but not on the Scheduled
Delivery Date,
(i) the German Lenders' actual cost of financing or funding
the relevant German Credits as determined two (2)
Business Days prior to the Scheduled Delivery Date with
respect to the period from (and including) the Scheduled
Delivery Date to (but excluding) the Delivery Date;
(ii) Losses in an amount equal to the amount by which the
British Lenders' and the French Lenders' actual cost of
financing or funding the relevant British Credits and
the French Credits respectively as determined two (2)
Business Days prior to the Scheduled Delivery Date for
the period between the Scheduled Delivery Date and the
<PAGE> 110
first Repayment Date exceeds the British Lenders' and
French Lenders' notional cost of financing or funding
the relevant British Credits and French Credits
respectively on the Delivery Date (as determined two (2)
Business Days prior to the Delivery Date by the Export
Credit Agencies or their respective financial
institutions involved in the "LASU" rate support
programme) with respect to the period between the
Delivery Date and the first Repayment Date; and
(iii) if, in addition to financing or funding the relevant
Loan, the Lenders have separately financed the guarantee
fee and credit insurance premia of the Export Credit
Agencies payable in respect of the relevant Loan two (2)
Business Days prior to the Scheduled Delivery Date,
Losses in the amount by which the Lenders' reimbursement
exposure (comprising scheduled repayment of portion of
principal together with interest) in financing such
guarantee fee and credit insurance premia for the period
between the Scheduled Delivery Date and the first
Repayment Date exceeds that portion of the Repayment
Instalment payable in accordance with the terms of this
Agreement and the relevant Loan Supplement, which is
attributable to the relevant Lenders' reimbursement
exposure (as described above) in financing such
guarantee fee and credit insurance premia, for the
period between the Delivery Date and the first Repayment
Date.
The Agent shall keep the relevant British Credits, French Credits and
German Credits from the Scheduled Delivery Date proposed in the
Utilisation Notice in an interest bearing account as agreed between the
Agent and the Borrower and shall, if delivery of the relevant Aircraft
occurs within ten (10) Business Days after the Scheduled Delivery Date
and if no undertaking has been given by the Agent and released to the
Seller pursuant to Clause 3.7.6 (Disbursement of the Loan) and after
first having received any payment due under the indemnity in this Clause
13.3.1, pay to the Borrower all amounts of interest actually accrued
thereon from (and including) the Scheduled Delivery Date to (but
excluding) the Delivery Date.
13.3.2 Any profit or gain realised by any Lender in respect of its funding
arrangements as a result of the circumstances contemplated in
sub-paragraph (a) or (b) of Clause 13.3.1 shall be for the account of
and, subject to the provisions of Clause 19 (Set Off and Pro Rata
Payments) be paid to the Borrower.
13.3.3 The Borrower shall indemnify the Security Trustee, the Agent and each
Lender within ten (10) Business Days of demand (accompanied by
supporting particulars in reasonable detail) for all amounts which the
Security Trustee, the Agent or such Lender certifies to be necessary to
compensate it for any Loss or Expense suffered or incurred by it
(together with amounts calculated pursuant to paragraph (ii) to (vi)
inclusive of the Make-Whole Amount) as a consequence of or in connection
with:-
(a) any prepayment of the Loan or any part thereof or any interest
accrued thereon;
(b) any amount of principal or interest on a Loan payable by the
Borrower hereunder being paid otherwise than on the due date
(excluding any grace period in relation to the relevant due
date); or
<PAGE> 111
(c) the occurrence of an Acceleration Event.
PROVIDED THAT this Clause 13.3.3 shall not require double payment of any
of the amounts described above to the extent that any Loss or Expense
form part of the Make-Whole-Amount, and the Borrower shall have no
liability under this Clause 13.3.3 following payment in full on the due
date of the aggregate of (i) the Loan, (ii) all interest on the Loan
accrued to the date of actual payment, (iii) the Make-Whole Amount (if
applicable) and (iv) Expenses (if any).
13.4 CURRENCY INDEMNITY
13.4.1 Any amount received or recovered by the Agent, the Security Trustee or
any Lender in respect of any monies due from the Borrower or any other
Obligor under any of the Transaction Documents (whether as a result of
any judgment or order of any court (including enforcement thereof) or in
the bankruptcy, reorganisation, liquidation or dissolution of any of the
Borrower or any other Obligor (including making or filing a claim or
proof against the Borrower) or by way of damages for any breach of any
obligation to make any payment to the Agent, the Security Trustee or
such Lender) in a currency (the "CURRENCY OF PAYMENT") other than the
currency in which the payment should have been made pursuant to the
relevant Transaction Document (the "CURRENCY OF OBLIGATION") in whatever
circumstances and for whatever reason shall only constitute a discharge
to the Borrower or any other Obligor to the extent of the amount of the
Currency of Obligation which the Agent, the Security Trustee or such
Lender, as the case may be, is able or would have been able, on the date
or dates of receipt by it of such payment or payments in the Currency of
Payment (or, in the case of any such date which is not a Banking Day, on
the next succeeding Banking Day), to purchase in the foreign exchange
market of its choice with the amount or amounts of the Currency of
Payment so received.
13.4.2 If the amount of the Currency of Obligation which the Agent, the
Security Trustee or the relevant Lender is so able to purchase falls
short of the amount originally due to such party hereunder, the Borrower
shall indemnify such party on demand against any loss or damage arising
as a result of paying to such party that amount in the Currency of
Obligation certified by such party as necessary to indemnify and hold it
harmless.
13.5 TAX TREATMENT OF INDEMNITY PAYMENTS
13.5.1 Where the Borrower or any other Obligor has an obligation to indemnify
or reimburse any Lender or Representative in respect of any Loss or
Expense under Clause 13.1.1 (Operational Indemnity), the calculation of
the amount payable by way of indemnity or reimbursement shall be based
upon the likely Tax treatment in the hands of the Lender or the
Representative (as determined by the Lender or the Representative in its
bona fide opinion) of the amount payable by way of indemnity or
reimbursement and of the Loss or Expense under Clause 13.1.1
(Operational Indemnity) in respect of which that amount is payable so as
to leave the Lender or the Representative in the same after-Tax position
(the "AFTER-TAX NEUTRAL POSITION") as it would have been in had the
payment made to the Lender or the Representative not given rise to a Tax
Liability and had the Loss or Expense incurred or payment made by the
Lender or the Representative not been deductible in the accounting
period in which that Loss, Expense or payment was incurred or made.
<PAGE> 112
13.5.2 If a Lender or Representative determines, in its good faith opinion,
that as a result of the application of Clause 13.5.1, it has received
and retained an amount in excess of that required to preserve its
After-Tax Neutral Position, such Lender or, as the case may be,
Representative shall, provided it has received all amounts which are
then due and payable by the Borrower or any other Obligor under any of
the provisions of the Transaction Documents, pay to the Borrower or any
other Obligor (to the extent that the Lender or, as the case may be,
Representative can do so without prejudicing its After-Tax Neutral
Position and the right of such Lender or, as the case may be,
Representative to obtain any other benefit, relief or allowance which
may be available to it) such amount, if any, as such Lender or, as the
case may be, Representative in its absolute discretion shall determine
will restore such Lender's or, as the case may be, Representative's
After-Tax Neutral Position PROVIDED that:-
(a) each Lender and Representative shall have an absolute discretion
as to the time at which and the order and manner in which it
realises or utilises any Tax benefit and shall not be obliged to
arrange its business or its Tax affairs in any particular way in
order to be eligible for any Tax benefit;
(b) no Lender or Representative shall be obliged to disclose any
information regarding its business, Tax affairs or Tax
computations;
(c) if any Lender or Representative has made a payment to the
Borrower pursuant to this Clause 13.5.2 to restore that person's
After-Tax Neutral Position and it subsequently transpires that
the After-Tax Neutral Position of such Lender or Representative
was not so restored, the Borrower shall pay on demand to such
Lender or Representative such sum as such Lender or
Representative may determine as being necessary to restore the
After-Tax Neutral Position of the Lender or Representative to
that which it would have been had no adjustment under this
paragraph (c) been necessary; and
(d) the Lender or Representative shall not be obliged to make any
payment under this Clause 13.5.2 if, by doing so, it would
contravene the terms of any applicable law or any notice,
direction or requirement of any governmental or regulatory
authority (whether or not having the force of law but in respect
of which compliance by banks or other financial institutions or
other persons in the relevant jurisdictions is generally
customary), provided that the provisions of this Clause 13.5
shall not apply to any Export Credit Agency which may at any
time become a Lender.
13.6 NO DOUBLE-COUNTING
No Lender or Representative shall be entitled, pursuant to the terms of
any of the Transaction Documents, to recover by way of indemnity any
Loss, Expense, Tax Liability to the extent that payment has previously
been received and retained by it in respect of such Loss, Expense, Tax
Liability under any other provision of any Transaction Document.
13.7 SURVIVAL OF INDEMNITIES AND OTHER OBLIGATIONS
The indemnities contained in this Agreement shall constitute a separate
and independent obligation from the other obligations contained in this
Agreement, shall give rise to a
<PAGE> 113
separate and independent cause of action, shall apply irrespective of
any indulgence granted by the Agent, the Security Trustee or any Lender
from time to time and shall continue in full force and effect
notwithstanding (a) the termination or expiry of this Agreement or (b)
the satisfaction in full of all amounts owing to the Security Trustee,
the Agent and each Lender under the Transaction Documents or (c) any
judgment or order for a liquidated sum or sums in respect of amounts due
hereunder or under any such judgment or order.
13.8 VALUE ADDED TAX
13.8.1 If any Indemnitee makes any supply to the Borrower or Representatives
for Value Added Tax purposes pursuant to or in connection with any of
the Transaction Documents, the Borrower shall (save to the extent that
the relevant Indemnitee is entitled to be indemnified in respect of
Value Added Tax by an increased payment under Clause 13.8.2) pay to the
relevant Indemnitee within ten (10) Business Days of demand (accompanied
by supporting particulars in reasonable detail) an amount equal to any
Value Added Tax which is payable under the laws of Bermuda, the United
States of America or the jurisdiction of organisation of a Sub-Borrower
or to the extent provided in Expenses in respect of that supply.
13.8.2 All payments made by the Borrower under the Transaction Documents are
calculated without regard to Value Added Tax. If any such payment
constitutes the whole or any part of the consideration for a taxable or
deemed taxable supply to the Borrower or Representatives by any
Indemnitee under the laws of Bermuda, the United States of America or
the jurisdiction of organisation of a Sub-Borrower or to the extent
provided in Expenses the amount of that payment shall be increased by an
amount equal to the amount of Value Added Tax which is chargeable in
respect of the taxable supply in question. The Borrower's obligations
under this Clause 13.8.2 shall be subject to the delivery on or before
the due date for that payment to the Borrower of an invoice for Value
Added Tax purposes made out in accordance with the applicable
regulations.
13.8.3 No payment or other consideration to be made or furnished by any
Indemnitee to the Borrower or Representatives pursuant to or in
connection with any of the Transaction Documents may be increased or
added to by reference to (or as a result of any increase in the rate of)
any Value Added Tax which shall be or may become chargeable in respect
of the taxable supply in question.
13.8.4 If any Indemnitee makes any payment under, or as contemplated in, any of
the Transaction Documents to the Representatives which under the laws of
Bermuda, the United States of America or the jurisdiction of
organisation of a Sub-Borrower or to the extent provided in Expenses
bears or includes Value Added Tax which such Indemnitee determines to be
irrecoverable by it, the Borrower shall within ten (10) Business Days of
demand (accompanied by supporting particulars in reasonable detail)
indemnify such Indemnitee for such Value Added Tax.
<PAGE> 114
14. CHANGE IN CIRCUMSTANCES
14.1 INCREASED COSTS
14.1.1 If a Change in Law shall:-
(a) subject any Lender to any Tax in connection with its commitment
to or participation in the Transaction or any part thereof
(except for changes in the rate of Tax on the overall net income
of such Lender or Representative or such Lender's lending office
imposed by any Government Entity of the country in which such
Lender or Representative is incorporated or in which such
Lender's lending office is located); or
(b) change the basis of Taxation of any Lender in respect of
payments of principal, interest or any other amount payable to
any Lender in connection with the Transaction (except for
changes in the rate of Tax on the overall net income of such
Lender or Representative or such Lender's lending office imposed
by any Government Entity of the country in which such Lender or
Representative is incorporated or in which such Lender's lending
office is located) (or the treatment for Taxation purposes of
such payments); or
(c) impose or modify any reserve, cash ratio, special deposit,
capital adequacy, liquidity or any other analogous requirement,
or require the making of any special deposit, against or in
respect of any assets or liabilities of, or deposit with or for
the account of, or loan or commitment by, any Lender in relation
to the Transaction; or
(d) change the manner in which any Lender is required by any
regulatory authority to allocate capital resources in relation
to the Transaction; or
(e) impose on any Lender any other condition directly affecting its
participation in the Transaction,
and the result of any of the foregoing is or will be (i) to increase the
cost to such Lender of funding, making available or maintaining its
participation in the Transaction or any part thereof or of funding,
making or maintaining its participation in any Loan or (ii) to render
such Lender unable to obtain the rate of return on its overall capital
reasonably allocated to its obligations hereunder which it would have
been able to obtain but for such Change in Law or (iii) to reduce any
amount payable to such Lender by the Borrower hereunder or to reduce its
return from the Transaction or any part thereof, then and in any such
case:-
(y) such Lender shall notify the Borrower (through the Agent);
(z) the Borrower shall (subject to Clause 14.1.2) pay from time to
time to the Agent (for the account of that Lender) within ten
(10) Business Days of demand (accompanied by supporting
particulars in reasonable detail) all amounts which that Lender
certifies are necessary to compensate that Lender or
Representative for such charge to Tax or increase in cost or
reduction in return or reduction in the amount payable.
<PAGE> 115
14.1.2 The provisions of Clause 14.1.1 shall not apply in respect of any charge
to Tax, increased cost, reduction in the rate of return or reduction in
an amount payable to the extent that the same:-
(a) arises from any action or omission of an Indemnitee which
constitutes wilful misconduct, fraud or reckless disregard with
knowledge of the probable consequences on the part of such
Indemnitee; or
(b) is caused by such Indemnitee's breach of any express
representation made by it in any Transaction Document or of any
express obligation under any Transaction Document (but excluding
any such breach in consequence (directly or indirectly) of a
breach by the Borrower or any other Obligor of any
representation or warranty contained in or of their respective
obligations under any Transaction Document); or
(c) is a deduction or withholding Tax, Value Added Tax or
documentary Tax (it being agreed that such Taxes are exclusively
provided for elsewhere in this Agreement and are not covered by
Clause 14.1.1) or a charge to Tax for which such Indemnitee has
received and retained a payment pursuant to other indemnity
provision of any Transaction Document; or
(d) is on or arises from any transfer by a Lender of any of its
rights, benefits and/or obligations hereunder other than
pursuant to Clause 15.2 (Prepayment of Affected Loans and
Replacement of Affected Lender); or
(e) arises prior to the date of the relevant notice thereof to the
Borrower; or
(f) arises out of such Indemnitee's own credit or risk based capital
rating or otherwise due to its own financial condition; or
(g) is not charged to the other borrower customers of such Lender;
or
(h) comprises a Tax on the overall net income, profit or capital
gains of any Indemnitee (or, in the case of any Indemnitee
acting through a branch outside the main jurisdiction in which
it is resident for Tax purposes, comprises a Tax on the overall
net income, profit or capital gains of that Indemnitee in the
jurisdiction to which that Indemnitee's interest in the
Transaction is properly attributable for Tax purposes)
attributable to any sums receivable by any Indemnitee pursuant
to any Transaction Document; or
(i) comprises any penalty, addition to Tax, fine or interest on or
in respect of a Tax or Tax Liability which would not have arisen
but for avoidable delay or failure by such Indemnitee in the
filing of Tax returns which such Indemnitee was obliged to file
by any law of the jurisdiction of incorporation or, in the case
of a Lender, the jurisdiction in which its Lending Office is
located, and which such Indemnitee ought reasonably to have been
aware it was so obliged to file in connection with the
Transaction or the payment of Taxes other than any such delay or
failure in consequence (directly or indirectly) of a request by
the Borrower or any Obligor or a delay of or failure by the
Borrower or any Obligor duly and punctually to perform any of
their respective obligations under the Transaction Documents or
in consequence of any event or
<PAGE> 116
circumstance outside the reasonable control of such Indemnitee
or otherwise caused (directly or indirectly) by the Borrower or
any Obligor; or
(j) is imposed by a jurisdiction other than the main jurisdiction in
which such Indemnitee is resident for Tax purposes to the extent
that it gives rise to a corresponding credit which such
Indemnitee has retained and utilised against any Tax Liability
imposed in the main jurisdiction in which such Indemnitee is so
resident; or
(k) would not have arisen but for:-
(i) any failure by such Indemnitee to file any relevant Tax
return or Tax computation which such Indemnitee was
obliged to file by any law of the jurisdiction of
incorporation or, in the case of a Lender, the
jurisdiction in which its Lending Office is located or
any documents which such Lender is obliged to file as a
result of any applicable law, regulation, practice,
concession, official directive, ruling, request, notice,
guideline, statement of policy or practice statement by
the Bank of England, the Banque de France, the Deutsche
Bundesbank, the European Central Bank, the Federal
Reserve Bank of New York, the European Union or any
central bank, Tax, fiscal, governmental, local,
international, national or other competent authority or
agency (whether or not having the force of law but in
respect of which compliance by banks or other financial
institutions or other persons in the relevant
jurisdiction is customary) and in each case which such
Indemnitee ought reasonably to have been aware it was so
obliged to file in connection with the Transaction
except for any such failure caused (directly or
indirectly) by any action or inaction of the Borrower or
any Obligor or any event or circumstance outside the
reasonable control of such Indemnitee; or
(ii) any failure (subject to the same exceptions and
exclusions as set out in Clause 4.12.5(g)(i)) to file or
provide the Borrower or the relevant Lessee with any Tax
claims, forms (including the Internal Revenue Service
Forms), affidavits, declarations or other like documents
which the Borrower or the relevant Lessee has reasonably
requested such Indemnitee in writing to file or provide
(any such request containing sufficient detail to enable
such Indemnitee to comply with the terms thereof)
unless:-
(aa) except with respect to the Internal Revenue
Service Forms, such Indemnitee determines acting
in good faith but nevertheless in its sole
discretion that it is unable to file or provide
or that it would be illegal or contrary to any
applicable law, official regulation, practice,
concession, directive, ruling, request, notice,
guideline, statement of policy or practice
statement by the Bank of England, the Banque de
France, the Deutsche Bundesbank, the European
Central Bank, the Federal Reserve Bank of New
York, the European Union or any
<PAGE> 117
central bank, Tax, fiscal, governmental, local,
international, national or other competent
authority or agency (whether or not having the
force of law but in respect of which compliance
by banks or other financial institutions or
other persons in the relevant jurisdiction is
customary) for such Indemnitee so to do or so to
do would or may result in the breach of any
agreement or confidentiality undertaking or the
disclosure of any information about such
Indemnitee's Tax affairs which such Indemnitee
considers (in its bona fide opinion) to be of a
confidential nature; or
(bb) in the case of the Internal Revenue Service
Forms, such failure is due to a Change in Law
occurring subsequent to the date on which any of
the Internal Revenue Service Forms was
originally required to be provided.
14.2 MARKET DISRUPTION
14.2.1 If, in relation to any Interest Period or other relevant period:-
(a) the Agent is notified by any Lender (in this Clause 14.2 the
"AFFECTED LENDER") that deposits in Dollars in amounts
sufficient to fund such affected Lender's participation in the
relevant Loan are not, in the ordinary course of business,
available in the London inter-bank market for a period equal to
the relevant Interest Period or other relevant period; or
(b) the Agent determines that, by reason of circumstances affecting
the London inter-bank market generally, reasonable and adequate
means do not or will not exist for ascertaining LIBOR in
relation to such Interest Period or other relevant period,
then:-
(i) the Agent shall promptly give a notice to the Borrower and each
Lender in writing advising of such event;
(ii) the Borrower shall on each subsequent Repayment Date for so long
as such circumstances continue pay to the Agent for the account
of the Affected Lender an amount equal to interest on the
Affected Lender's Relevant Proportion of the relevant Loan at
the rate which is agreed between the Borrower and such Lender,
each acting in good faith, and if no agreement can be reached,
equal to the cost to such Affected Lender (as certified by such
Affected Lender and notified to the Agent) of obtaining Dollars
from whatever source or sources it may in good faith but
otherwise in its absolute discretion select for funding its
Relevant Proportion of the Loan during such Interest Period or
other relevant period.
<PAGE> 118
14.3 ILLEGALITY
14.3.1 If, at any time as a result of a Change in Law it is or it will become
unlawful for any Lender (the "AFFECTED LENDER"), to make, fund or allow
to remain outstanding any part of its Commitment or its participation in
the Facility or any Loan, then any Affected Lender may deliver to the
Borrower through the Agent a notice to that effect, whereupon subject to
Clause 15.1 (Mitigation) the Borrower shall on or before the date the
Agent notifies the Borrower that the Affected Lender's obligations
hereunder are unlawful prepay each Loan affected by the relevant
circumstances together with all interest accrued thereon, the Make-Whole
Amount and Expenses (if any) to the Affected Lender pursuant to this
Agreement or any relevant Aircraft Operative Document.
14.3.2 If at any time as a result of a Substantive Law Change any Loan or the
repayment of any Loan or the payment of interest at the stated
non-default rate on any Loan or the guarantee by the Guarantor hereunder
or any material element of the security package as contemplated by the
Aircraft Security Documents in relation to any Loan shall become illegal
or unenforceable, then the Agent may deliver to the Borrower a notice to
that effect, whereupon, subject to Clause 15.1.3 (Mitigation), the
Borrower shall forthwith prepay each Loan to which such relevant
circumstances apply together with all interest accrued thereon, the
Make-Whole Amount and Expenses (if any) pursuant to this Agreement or
any relevant Aircraft Operative Document.
15. MITIGATION AND CONTEST RIGHTS
15.1 MITIGATION
15.1.1 If circumstances arise in respect of any Lender which would, or upon the
giving of notice would, result in the operation of Clause 4.12
(Deductions and Withholdings), 14.1 (Increased Costs), 14.2 (Market
Disruption) or 14.3 (Illegality) to the detriment of the Borrower:
(a) each such Lender shall promptly upon becoming aware of the same
notify the Borrower and upon the written request of the Borrower
shall negotiate in good faith with the Borrower for a period not
exceeding forty-five (45) days with a view to avoiding or
minimising the relevant duty, tax, fee or charge including, in
the case of a Lender, a change in its Lending Office or a
transfer of its participation in the Loans and its Commitments
to another bank or financial institution or in the case a
Representative, including resignation in accordance with the
provisions of the Lenders' Agreement; and
(b) at the request of the Borrower, such Representative will
negotiate in good faith with the Borrower with a view to
avoiding or minimising the consequences of such including
resigning in accordance with the provisions of the Lenders'
Agreement.
15.1.2 Without limiting or reducing the obligations of the Obligors (or any of
them) under Clause 4.12 (Deductions and Withholdings), Clause 14.1
(Increased Costs), Clause 14.2 (Market Disruption), or Clause 14.3
(Illegality), in relation to Clauses 4.12 (Deductions and Withholdings),
14.1 (Increased costs), 14.2 (Market Disruption) and 14.3 (Illegality)
no Lender or Representative shall have any obligation to take any action
under Clause 15.1.1
<PAGE> 119
if, in its good faith opinion, to do so would be likely to (a) have a
material adverse effect upon its business, operation or financial
condition, or (b) result in its rights, interests, anticipated financial
return or position under or in relation to any of the Transaction
Documents being materially less favourable to it than would have been
the case in the absence of such action unless indemnified or secured to
its satisfaction in respect thereof, or (c) involve it in any unlawful
act or activity or any act or activity that is contrary to any official
directive, concession, guideline, request or requirement of any
competent authority (whether or not having the force of law but, in the
case only of any of the same not having the force of law, in respect of
which compliance by banks or other institutions of a similar nature to
the relevant Lender or Representative, as the case may be, is generally
considered mandatory), or (d) (unless indemnified or secured to its
satisfaction) involve it in any Tax Liability or any expense which is
significant in such Lender's or Representative's bona fide opinion or
(e) unless protected by confidentiality procedures involve it in any
disclosure of any document or information relating to its business or
affairs which it considers (in its good faith opinion) to be of a
confidential nature.
15.1.3 If the circumstances referred to in Clause 14.3.2 (Illegality) arise,
upon the written request of either the Borrower or the Agent, the
Borrower and the Representatives shall negotiate in good faith for a
period not exceeding sixty (60) days (or such shorter period as may be
required by law) with a view to restructuring each affected Loan and
rectifying and amending the relevant Transaction Documents in order to
mitigate the effect of the relevant Substantive Law Change and the
Borrower shall pay for the Expenses incurred by the Representatives (as
a group) for such negotiations as well as (if alternative arrangements
are agreed) to complete all steps required to implement such
restructuring and all rectifications and amendments to the relevant
Transaction Documents in relation to each Loan affected by the
circumstances referred to in Clause 14.3.2 (Illegality). If a resolution
acceptable to the Borrower and the Representatives is obtained as a
result of this mitigation procedure, the Borrower shall implement the
rectification and amendments referred to in Clause 15.1.3 to the
relevant Transaction Documents, to the satisfaction of the Agent, within
sixty (60) days from the earlier of the date when such resolution is
reached and the date upon which the period of sixty (60) days (or such
shorter period as required by law) is referred to in Clause 15.1.3
expires. If the Borrower fails to implement such rectification and
amendment to the relevant Transaction Documents within such period the
Borrower shall prepay each Loan to which Clause 14.3.2 (Illegality)
applies as aforesaid.
15.1.4 If any Export Credit Agency were to become a Lender, the provisions of
Clause 14 (Change of Circumstances) and this Clause 15 shall not apply
to such Export Credit Agency.
15.2. PREPAYMENT OF AFFECTED LOANS AND REPLACEMENT OF AFFECTED LENDER
15.2.1 If the circumstances referred to in Clauses 4.12 (Deductions and
Withholdings), 14.1 (Increased Costs), 14.2 (Market Disruption) and 14.3
(Illegality) arise, and no resolution acceptable to the parties is
obtained as a result of the mitigation procedure referred to in Clause
15.1 (Mitigation and Contest Rights), or if a Lender has defaulted on
its obligations hereunder (also an "AFFECTED LENDER").
(a) if requested by the Borrower, the Agent will consult with the
Borrower with a view to identifying and approaching bank(s) and
financial institution(s) acceptable to the Borrower (acting
reasonably) which may be willing to
<PAGE> 120
become a party to this Agreement as "Lender(s)" ("REPLACEMENT
LENDER") in replacement of the Affected Lender, subject to the
approval of the relevant Export Credit Agency. Once a suitable
Replacement Lender has been found and is approved by the
relevant Export Credit Agency, each Affected Lender shall
transfer its Relevant Proportion of each Loan affected by such
circumstances and its right, benefits and obligations under the
Transaction Documents to another bank which is not affected by
such circumstances in accordance with the terms of Clause 18
(Assignment and Transfers). The Borrower shall indemnify the
Affected Lender (except in the case of a defaulting Lender) and
the Agent for all Expenses incurred by the Affected Lender and
the Agent in relation to such transfer; and
(b) if the Borrower does not so request the Borrower shall pay to
the Agent (for the account of each Affected Lender (the
"AFFECTED LENDER")) each Affected Lender's Relevant Proportion
of each Loan affected by such circumstances together with all
accrued interest thereon and, except in the case of a defaulting
Lender, the Make-Whole Amount and Expenses (if any) owing to the
Affected Lender in connection with any such Loan or under this
Agreement or the relevant Aircraft Operative Documents.
15.2.2 (a) Except in the case of a defaulting Lender, if the Borrower
wishes to make any payment referred to in Clause 15.2.1(b), such
payment shall be treated as a voluntary prepayment and
accordingly the provisions of Clause 4.3 (Voluntary Prepayment)
shall apply and in particular the Borrower should comply with
provisions of Clause 4.3.1 and 4.3.3 in relation to any such
payment referred to in Clause 15.2.1.
(b) The Agent shall as soon as reasonably practicable after receipt
of the Borrower's prepayment notice, unless the Borrower elects
to prepay the entire Loan in relation to an Aircraft, prepare a
substitute schedule for schedule 2 to the relevant Loan
Supplement showing new amounts for the repayment of the relevant
Loan for the period following such prepayment calculated on the
same basis and assumptions (other than the assumption as to the
total principal amount of the relevant Loan) as were used for
the purpose of preparing the original schedule 2 to such Loan
Supplement. Upon the Borrower and each Export Credit Agency
agreeing to the same, such substitute Schedules shall become for
all purposes schedule 2 to the relevant Loan Supplement and
shall be binding on all parties with effect from the date of the
prepayment.
15.3 MITIGATION OF DOCUMENTARY TAXES
15.3.1 Without prejudice to the provisions of Clause 13.2 (Documentary Taxes),
if (in the opinion of any Lender or Representative) any duties, taxes,
fees or charges referred to in Clause 13.2 arise and the Borrower so
requests, the relevant Lender or Representative shall consult for a
period not exceeding thirty (30) days with the Borrower (at the
Borrower's cost) with a view to agreeing a means for reducing or
avoiding the relevant duty, tax, fee or charge (including, in the case
of a Lender, by transferring its rights and obligations under the
Transaction Documents to another Lending Office or another person or, in
the case of a Representative, by resigning in accordance with the
provisions of the Lenders' Agreement once a suitable Replacement Lender
has been found and approved by the Export Credit Agencies).
<PAGE> 121
15.3.2 Without limiting or reducing the obligations of the Obligors (or any of
them) under Clause 13.2 (Documentary Taxes), no Lender or Representative
shall have any obligation to take any action under Clause 15.3.1 if, in
its good faith opinion, to do so would be likely to (a) have a material
adverse effect upon its business, operation or financial condition, or
(b) result in its rights, interests, anticipated financial return or
position under or in relation to any of the Transaction Documents being
materially less favourable to it than would have been the case in the
absence of the relevant duty, tax, fee or charge unless indemnified or
secured to its satisfaction in respect thereof, or (c) involve it in any
unlawful act or activity or any act or activity that is contrary to any
official directive, concession, guideline, request or requirement of any
competent authority (whether or not having the force of law but, in the
case only of any of the same not having the force of law, in respect of
which compliance by banks or other institutions of a similar nature to
the relevant Lender or Representative, as the case may be, is generally
considered mandatory), or (d) (unless indemnified or secured to its
satisfaction) unless protected by confidentiality procedures involve it
in any Tax Liability or any expense which is significant in such
Lender's or Representative's bona fide opinion or (e) involve it in any
disclosure of any document or information relating to its business or
affairs which it considers (in its good faith opinion) to be of a
confidential nature.
15.4 CONTEST RIGHTS
If requested by the Borrower in a written notice to the relevant
Indemnitee and the Agent, following a demand by such Indemnitee (or by
the Agent on its behalf) pursuant to Clause 4.12 (Deductions and
Withholdings) or Clause 13.2 (Documentary Taxes) in respect of a Tax
Liability of such Indemnitee, such Indemnitee shall, to the extent that
(a) it is able and entitled to do so, (b) it is not illegal or contrary
to any official directive or policy for it to do so, (c) it is
commercially reasonable for it to do so and (d) to do so would not
adversely affect its business, operation or financial condition, take
such action as the Borrower may reasonably request to contest (including
pursuing all administrative appeals) the validity, applicability or
amount of such Taxes and shall (x) seek postponement of payment thereof
if available and practicable, (y) pay the same only under protest, if
payment under protest is a permitted alternative under the laws and
procedures of the relevant taxation authority and is in the
circumstances, reasonable or (z) if payment must be or shall have been
made, seek a refund thereof in appropriate administrative or judicial
proceedings PROVIDED THAT:-
(a) the Borrower shall indemnify such Indemnitee (and prior to
taking such action shall if requested by such Indemnitee, acting
reasonably, provide to such Indemnitee security reasonably
satisfactory to such Indemnitee in respect of any amounts so
payable) against all losses, damages, costs and expenses which
such Indemnitee may incur in connection with or as a result of
contesting such claim or taking such action (including, without
limitation, reasonable costs and expenses of legal counsel and
tax advisors) as well as any Tax Liability arising thereon or in
connection therewith and the amount of any interest or penalties
which may be payable and any other loss or damage whatsoever
which may be incurred as a result of contesting such claim or
taking such action;
(b) if such contest is to be initiated by the payment of, and the
claiming of a refund for, such Taxes, the Borrower shall have
advanced to such Indemnitee sufficient funds (on an
interest-free basis and, if such advance results in taxable
<PAGE> 122
income to such Indemnitee, on an after-tax basis taking into
account the timing and incidence of tax payments) to make such
payment; and
(c) nothing herein shall require any Indemnitee to disclose any information
or provide any document such Indemnitee, acting in good faith, considers
confidential to it, or to take or refrain from taking any action or
doing anything which would (or might), in the opinion of such
Indemnitee, acting in good faith, materially adversely affect any of the
business or commercial interests of such Indemnitee.
16. FEES AND EXPENSES
16.1 TRANSACTION EXPENSES
The Borrower shall pay to the Agent within ten (10) Business Days of
demand and supported by the relevant invoices or receipts in reasonable
detail (whether or not any Utilisation Documentation is entered into
and/or any amount is disbursed under the Agreement) all Expenses
incurred by the Representatives, the Lenders and the Export Credit
Agencies as a group:-
(i) in connection with the negotiation, preparation, execution,
registration and implementation of each of the Transaction
Documents and the other documents contemplated hereby or thereby
or at any time hereafter (including the agreed or, if not
agreed, the reasonable expenses of the Agent's legal counsel in
connection with the preparation of each Aircraft Operative
Document and the collection of the conditions precedent listed
on Schedule 6, in respect of each Utilisation;
(ii) in connection with the granting of any release, waiver or
consent in connection with any of the Transaction Documents
PROVIDED that the Borrower shall not be liable for the costs and
expenses of the Agent, the Security Trustee or the Lenders
arising in relation to the granting of any release, waiver or
consent requested by the Lenders (other than any such release,
waiver or consent required by any of the Export Credit Agencies
or as a result of or in consequence of a Change in Law or of a
Substantive Law Change or as a result of the Borrower or any
other Obligor being in breach of their respective obligations
hereunder or under any of the other Transaction Documents); and
(iii) in connection with any variation, amendment, supplement,
restructuring, novation, discharge or reassignment of any of the
Transaction Documents, PROVIDED that the Borrower shall not be
liable for the costs and expenses of the Agent, the Security
Trustee or the Lenders arising in relation to a variation,
amendment, supplement, restructuring, novation, discharge or
reassignment requested by the Lenders (other than any such
variation, amendment, supplement, novation, discharge or
reassignment required by any of the Export Credit Agencies or as
a result of or in consequence of a Change in Law or of a
Substantive Law Change or as a result of the Borrower or any
Obligor being in breach of any of their respective obligations
under any of the Transaction Documents).
<PAGE> 123
16.2 ENFORCEMENT EXPENSES
The Borrower shall pay to the Agent within ten (10) Business Days of
demand and supported by the relevant invoices or receipts in reasonable
detail all Expenses incurred or sustained by the Representatives, the
Lenders and the Export Credit Agencies (provided that in the case of
legal expense, they shall only be incurred as a group) in connection
with, after a Termination Event, the enforcement or preservation or
attempted enforcement or preservation of their respective rights, powers
or duties under this Agreement and/or any of the other Transaction
Documents or (in the event of a claim against an Export Credit Agency
arising as a result of an Acceleration Event) under any of the Support
Agreements.
17. CHANGE OF AGENT AND SECURITY TRUSTEE
17.1 Each Representative and each Lender undertakes with the Borrower that
any bank or financial institution appointed as Agent or Security Trustee
pursuant to the Lenders' Agreement shall be so appointed in respect of
all of the Transaction Documents.
17.2 If, in accordance with the Lenders' Agreement, the Agent or the Security
Trustee gives notice of its resignation or is dismissed, then the
Majority Lenders (after consultation with the Borrower) may appoint any
reputable and experienced bank or other financial institution approved
by the Borrower (such approval not to be unreasonably withheld) as a
successor to the Agent or, as the case may be, the Security Trustee.
17.3 The Borrower shall not be under any obligation to pay any greater amount
under this Agreement as a result of a change in the Agent or the
Security Trustee if, in the circumstances existing at the time of such
change, such greater amount would not have been payable but for the
change unless and until a Substantive Law Change or Change in Law occurs
and as a result of such Substantive Law Change or Change in Law
(excluding any Substantive Law Change or Change in Law which occurs, or
the intended implementation of which is officially announced or proposed
before the date of such transfer or change in Lending Office), PROVIDED
that the provisions of this Clause 17.3 shall not apply if the Agent or
the Security Trustee is required by any Export Credit Agency to transfer
its functions to an Export Credit Agency or to another bank or financial
institution or if such transfer is made pursuant to Clause 15
(Mitigation and Contest Rights).
17.4 The Lenders and the Representatives represent and warrant to the
Obligors and agree with the Obligors that the provisions of the Lenders
Agreement are not and will not be inconsistent with the provisions of
the Transaction Documents, including with respect to the identity of the
Agent or Security Trustee or the voting or any other making of
determinations by the Majority Lenders, the Agent or the Security
Trustee as provided under the Transaction Documents.
<PAGE> 124
18. ASSIGNMENTS AND TRANSFERS
18.1 TRANSFERS BY OBLIGORS
None of the Obligors shall assign any rights or transfer any obligations
arising from this Agreement without the prior written consent of the
Security Trustee (acting on the instructions of the Majority Lenders),
except that (i) the Borrower or any Sub-Borrower may transfer for the
purposes of merger or solvent liquidation or contractually or by
operation of law its rights and obligations to a person that becomes the
Borrower or a Sub-Borrower, and the Parent or an Intermediate Lessee may
transfer for the purposes of merger or solvent liquidation or
contractually or by operation of law its rights and obligations to a
person that becomes the Parent or an Intermediate Lessee, as the case
may be, and is a Subsidiary of the Guarantor (not incorporated in the
United States except in the case of the Parent or which in the case of
the Sub-Borrower or Intermediate Lessee is an owner trust and/or voting
trust) and (ii) in the case of the Guarantor, to a successor or assign
permitted under Schedule 5, (in each case the "TRANSFEREE") provided
that any such transfer is subject to the conditions precedent that:
(a) no Relevant Event or Termination Event has occurred and is
continuing;
(b) where the Transferee is the Guarantor, a Sub-Borrower or an
Intermediate Lessee organised in a Regular Jurisdiction, the
Transferee shall accede to this Agreement by executing an
Accession Deed (which shall, in the case of the Guarantor, be
appropriately amended to the satisfaction of the Agent) and such
other Transaction Documents as the Agent, in its good faith
opinion, considers appropriate so that such Transferee shall
become a party to this Agreement and such of the other
Transaction Documents as may be appropriate as if named therein
as a party;
(c) if Clause 18.1(b) does not apply (including if the Transferee is
organised in an Irregular Jurisdiction, if applicable) each of
the remaining Obligors and, such Transferee shall enter into
such other documents and provide such security as the Security
Trustee may, in its good faith opinion (after taking legal
advice from counsel to the Lenders in the jurisdiction of the
relevant Transferee), require in order to ensure that (i) the
Representatives and each of the Lenders are in a position,
having a substantially similar effect (including as to their
security position) with respect to such Transferee as they were
with respect to the transferor under the Transaction Documents
and (ii) the rights of the Representatives and the Lenders are
not materially different than with respect to the relevant
transferor under the Transaction Documents, it being
acknowledged and agreed for the purpose of determining the
foregoing matters that (i) any trustee in a United States
owner/voting trust will be party to the relevant Transaction
Documents not in its individual capacity but solely as trustee,
(ii) common law jurisdictions are acceptable and (iii) with
respect to civil jurisdictions, the Borrower and the Agent shall
negotiate in good faith, to the extent necessary, alternative
security to that available in common law jurisdictions which is
acceptable to the Security Trustee, acting upon the instruction
of the Majority Lenders;
(d) upon receipt by the Agent of the Accession Deed signed on behalf
of the Borrower, Guarantor, other Obligors and by the proposed
Transferee, the Agent
<PAGE> 125
shall sign the same for itself and on behalf of the Lenders and
shall as promptly as practicable give notice of such execution
to all of the parties to the Accession Deed;
(e) upon execution of any such Accession Deed, the transfer shall
take effect in accordance with, but subject to, the terms hereof
and thereof;
(f) evidence satisfactory to the Security Trustee (including a legal
opinion from counsel to the Lenders in the jurisdiction in which
transfer of title to the Aircraft takes place) that the
Transferee (as the case may be) has obtained title to the
Aircraft free and clear of any Liens other than Permitted Liens
including a certified copy of the Bill of Sale in relation to
each Aircraft, if applicable, to the Transferee;
(g) a legal opinion from counsel to the Lenders in the jurisdiction
in which the Transferee is organised which is satisfactory to
the Security Trustee concerning the relevant Accession Deed or,
an adaptation thereof pursuant to sub-paragraphs (b) or (c)
above, any assignment of the Mortgage or, if applicable, the
relevant Mortgages, the filing or registration and perfection in
that jurisdiction of the Mortgage or, if applicable, the
relevant Mortgages, (or alternative security) with respect to
the Aircraft, the Charge over Shares of Sub-Borrower (if any)
and any other Aircraft Security Documents which will be entered
into by the Transferee and the validity of a guarantee and
indemnity to be entered into by the Transferee (if other than
the Guarantor) in place of the Sub-Borrower Guarantee (if the
Transferor is a Sub-Borrower) in favour of the Security Trustee;
(h) where the Transferee assumes the obligations of the Guarantor
under this Agreement, a legal opinion from in-house counsel to
the Transferee and from external counsel to the Transferee in
the jurisdiction in which the Transferee is organised in favour
of the Security Trustee in a form acceptable to it concerning
the Accession Deed entered into by the Transferee as
appropriately amended in accordance with sub-paragraph (b)
above;
(i) the relevant legal opinions from counsel to the Lenders as
provided in paragraph 4 of Part I to Schedule 6;
(j) evidence of insurance having been effected in respect of the
Aircraft with the Security Trustee named as a contract party and
(to the extent possible under AVN67B, or such other endorsement
as may be applicable) loss payee;
(k) if applicable, copies of the certificate of registration of the
Replacement Aircraft and airworthiness issued by the Aviation
Authority;
(l) the following signed documents:
(i) Accession Deed or an adaptation thereof pursuant to
sub-paragraphs (b) or (c) above (if applicable) (if such
person has not previously acceded to the Transaction
Documents);
<PAGE> 126
(ii) the assignment of the Mortgages (if applicable) or
alternative security satisfactory to the Security
Trustee, acting upon the instructions of the Majority
Lenders;
(iii) assignment of the Warranties (to the extent assignable);
(iv) the assignment of the Engine Warranties (to the extent
assignable);
(v) Sub-Borrower Debenture (if applicable);
(vi) Intermediate Lessee Debenture (if applicable);
(vii) Charge Over Shares of Sub-Borrower (if applicable);
(viii) Charge Over Shares of Intermediate Lessee (if
applicable);
(ix) Lease Security Assignment (if applicable);
(x) Intermediate Lease Security Agreement (if applicable);
(xi) Notice of Charge as amended to record transfer of title
to the Aircraft to the Transferee;
(m) evidence to the Security Trustee that a maintenance reserve
account, a rental account and a security deposit account have
been opened in the name of the Transferee with a financial
institution acceptable to the Security Trustee and that US$10
has been deposited in each of such accounts.
18.2 TRANSFERS BY LENDERS
Any German Lender may at any time after January 19, 1999 and any French
Lender or British Lender after March 1, 1999, transfer all or any of its
rights, benefits and obligations under this Agreement or change its
Lending Office (whether in the same or a different jurisdiction)
PROVIDED always that:-
(a) prior to the transfer or change in Lending Office becoming
effective, the relevant Lender gives notice to the Guarantor
(with a copy to the Agent) of the identity of the Transferee or,
as the case may be, the new Lending Office and the jurisdiction
of tax residence of the Transferee or, as the case may be, the
new Lending Office and the jurisdiction of tax residence of the
persons controlling the Transferee;
(b) the Transferee is eligible for support from each of the Export
Credit Agencies and has been approved by the Borrower (such
approval not to be unreasonably withheld) or is designated by an
Export Credit Agency, and in each case has a credit rating with
Standard and Poor's Corporation of at least BBB or a credit
rating with Moody's Investor Service Inc. of at least Baa2 or,
in each case, the equivalent successor rating, and is not on
negative credit watch to fall below such rating;
<PAGE> 127
(c) the Transferee shall be able to file for US tax treaty benefits
on a zero rate of withholding tax and shall provide US Internal
Revenue Service Form 1001 (or its equivalent) to the Agent or
the Transferee shall be able to file for exemption from
withholding tax on income of a Lender effectively connected with
the conduct of a trade or business in the United States and
shall provide US Internal Revenue Service Form 4224 (or its
equivalent) to the Agent;
(d) the Transferee is neither resident in the United Kingdom for
United Kingdom tax purposes nor controlled by persons who are so
resident if the transfer to the Transferee would result in
Advances of Lenders resident in the United Kingdom for United
Kingdom tax purposes or controlled by persons who are so
resident constituting fifty per cent. (50%) or more of the
Advances as at the date of the proposed transfer;
(e) all costs and expenses of the Transfer shall be borne by the
transferring Lender and no Obligor shall be under any obligation
to pay any greater amount or suffer any other material increase
in liabilities or material diminution in right or benefit under
the Transaction Documents following and as a consequence
(directly or indirectly) of any such transfer or change in
Lending Office unless and until a Change in Law occurs and as a
result of such Change in Law (excluding any Change of Law which
occurs, or the intended implementation of which is officially
announced or proposed before the date of such transfer or change
in Lending Office); and
(f) such Transfer does not violate any applicable securities or
other law,
PROVIDED further that the provisos set out above shall not apply to the
extent that any Lender has so assigned or transferred its Relevant
Proportion of any Loan or changed its Lending Office in relation to any
Loan pursuant to Clause 15 (Mitigation and Contest Rights).
18.3 TRANSFER CERTIFICATES
18.3.1 If any Lender (the "TRANSFEROR") transfers all or any part of its
rights, benefits and/or obligations to another bank or financial
institution (the "TRANSFEREE"), such transfer shall be effected by way
of a novation by the delivery to, and the execution by, the Agent of a
duly completed Transfer Certificate or in such other manner as all
parties hereto may agree.
18.3.2 On the date specified in the Transfer Certificate:-
(i) to the extent that in the Transfer Certificate the Transferor
seeks to transfer its rights and obligations hereunder the
Borrower, each of the Obligors and the Transferor shall each be
released from further obligations to each other under this
Agreement and their respective rights against each other shall
be cancelled (such rights and obligations being referred to in
this Clause 18.3 as "DISCHARGED RIGHTS AND OBLIGATIONS");
(ii) the Borrower, the Agent, the Security Trustee, each of the
Obligors and the Transferee shall each assume obligations
towards each other and/or acquire rights against each other
which, subject to Clause 18.2 above, which differ
<PAGE> 128
from the Discharged Rights and Obligations only insofar as the
Borrower, each of the Obligors, and the Transferee have assumed
and/or acquired the same in place of the Borrower, each of the
Obligors and the Transferor;
(iii) the Agent, the Security Trustee, each of the Obligors, the
Borrower, the Transferee and the other Lenders shall acquire the
same rights and assume the same obligations among themselves as
they would have acquired and assumed had the Transferee
originally been a party hereunder as a Lender with the rights
and/or the obligations acquired or assumed by it as a result of
the transfer; and
(iv) the Transferee, the Agent, the Security Trustee and each of the
other Lenders shall acquire the same rights and assume the same
obligations amongst themselves in respect of the Lenders
Agreement as they would have acquired and assumed had the
Transferee originally been a party to the Lenders Agreement as a
Lender in the place of the Transferor.
18.3.3 Each of the Obligors (other than the Borrower) each with respect to
itself hereby confirm that the execution of any such Transfer
Certificate by the Borrower, for and on behalf of, inter alia, each of
the other Obligors shall be binding upon and enforceable against each of
the other Obligors as if each of the other Obligors had each executed
the Transfer Certificate itself.
18.3.4 The Agent and the Borrower shall each promptly complete Transfer
Certificates on written request by a Transferor. Each of the Lenders
hereby irrevocably authorise the Agent and each Obligor (other than the
Borrower) hereby irrevocably authorise the Borrower to execute any duly
completed Transfer Certificate on its behalf provided that such
authorisation does not extend to the execution of a Transfer Certificate
on behalf of either the Transferor or the Transferee named therein.
18.4 COSTS AND EXPENSES
In relation to any transfer contemplated by this Clause 18 which is
undertaken voluntarily by any Lender, the costs and expenses thereby
incurred by the Borrower, the Agent, the Security Trustee and each
Lender shall be for the account of the Transferee or the Transferor (as
they may agree between themselves). In relation to any other transfer,
the Borrower shall pay within ten (10) Business Days of demand supported
by the relevant invoices or receipts in reasonable detail all reasonable
out-of-pocket Expenses incurred by the Agent, the Security Trustee and
each Lender in connection with any transfer contemplated by this Clause
18. For the purposes of this Clause 18.4, a voluntary transfer by any
Lender shall mean any transfer except a transfer by a non-defaulting
Lender pursuant to Clause 15 (Mitigation and Contest Rights).
19. SET-OFF AND PRO RATA PAYMENTS
19.1 SET-OFF
19.1.1 Each Lender and each of the Representatives may, at any time during the
continuance of a Termination Event, set off from any sum payable by it
to any one or more of the Obligors under any of the Transaction
Documents any sum due and unpaid by the relevant Obligor to such Lender
or Representative in each case under or in relation to any of the
<PAGE> 129
Transaction Documents and any document or agreement entered into
pursuant to or in connection with any of the Transaction Documents.
19.1.2 The Borrower shall not be entitled to deduct any sum which may be due to
the Borrower from the Lenders (or any of them) howsoever arising from
any sum payable by the Borrower under or in connection with any of the
Transaction Documents.
19.1.3 No Obligor shall be entitled to refuse or to postpone performance of any
payment or other obligation under any of the Transaction Documents by
reason of any claim which it may have or may consider that it has
against (i) the Lenders (or any of them) under or in connection with any
of the Transaction Documents, or any other agreement with any of the
Lenders and/or (ii) any other party under or in connection with any of
the Transaction Documents.
19.2 PRO-RATA SHARING
(a) Provided that no Acceleration Event has occurred and is
continuing, if any Lender (the "SHARING LENDER") shall at any
time obtain (whether by way of voluntary or involuntary payment,
right of set-off, or otherwise) a proportion of its Loan in any
sum due from the Borrower or a proportion in respect of its
participation in any sum due from any one or more of the
Obligors under any of the Transaction Documents which is greater
than the proportion obtained by the Lender or Lenders
respectively obtaining the smallest proportion of its Loan, or
as the case may be, its participation therein, including a nil
receipt, (the amount so obtained by the Sharing Lender which is
attributable to such excess being here called "the excess
amount"), then:-
(i) the Sharing Lender shall promptly pay to the Agent, for
the account of the Lenders, an amount equal to the
excess amount, whereupon the Agent shall notify the
Borrower or, as the case may be, the relevant Obligor of
such amount and its receipt by the Agent;
(ii) the Agent shall treat such payment as if it were a
payment by the Borrower or, as the case may be, the
relevant Obligor on account of sums owed to the Lenders;
and
(iii) as between the Borrower or, as the case may be, the
relevant Obligor and the Sharing Lender the excess
amount shall be treated as not having been paid, while
as between the Borrower or, as the case may be, the
relevant Obligor and each Lender it shall be treated as
having been paid to the extent any moneys are received
by such Lender.
(b) Each Lender shall forthwith notify the Agent of any such receipt
or recovery by it other than by payment through the Agent.
(c) If any excess amount subsequently has to be wholly or partly
refunded to the Borrower or, as the case may be, the relevant
Obligor by any Sharing Lender which has paid an amount equal
thereto to the Agent under (a) above, each Lender to which any
part of that amount was distributed shall on request from the
Sharing Lender repay to the Sharing Lender such Lender's pro
rata share of
<PAGE> 130
the amount which has to be so refunded by the Sharing Lender.
Each Lender shall on request supply to the Agent such
information as the Agent may from time to time request for the
purpose of this Clause 19. Notwithstanding the foregoing
provisions of this Clause 19, (i) no Sharing Lender shall be
obliged to share any excess amount which it receives or recovers
pursuant to legal proceedings taken by it to recover any sums
owing to it under any of the Transaction Documents with any
other party which has a legal right to, but does not, either
join in such proceedings or commence and diligently pursue
separate proceedings to enforce its rights in the same or
another court, unless the proceedings instituted by the Sharing
Lender are instituted by it without prior notice having been
given to such party through the Agent and (ii) no Lender shall
be obliged to exercise any right of set-off it may have against
any or all of the Borrower or any of the Obligors at any time,
or to set-off against any obligations of the Borrower, or any of
the Obligors in relation to the Transaction Documents any sum
which such Lender may hold on deposit or otherwise from the
Borrower or any Obligor, or any other right against the Borrower
or any Obligor in favour of such Lender which sum has been
received or right has arisen unrelated to and independent from
the Transaction.
20. RIGHTS CUMULATIVE, WAIVERS, SEVERABILITY
20.1 CUMULATIVE RIGHTS
The respective rights of the Agent, the Security Trustee and the Lenders
pursuant to this Agreement and the other Transaction Documents:-
(a) are cumulative, may be exercised as often as they consider
appropriate and are in addition to their respective rights under
the general law; and
(b) shall not be capable of being waived or varied otherwise than by
an express waiver or variation in writing.
20.2 WAIVERS
Any failure to exercise, or any delay in exercising, on the part of any
Representative or Lender any right under any Transaction Document shall
not operate as a waiver or variation of that or any other right and any
defective or partial exercise of any such right shall not preclude any
other or further exercise of that or any other right, and no act or
course of conduct or negotiation shall in any way preclude any party
hereto from exercising any such right or constitute a suspension or any
variation of any such right.
20.3 SEVERABILITY
If at any time any provision hereof is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, neither
the legality, validity nor the enforceability of the remaining
provisions hereof nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be
affected or impaired.
<PAGE> 131
21. FURTHER ASSURANCE
The Borrower and each other Obligor shall from time to time and at its
own cost promptly sign, seal, execute, acknowledge, deliver, file and
register all such additional documents, instruments, agreements,
certificates, consents and assurances and do all such other acts and
things as may be required by law or reasonably requested by the Agent
from time to time in order to give full effect to each Transaction
Document or to establish, maintain, protect or preserve the rights of
the Security Trustee, the Agent and the Lenders under the Transaction
Documents or to enable any of them to obtain the full benefit of each
Transaction Document and to exercise and enforce their respective rights
and remedies under the Transaction Documents PROVIDED that no Obligor
shall be required to do any act or thing or take any step in connection
with the registration, recording or filing of any instrument creating or
evidencing a Lien over an Aircraft in the register of the Aviation
Authority where such Aircraft is registered, or any other registration,
recording or filing outside the jurisdiction of organisation of the
Borrower or, if applicable, any Sub-Borrower or any Intermediate Lessee,
or any actions with respect to the Lessee or any Sub-Lessee (other than
any registration, recording or filing of a Lien over an Aircraft within
the jurisdiction of organisation of the Borrower or, if applicable, any
Sub-Borrower or any Intermediate Lessee or the Parent) or with respect
to its jurisdiction of organisation or principal place of business,
unless a Third Trigger Event or Termination Event has occurred and is
continuing.
22. BAYERISCHE HYPO-UND VEREINSBANK AG
Bayerische Hypo-und Vereinsbank AG in its capacity as a German Lender
hereby notifies each of the other parties to this Agreement that, for
the purposes of this Agreement and the other Transaction Documents, it
has appointed HypoVereinsbank Luxembourg Societe Anonyme ("HVB-LUX") as
its agent to exercise and/or perform on its behalf any and all rights
and/or obligations and to take any and all of its decisions (after
consultation with Bayerische Hypo-und Vereinsbank AG) as a German Lender
under this Agreement and each of the other Transaction Documents (except
as the same pertain to the German export credit insurance). Each of the
parties hereto confirms and acknowledges that the performance by HVB-Lux
of the rights, obligations and decisions of Bayerische Hypo-und
Vereinsbank AG shall, subject to the terms and conditions of this
Agreement and the other Transaction Documents and to the extent so
performed, be binding on it and each of the parties shall be entitled to
perform each and every one of their obligations which are expressed to
be due to be performed in favour of Bayerische Hypo-und Vereinsbank AG
in favour of HVB-Lux and such performance shall be deemed to constitute
good performance of the relevant obligations.
23. NOTICES
23.1 Unless otherwise expressly provided herein, all notices, requests,
demands or other communications to or upon the respective parties hereto
in connection with any Transaction Document, the Facility, any
Utilisation or any Aircraft shall:-
(a) in order to be valid be in English and in writing;
<PAGE> 132
(b) be deemed to have been duly served on, given to or made in
relation to a party if it is:-
(i) left at the address of that party set out herein or at
such other address as that party may notify to the other
parties hereto in writing from time to time or to any
officer of the addressee; or
(ii) sent by facsimile to the facsimile number of that party
set out herein or to such other number as that party may
notify to the other parties hereto from time to time;
(c) be sufficient if:-
(i) executed under the seal of the party giving, serving or
making the same; or
(ii) signed or sent on behalf of the party giving, serving or
making the same by any attorney, director, secretary,
agent or other duly authorized representative of such
party;
(d) be effective:-
(i) in the case of a letter, when left at the address
referred to in Clause 23.1(b)(i) or delivered in person
to any officer of the addressee; and
(ii) in the case of a facsimile transmission, when receipt is
confirmed by return facsimile or by telephone (or on
actual receipt if not so confirmed);
23.2 For the purposes of this Clause 23, all notices, requests, demands or
other communications shall be given or made by being addressed as
follows:-
(a) if to the Borrower to:-
SIERRA LEASING LIMITED
29 Richmond Road
Hamilton HM-AX
Bermuda
Facsimile No: +1 441 298 5274
Attention: L. Michael Murphy
with a copy to the Guarantor
<PAGE> 133
(b) if to the Parent to:-
Aircraft SPC-9 Inc.
c/o INTERNATIONAL LEASE FINANCE CORPORATION
1999 Avenue of the Stars
39th Floor
Los Angeles
CA 90067
Facsimile No: +1 310 788 1990
Attention: Legal Department and Chief Financial Officer
with a copy to the Guarantor
(c) if to the Guarantor or the Subordinated Lender to:-
INTERNATIONAL LEASE FINANCE CORPORATION
1999 Avenue of the Stars
39th Floor
Los Angeles
CA 90067
United States
Tel: +1 310 788 1999
Facsimile No: +1 310 788 1990
Attention: Legal Department and Chief Financial Officer
(d) if to the Agent or the Security Trustee to:-
HALIFAX plc
Group Treasury
33 Old Broad Street
London
EC2N 1HZ
Tel: +44 171 574 8042
Facsimile No: +44 171 574 8139
Attention: Head of Aircraft Finance
copy to:
HALIFAX plc
Group Treasury Operations
Trinity Road
Halifax
West Yorkshire
HX1 2RG
Tel: +44 1422 333333
Facsimile No: +44 1422 391442
Attention: Senior Manager - Structured
Finance Administration
<PAGE> 134
(e) if to a Lender from any of the Obligors, then to such Lender
care of the Agent.
(f) if to a Lead Manager, then to the address and/or facsimile
number set out opposite the name of such Lead Manager in the
relevant Part of Schedule 1.
24. GOVERNING LAW AND JURISDICTION
24.1 This Agreement shall be governed and construed in accordance with
English law.
24.2 The Borrower and each other Obligor irrevocably agrees for the benefit
of each of the Agent, the Security Trustee and the Lenders , and each of
the Agent, the Security Trustee and each of the Lenders irrevocably
agree for the benefit of each Obligor, that the courts of England shall
have jurisdiction to hear and determine any suit, action or proceeding,
and to settle any disputes, which may arise out of or in connection with
this Agreement or any other Transaction Document and, for such purposes,
irrevocably submits to the jurisdiction of such courts.
24.3 Each party irrevocably waives any objection which it might now or
hereafter have to the courts referred to in Clause 24.2 being nominated
as the forum to hear and determine any suit, action or proceeding, and
to settle any disputes, which may arise out of or in connection with
this Agreement or any other Transaction Document and agrees not to claim
that any such court is not a convenient or appropriate forum in each
case whether on the grounds of venue or forum non conveniens or any
similar grounds or otherwise.
24.4 For the purpose of any suit, action, proceeding or settlement of dispute
in the English courts (whether under this Agreement or any other
Transaction Document), the Borrower and each Obligor and each Lender and
Representative which is not incorporated in England (or registered as an
oversea company pursuant to the Companies Act 1985):
(a) appoints the agent specified in Schedule 7 to accept service of
process in respect of any such suit, action, proceeding or
settlement of dispute;
(b) confirms that such agent is willing to accept service of such
process on its behalf in respect of this Agreement and the other
Transaction Documents; and
(c) if the agent specified in Schedule 7 no longer serves as its
agent, shall promptly appoint another such agent acceptable to
the Agent and advise the Agent thereof.
24.5 The submission to the jurisdiction of the courts referred to in Clause
24.2 shall not (and shall not be construed so as to) limit the right of
any party to take proceedings against any other party in any other court
of competent jurisdiction nor shall the taking of proceedings in any one
or more jurisdictions preclude the taking of proceedings in any other
jurisdiction, whether concurrently or not.
24.6 To the extent that the Borrower or any other Obligor or any of the
property of the Borrower or any other Obligor is or becomes entitled at
any time to any immunity on the grounds of sovereignty or otherwise from
any legal action, suit or proceeding, from set-off or counterclaim, from
the jurisdiction of any competent court, from service of process,
<PAGE> 135
from attachment prior to judgment, from attachment in aid of execution,
or from execution prior to judgment, or other legal process in any
jurisdiction, the Borrower and each other Obligor, for itself and its
property, hereby irrevocably and unconditionally waives, and agrees not
to plead or claim, any such immunity with respect to its obligations,
liabilities or any other matter under or arising out of or in connection
with any of the Transaction Documents.
25. MISCELLANEOUS
25.1 A certificate given by the Agent, the Security Trustee or any Lender as
to the amount of any sum required to be paid to it under any provisions
of this Agreement or any of the other Transaction Documents shall, save
as otherwise provided for in this Agreement or any of the other
Transaction Documents and save in the case of manifest error, be
conclusive evidence of the amounts therein stated for all purposes of
this Agreement or, as the case may be, any of the other Transaction
Documents. Any such certificate shall contain a reasonable explanation
of the way in which the sum required to be paid was calculated, together
with reasonable supporting evidence, PROVIDED that in providing such a
reasonable explanation and such evidence, neither the Agent nor the
Security Trustee nor any of the Lenders shall be required to disclose
any documents and/or information relating to its business or affairs
which it considers (in its bona fide opinion) to be of a confidential
nature.
25.2 The parties hereto agree and acknowledge that this Agreement shall
continue in full force and effect for all purposes until all Secured
Obligations (exclusive of indemnities in respect of which no claims have
been, or to the knowledge of the Security Trustee will be, asserted)
have been paid in full notwithstanding that the Commitments may at any
time be reduced to zero.
25.3 Each of the parties hereto agrees that no amendments, variations,
supplements or modifications may be made to any of the Transaction
Documents other than by an instrument in writing executed by the
applicable Obligor(s) and the Agent or the Security Trustee as provided
in the applicable Transaction Document, or where expressly provided in
the applicable Transaction Document, the Agent on behalf and on the
instructions of the Majority Lenders (which consent shall not be
unreasonably withheld).
25.4 Each of the Borrower, the Guarantor and the Parent hereby acknowledges
and accepts that under the Support Agreements the Export Credit Agencies
have certain rights to require the Lenders, the Agent and/or the
Security Trustee to act, or to omit to act, in accordance with the
instructions of the Export Credit Agencies. Accordingly, each of the
Borrower, the Guarantor and the Parent hereby acknowledges and accepts
that if any of the Lenders, the Agent and/or, as the case may be, the
Security Trustee have to exercise a right, discretion or power under any
of the Transaction Documents "reasonably", "in good faith" or "bona
fide" or with any other restriction of whatsoever nature then such
Lender, the Agent and/or, as the case may be, the Security Trustee will
be deemed to be acting "reasonably", "in good faith" or "bona fide" or
in accordance with such other restrictions (as the case may be) if such
Lender, the Agent and/or the Security Trustee exercises, or refrains
from exercising, such right, discretion or power in accordance with the
instructions of the relevant Export Credit Agency.
<PAGE> 136
26. CONFIDENTIALITY
26.1 At all times during the Security Period and after the termination
thereof, each party hereto shall use all reasonable endeavours to ensure
that its respective officers, directors, employees and agents shall keep
secret and confidential and not, without the prior written consent of
the Borrower, the Guarantor, the Agent and the Security Trustee,
disclose to any third party the terms of any of the Transaction
Documents, any Lease, Sub-Lease, Insurances, Purchase Agreements or
Engine Agreements or any of the information, reports, invoices, or
documents supplied by or on behalf of any of the other parties hereto,
save that any such party shall be entitled to disclose any such terms,
information, reports or documents:-
(i) in connection with any proceedings arising out of or in
connection with any of the Transaction Documents to the extent
that such party may consider necessary to protect its interest;
or
(ii) to any potential permitted assignee or transferee of all or any
of such party's rights under any of the Transaction Documents or
any other permitted person proposing to enter into contractual
arrangements with such party in relation to or in connection
with the transactions contemplated by any of the Transaction
Documents, subject to it obtaining an undertaking from such
potential permitted assignee or permitted other person in the
terms similar to this Clause 26.1; or
(iii) if required to do so by an order of a court of competent
jurisdiction whether in pursuance of any procedure for
discovering documents or otherwise; or
(iv) pursuant to any law or regulation having the force of law
(including, without limitation, SEC filing requirements); or
(v) to any fiscal, monetary, tax, governmental or other competent
authority; or
(vi) to its auditors, bankers, legal or other professional advisers
(which are under an ethical obligation to or agree to hold such
information confidential); or
(vii) to any of the Export Credit Agencies; or
(viii) in any manner contemplated by any of the Transaction Documents.
26.2 In addition, any party shall be entitled to disclose or use any such
information, reports or documents if the information contained therein
shall have emanated in conditions free from confidentiality bona fide
from some person other than the relevant party hereto and such party
would, but for the preceding provisions of this Clause 26 have been free
to disclose or use the same.
26.3 Each party may, notwithstanding any other provision of this Clause 26,
release to any potential assignee or transferee (permitted in each case
pursuant hereto or to the relevant Transaction Document), or other
person proposing to enter into contractual arrangements with such party
in relation to or in connection with the transactions contemplated by
any of the Transaction Documents, a copy of any of the Transaction
Documents, PROVIDED that each such potential assignee or transferee or
other person confirms in writing to the other
<PAGE> 137
parties to this Agreement that it is bound by the terms of this Clause
26 as if it had been a party to this Agreement.
27. COUNTERPARTS AND DELIVERY BY FACSIMILE
27.1 This Agreement may be executed in any number of counterparts and by
different parties thereto on separate counterparts and any single
counterpart or set of counterparts signed, in either case, by all the
parties hereto shall be deemed to constitute a full and original
agreement for all purposes but all counterparts shall constitute but one
and the same instrument.
27.2 Delivery of an executed counterpart of this Agreement by facsimile will
be deemed as effective as delivery of an originally executed
counterpart. Any party delivering an executed counterpart of this
Agreement will also deliver an originally executed counterpart, but the
failure of any party to deliver an originally executed counterpart of
this Agreement will not affect the validity or effectiveness of this
Agreement.
IN WITNESS whereof this Agreement has been executed by the duly authorised
representatives of the parties hereto (other than the Guarantor) under hand, and
has been executed by the Guarantor as a Deed with the intention that it be
delivered on the day and year first above written.
<PAGE> 138
SCHEDULE 1 - PART I
THE BRITISH LENDERS
<TABLE>
<CAPTION>
AMOUNT OF
JURISDICTION BRITISH LENDERS
LENDING ADDRESS FOR OF COMMITMENTS
LENDER OFFICE NOTICES INCORPORATION (US$)
- ------ ------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
HALIFAX plc Trinity Road HALIFAX PLC England and 1,123,000,000
Halifax 33 Old Broad Street Wales
West Yorkshire London
HX 2RG EC2N 1HZ
Tel: +44 171 574 8042
Fax No:+44 171 574
8139
Attention: Head of
Aircraft
Finance
copy to:
HALIFAX plc
Group Treasury
Operations
Trinity Road
Halifax
West Yorkshire
HX1 2RG
Tel: +44 1422 333
333
Fax No: +44 1422
391 442
Attention: Senior
Manager - Structured
Finance
Administration
</TABLE>
<PAGE> 139
SCHEDULE 1 - PART II
THE FRENCH LENDERS
<TABLE>
<CAPTION>
AMOUNT OF
JURISDICTION FRENCH LENDERS
LENDING ADDRESS FOR OF COMMITMENTS
LENDER OFFICE NOTICES INCORPORATION (US$)
- ------ ------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Societe Generale Societe Generale, Serge Bozovic France 1,975,000,000
FINT/EXT/BAC, Tel: +33 1 42 14 41 19
17 Cours Valmy, Fax: +33 1 42 13 04 15
92972 Paris,
La Defense cedex 7, Francoise Refabert
France Tel: +33 1 42 14 03 89
Fax: +33 1 42 14 66 04
with a copy to
Florence Roussel
Pollet
Tel: +33 1 42 14 24 02
Fax: +33 1 42 14 85 07
</TABLE>
<PAGE> 140
SCHEDULE 1 - PART III
THE GERMAN LENDERS
<TABLE>
<CAPTION>
AMOUNT OF
GERMAN
JURISDICTION LENDERS
LENDING ADDRESS FOR OF COMMITMENTS
LENDER OFFICE NOTICES INCORPORATION (US$)
- ------ ------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Bayerische Hypo-und HypoVereinsbank Bayerische Hypo-und Germany 399,509,500
Vereinsbank AG Luxembourg Vereinsbank AG, Global
Societe Anonyme, Aircraft Finance (FPA3),
4, rue Alphonse Am Tucherpark 1, 80538
Weicker, L-2099 Munich, Germany
Luxembourg
Tel: +49 89 37 82 43 03
Fax: +49 89 37 82 03 54
Attention: Michael Trentzsch
copy to:
HypoVereinsbank
Luxembourg Societe
Anonyme,
4, rue Alphonse Weicker,
L-2099 Luxembourg
Tel: +352 4272 2124
Fax: +352 4272 4510
Attention: Credit
Department - Corporate
and Structured Finance
Kreditanstalt fur Kreditanstalt Kreditanstalt fur Germany 430,241,000
Wiederaufbau fur Wiederaufbau, Export and
Wiederaufbau, Project Finance -
Palmengartenstrasse Aerospace -
5-9, Palmengartenstrasse 5-9,
60325 Frankfurt 60325 Frankfurt am Main,
am Main, Germany Germany
Tel: +49 69 7431 3741
Fax: +49 69 7431 2944
</TABLE>
<PAGE> 141
<TABLE>
<CAPTION>
AMOUNT OF
GERMAN
JURISDICTION LENDERS
LENDING ADDRESS FOR OF COMMITMENTS
LENDER OFFICE NOTICES INCORPORATION (US$)
- ------ ------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Commerzbank Commerzbank AG, Commerzbank AG Germany 399,509,500
Aktiengesellschaft Los Angeles Corporate Finance/
Branch, Aircraft Finance
633 West Fifth 60261 Frankfurt am
Street, Main, Germany
Suite 6600,
Los Angeles, Tel: +49 69 136-23680
CA 90071, USA Fax: +49 69 136-27896
Attention: Matthias Hommel
with a copy to:
Commerzbank AG,
Los Angeles Branch,
633 West Fifth Street,
Suite 6600,
Los Angeles,
CA 90071, USA
Tel: +1 213 623-8223/
683-5408
Fax: +1 213 623 0039
Attention: Werner
Schmidbaur/Karla Wirth
</TABLE>
<PAGE> 142
SCHEDULE 2
FORM OF TRANSFER CERTIFICATE
To: [Agent]
TRANSFER CERTIFICATE
This transfer certificate ("TRANSFER CERTIFICATE") relates to a Agreement dated
19th January 1998 and made between (1) the banks and financial institutions
named therein as Lenders, (2) Halifax plc as Agent, (3) Halifax plc as Security
Trustee, (4) Sierra Leasing Limited (the "BORROWER"), (5) Aircraft SPC-9, INC.
(the "PARENT"), (6) International Lease Finance Corporation as guarantor (the
"GUARANTOR") and (7) International Lease Finance Corporation as subordinated
lender (the "SUBORDINATED LENDER") (the "AGREEMENT" which term shall include any
amendments or supplements thereto) and to each of the Loan Supplements made
between the Agent, the Security Trustee and the Borrower in respect of an
Advance under the Agreement.
Terms defined or incorporated by reference in the Agreement shall, unless
otherwise defined, have the same meanings when used in this Transfer
Certificate.
I. [Details of the Transferor] (the "TRANSFEROR"):-
1. confirms that to the extent that details appear in the Schedule to this
Transfer Certificate under the headings "Transferor's Commitment",
"Amount of Commitment Transferred and the Related Rights and Obligations
of the Transferor to be Transferred", "Transferor's Participation" and
"Amount of Transferor's Participation Transferred and Related Rights and
Obligations of the Transferor to be Transferred", those details
accurately summarise its Commitment and its participation in the
Facility and its participation in each Advance already made all or part
of which is to be transferred (as more particularly described in the
Loan Supplements);
2. requests [Details of Transferee] (the "TRANSFEREE") to accept and
procure, in accordance with Clause 18.3 (Transfer Certificates) of the
Agreement, the substitution of the Transferor by the Transferee in
respect of the amount specified in the Schedule hereto of its Commitment
and its participation in the Facility and its participation in each
Advance already made (as more particularly described in the Loan
Supplements) by signing this Transfer Certificate.
II. The Transferee hereby requests each of the Obligors, the Lenders, the
Borrower, the Agent and the Security Trustee to accept this executed
Transfer Certificate as being delivered under and for the purposes of
Clause 18.3 (Transfer Certificates) of the Agreement so as to take
effect in accordance with the terms thereof on the Transfer Date or on
such later date as may be determined in accordance with the terms
thereof.
III. The Transferee:-
1. represents that it has received a copy of the Agreement and
copies of each Loan Supplement together with such other
documents and information as it has requested in connection with
this transaction;
<PAGE> 143
2. represents that it has not relied and will not rely on the
Transferor to check or enquire on its behalf into the legality,
validity, effectiveness, adequacy, accuracy or completeness of
any such documents or information; and
3. agrees that it has not relied and will not rely on any of the
Transferor, the Agent or any of the Lenders to assess or keep
under review on its behalf the financial condition,
creditworthiness, condition, affairs, status or nature of any
party to any of the Transaction Documents or the legality,
validity, priority, adequacy, effectiveness or enforceability of
any of the Transaction Documents.
4. represents that its has a credit rating with Standard and Poor's
Corporation of at least BBB or a credit rating with Moody's
Investor Service Inc. of at least Baa2 or, in each case, the
equivalent successor rating, and is not on negative credit watch
to fall below such rating;
5. represents that it is able to file for either (i) US tax treaty
benefits on a zero rate of withholding tax and agrees to provide
US Internal Revenue Service Form 1001 (or its equivalent) to the
Agent or (ii) exemption from withholding tax on income
effectively connected with the conduct of a trade or business in
the United States and agrees to provide US Internal Revenue
Service Form 4224 (or its equivalent) to the Agent;
6. represents that it is neither resident in the United Kingdom for
United Kingdom tax purposes nor controlled by persons who are so
resident if the transfer hereunder would result in Advances of
Lenders resident in the United Kingdom for United Kingdom tax
purposes or controlled by persons whoa re so resident
constituting fifty per cent. (50%) or more of the Advances as at
the date of the proposed transfer;
7. represents that it is acquiring the Transferor's right, title
and interest hereunder in the ordinary course of its lending
business and not with any present view to the distribution
thereof in violation of the registration requirements of the
U.S. Securities Act of 1933, as amended, and that the transfer
is in compliance with all applicable securities and other laws
(if any); and
8. agrees that it will be bound by the provisions of the Facility
Agreement and the other Transaction Documents and will perform
in accordance with the terms of the Facility Agreement and the
other Transaction Documents the obligations which by their terms
are required to be performed by a Lender.
IV. The Transferee undertakes with the Transferor and each of the other
parties to the Agreement that it shall perform in accordance with their
terms all those obligations which by the terms of Clause V of this
Transfer Certificate will be assumed by it upon delivery of the executed
copy of this Transfer Certificate to the Agent and further undertakes
with the Transferor, each of the other Lenders, the Agent and the
Security Trustee that it shall perform in accordance with their terms
all of the obligations of the Transferor under the Lenders' Agreement as
if the Transferee had originally been a party to the Lenders' Agreement
and each of the other Lenders, the Agent and the Security
<PAGE> 144
Trustee undertake with the Transferee to perform their obligations under
the Lenders' Agreement to the Transferor in favour of the Transferee as
if the Transferee had originally been a party to the Lenders' Agreement.
V. With effect from the Transfer Date as specified in the Schedule hereto
the parties hereto (including in particular but without limitation the
Transferee) agree that:
(i) to the extent of the Transferor's rights and obligations under
the Agreement and the other Transaction Documents in respect of
the participation the Borrower and the Transferor shall each be
released from further obligations to each other under the
Agreement and the other Transaction Documents and their
respective rights against each other shall be cancelled (such
rights and obligations being referred to in this Clause V as
"Discharged Rights and Obligations"); and
(ii) the Borrower, the Agent, the Security Trustee and the Transferee
shall each assume obligations towards each other and/or acquire
rights against each other in respect of the participation which
differ from the Discharged Rights and Obligations only insofar
as the Borrower and the Transferee have assumed and/or acquired
the same in place of the Borrower and the Transferor; and
(iii) the Agent, the Security Trustee, the Borrower, the Transferee
and the other Lenders shall acquire the same rights and assume
the same obligations among themselves as they would have
acquired and assumed had the Transferee originally been a party
to the Agreement and the other Transaction Documents as a Lender
in respect of the participation; and
(iv) the Transferee, the Agent, the Security Trustee and each of the
other Lenders shall acquire the same rights and assume the same
obligations amongst themselves in respect of the Lenders
Agreement as they would have acquired and assumed had the
Transferee originally been a party to the Lenders' Agreement as
a Lender in respect of the participation in the place of the
Transferor.
(v) all costs and expenses of the transfer hereunder shall be borne
by the Transferor or Transferee, as the case may be, and no
Obligor shall be under any obligation to pay any greater amount
or suffer any other material increase in liabilities or material
diminution in right or benefit under the Transaction Documents
following and as a consequence (directly or indirectly) of any
such transfer or change in Lending Office unless and until a
Change in Law occurs and as a result of such Change in Law
(excluding any Change of Law which occurs, or the intended
implementation of which is officially announced or proposed
before the date of such transfer or change in lending Office).
VI. None of the Transferor, any of the Lenders, the Agent, the Security
Trustee or the Borrower:-
1. makes any representation or warranty or assumes any
responsibility with respect to the legality, validity,
effectiveness, adequacy or enforceability of the Agreement; or
<PAGE> 145
2. assumes any responsibility for the financial condition of any of
the Obligors or for the performance and observance by any of the
Obligors or any other party to any of the Transaction Documents
or any other document relating thereto of any of the Obligor's
or such other party's obligations under any of the Transaction
Documents or any document relating thereto and any and all
conditions and warranties, whether express or implied by law or
otherwise, are excluded.
VII. None of the Obligors assumes any responsibility for the financial
condition of any party, or for the performance or observance by any
party, other than the Obligors, of any of the Transaction Documents or
any other document relating thereto or such party's obligations under
the Agreement or any document relating thereto (other than those of the
Obligors) and any and all conditions and warranties whether express or
implied by law or otherwise, are excluded (other than in relation to the
performance or observance of the Obligors).
VIII. The Transferee confirms that its Lending Office and address for notices
for the purposes of the Agreement are as set out in the Schedule hereto.
IX. A. The Transferor hereby gives notice to the Transferee (and the
Transferee hereby acknowledges and agrees with the Transferor)
that the Transferor is under no obligation to re-purchase (or in
any other manner to assume, undertake or discharge any
obligation or liability in relation to) the transferred
Commitment, and/or transferred participation in the Advances
already made (as more particularly described in the Loan
Supplements) and/or the transferred rights and/or obligations at
any time after this Transfer Certificate shall have taken
effect.
B. Following the date upon which this Transfer Certificate shall
have taken effect, without limiting the provisions hereof, each
of the Transferee and the Transferor hereby acknowledges and
confirms to the other that in relation to the relative
Commitment/participation in the Advances already made (as more
particularly described in the Loan Supplements) and the rights
and/or obligations under the Agreement assumed by the Transferee
(or part thereof), variations, amendments or alterations to any
of the terms of the Agreement and/or any of the Loan Supplements
arising in connection with any re-negotiation or re-scheduling
of the obligations hereunder shall apply to and be binding on
the Transferee alone.
X. The Transferor hereby gives notice that nothing herein or in the
Agreement (or any document relating thereto) shall oblige the Lender to
(i) accept a re-transfer from the Transferee of the whole or any part of
its rights, benefits and/or obligations under the Agreement transferred
pursuant hereto or (ii) support any losses directly or indirectly
sustained or incurred by the Transferee for any reason whatsoever
including, without limitation, the non-performance by any other party to
the Agreement (or any document relating thereto) of its obligations
under any such document. The Transferee hereby acknowledges the absence
of any such obligation as is referred to in (i) or (ii) above.
XI. The Transferee hereby confirms, pursuant to and in accordance with the
provisions of Clause 24.4 (Governing Law and Jurisdiction) of the
Agreement, that its agent for service of process in England is as set
out in the Schedule to this Transfer Certificate and
<PAGE> 146
confirms that such agent is willing to accept service of such process as
is described in Clause 24.4 of the Agreement on behalf of the Transferee
in respect of the Agreement, any other Transaction Document.
XII. This Transfer Certificate shall be governed by and construed in
accordance with English Law.
[Transferee]
By:
------------------------------
(Duly Authorised)
[Transferor]
By:
------------------------------
(Duly Authorised)
The Agent on behalf of itself and all other parties to the Agreement (other than
the Transferor and the Obligors).
By:
------------------------------
(Duly Authorised)
The Borrower on behalf of itself and all the other Obligors
By:
------------------------------
(Duly Authorised)
Dated: [ ]
<PAGE> 147
SCHEDULE TO THE TRANSFER CERTIFICATE
Transferor's Commitment Amount of Commitment Transferred and the Related
Rights and Obligations of the Transferor to be
Transferred
Transferor's Participation Amount of Transferor's Participation in Advances
in Advances already made already made Transferred and Related Rights and
Obligations of the Transferor to be Transferred
Date:
[Transferee]
LENDING OFFICE: ADDRESS FOR NOTICES:
[___________________] [________________________________]
Telephone: [______________]
Facsimile: [______________]
JURISDICTION OF INCORPORATION:
[_____________]
English Process Agent:
[_____________]
Transfer Date: [_________]
<PAGE> 148
SCHEDULE 3
UTILISATION NOTICE
To: (1) HALIFAX PLC (as Agent)
Group Treasury
33 Old Broad Street
London
EC2N 1HZ
Facsimile No: +44 171 574 8139
Tel No: +44 171 574 8042
Attention: Head of Aircraft Finance
From: [_____] (the "BORROWER")
[_____________________________
______________________________
______________________________
______________________________
______________________________]
RE: AIRCRAFT FACILITY AGREEMENT DATED 19TH JANUARY, 1999 AND MADE BETWEEN
THE BANKS AND FINANCIAL INSTITUTIONS NAMED THEREIN AS LENDERS, HALIFAX
PLC AS AGENT AND SECURITY TRUSTEE, THE BORROWER, AIRCRAFT SPC 9, INC. AS
PARENT, AND INTERNATIONAL LEASE FINANCE CORPORATION AS GUARANTOR AND
SUBORDINATED LENDER AS AMENDED, SUPPLEMENTED OR ACCEDED TO FROM TIME TO
TIME (THE "AGREEMENT")
The Borrower hereby gives notice in accordance with Clause 3.1.1 of the
Agreement that:-
(i) the Borrower desires to effect a Utilisation on the Delivery Date, which
is currently scheduled to be [________];
(ii) the requested amount of the proposed Advance is US$[_____];
(iii) the Aircraft the subject of the Utilisation is one Airbus
[A319/A320/A321/A330/A340] Aircraft with manufacturer's serial number
[_______], proposed [_______] Registration Mark [_______] and [_______]
installed Engines;
[(iv) the proposed [Lessee][Sub-Lessee] of the Aircraft the subject of the
Utilisation is [_______], a company incorporated in [_______] and having
its principal place of business in [_______] and it is proposed that the
Aircraft shall be [registered] in [_______]. The Lessee will [and the
Sub-Lessee] [will] [will not] require quiet enjoyment covenants from the
Borrower and the Security Trustee in the form agreed between the
Borrower, the Security Trustee and the Guarantor.]
A certified copy of the [executed Lease] [latest draft of the proposed
Lease] is attached hereto;]
<PAGE> 149
[(v) the Borrower confirms that [______________], as Sub-Borrower, shall be
the owner of the Aircraft];
(vi) the Borrower desires the Lenders to disburse the Loan on
[____________________________]; and
(vii) The Aircraft Purchase Price is US$[______________];
The account into which the Loan should be paid is account no. [______________]
with [_______].
The Borrower hereby certifies that as at the date of this notice no Relevant
Event, Termination Event, and except as disclosed to the Agent no Second Trigger
Event or Third Trigger Event, has occurred and is continuing or would result
from the drawdown of the Advance, the subject of this Utilisation.
The Borrower hereby certifies that all representations and warranties on its
part contained in Clause 6.2 of the Facility Agreement remain true and correct
at the date of this notice and shall remain true and correct on the Delivery
Date and no event has occurred which constitutes or, with the passing of time or
the giving of notice or the making of any determination or any combination
thereof would constitute, a Termination Event.
Capitalised terms used herein defined in the Agreement have the same meanings
herein.
[____________________________]
By:
Name:
Title:
<PAGE> 150
SCHEDULE 4
PART I
DETAILS OF PROPOSED AIRCRAFT AND PROPOSED AIRCRAFT DELIVERY SCHEDULE
(ALL FIGURES IN US$)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
NATIONAL
ASSUMED CONTENT
SCHEDULED PROPOSED FINANCED (ASSUMED
AIRCRAFT DELIVERY ENGINE INITIAL AMOUNT %)
NO. MONTH TYPE TYPE LESSEE (MILLIONS) UK FRANCE GERMANY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Feb-99 A319 CFM56-5A4 Air France 29,652.25 18 51 31
2 Mar-99 A319 CFM56-5B TAP 29,652.25 18 51 31
3 Apr-99 A319 CFM56-5A4 Air France 29,435.50 18 51 31
4 Apr-99 A319 CFM58-5A4 Air France 29,435.50 18 51 31
5 May-99 A319 CFM56-5B Swissair 29,435.50 18 51 31
6 Jan-99 A320 V2527-A5 Dragonair #5 35,372.75 32 32 36
7 Mar-99 A320 CFM56-5A3 TAP #4 35,372.75 20 49 31
8 Apr-99 A320 CFM56-5A3 Star Airlines 35,198.50 20 49 31
9 May-99 A320 CFM56-5B4 Iberia 35,198.50 20 49 31
10 Oct-99 A320 CFM56-5B4 Iberia 36,035.75 20 49 31
11 Nov-99 A320 V2527-A5 BMA #1 36,035.75 32 32 36
12 Feb-99 A321 V2533-A5 BMA #3 40,415.80 33 32 35
13 Feb-99 A321 V2533-A5 Aerolloyd #2 40,415.80 33 32 35
14 Mar-99 A321 V2533-A5 Dragonair #6 40,415.80 33 32 35
15 Mar-99 A321 CFM56-5B Aer Lingus 40,415.80 17 52 31
16 Mar-99 A321 V2533-A5 BMA #4 40,415.80 33 32 35
17 Apr-99 A321 V2533-A5 Aerolloyd #3 40,073.25 33 32 35
18 May-99 A321 V2533-A5 Dragonair #7 40,073.25 33 32 35
19 Jul-99 A321 V2533-A5 Asiana #1 40,366.50 33 32 35
20 Dec-99 A321 CFM56-5B Swissair 41,208.00 17 52 31
</TABLE>
<TABLE>
<CAPTION>
(1) (8)
ASSUMED NATIONAL PROPORTIONS
ASSUMED
AIRCRAFT BRITISH ASSUMED FRENCH ASSUMED GERMAN
NO. LENDERS' LENDERS' LENDERS'
PROPORTION PROPORTION PROPORTION
<S> <C> <C> <C>
1 5,337,405.00 15,122,647.50 9,192,197.50
2 5,337,405.00 15,122,647.50 9,192,197.50
3 5,298,390.00 15,012,105.00 9,125,005.00
4 5,298,390.00 15,012,105.00 9,125,005.00
5 5,298,390.00 15,012,105.00 9,125,005.00
6 11,319,280.00 11,319,280.00 12,734,190.00
7 7,074,550.00 17,332,647.50 10,965,552.50
8 7,039,700.00 17,247,265.00 10,911,535.00
9 7,039,700.00 17,247,265.00 10,911,535.00
10 7,207.150.00 17,657,517.50 11,171,082.50
11 11,531,440.00 11,531,440.00 12,972,870.00
12 13,337,214.00 12,933,056.00 14,145,530.00
13 13,337,214.00 12,933,056.00 14,145,530.00
14 13,337,214.00 12,933,056.00 14,145,530.00
15 6,870,686.00 21,016,216.00 12,528,898.00
16 13,337,214.00 12,933,056.00 14,145,530.00
17 13,224,172.50 12,823,440.00 14,025,637.50
18 13,224,172.50 12,823,440.00 14,025,637.50
19 13,320,945.00 12,917,280.00 14,128,275.00
20 7,005,360.00 21,428,160.00 12,774,480.00
</TABLE>
- 147 -
<PAGE> 151
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
NATIONAL
ASSUMED CONTENT
SCHEDULED PROPOSED FINANCED (ASSUMED
AIRCRAFT DELIVERY ENGINE INITIAL AMOUNT %)
NO. MONTH TYPE TYPE LESSEE (MILLIONS) UK FRANCE GERMANY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
21 Feb-99 A330-200 Trent 772-60 Air Transat 56,960.63 38 34 28
22 Apr-99 A330-200 Trent 772-60 Air Transat 56,960.63 38 34 28
23 Feb-99 A330-200 PW4168A Swissair #2 56,960.63 24 41 35
24 Feb-99 A330-200 PW4168A Swissair #3 56,960.63 24 41 35
25 Mar-99 A330-200 PW4168A Swissair #4 56,896.17 24 41 35
26 May-99 A330-200 PW4168A Swissair #5 56,896.17 24 41 35
27 May-99 A330-200 CF6-80E1 Canada 3000 56,896.17 22 43 35
#3
28 Aug-99 A330-200 PW4168A Sabena #1 57,128.50 24 41 35
29 Oct-99 A330-200 PW4168A Sabena #2 58,964.50 24 41 35
30 Nov-99 A330-200 PW4168A Sabena #3 58,964.50 24 41 35
31 Feb-99 A340-300 CFM56-5C4 Air Canada #4 72,938.50 20 50 30
32 Jan-00 A319-100 CFM56-5A4 Air France 28,477.83 18 51 31
33 Jan-00 A319 CFM56-5B5 Iberia 28,477.83 18 51 31
34 Feb-00 A319 CFM56-5B5 Iberia 28,477.83 18 51 31
35 Mar-00 A319 CFM56-5A4 Air France 28,477.83 18 51 31
36 Apr-00 A319 V2524-A5 TBD 27,602.33 28 39 33
</TABLE>
<TABLE>
<CAPTION>
(1) (8)
ASSUMED NATIONAL PROPORTIONS
ASSUMED
AIRCRAFT BRITISH ASSUMED FRENCH ASSUMED GERMAN
NO. LENDERS' LENDERS' LENDERS'
PROPORTION PROPORTION PROPORTION
<S> <C> <C> <C>
21 21,645,039.40 19,366,614.20 15,948,976.40
22 21,645,039.40 19,366,614.20 15,948,976.40
23 13,670,551.20 23,353,858.30 19,936,220.50
24 13,670,551.20 23,353,858.30 19,936,220.50
25 13,655,080.80 23,327,429.70 19,913,659.50
26 13,655,080.80 23,327,429.70 19,913,659.50
27 12,517,157.40 24,465,353.10 19,913,659.50
28 13,710,840.00 23,422,685.00 19,944,975.00
29 14,151,480.00 24,175,445.00 20,637,575.00
30 14,151,480.00 24,175,445.00 20,637,575.00
31 14,587,700.00 36,469,250.00 21,881,550.00
32 5,126,009.40 14,523,693.30 8,828,127.30
33 5,126,009.40 14,523,693.30 8,828,127.30
34 5,126,009.40 14,523,693.30 8,828,127.30
35 5,126,009.40 14,523,693.30 8,828,127.30
36 7,728,652.40 10,764,908.70 9,108,768.90
</TABLE>
- 148 -
<PAGE> 152
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
NATIONAL
ASSUMED CONTENT
SCHEDULED PROPOSED FINANCED (ASSUMED
AIRCRAFT DELIVERY ENGINE INITIAL AMOUNT %)
NO. MONTH TYPE TYPE LESSEE (MILLIONS) UK FRANCE GERMANY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
37 Apr-00 A319-100 CFM56-5A4 Air France 27,602.33 18 51 31
38 May-00 A319-100 CFM56-5B5 Iberia 27,602.33 18 51 31
39 Nov-00 A319-100 CFM56-5B5 Iberia 26,809.00 18 51 31
40 Feb-00 A320 V2527-A5 BMA #2 36,120.75 32 32 36
41 Mar-00 A320 V2527-A5 BMA #3 36,120.75 32 32 36
42 Apr-00 A320 CFM56-5B4 Iberia 34,875.50 20 49 31
43 Apr-00 A320-200 CFM56-5B4 Iberia 34,875.50 20 49 31
44 May-00 A320 CFM56-5B4 Iberia 34,875.50 20 49 31
45 Feb-00 A319 CFM56-5B Air France 28,477.83 18 51 31
46 Mar-00 A321 V2533-A5 Aerolloyd #4 39,995.33 33 32 35
47 Apr-00 A321 V2533-A5 Aerolloyd #5 41,297.25 33 32 35
48 Jul-00 A321 V2533-A5 Asiana #2 41,297.25 33 32 35
49 Oct-00 A321 V2527-A5 TBD 41,798.33 33 32 35
50 Nov-00 A321 V2527-A5 TBD 41,825.65 33 32 35
51 Feb-00 A330-200 PW4168A Austrian 57,961.50 24 41 35
52 May-00 A330-200 CF6-80E1 Aer Lingus 57,757.50 22 43 35
53 May-00 A330-200 Trent 772-60 TBD 57,774.50 38 34 28
54 Nov-00 A330-200 PW4168A TBD 57,774.50 24 41 35
55 Apr-00 A340-300 CFM56-5C4 TBD 75,514.00 20 50 30
</TABLE>
<TABLE>
<CAPTION>
(1) (8)
ASSUMED NATIONAL PROPORTIONS
ASSUMED
AIRCRAFT BRITISH ASSUMED FRENCH ASSUMED GERMAN
NO. LENDERS' LENDERS' LENDERS'
PROPORTION PROPORTION PROPORTION
<S> <C> <C> <C>
37 4,968,419.40 14,077,188.30 8,556,722.30
38 4,968,419.40 14,077,188.30 8,556,722.30
39 4,825,620.00 13,672,590.00 8,310,790.00
40 11,558,640.00 11,558,640.00 13,003,470.00
41 11,558,640.00 11,558,640.00 13,003,470.00
42 6,975,100.00 17,088,995.00 10,811,405.00
43 6,975,100.00 17,088,995.00 10,811,405.00
44 6,975,100.00 17,088,995.00 10,811,405.00
45 5,126,009.40 14,523,693.30 8,828,127.30
46 13,198,458.90 12,798,505.60 13,998,365.50
47 13,628,092.50 13,215,120.00 14,454,037.50
48 13,628,092.50 13,215,120.00 14,454,037.50
49 13,793,448.90 13,375,465.60 14,629,415.50
50 13,802,464.50 13,384,208.00 14,638,977.50
51 13,910,760.00 23,764,215.00 20,286,525.00
52 12,706,650.00 24,835,725.00 20,215,125.00
53 21,954,310.00 19,643,330.00 16,176,860.00
54 13,865,880.00 23,687,545.00 20,221,075.00
55 15,102,800.00 37,757,000.00 22,654,200.00
</TABLE>
- 149 -
<PAGE> 153
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
NATIONAL
ASSUMED CONTENT
SCHEDULED PROPOSED FINANCED (ASSUMED
AIRCRAFT DELIVERY ENGINE INITIAL AMOUNT %)
NO. MONTH TYPE TYPE LESSEE (MILLIONS) UK FRANCE GERMANY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
56 Jan-01 A319-100 CFM56-5B5 Iberia 27,746.13 18 51 31
57 Mar-01 A319 CFM56-5B5 Iberia 27,746.13 18 51 31
58 Mar-01 A319-100 CFM56-5B5 Iberia 27,746.13 18 51 31
59 May-01 A319-100 CFM56-5B5 Iberia 27,047.00 18 51 31
60 Sep-01 A319-100 CFM56-5B5 Iberia 27,055.50 18 51 31
61 Feb-01 A320 V2527-A5 BMA #4 34,680.00 32 32 36
62 Feb-01 A320 CFM56-5B4 Iberia 34,680.00 20 49 31
63 Mar-01 A320-200 V2527-A5 TBD 34,680.00 32 32 36
64 Mar-01 A320 V2527-A5 BMA #5 34,680.00 32 32 36
65 Mar-01 A320-200 V2527-A5 BMA #6 34,680.00 32 32 36
66 May-01 A320 CFM56-5B4 Iberia 32,529.50 20 49 31
67 Feb-01 A321 V2533-A5 Aerolloyd #6 41,565.00 33 32 35
68 Apr-01 A321 V2533-A5 Aerolloyd opt 40,564.83 33 32 35
69 Apr-01 A321-200 V2527-A5 TBD 40,564.83 33 32 35
70 Apr-01 A330-200 PW4168A TBD 58,352.50 24 41 35
71 May-01 A330-200 CF6-80E1 TBD 58,352.50 22 43 35
72 Sep-01 A330-200 Trent 772-60 Star Airlines 58,522.50 38 34 28
73 Nov-01 A330-200 PW4168A Star Airlines 58,718.00 24 41 35
</TABLE>
<TABLE>
<CAPTION>
(1) (8)
ASSUMED NATIONAL PROPORTIONS
ASSUMED
AIRCRAFT BRITISH ASSUMED FRENCH ASSUMED GERMAN
NO. LENDERS' LENDERS' LENDERS'
PROPORTION PROPORTION PROPORTION
<S> <C> <C> <C>
56 4,994,303.40 14,150,526.30 8,601,300.30
57 4,994,303.40 14,150,526.30 8,601,300.30
58 4,994,303.40 14,150,526.30 8,601,300.30
59 4,868,460.00 13,793,970.00 8,384,570.00
60 4,869,990.00 13,798,305.00 8,387,205.00
61 11,097,600.00 11,097,600.00 12,484,800.00
62 6,936,000.00 16,993,200.00 10,750,800.00
63 11,097,600.00 11,097,600.00 12,484,800.00
64 11,097,600.00 11,097,600.00 12,484,800.00
65 11,097,600.00 11,097,600.00 12,484,800.00
66 6,505,900.00 15,939,455.00 10,084,145.00
67 13,716,450.00 13,300,800.00 14,547,750.00
68 13,386,393.90 12,980,745.60 14,197,690.50
69 13,386,393.90 12,980,745.60 14,197,690.50
70 14,004,600.00 23,924,525.00 20,423,375.00
71 12,837,550.00 25,091,575.00 20,423,375.00
72 22,238,550.00 19,897,650.00 16,386,300.00
73 14,092,320.00 24,074,380.00 20,551,300.00
</TABLE>
- 150 -
<PAGE> 154
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
NATIONAL
ASSUMED CONTENT
SCHEDULED PROPOSED FINANCED (ASSUMED
AIRCRAFT DELIVERY ENGINE INITIAL AMOUNT %)
NO. MONTH TYPE TYPE LESSEE (MILLIONS) UK FRANCE GERMANY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
74 Apr-01 A340-300 CFM56-5C4 TBD 78,387.00 20 50 30
75 May-01 A340 CFM56-5C4 TBD 78,387.00 20 50 30
3,169,705,530
</TABLE>
<TABLE>
<CAPTION>
(1) (8)
ASSUMED NATIONAL PROPORTIONS
ASSUMED
AIRCRAFT BRITISH ASSUMED FRENCH ASSUMED GERMAN
NO. LENDERS' LENDERS' LENDERS'
PROPORTION PROPORTION PROPORTION
<S> <C> <C> <C>
74 15,677,400.00 39,193,500.00 23,516,100.00
75 15,677,400.00 39,193,500.00 23,516,100.00
807,161,405.70 1,318,436,938.60 1,044,107,185.70
</TABLE>
NOTE: 1. "*" denotes potential or unconfirmed lessee. ILFC may at its
discretion, change the identity of the initial lessees and the engine
type.
NOTE: 2. Aircraft No. and other information may be changed in accordance with
the definition of Eligible Aircraft.
NOTE: 3. Scheduled Delivery months may be changed.
NOTE: 4. Assumed Financed Amount for each Aircraft is for indicative purposes
only and is subject to adjustment.
- 151 -
<PAGE> 155
SCHEDULE 4 : PART II
INTERNATIONAL LEASE FINANCE CORPORATION SAMPLE LOAN PROFILES
AS A PERCENTAGE OF AIRCRAFT COST
FOR AIRBUS A319/A320/A321/A330/A340 DELIVERIES
PURCHASE PRICE 120,000,000
(LASU RATE _____% PER ANNUM CALCULATED ON ACTUAL/360 DAY BASIS)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
REPAYMENT DATE NUMBER TRANCHE A ECA TRANCHE B ECA TOTAL LOAN ADVANCE OUTSTANDING
(SEMI-ANNUAL REPAYMENTS) (%)
DELIVERY DATE
<S> <C> <C> <C> <C>
2nd January 1999 75,000,000.00 27,000,000.00 102,000,000.00 85.00
1st July 1999 71,250,000.00 25,650,000.00 96,900,000.00 80.75
2nd January 2000 67,500,000.00 24,300,000.00 91,800,000.00 76.50
1st July 2000 63,750,000.00 22,950,000.00 86,700,000.00 72.25
2nd January 2001 60,000,000.00 21,600,000.00 81,600,000.00 68.00
1st July 2001 56,250,000.00 20,250,000.00 76,500,000.00 63.75
2nd January 2002 52,500,000.00 18,900,000.00 71,400,000.00 59.50
1st July 2002 48,750,000.00 17,550,000.00 66,300,000.00 55.25
2nd January 2003 45,000,000.00 16,200,000.00 61,200,000.00 51.00
1st July 2003 41,250,000.00 14,850,000.00 56,100,000.00 46.75
2nd January 2004 37,500,000.00 13,500,000.00 51,000,000.00 42.50
1st July 2004 33,750,000.00 12,150,000.00 45,900,000.00 38.25
2nd January 2005 30,000,000.00 10,800,000.00 40,800,000.00 34.00
1st July 2005 26,250,000.00 9,450,000.00 35,700,000.00 29.75
2nd January 2006 22,500,000.00 8,100,000.00 30,600,000.00 25.50
1st July 2006 18,750,000.00 6,750,000.00 25,500,000.00 21.25
2nd January 2007 15,000,000.00 5,400,000.00 20,400,000.00 17.00
1st July 2007 11,250,000.00 4,050,000.00 15,300,000.00 12.75
2nd January 2008 7,500,000.00 2,700,000.00 10,200,000.00 8.50
1st July 2008 3,750,000.00 1,350,000.00 5,100,000.00 4.25
2nd January 2009 0.00 0.00 0.00 0.00
</TABLE>
- 152 -
<PAGE> 156
SCHEDULE 5
GUARANTOR COVENANTS
1. In this Schedule 5 each of the following words shall have the following
meanings:-
"FINANCIAL INDEBTEDNESS" of any Person means, and includes all
obligations of such Person which in accordance with generally accepted
accounting principles in the United States of America shall be
classified upon a balance sheet of such Person as liabilities of such
Person, and in any event shall include all:-
(a) obligations of such Person for borrowed money or which have been
incurred in connection with the acquisition of property or
assets (other than security and other deposits on flight
equipment);
(b) obligations secured by any Lien or other charge upon property or
assets owned by such Person, even though such Person has not
assumed or become liable for the payment of such obligations;
(c) obligations created or arising under any conditional sale, or
other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such
agreement in the event of default are limited to repossession or
sale of property;
(d) obligations evidenced by bonds, debentures, notes or other
similar instruments; and
(e) Guarantees by such Person to the extent required pursuant to the
definition thereof,
but:
(i) shall not include amounts which would otherwise be taken into
account which are owed by the Guarantor to any of its
Subsidiaries or by any Subsidiary of the Guarantor to the
Guarantor or another Subsidiary of the Guarantor;
(ii) no amount shall be taken into account more than once in the same
calculation;
(iii) shall not include any aircraft lease rentals received in
advance;
(iv) shall not include any concessions received in advance from
manufacturers;
(v) shall not include any amounts in respect of current or deferred
Tax;
"GUARANTEES" by any person means all obligations (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in
effect guaranteeing any Financial Indebtedness, dividend or other
obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, all
obligations incurred through an
<PAGE> 157
agreement, contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or obligation or any property or assets constituting
security therefor, (b) to advance or supply funds (i) for the purchase
or payment of such Indebtedness or obligation or (ii) to maintain
working capital or other balance sheet condition or otherwise to advance
or make available funds for the purchase or payment of such Indebtedness
or obligation, (c) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the primary obligor against loss in
respect thereof; provided, however, that the obligation described in
clause (c) shall not include (i) obligations of a buyer under an
agreement with a seller to purchase goods or services entered into in
the ordinary course of such buyer's and seller's business unless such
agreement required that such buyer make payment whether or not delivery
is ever made of such goods or services and (ii) agreements where the
remaining debt on an aircraft does not exceed the aircraft's net book
value, determined in accordance with industry standards, except that
clause (c) shall apply to the amount of remaining debt that exceeds the
net book value of the aircraft. For the purposes of all computations
made under this Guarantee, a Guarantee in respect of any Financial
Indebtedness for borrowed money shall be deemed to be Financial
Indebtedness equal to the principal amount of such Financial
Indebtedness for borrowed money which has been guaranteed, and a
Guarantee in respect of any other obligation or liability or any
dividend shall be deemed to be Financial Indebtedness equal to the
maximum aggregate amount of such obligation, liability or dividend.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or
other entity of any kind;
"RELATED PARTY" means any Person (other than a Subsidiary):-
(i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with,
the Guarantor;
(ii) which beneficially owns or holds five per cent. (5%) or more of
the equity interest of the Guarantor; or
(iii) twenty per cent. (20%) or more of the equity interest of which
is beneficially owned or held by the Guarantor or a Subsidiary.
The term "control" means, for the purposes of the above definition, 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;
2. The Guarantor hereby undertakes and covenants with the Agent, the
Security Trustee, and each of the Lenders separately and severally that
from the date of this Agreement and until all Guaranteed Obligations
then payable have been paid in full:-
2.1 the Guarantor shall furnish to the Security Trustee sufficient copies
for each Lender (which the Security Trustee shall promptly furnish to
each Lender):-
<PAGE> 158
(a) as soon as available, and in any event within ninety-five (95)
days after the end of each fiscal year of the Guarantor, a copy
of the audited financial statements and annual audit report of
the Guarantor and its Subsidiaries for such fiscal year
beginning with the year ending December 31 1998 prepared on a
consolidated basis and in conformity with generally accepted
accounting principles in the United States of America and
certified by Price Waterhouse Coopers LLP or by another
independent United States of America certified public accountant
of recognised national standing in the United States of America
selected by the Guarantor;
(b) as soon as available, and in any event within fifty (50) days
after the end of each quarter (except the last quarter) of each
fiscal year of the Guarantor, a copy of the unaudited financial
statements of the Guarantor and its Subsidiaries for such
quarter prepared in a manner consistent with the audited
financial statements referred to in Paragraph 2.1(a) signed by
the Guarantor's chief financial officer and consisting of at
least a balance sheet as at the close of such quarter and
statements of earnings and cash flows for such quarter and for
the period from the beginning of such fiscal year to the close
of such quarter;
(c) contemporaneously with the furnishing of a copy of each annual
audit report and of each set of quarterly statements provided
for in this Paragraph 2.1, a certificate of the Guarantor dated
the date of such annual report or such quarterly statements and
signed by the Guarantor's chief financial officer or treasurer,
to the effect that no Termination Event or Relevant Event has
occurred and is continuing, or, if there is any such event,
describing it and the steps, if any, being taken to cure it and
as to the long term debt rating of the Guarantor as rated by
Standard & Poor's Corporation and by Moody's Investor Service,
Inc. or by an alternative service of equivalent recognition (if
neither Standard & Poor's Corporation nor Moody's Investor
Service, Inc. has assigned any rating);
(d) promptly after the filing or making thereof, copies of all 8-K's
(other than 8-K's relating solely to the issuance by the
Guarantor of securities pursuant to an effective registration
statement), 10-Q's, 10-K's, and other material reports or
registration statements filed by the Guarantor with or to any
securities exchange or the Securities and Exchange Commission;
(e) from time to time such other information concerning the
Guarantor as the Agent or the Security Trustee may reasonably
request;
2.2 promptly after learning of the occurrence of any Termination Event or a
First Trigger Event, Second Trigger Event or Third Trigger Event, the
Guarantor shall furnish to the Security Trustee written notice thereof,
describing the same and the steps being taken by the Guarantor affected
with respect thereto;
2.3 subject to Paragraph 2.8 the Guarantor will maintain and preserve its
existence as a corporation or other form of business organisation;
2.4 the Guarantor will engage in substantially the same fields of business
as it is engaged in on the date hereof;
<PAGE> 159
2.5 the Guarantor will maintain complete and accurate books and records in
which full and correct entries in conformity with generally accepted
accounting principles in the United States of America shall be made of
all dealings and transactions in relation to its respective business and
activities;
2.6 the Guarantor will not declare or pay any dividends whatsoever or make
any distribution on any capital stock of the Guarantor (except in shares
of, or warrants or rights to subscribe for or purchase shares of,
capital stock of the Guarantor), and not, and not permit any Subsidiary
to, make any payment to acquire or retire shares of capital stock of the
Guarantor, at any time when a Termination Event has occurred and is
continuing provided, however, that notwithstanding the foregoing, this
Paragraph 2.6 shall not prohibit the payment of dividends on any of the
Guarantor's money market preferred stock that was sold to the public
pursuant to an effective registration statement under the United States
of America Securities Act of 1933 or the payment of dividends within 30
days of the declaration thereof if such declaration was not prohibited
by this Section 2.6;
2.7 the Guarantor will not enter into or be a party to any transaction or
arrangement, including, without limitation, the purchase, sale, lease or
exchange of property or the rendering of any service, with any Related
Party, except in the ordinary course of and pursuant to the reasonable
requirements of the Guarantor's business and upon fair and reasonable
terms no less favourable to the Guarantor than would be obtained in a
comparable arm's length transaction with a Person not a Related Party;
2.8 in the event that the Guarantor is a party to any merger or
consolidation then the successor person, if other than the Guarantor,
shall assume all of the Guaranteed Obligations.
<PAGE> 160
SCHEDULE 6
CONDITIONS PRECEDENT AND SUBSEQUENT TO A UTILISATION
PART I
CONDITIONS PRECEDENT TO EACH UTILISATION
The obligations of each of the Lenders and the Representatives, under
this Agreement with respect to each Utilisation shall be subject to the
following conditions precedent having been fulfilled to the satisfaction
of, or waived in writing by, the Agent:-
1. (A) no Cancellation Notice shall have been served and still
be in effect and no Relevant Event or Termination Event
shall have occurred which is continuing on the relevant
Utilisation Date; and
(B) all representations and warranties made (or deemed
repeated) by or on behalf of the Borrower and each other
Obligor in Clause 6 (Representations and Warranties) and
paragraph 2 of the relevant Accession Deed on the
Utilisation Date shall be true and accurate in the light
of the circumstances and with reference to the facts
existing on the Utilisation Date (except to the extent
that the representation in Clause 6.1(l) specifically
relates to an earlier date).
2. three (3) Business Days prior to the Utilisation Date, or such
lesser period as the Agent shall have agreed in writing, the
Agent shall have received:
(A) duly executed originals of all previously undelivered
Aircraft Operative Documents to which the Agent and the
applicable Obligor is to be a party (other than those
referred to in Part II of this Schedule 6) comprising
the following documents for the relevant Aircraft:
(a) the Partial Purchase Agreement Assignment;
(b) the BFE Bill of Sale;
(c) a certified copy of the Lease (if available);
(d) a certified copy of the assignment of the Lease
to the Borrower or the Relevant Sub-Borrower (as
the case may be);
(e) the Assignment of General Terms Agreement Re
Engine Warranties or as the case may be the RR
Engine Warranty Agreement;
(f) if applicable, Assignment of Warranty and
Support Rights (Airframe) between the Guarantor
and the Lessee;
<PAGE> 161
(g) if applicable, Assignment Agreement (Assignment
of Rights (Engines)) between the Guarantor, the
Lessee and the relevant Engine Manufacturer;
(h) the Loan Supplement;
(i) the Mortgage (or alternative security
satisfactory to the Security Trustee acting upon
the instructions of the Majority Lenders);
(j) the Sub-Borrower Debenture (if applicable);
(k) Charge Over Shares of Sub-Borrower (if
applicable);
(l) Sub-Borrower Guarantee (if applicable);
(m) Lease Security Assignment (if a Third Trigger
Event shall have occurred and be continuing);
(n) Accession Deed (if applicable).
(o) Intermediate Lessee Debenture (if applicable);
(p) Charge Over Shares of Intermediate Lessee (if
applicable);
(q) Intermediate Lease Security Assignment (if a
Third Trigger Event shall have occurred and be
continuing) (if applicable);
(r) Intermediate Lease (if applicable);
(s) Bill of Sale;
(t) Notice of Charge;
(u) the definitive drafts of legal opinions referred
to in Clause 3.1.4(c) and (d) (Utilisation
Notices), if applicable;
(B) payment instructions relating to payments to be made on
the Delivery Date under the Aircraft Operative
Documents;
(C) with respect to such Utilisation, the Support Agreements
or the requisite approval of each of ECGD, COFACE and
HERMES in lieu of and/or as a precursor to the issue of
the relevant Support Agreement;
3. on or before the first Utilisation the Agent shall have
received:
<PAGE> 162
(a) a legal opinion from Appleby, Spurling & Kempe, Bermudan
counsel to the Lenders;
(b) a legal opinion from Buchalter Nemer, Fields & Younger,
Californian counsel to the Lenders;
(c) a legal opinion from Paul, Hastings, Janofsky & Walker
LLP regarding the Guarantor's corporate authority to
enter into the Facility Agreement and its due
authorisation thereof, and to other matters applicable
to the Guarantor or the Parent, from in-house counsel to
the Guarantor;
(d) a legal opinion from Wilde Sapte, English counsel to the
Lenders;
it being understood that after the occurrence and continuation
of a Second Trigger Event, the Agent shall be entitled to
request receipt of such other legal opinions as it in its good
faith considers appropriate and the reissue of any other Master
Opinion in addition to the Master Opinions and any "bring-down"
opinions referred to in Clause 7.1(s) (General Covenants of
Borrower, Sub-Borrower and Intermediate Lessee) and from counsel
in the state of registration of the Aircraft;
4. on or before each Utilisation in respect of which a Sub-Borrower
and/or Intermediate Lessee is incorporated in the structure and
in either or both cases has not previously acceded to the
Agreement, the Agent shall have received an opinion from legal
counsel to the Lenders in the jurisdiction of organisation of
such Sub-Borrower and/or Intermediate Lessee (being a legal
opinion from Maples & Calder, if the Cayman Islands is the
relevant jurisdiction or a legal opinion from A&L Goodbody, if
Ireland is the relevant jurisdiction) regarding the due
execution and validity of the Accession Deed, of the relevant
Aircraft Security Documents and of other documents as the
Representatives may have required pursuant to Clause 3.3.3(b)
(Sub-Borrowers/Intermediate Lessees).
<PAGE> 163
CONDITIONS PRECEDENT AND SUBSEQUENT TO A UTILISATION
PART II
FURTHER CONDITIONS PRECEDENT
In addition, the Agent shall have received on or before the Utilisation Date all
of the following:-
1. if applicable, evidence of registration of the Aircraft with the
applicable Aviation Authority;
2. a certificate of the insurance broker in respect of the Insurances
together with a broker's letter of undertaking (if any) and any
certificate of reinsurance and reinsurance broker's letter of
undertaking (if any) in form and substance acceptable to the Security
Trustee;
3. evidence satisfactory to the Agent that the bills of sale/confirmation
of transfer by delivery of possession relating to the transfer of title
to the Aircraft and the installed Buyer Furnished Equipment will be
delivered by the Seller to the Borrower;
4. a commercial invoice for the Aircraft (including the installed Buyer
Furnished Equipment) issued by the Seller specifying the net final
contract price as described in the relevant Purchase Agreement in
relation to the Aircraft;
5. duly executed originals of all of the notices to the Partial Purchase
Agreement Assignment, the Assignment of General Terms Agreement re
Engine Warranties, the Mortgage, and duly executed originals of the
notices to the relevant Sub-Borrower Debenture or the Borrower
Debenture;
6. duly executed originals or, as the case may be, certified copies of the
documents ancillary to any Charge Over Shares entered into in connection
with the delivery of the Aircraft being certified copies of the
memorandum of association and bye-laws and the share register (if any)
of the relevant Sub-Borrower or Intermediate Lessee and the originals of
the letters of resignation, irrevocable proxy and undated Share Transfer
forms referred to in such Charge over Shares;
7. in form and substance satisfactory to the Agent certified copies of all
consents, authorisations, approvals, filings and registrations (if any)
of or with any governmental or other competent agency or authority
(including in relation to exchange control) which any of the legal
opinions referred to in paragraph 2 of Part I of this Schedule 6 provide
are required to be obtained or made by any party to the Aircraft
Operative Documents in connection with the execution, delivery and
performance of the Aircraft Operative Documents or any documents
contemplated thereby but subject to the parenthetical proviso in Clause
7.1(f) (General Covenants of Borrower, Sub-Borrower and Intermediate
Lessee) and except for those which it is not customary practice in the
applicable jurisdiction to make or obtain at such time;
8. copies of all documents (not otherwise required under this annex) as are
conditions precedent to such Utilisation under any Aircraft Operative
Document;
<PAGE> 164
9. evidence of the Consent and Agreement of the Seller and the Engine
Manufacturer to the provisions of the warranty assignments pursuant to
the Partial Purchase Agreement Assignment, the Assignment of General
Terms Agreement re Engine Warranties and the Mortgage and (where
appropriate) the service of such documents upon the Seller by huissiers
de justice in accordance with the provisions of Article 1690 of the
French Civil Code;
10. a certified copy of the bill of sale issued by the Guarantor in favour
of the Seller and relating to the Buyer Furnished Equipment and having
attached thereto a Schedule describing the nature, the quantity, the
vendor and the part number of the individual items which comprise the
Buyer Furnished Equipment;
11. written confirmation from the Guarantor addressed to the Agent that the
Buyer Furnished Equipment (excluding that relating to Post-Delivery
Modifications) has been installed on the Aircraft;
12. a certificate from the Manufacturer addressed to the Agent confirming
that the Buyer Furnished Equipment (excluding that relating to
Post-Delivery Modifications) has been installed on the Aircraft as at
the Delivery Date in form and substance satisfactory to the Export
Credit Agencies;
13. an undertaking from the Guarantor addressed to the Agent that (i) the
Buyer Furnished Equipment as is scheduled for installation within 180
days of the Delivery Date will be installed by the end of the
Post-Delivery Modification Period or that the applicable portion of the
relevant Loan will be prepaid as required under the Facility Agreement,
and (ii) it will provide to the Agent a list of the Buyer Furnished
Equipment installed on the Aircraft (after completion, if applicable, of
Post-Delivery Modifications) specifying each item's stated country of
origin as soon as practicable after the Delivery Date;
14. in the circumstances where the provisions of Clause 3.6.4 (Repayment
Schedules) apply, substitute schedules to replace schedule 2 to the Loan
Supplement duly signed for and on behalf of the Borrower and the
relevant Lessee;
15. if a Sub-Borrower or an Intermediate Lessee, which has not previously
acceded to the Transaction Documents, has been incorporated into the
structure, evidence that the Sub-Borrower Accounts and/or the
Intermediate Lessee Accounts have been opened and that ten Dollars has
been deposited in each such Sub-Borrower Account or each such
Intermediate Lessee Account (as the case may be);
16. a letter from the relevant Engine Manufacturer to the Agent setting out
the credit memoranda deductible from the purchase price of the Aircraft
in respect of the relevant Engines;
17. evidence satisfactory to it that no proceedings for insolvency of, and
no petition for winding-up or liquidating, the Borrower, the relevant
Sub-Borrower or the relevant Intermediate Lessee (as the case may be)
has been instituted or filed as at the Utilisation Date in a corporate
or similar register against the Borrower, the relevant Sub-Borrower or
the relevant Intermediate Lessee (as the case may be) as at the
Utilisation Date;
18. with respect to any previous Utilisation (having an analogous structure
and/or the same jurisdiction as the proposed Utilisation) as to which
the provisions of Clause 14.3.2
<PAGE> 165
(Illegality) have applied, evidence that all mitigating action has been
completed or the affected Loan has been prepaid pursuant to Clause 14.3
(Illegality) and that relevant Master Opinions in form and substance
satisfactory to the Agent have been reissued for the proposed
Utilisation;
<PAGE> 166
CONDITIONS PRECEDENT AND SUBSEQUENT TO A UTILISATION
PART III
CONDITIONS SUBSEQUENT TO A UTILISATION
It shall be a condition subsequent to each Advance that:-
(A) (a) the Borrower shall within sixty (60) days after delivery
and title transfer of the relevant Aircraft from the
Seller to the Borrower or the relevant Sub-Borrower (or
following the occurrence and continuation of a Second
Trigger Event within seven (7) days after such delivery
and title transfer) locate the Aircraft (including the
Engines) at the time the Mortgage is to come into
effect, (i) in England and Wales or Hong Kong or (ii) in
United Kingdom or Hong Kong airspace or (iii) in such
other location in respect of which the Agent is able to
obtain a satisfactory legal opinion of counsel to the
Lenders in the jurisdiction of such other location of
the Aircraft (including the Engines) that, under the
relevant conflicts of laws rules, the Mortgage will be
recognised as a valid and binding Mortgage governed by
English law, and shall provide within such sixty (60)
day period or, as the case may be, seven (7) day period,
evidence satisfactory to the Agent that the Aircraft
(including the Engines) has been located in one of the
three applicable locations; and
(b) with respect to a substitution of a Replacement
Aircraft, the Borrower or any Sub-Borrower (as the case
may be) shall within sixty (60) days after title to the
Replacement Aircraft has transferred to the Borrower or
the relevant Sub-Borrower (as the case may be) pursuant
to Clause 4.7 (Substitution of Aircraft) (or following
the occurrence and continuation of a Second Trigger
Event within seven (7) days after such delivery and
title transfer) locate the Replacement Aircraft
(including the Engines) at the time the Mortgage is to
come into effect, (i) in England and Wales or Hong Kong
or (ii) in United Kingdom or Hong Kong airspace or (iii)
in such other location in respect of which the Agent is
able to obtain a satisfactory legal opinion of counsel
to the Lenders in the jurisdiction of such other
location of the Replacement Aircraft (including the
Engines) that, under the relevant conflicts of laws
rules, the Mortgage will be recognised as a valid and
binding Mortgage governed by English law, and shall
provide within such sixty (60) day period or, as the
case may be, seven (7) day period, evidence satisfactory
to the Agent that the Replacement Aircraft (including
the Engines) has been located in one of the three
applicable locations;
it being understood, in so far as the Borrower is concerned,
that failure to fulfil the condition subsequent in sub-paragraph
(a) or (b) above in respect of a
<PAGE> 167
particular Loan shall constitute a mandatory prepayment event in
accordance with Clause 4.10.1 (Mandatory Prepayment Event); and
it being understood, in so far as the Lender and the Agent are
concerned, that:-
(i) the Agent shall inform the Lead Managers if and when
each (if applicable) condition subsequent is fulfilled;
and
(ii) within such sixty (60) day period, the Agent shall seek,
if applicable, the legal opinion of counsel to the
Lenders referred to in sub-paragraph (a)(iii) above or
sub-paragraph (b) above within such sixty (60) day
period and, at the Expense of the Borrower, shall seek a
confirmation from its legal counsel in the jurisdiction
in which the Borrower or the relevant Sub-Borrower (as
the case may be) is organised as to the recording,
filing, registration and perfection of the Mortgage (to
the extent permitted under applicable law) in that
jurisdiction of the Mortgage;
(B) the Borrower shall use all reasonable endeavours to cause the
Seller to provide to the Security Trustee within thirty (30)
days after delivery and title transfer of the relevant Aircraft
from the Seller to the Borrower or the relevant Sub-Borrower (as
the case may be):-
(a) a legal opinion from in-house counsel to the Seller (in
relation to its consent and agreement to the Partial
Purchase Agreement Assignment and to Mortgage
respectively) in form and content satisfactory to the
Agent; and
(b) a legal opinion from in-house counsel to the relevant
Engine Manufacturer (in relation to its consent and
agreement to the Assignment of General Terms Agreement
Re Engine Warranties and to Mortgage respectively) in
form and content satisfactory to the Agent,
and the Agent shall inform the Lead Managers of the receipt of
such legal opinions promptly after its receipt.
<PAGE> 168
SCHEDULE 7
ENGLISH PROCESS AGENTS
Societe Generale Societe Generale
60 Gracechurch Street
London EC3V 0HD
Commerzbank AG Commerzbank AG, London Branch
Commerzbank House
23 Austin Friars
London EC2N 2EN
Bayerishe Hypo-und Vereinsbank AG HypoVereinsbank, London Branch
41 Moorgate
London EC2R 6PP
Kreditanstalt fur Wiederaufbau Wilde Sapte
1 Fleet Place
London EC4M 7WS
Attention: Managing Partner
Borrower: Paul, Hastings, Janofsky & Walker LLP
International Financial Centre
Old Broad Street
London EC2N 1HQ
Parent: Paul, Hastings, Janofsky & Walker LLP
International Financial Centre
Old Broad Street
London EC2N 1HQ
Guarantor: Paul, Hastings, Janofsky & Walker LLP
International Financial Centre
Old Broad Street
London EC2N 1HQ
Subordinated Lender Paul, Hastings, Janofsky & Walker LLP
International Financial Centre
Old Broad Street
London EC2N 1HQ
<PAGE> 169
SCHEDULE 8
INSURANCE
1. OBLIGATION TO INSURE
Throughout the Security Period the Borrower or Sub-Borrower will ensure
that there is effected and maintained appropriate insurances in respect
of each Aircraft and its operation including insurance for:
(a) loss or damage to each part of the Aircraft; and
(b) any liability for injury to or death of persons and damage to or
the destruction of public or private property arising out of or
in connection with the operation, storage, maintenance or use of
(in each case to the extent available) the Aircraft and of any
other part thereof not belonging to the Borrower or Sub-Borrower
but from time to time installed on the airframe.
2. SPECIFIC INSURANCES
The Borrower or Sub-Borrower will maintain or will cause to be
maintained the following specific insurances with respect to each
Aircraft (subject to paragraph 3)):
(a) All Risks Hull Insurance - All risks hull insurance policy on
the Aircraft in an amount at least equal to 110% of the
outstanding principal under the Loan (the "Required Insured
Value") on an agreed value basis and naming the Security Trustee
as a "Contract Party" and loss payee for the Required Insured
Value (provided, however, that to the extent it is possible
under AVN67B or its then equivalent only to name the Security
Trustee as a "Contract Party" or one of the "Contract Parties"
the Lessee will only be required to do so);
(b) Hull War Risk Insurance -Hull war risk and allied perils
insurance, including hijacking, on the Aircraft where the custom
in the industry is to carry war risk for aircraft operating on
routes or kept in locations similar to the Aircraft in an amount
not less than the Required Insured Value on an agreed value
basis and naming the Security Trustee as a loss payee for the
Required Insured Value (provided, however, that to the extent it
is possible under AVN67B or its then equivalent only to name the
Security Trustee as a "Contract Party" or one of the "Contract
Parties", the Lessee will only be required to do so);
(c) Legal Liability Insurance - Third party legal liability
insurance for a combined single limit (bodily injured and
property damage) of not less than $300,000,000 for a
narrow-bodied aircraft and not less than $500,000,000 for
wide-bodied aircraft. The Security Trustee on behalf of the
Agent and the Lenders shall be named as additional insureds on
such policies.
(d) Aircraft Spares Insurance - Insurance for the engines and the
parts while not installed on the Airframe for their replacement
cost or an agreed value basis.
<PAGE> 170
3. VARIATIONS ON SPECIFIC INSURANCE REQUIREMENTS
In certain circumstances, it is customary that not all of the insurances
described in paragraph 2 be carried for the Aircraft. For example, when
an Aircraft is not on lease to a passenger air carrier or is in storage
or is being repaired or maintained, ferry or ground rather than
passenger flight coverages for the Aircraft are applicable. Similarly,
when an Aircraft is being utilised by a Government Entity (as defined in
each Lease with a Lessee), indemnities may be provided by the Government
Entity in lieu of particular insurances. The Borrower or Sub-Borrower
will determine the necessary coverages for the Aircraft in such
situations consistent with the manner in which the Borrower or
Sub-Borrower or the Guarantor or the Guarantor's Subsidiaries or
affiliates does so with respect to its other aircraft.
4. HULL INSURANCES IN EXCESS OF REQUIRED INSURANCE VALUE
For the avoidance of doubt, the Borrower or Sub-Borrower and/or Lessee
may carry hull risks and hull war and allied perils insurance on the
Aircraft in excess of the Required Insured Value which will not be
payable to the Security Trustee. Such excess insurances will be payable
to the Borrower or Sub-Borrower or the Lessee, as the case may be.
5. CURRENCY
All insurance and reinsurances effected pursuant to this Schedule 8
shall be payable in Dollars, save that in the case of the insurances
referred to in paragraph 2(c) if such denomination is (a) required by
the law of the state of registration of the Aircraft; or (b) the normal
practice of airlines in the relevant country that operate aircraft
leased from lessors located outside such country; or (c) otherwise
agreed by the Security Trustee.
6. SPECIFIC TERMS OF INSURANCES
Insurance policies which are underwritten in the London insurance market
and which pertain to financed or leased aircraft equipment contain the
coverage and endorsements described in AVN67B. The present form of
AVN67B is set forth in an "Exhibit C" to each Lease. Each of the
Borrower and the Sub-Borrower agrees that, throughout the Security
Period, the Aircraft will be insured and the applicable insurance
policies endorsed either (i) in a manner consistent with AVN67B, as it
may be amended or revised or its equivalent or (ii) as may then be
customary in the airline industry for aircraft of the same type as the
Aircraft utilised by operators in the same country and whose operational
network for such Aircraft and credit status is similar to the type of
business as the Lessee (if any) and at the time commonly available in
the insurance market. In all cases, the Borrower or Sub-Borrower will
set the standards, review and manage the insurances on the Aircraft
consistent with the manner in which the Borrower or Sub-Borrower or its
affiliates does so with respect to its other aircraft.
7. INSURANCE BROKERS AND INSURERS
In reviewing and accepting the insurance brokers (if any) and
reinsurance brokers (if any) and insurers and reinsurers (if any)
providing coverage with respect to the Aircraft, the Borrower or
Sub-Borrower will utilise standards consistent with those applied by it
or its affiliates with respect to its other aircraft. It is recognised
that airlines in certain countries are required to utilise brokers (and
sometimes even no brokers) or carry insurance with local insurance
brokers and insurers. If at any time the Aircraft is not subject to a
Lease or an Intermediate Lease the Borrower or Sub-Borrower will cause
its insurance brokers to provide the Security
<PAGE> 171
Trustee with evidence that the insurances described in this Schedule 8
are in full force and effect.
8. DEDUCTIBLE AMOUNTS, SELF-INSURANCE AND REINSURANCE
With respect to the type of aircraft concerned, the nationality and
creditworthiness of the airline operator, the airline operator's use and
operation thereof and to the scope of and the amount covered by the
insurances carried by the Lessee, the Borrower or Sub-Borrower will
apply standards consistent with those of its affiliates in reviewing and
accepting the amount of any insurance deductibles, whether the Lessee
may self-insure any of the risks covered by the insurances and the scope
and terms of reinsurance, if any, including a cut-through and assignment
clause.
9. RENEWALS
The Borrower or Sub-Borrower will monitor the insurances on the Aircraft
and their expiration dates. The Borrower or the Sub-Borrower shall, when
requested by the Security Trustee, promptly inform the Security Trustee
as to whether or not, the Guarantor has been advised that renewal
instructions for any of the insurances have been given by the airline
operator or its broker prior to or on the scheduled expiry date of the
relevant insurance. The Borrower or the Sub-Borrower shall promptly
notify the Security Trustee in writing if it receives notice that any of
the insurances have in fact expired without renewal. Promptly after
receipt, the Borrower or Sub-Borrower will provide to the Security
Trustee evidence of renewal of the insurances and reinsurance (if any).
10. INFORMATION
The Borrower or Sub-Borrower shall provide the Security Trustee or shall
ensure that the Security Trustee is provided with any information
reasonably requested by the Security Trustee from time to time
concerning the insurances maintained with respect to the Aircraft or, if
reasonably available to the Borrower or Sub-Borrower, in connection with
any claim being made or proposed to be made thereunder.
<PAGE> 172
SCHEDULE 9
FORM OF CERTIFICATE TO BE GIVEN ON EACH QUARTER DATE
QUARTER DATE CERTIFICATE
To: Halifax PLC as Agent
From: International Lease Finance Corporation (ILFC) as Guarantor
Date: [Insert relevant Quarter Date]
AIRCRAFT FACILITY AGREEMENT DATED 19TH JANUARY 1999 RELATING TO A TERM FACILITY
IN THE MAXIMUM PRINCIPAL AMOUNT OF US$4,327,260,000 FOR THE FINANCING OF
APPROXIMATELY SEVENTY FIVE (75) AIRBUS AIRCRAFT AND MADE BETWEEN (1) THE BANKS
AND FINANCIAL INSTITUTIONS NAMED THEREIN (AS LENDERS), (2) HALIFAX PLC (AS
AGENT), (3) HALIFAX PLC (AS SECURITY TRUSTEE), (4) SIERRA LEASING LIMITED (AS
BORROWER), (5) AIRCRAFT SPC-9, INC. (AS PARENT), (6) INTERNATIONAL LEASE FINANCE
CORPORATION (AS GUARANTOR) AND (7) INTERNATIONAL LEASE FINANCE CORPORATION (AS
SUBORDINATED LENDER) AS AMENDED, SUPPLEMENTED OR ACCEDED TO FROM TIME TO TIME
(THE "AGREEMENT")
1. I, [__________] a duly authorised representative of ILFC hereby certify
that as of the date hereof to the best of my knowledge, after due
enquiry, [the long term debt rating of ILFC as rated by Standard &
Poor's Corporation is [__________] and is [__________] as rated by
Moody's Investor Service Inc.] [The long term debt rating by [a service
of equivalent recognition] is [__________](1).
[2. Further, I hereby certify that as of the date hereof to the best of my
knowledge, after due enquiry, no Termination Event or Relevant Event (as
each are defined in the Agreement) that has occurred and is continuing.]
[2. A Termination Event or Relevant Event has occurred and is continuing and
in accordance with the provisions of paragraph 2.1 (c) of Schedule 5 we
give you notice that the following steps are being taken to cure the
same:-. ](2)
Yours faithfully
[______________________________]
FOR AND ON BEHALF OF ILFC
- ------------------
(1) Only use this option if no rating by Standard & Poor's and Moody's is
available.
(2) Delete as appropriate.
<PAGE> 173
SCHEDULE 10
BLENDED LASU RATES
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
SCHEDULED PROPOSED LASU RATE
AIRCRAFT DELIVERY PRODUCTION ENGINE INITIAL LASU RATE TRANCHE B BLENDED LASU
NO. MONTH NO. TYPE TYPE LESSEE TRANCHE A (1) RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Feb-99 4009 A319 CFM56-5A4 Air France 5.75% 5.76% 5.753%
2 Mar-99 4010 A319 CFM56-5B TAP 5.75% 5.76% 5.753%
3 Apr-99 4011 A319 CFM56-5A4 Air France 5.75% 5.81% 5.766%
4 Apr-99 4119 A319 CFM58-5A4 Air France 5.75% 5.81% 5.766%
5 May-99 4012 A319 CFM56-5B Swissair 5.75% 5.81% 5.766%
6 Jan-99 4077 A320 V2527-A5 Dragonair #5 5.75% 5.76% 5.753%
7 Mar-99 4079 A320 CFM56-5A3 TAP #4 5.75% 5.76% 5.753%
8 Apr-99 4080 A320 CFM56-5A3 Star Airlines 5.75% 5.81% 5.766%
9 May-99 4081 A320 CFM56-5B4 Iberia 5.75% 5.81% 5.766%
10 Oct-99 4082 A320 CFM56-5B4 Iberia 5.75% 5.87% 5.782%
11 Nov-99 4078 A320 V2527-A5 BMA #1 5.75% 5.87% 5.782%
12 Feb-99 4114 A321 V2533-A5 BMA #3 5.75% 5.76% 5.753%
13 Feb-99 4115 A321 V2533-A5 Aerolloyd #2 5.75% 5.76% 5.753%
14 Mar-99 4116 A321 V2533-A5 Dragonair #6 5.75% 5.76% 5.753%
15 Mar-99 4117 A321 CFM56-5B Aer Lingus 5.75% 5.76% 5.753%
16 Mar-99 4123 A321 V2533-A5 BMA #4 5.75% 5.76% 5.753%
17 Apr-99 4118 A321 V2533-A5 Aerolloyd #3 5.75% 5.81% 5.766%
18 May-99 4121 A321 V2533-A5 Dragonair #7 5.75% 5.81% 5.766%
19 Jul-99 4120 A321 V2533-A5 Asiana #1 5.75% 5.81% 5.766%
20 Dec-99 4122 A321 CFM56-5B Swissair 5.75% 5.87% 5.782%
21 Feb-99 6014 A330-200 Trent 772-60 Air Transat 5.75% 5.76% 5.753%
22 Apr-99 6015 A330-200 Trent 772-60 Air Transat 5.75% 5.81% 5.766%
23 Feb-99 6016 A330-200 PW4168A Swissair #2 5.75% 5.76% 5.753%
24 Feb-99 6017 A330-200 PW4168A Swissair #3 5.75% 5.76% 5.753%
</TABLE>
- 170 -
<PAGE> 174
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
SCHEDULED PROPOSED LASU RATE
AIRCRAFT DELIVERY PRODUCTION ENGINE INITIAL LASU RATE TRANCHE B BLENDED LASU
NO. MONTH NO. TYPE TYPE LESSEE TRANCHE A (1) RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
25 Mar-99 6018 A330-200 PW4168A Swissair #4 5.75% 5.76% 5.753%
26 May-99 6019 A330-200 PW4168A Swissair #5 5.75% 5.81% 5.766%
27 May-99 6020 A330-200 CF6-80E1 Canada 3000 5.75% 5.81% 5.766%
#3
28 Aug-99 6021 A330-200 PW4168A Sabena #1 5.75% 5.81% 5.766%
29 Oct-99 6022 A330-200 PW4168A Sabena #2 5.75% 5.87% 5.782%
30 Nov-99 6023 A330-200 PW4168A Sabena #3 5.75% 5.87% 5.782%
31 Feb-99 6042 A340-300 CFM56-5C4 Air Canada #4 5.75% 5.76% 5.753%
32 Jan-00 4136 A319-100 CFM56-5A4 Air France 5.75% 5.87% 5.782%
33 Jan-00 4124 A319 CFM56-5B5 Iberia 5.75% 5.87% 5.782%
34 Feb-00 4013 A319 CFM56-5B5 Iberia 5.75% 5.87% 5.782%
35 Mar-00 4014 A319 CFM56-5A4 Air France 5.75% 5.87% 5.782%
36 Apr-00 4015 A319 V2524-A5 TBD 5.75% 5.97% 5.808%
37 Apr-00 4137 A319-100 CFM56-5A4 Air France 5.75% 5.97% 5.808%
38 May-00 4138 A319-100 CFM56-5B5 Iberia 5.75% 5.97% 5.808%
39 Nov-00 4139 A319-100 CFM56-5B5 Iberia 5.75% 6.05% 5.829%
40 Feb-00 4083 A320 V2527-A5 BMA #2 5.75% 5.87% 5.782%
41 Mar-00 4084 A320 V2527-A5 BMA #3 5.75% 5.87% 5.782%
42 Apr-00 4085 A320 CFM56-5B4 Iberia 5.75% 5.97% 5.808%
43 Apr-00 4167 A320-200 CFM56-5B4 Iberia 5.75% 5.97% 5.808%
44 May-00 4086 A320 CFM56-5B4 Iberia 5.75% 5.97% 5.808%
45 Feb-00 4178 A319 CFM56-5B Air France 5.75% 5.87% 5.782%
46 Mar-00 4125 A321 V2533-A5 Aerolloyd #4 5.75% 5.87% 5.782%
47 Apr-00 4126 A321 V2533-A5 Aerolloyd #5 5.75% 5.97% 5.808%
48 Jul-00 4127 A321 V2533-A5 Asiana #2 5.75% 5.97% 5.808%
49 Oct-00 4128 A321 V2527-A5 TBD 5.75% 6.05% 5.829%
50 Nov-00 4129 A321 V2527-A5 TBD 5.75% 6.05% 5.829%
51 Feb-00 6024 A330-200 PW4168A Austrian 5.75% 5.87% 5.782%
52 May-00 6025 A330-200 CF6-80E1 Aer Lingus 5.75% 5.97% 5.808%
</TABLE>
- 171 -
<PAGE> 175
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
SCHEDULED PROPOSED LASU RATE
AIRCRAFT DELIVERY PRODUCTION ENGINE INITIAL LASU RATE TRANCHE B BLENDED LASU
NO. MONTH NO. TYPE TYPE LESSEE TRANCHE A (1) RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
53 May-00 6050 A330-200 Trent 772-60 TBD 5.75% 5.97% 5.808%
54 Nov-00 6051 A330-200 PW4168A TBD 5.75% 6.05% 5.829%
55 Apr-00 6043 A340-300 CFM56-5C4 TBD 5.75% 5.97% 5.808%
56 Jan-01 4140 A319-100 CFM56-5B5 Iberia 5.75% 6.05% 5.829%
57 Mar-01 4016 A319 CFM56-5B5 Iberia 5.75% 6.05% 5.829%
58 Mar-01 4142 A319-100 CFM56-5B5 Iberia 5.75% 6.05% 5.829%
59 May-01 4143 A319-100 CFM56-5B5 Iberia 5.75% 6.15% 5.856%
60 Sep-01 4144 A319-100 CFM56-5B5 Iberia 5.75% 6.15% 5.856%
61 Feb-01 4087 A320 V2527-A5 BMA #4 5.75% 6.05% 5.829%
62 Feb-01 4141 A320 CFM56-5B4 Iberia 5.75% 6.05% 5.829%
63 Mar-01 4168 A320-200 V2527-A5 TBD 5.75% 6.05% 5.829%
64 Mar-01 4088 A320 V2527-A5 BMA #5 5.75% 6.05% 5.829%
65 Mar-01 4169 A320-200 V2527-A5 BMA #6 5.75% 6.05% 5.829%
66 May-01 4132 A320 CFM56-5B4 Iberia 5.75% 6.15% 5.856%
67 Feb-01 4130 A321 V2533-A5 Aerolloyd #6 5.75% 6.05% 5.829%
68 Apr-01 4131 A321 V2533-A5 Aerolloyd opt 5.75% 6.15% 5.856%
69 Apr-01 4179 A321-200 V2527-A5 TBD 5.75% 6.15% 5.856%
70 Apr-01 6052 A330-200 PW4168A TBD 5.75% 6.15% 5.856%
71 May-01 6053 A330-200 CF6-80E1 TBD 5.75% 6.15% 5.856%
72 Sep-01 6054 A330-200 Trent 772-60 Star Airlines 5.75% 6.15% 5.856%
73 Nov-01 6055 A330-200 PW4168A Star Airlines 5.75% 6.31% 5.898%
74 Apr-01 6044 A340-300 CFM56-5C4 TBD 5.75% 6.15% 5.856%
75 May-01 6045 A340 CFM56-5C4 TBD 5.75% 6.15% 5.856%
</TABLE>
- 172 -
<PAGE> 176
(1) The Tranche B LASU rate is based on the actual delivery month and may change
from this schedule. The delivery months and the associated rates are as follows:
<TABLE>
<CAPTION>
DELIVERIES INTEREST
FROM TO RATE
<S> <C> <C>
Oct-98 Mar-99 5.76%
Apr-99 Sep-99 5.81%
Oct-99 Mar-00 5.87%
Apr-00 Sep-00 5.97%
Oct-00 Mar-01 6.05%
Apr-01 Sep-01 6.15%
Oct-01 Mar-02 6.31%
</TABLE>
- 173 -
<PAGE> 177
APPENDIX A
FORM OF LOAN SUPPLEMENT
<PAGE> 178
APPENDIX B
FORM OF PARTIAL PURCHASE AGREEMENT ASSIGNMENT
(INCLUDING AIRFRAME WARRANTIES)
<PAGE> 179
APPENDIX C
FORM OF ENGLISH LAW AIRCRAFT MORTGAGE
<PAGE> 180
APPENDIX D
PART I
FORM OF ASSIGNMENT OF GENERAL TERMS AGREEMENT
RE ENGINE WARRANTIES
<PAGE> 181
PART II
FORM OF ASSIGNMENT OF GENERAL TERMS AGREEMENT
RE ENGINE WARRANTIES IN RESPECT OF ENGINES
MANUFACTURED BY UNITED TECHNOLOGIES CORPORATION,
PRATT & WHITNEY GROUP
<PAGE> 182
PART III
FORM OF RR ENGINE WARRANTY AGREEMENT
<PAGE> 183
APPENDIX E
FORM OF BFE BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
THAT the undersigned, International Lease Finance Corporation, a corporation
incorporated under the laws of the State of California (the "Seller"), is the
owner of the full legal and beneficial title to the buyer furnished equipment
specified in the attached Schedule ("BFE").
THAT for and in consideration of payment to the Seller of the sum of [_______]
United States Dollars (U.S.$[_______]), the Seller does this [_______] day of
[_______] [_______] grant, convey, transfer, bargain and sell, deliver and set
over, all of its right, title and interest in and to the BFE unto AVSA,
S.A.R.L., a French societe a responsabilite limitee (the "Buyer").
THAT the Seller hereby warrants to the Buyer, its successors and assigns, that
there is hereby conveyed to the Buyer on the date hereof good title to the BFE
free and clear of all mortgages, charges, pledges, liens, statutory rights in
rem, rights of possession, attachment or detention, rights of set-off, title
retention arrangements, rights of ownership, hypothecations, leases, levies,
claims or any encumbrances or security interests whatsoever, howsoever created
or arising or any right or arrangement having a similar effect to any of the
above and that the Seller will warrant and defend such title forever against all
claims and demands whatsoever.
THAT this Bill of Sale is and shall be governed by and construed in accordance
with the laws of the State of New York.
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale to be executed by
its duly authorised officer this [_______] day of [_______], [_______].
INTERNATIONAL LEASE FINANCE CORPORATION
By:
Title:
AGREED and ACCEPTED this
[____] day of [__________], [______]
AVSA, S.A.R.L.
By:
Title:
<PAGE> 184
SCHEDULE TO BFE BILL OF SALE
NATURE, QUANTITY, VENDOR AND PART NUMBER IN RESPECT OF BFE
<PAGE> 185
APPENDIX F
FORM OF AIRCRAFT BILL OF SALE
Know all men by these presents that AVSA S.A.R.L., a societe a responsabilite
limitee (the "Seller"), is the owner of the full, legal and beneficial title to
the following airframe (the "Airframe"), the attached engines as specified (the
"Engines") and together with all appliances, components, parts, instruments,
appurtenances, accessories, furnishings, modules and other equipment or property
incorporated, installed in or on or attached to the Airframe and Engines on the
date hereof (the "Parts"):
<TABLE>
<S> <C>
Manufacturer of Airframe: Manufacturer of Engines:
AIRBUS INDUSTRIE G.I.E. [____________________________]
Model: AIRBUS A3[______________] Model: [__________________]
Manufacturer's Serial No: [______________] Serial Nos: [______________] [______________]
[______________] [______________]
Registration Letters: [______________]
</TABLE>
The Airframe, Engines and Parts are hereafter together referred to as the
"Aircraft".
For and in consideration of the payment by [_______] (the "Buyer") to the Seller
of the sum of one US Dollars (US$1.00) and other good and valuable consideration
in hand received, the Seller does this [___] day of [_______] [_______] sell,
transfer and deliver all of its above described rights, title and interest to
the Aircraft to the Buyer and to its successors and assigns forever.
The Seller hereby warrants to the Buyer, its successors and assigns that it has
on the date hereof good and lawful right to sell, deliver and transfer title to
the Aircraft to the Buyer and that there is hereby conveyed to the Buyer on the
date hereof good, legal and valid title to the Aircraft, free and clear of all
liens, claims, charges, encumbrances and rights of others, (save only that in
relation to the buyer furnished equipment (supplied to the Seller by
International Lease Finance Corporation) the Seller hereby conveys to the Buyer
such title to such buyer furnished equipment as was transferred to the Seller by
International Lease Finance Corporation pursuant to a bill of sale dated [ ] [
], and free and clear of all liens, claims, charges and encumbrances and rights
of others created by the Seller) and that the Seller will warrant and defend
such title forever against all claims and demands whatsoever.
THAT this Bill of Sale is and shall be governed by and construed in accordance
with the laws of the state of New York.
IN WITNESS WHEREOF the undersigned has caused this instrument to be executed by
its duly authorised representative this [_______] day of [_______] [_______]
<PAGE> 186
In [_____________________]
-------------------
AVSA, S.A.R.L.
By:
------------------------------------------
Title:
---------------------------------------
Signature:
-----------------------------------
<PAGE> 187
APPENDIX G
FORM OF SUB-BORROWER CHARGE OVER SHARES
<PAGE> 188
APPENDIX H
FORM OF SUB-BORROWER GUARANTEE
<PAGE> 189
APPENDIX I
FORM OF SUB-BORROWER DEBENTURE
<PAGE> 190
APPENDIX J
FORM OF ACCESSION DEED
THIS ACCESSION DEED is dated the _____ day of _______________ and made BETWEEN
(1) [_____] (the "ACCEDING PARTY"), (2) Halifax plc in its capacity as Security
Trustee under the Facility Agreement referred to in Recital (A) hereof and on
behalf of each Lender, (3) Halifax plc in its capacity as Agent under the
Facility Agreement, (4) Sierra Leasing Limited (the "BORROWER"), (5) Aircraft
SPC-9, Inc. (the "PARENT"), (6) International Lease Finance Corporation as
guarantor (the "GUARANTOR"), (7) International Lease Financing Corporation as
Subordinated Lender (the "SUBORDINATED LENDER") and (8) the other Obligors.
WHEREAS:
(A) The Borrower, the Parent, the Guarantor, the Subordinated Lender and the
other Obligors which have acceded to the Facility Agreement, the Agent
and the Security Trustee and the Lenders (each as referred to therein)
are parties to a Facility Agreement (the "FACILITY AGREEMENT") dated
19th January, 1999 which term includes any amendments thereto which may
at any time be made in relation thereto and also any Transfer
Certificates or Accession Deeds in respect thereof.
(B) By and upon and subject to the terms of the Facility Agreement a
facility for the purchase of certain aircraft was made available to the
Borrower.
(C) The Acceding Party wishes to become party to the Facility Agreement as a
[Sub-Borrower][an Intermediate Lessee] and Obligor pursuant to the
procedures established in clauses 3.3 (Sub-Borrowers/Intermediate
Lessee), 7.2.11 (Change of Title Holder during Security Period) and 18.1
(Transfers by Obligors) of the Facility Agreement by the execution of
this Accession Deed.
NOW IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
Terms used herein which are defined in or to which a meaning or
construction is assigned by or in the Facility Agreement (whether
expressly or by reference to another document) shall, unless otherwise
defined herein, have the same meaning and construction herein as
therein.
2. AGREEMENTS, CONFIRMATIONS, REPRESENTATIONS AND COVENANTS
2.1 The Acceding Party hereby:-
(a) confirms that it has received a copy of the Facility Agreement
together with such other documents and information as it has
required in connection herewith and therewith;
(b) agrees to become, with effect from the date of this Accession
Deed, [a Sub-Borrower] [an Intermediate Lessee] and Obligor
under the Facility Agreement and agrees to be bound in each such
capacity with effect from such date by the terms of the Facility
Agreement by its terms applicable to it and undertakes
<PAGE> 191
accordingly to perform its obligations as [a Sub-Borrower] [an
Intermediate Lessee] and Obligor thereunder;
(c) confirms the accuracy of the information set out under its name
at the end of this Accession Deed;
(d) represents and warrants as [a Sub-Borrower] [an Intermediate
Lessee] and Obligor to the Security Trustee, the Agent and each
of the Lenders in the terms of clause 6 (Representations and
Warranties) of the Facility Agreement by reference to the facts
and circumstances existing at the date hereof and that it is
duly organised and validly existing under the laws of [ ];
(e) confirms that it has not relied on the Security Trustee, the
Agent or any of the Lenders to access or inform it as to the
legality, validity, effect or enforceability of the Facility
Agreement or any other document referred to therein or the
accuracy or completeness of any such information as is referred
to in paragraph (i) above or the creditworthiness, affairs,
condition or status of any of the parties to the Facility
Agreement or any such other document;
(f) confirms that its registered office is at:
[_______________________________________]
and its address for notices pursuant to clause 22 (Notices) of
the Facility Agreement is as follows:
[_______________________________________]
[(g) as continuing security for the punctual payment and discharge of
the Secured Obligations, the Acceding Party hereby
unconditionally and irrevocably agrees and undertakes with the
Security Trustee as trustee for and on behalf of itself, the
Agent and each of the Lenders that immediately upon the
occurrence of a Third Trigger Event it shall execute a Lease
Security Assignment in favour of the Security Trustee in
substantially the same form as set out in schedule 2 to the
Mortgage annexed as Appendix C to the Facility Agreement. If the
Intermediate Lessee has entered into another Intermediate Lease
with another Intermediate Lessee, upon the occurrence of a
Termination Event or a Third Trigger Event, the Mortgagor shall
execute an Intermediate Lease Security Assignment in favour of
the Security Trustee in substantially the same form as set out
in schedule 4 to the Mortgage annexed as Appendix C to the
Facility Agreement;](3)
(h) The Intermediate Lessee hereby covenants that without the prior
written consent of the Security Trustee (such consent to be
exercisable in the absolute discretion of the Security Trustee)
it shall not nor shall it agree or purport to, other than in
connection with a Permitted Lien or pursuant to a Final
Disposition of an Aircraft, a Sub-Borrower Sale or a transfer
permitted under clauses 7.2.11 (Change of Title Holder of
Aircraft or Introduction of an Intermediate Lessee) or 18.1
(Transfers by Obligors) of the Facility Agreement,
- -----------------
(3) For Intermediate Lessee only.
<PAGE> 192
assign, whether by way of security, absolutely or otherwise,
sell, transfer, charge or otherwise dispose of, whether by means
of one or a number of transactions related or not and whether at
one time or over a period of time, the whole or any part of its
interest in any Lease or Intermediate Lease, or any Debts (as
defined in the relevant Intermediate Lessee Debenture) or Credit
Balances (as defined in the relevant Intermediate Lessee
Debenture) relating to any Lease or Intermediate Lease.
2.2 Each Obligor (other than the Acceding Party), the Security Trustee, the
Agent and each Lender hereby agree amongst themselves and with the
Acceding Party that the Acceding Party shall become party to the
Facility Agreement as [a Sub-Borrower] [an Intermediate Lessee] and
Obligor with effect from the date of this Accession Deed.
2.3 [The Borrower][The Parent] represents and warrants that on the date
hereof it is the legal and beneficial owner of all of the issued share
capital of the Acceding Party and covenants that it will remain the
legal and beneficial owner of all of the issued share capital in the
Acceding Party throughout the Security Period to the extent provided in
the Facility Agreement.
2.4 The Guarantor hereby confirms that the guarantee and indemnity set out
in clause 5 (Guarantee and Indemnity) of the Facility Agreement is in
full force and effect and covers the obligations of the Acceding Party
under the Transaction Documents to which it is or shall be a party.
3. LAW
3.1 This Accession Deed shall be governed by and construed in accordance
with English law.
3.2 The Acceding Party hereby irrevocably designates, appoints and empowers
Paul, Hastings, Janofsky & Walker LLP of International Financial Centre,
Old Broad Street, London EC2N 1HQ to receive, for and on behalf of
itself, service of process out of the English Courts in any proceedings
with respect to the Facility Agreement and/or this Accession Deed or any
judgment in connection therewith and agrees that failure by such process
agent to give notice of such service of process to the Acceding Party
shall not impair or affect the validity of such service or of any
judgement based thereon.
4. COUNTERPARTS
This Accession Deed may be executed in any number of counterparts and by
different parties hereto on separate counterparts and any single
counterpart or set of counterparts signed, in either case, by each of
the parties hereto shall be deemed to constitute a full and original
agreement for all purposes but all counterparts shall constitute but one
and the same instrument.
IN WITNESS WHEREOF the parties hereto have caused this Accession Deed to be duly
executed as a deed and it is intended to be and is hereby delivered the day and
year first written above.
<PAGE> 193
SIGNATURES
SIGNED as a DEED, SEALED )
AND DELIVERED )
by [ACCEDING PARTY] )
attorney-in-fact for and on behalf of )
[ACCEDING PARTY] )
in the presence of: )
SECURITY TRUSTEE
SIGNED by HALIFAX PLC )
for itself and as Security Trustee for and )
on behalf of each Lender acting through )
its authorised signatories )
in the presence of: )
AGENT
SIGNED by HALIFAX PLC )
as Agent )
acting through its authorised signatories )
in the presence of:
SIGNED as a DEED, SEALED AND DELIVERED by )
INTERNATIONAL LEASE FINANCE CORPORATION )
as Guarantor acting through its duly )
authorised attorney-in-fact )
in the presence of: )
)
)
<PAGE> 194
SIGNED as a DEED, SEALED AND DELIVERED by )
INTERNATIONAL LEASE FINANCE CORPORATION )
as Suborindated Lender acting through its )
duly authorised attorney-in-fact )
in the presence of: )
)
)
THE COMMON SEAL of )
SIERRA LEASING LIMITED )
as Borrower for and on behalf of each )
other Obligor(4) was hereunto affixed )
in the presence of: )
)
)
SIGNED as a DEED, SEALED AND DELIVERED by )
AIRCRAFT SPC-9, INC. )
as Parent acting through its duly )
authorised attorney-in-fact )
in the presence of: )
)
- ------------------
(4) Other Obligors will need to appoint Sierra as Agent to do this.
<PAGE> 195
APPENDIX K
FORM OF BORROWER DEBENTURE
<PAGE> 196
APPENDIX L
FORM OF CHARGE OVER SHARES OF INTERMEDIATE LESSEE
(TO BE FINALISED PURSUANT TO SUB-BORROWER/INTERMEDIATE LESSEE
LETTER AGREEMENT)
<PAGE> 197
APPENDIX M
FORM OF INTERMEDIATE LESSEE DEBENTURE
(TO BE FINALISED PURSUANT TO SUB-BORROWER/INTERMEDIATE LESSEE
LETTER AGREEMENT)
<PAGE> 198
APPENDIX N
FORMS OF LEASE SECURITY ASSIGNMENT AND INTERMEDIATE LEASE SECURITY ASSIGNMENT
PART I
FORM OF LEASE SECURITY ASSIGNMENT
<PAGE> 199
PART 2
FORM OF INTERMEDIATE LEASE SECURITY ASSIGNMENT
<PAGE> 200
APPENDIX O
FORM OF REPLACEMENT BILL OF SALE
Know all men by these presents that [_________] (the "Seller"), is the owner of
the full, legal and beneficial title to the following airframe (the "Airframe"),
the attached engines as specified (the "Engines") and together with all
appliances, components, parts, instruments, appurtenances, accessories,
furnishings, modules and other equipment or property incorporated, installed in
or on or attached to the Airframe and Engines on the date hereof (the "Parts"):
<TABLE>
<S> <C>
Manufacturer of Airframe: Manufacturer of Engines:
AIRBUS INDUSTRIE G.I.E. [__________________________________________]
Model: AIRBUS A3[______________] Model: [______________________________]
Manufacturer's Serial No: [______________] Serial Nos: [_____________] [____________]
[_____________] [____________]
Registration Letters: [______________]
</TABLE>
The Airframe, Engines and Parts are hereafter together referred to as the
"Aircraft".
For and in consideration of the payment by [[_____________] (the "Buyer") to the
Seller of the sum of one US Dollar (US$1.00) and other good and valuable
consideration in hand received, the Seller does this [[______________]] day of
[[______________]] [[______________]] sell, transfer and deliver all of its
above described rights, title and interest to the Aircraft to the Buyer and to
its successors and assigns forever.
The Seller hereby warrants to the Buyer, its successors and assigns that it has
on the date hereof good and lawful right to sell, deliver and transfer title to
the Aircraft to the Buyer and that there is hereby conveyed to the Buyer on the
date hereof good, legal and valid title to the Aircraft, free and clear of all
liens, claims, charges, encumbrances and rights of others, and that the Seller
will warrant and defend such title forever against all claims and demands
whatsoever.
THAT this Bill of Sale is and shall be governed by and construed in accordance
with the laws of the state of New York.
IN WITNESS WHEREOF the undersigned has caused this instrument to be executed by
its duly authorised representative this [[______________]] day of
[[______________]] [[______________]]
In [[______________] ----------------------
[Seller]
By:
----------------------------------------
Title:
------------------------------------
Signature:
----------------------------------
<PAGE> 201
APPENDIX P*
FORM OF LETTER COMPRISING NOTICE OF CHARGE AND AIRCRAFT
MORTGAGE AND QUIET ENJOYMENT COVENANT
To: [Lessee]
[Sub-Lessee]
Dated 19
1. Reference is made to [ ] Aircraft Manufacturer's Serial Number [ ] (the
"AIRCRAFT") and the Aircraft Lease Agreement (the "LEASE") dated [ ] 19[
] between [name of Lessor] (the "LESSOR")
and [name of Lessee] (the "LESSEE").
2. The Lessor and Halifax plc as security trustee on behalf of itself and
certain other lenders named therein (the "Security Trustee") hereby give
you notice that (a) by a Debenture dated [______________________] the
"DEBENTURE") between the Lessor and the Security Trustee the Lessor has
charged by way of security to the Security Trustee all the Lessor's
rights, title and interest in and to the Lease and (b) by an Aircraft
Mortgage [entered into on [__________________________________]] [to be
entered into within sixty days of delivery of the Aircraft to the
Lessor], the Lessor has mortgaged the Aircraft to the Security Trustee
and has agreed to grant a contingent future security assignment of the
Lease.
3. Henceforth all moneys that may be payable to the Lessor under the Lease
shall continue to be paid to the bank account specified in the Lease or
as otherwise directed in writing by the Lessor unless and until the
Security Trustee issues to you a Lessor Trigger Notice as defined in and
pursuant to paragraph 7(A) below directing you to pay such amounts to
another account, whereupon the Lessee is authorised and required to
comply with the Security Trustee's directions. Notwithstanding the
foregoing sentence, the Lessee shall continue to perform its obligations
under the Lease in favour of and for the benefit of the Lessor until
such time as the Security Trustee may issue to you a Lessor Default
Notice as defined in and pursuant to paragraph 7(B) below. Until such
Lessor Default Notice is delivered, the Lessee shall continue to deal
solely with the Lessor with respect to, and the Lessor alone shall have,
all rights, powers, privileges, remedies and other benefits in respect
of the Lease, including, without limitation, to amend, supplement, waive
or otherwise modify the Lease, to enforce the Lease, to extend or
terminate the Lease, to enter into a new Lease, or to use, apply,
release or modify any [Security Deposit, Maintenance Reserves or other]
support or security.
4. This notice contained in paragraph 2 above and the instructions
contained in paragraph 3 above are irrevocable. The Lessee is hereby
authorised to observe and act upon the instructions of the Security
Trustee expressed to be assumed by it under paragraph 7 to the effect
that, so far as the same would otherwise be incompatible therewith, the
Lessee's obligations to the Lessor under the Lease will be modified
accordingly.
5. The Security Trustee for and on behalf of the Lenders confirms to you
that none of the Lenders nor the Security Trustee nor any person
lawfully claiming through the Lenders or the Security Trustee will
interfere with the lawful* use, possession and quiet enjoyment of the
Aircraft by the Lessee in accordance with the Lease so long as no "event
of default" under and as defined in the Lease has occurred and is
continuing and the Lessee complies with the provisions contained in
paragraph 7 below. This undertaking shall not operate as an
<PAGE> 202
assumption by the Security Trustee of any obligation of the Lessor,
unless and until the Security Trustee succeeds to the rights and
interests of the Lessor in the Lease or a new lease is entered into as
provided in paragraph 7 below.
6. The foregoing undertaking is not to be construed as restricting the
rights of the Security Trustee to dispose of the Aircraft in certain
circumstances to such persons and on such terms as the Security Trustee
considers appropriate. However, if the Security Trustee becomes entitled
to exercise such rights during the term of the Lease and provided that
the Lessee complies with its obligations under the Lease and with the
provisions in paragraph 7 below, the Security Trustee will (subject to
any requirements or restrictions imposed by applicable law) dispose of
the Aircraft expressly subject to the Lease and on terms that the
purchaser issues an undertaking to the Lessee that it will not interfere
with the lawful* use, possession and quiet enjoyment of the Aircraft by
the Lessee in accordance with the Lease, so long as no "event of
default" under and as defined in the Lease has occurred and is
continuing and the Lessee complies with the provisions contained in
paragraph 7 below.
7. (A) If the Security Trustee issues to the Lessee a notice (a "Lessor
Trigger Notice") that the Security Trustee's rights as assignee
have become exercisable following the occurrence of a Third
Trigger Event under a certain Facility Agreement dated January [
], 1999 with [name of Borrower] the Lessee agrees that the
Security Trustee and the Lenders shall not be responsible in any
way whatsoever for the actions or inactions of the Lessor, and
after issue by the Security Trustee of any Lessor Trigger Notice
the Lessee shall pay to the Security Trustee at such account as
it may nominate all rentals and other amounts from time to time
payable by the Lessee under the Lease.
(B) If the Security Trustee issues to the Lessee a notice (a "Lessor
Default Notice") that the Security Trustee's rights as assignee
have become exercisable following the occurrence of an
Acceleration Event under a certain Facility Agreement dated
January [ ], 1999 with [name of Borrower] the Lessee agrees that
the Security Trustee and the Lenders shall not be responsible in
any way whatsoever for the actions or inactions of the Lessor,
and after issue by the Security Trustee of any Lessor Default
Notice the Lessee shall:-
(a) pay to the Security Trustee at such account as it may
nominate all rentals and other amounts from time to time
payable by the Lessee under the Lease;
(b) to the exclusion of the Lessor, perform, observe and
comply with all other undertakings and obligations of
the Lessee under the Lease in favour and for the benefit
of the Security Trustee as if the Security Trustee were
named as lessor therein; and
(c) if the Security Trustee requests, after (i) the Security
Trustee succeeds to the interest of a Lessor in the
Lease by exercising its rights under the Debenture or
any perfected security assignment of the Lease or (ii)
the Security Trustee exercises its rights or remedies
under the Mortgage, enter into a lease with the Security
Trustee or its nominee, on the same terms (mutatis
mutandis) as the Lease.
8. Following the issue of a Lessor Default Notice the Security Trustee
shall have the benefit of Clause [________] of the Lease (Disclaimer and
Indemnity); provided, however, neither the
<PAGE> 203
foregoing, nor any other provision of this letter nor the assignments
described herein shall have the effect of increasing the Lessee's
liabilities or obligations under the Lease.
- ------------------------------------
[Lessor]
- ------------------------------------
[Security Trustee]
*
[WHEN APPLICABLE, THIS FORM SHALL BE ADAPTED TO INCORPORATE REFERENCES TO AN
INTERMEDIATE LESSEE AND AN INTERMEDIATE LEASE]
- -----------------
* The deletion of the word lawful will only be made on receipt of Californian
legal opinion that the Lessor may terminate the Lease on account of illegality
without facing a claim from the lessee customer as to a breach by the Lessor of
its quiet enjoyment covenant.
<PAGE> 204
THE BRITISH LENDERS
HALIFAX PLC
By: /s/ PETER BARKER
-------------------------------
Name: Peter Barker
-------------------------------
Title:
-------------------------------
THE FRENCH LENDERS
SOCIETE GENERALE
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE GERMAN LENDERS
BAYERISCHE HYPO-UND VEREINSBANK A.G.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 205
THE BRITISH LENDERS
HALIFAX PLC
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE FRENCH LENDERS
SOCIETE GENERALE
By: /s/ FLORENCE ROUSSEL POLLET
-------------------------------
Name: Florence Roussel Pollet
-------------------------------
Title: Attorney in Fact
-------------------------------
THE GERMAN LENDERS
BAYERISCHE HYPO-UND VEREINSBANK A.G.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 206
THE BRITISH LENDERS
HALIFAX PLC
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE FRENCH LENDERS
SOCIETE GENERALE
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE GERMAN LENDERS
BAYERISCHE HYPO-UND VEREINSBANK A.G.
By: [SIG] By: /s/ MICHAEL TRENTZSCH
------------------------------- --------------------------------------
Name: Name: Michael Trentzsch
------------------------------- ------------------------------------
Title: Managing Director Title: Vice President Aircraft Finance
------------------------------- -----------------------------------
<PAGE> 207
KREDITANSTALT FUR WIEDERAUFBAU
By: /s/ [SIG] By: /s/ SILKE RICHLER
------------------------------- --------------------------------------
Name: Name: Silke Richler
------------------------------- ------------------------------------
Title: First Vice President Title: Senior Project Manager
------------------------------- -----------------------------------
COMMERZBANK AG
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE AGENT
HALIFAX PLC
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE SECURITY TRUSTEE
HALIFAX PLC
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 208
KREDITANSTALT FUR WIEDERAUFBAU
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
COMMERZBANK AG
By: /s/ [SIG]
-------------------------------
Name:
-------------------------------
Title: SVP As Treasurer
-------------------------------
THE AGENT
HALIFAX PLC
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE SECURITY TRUSTEE
HALIFAX PLC
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 209
KREDITANSTALT FUR WIEDERAUFBAU
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
COMMERZBANK AG
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE AGENT
HALIFAX PLC
By: /s/ PETER BARKER
-------------------------------
Name: Peter Barker
-------------------------------
Title:
-------------------------------
THE SECURITY TRUSTEE
HALIFAX PLC
By: /s/ PETER BARKER
-------------------------------
Name: Peter Barker
-------------------------------
Title:
-------------------------------
<PAGE> 210
THE BORROWER
SIERRA LEASING LIMITED
By: /s/ ALAN H. LUND By: /s/ PAMELA HENDRY
------------------------------- --------------------------------------
Name: Alan H. Lund Name: Pamela Hendry
------------------------------- ------------------------------------
Title: Director Title: Vice-President
------------------------------- -----------------------------------
PARENT
AIRCRAFT SPC-9, INC
By: /s/ ALAN H. LUND By: /s/ PAMELA HENDRY
------------------------------- --------------------------------------
Name: Alan H. Lund Name: Pamela Hendry
------------------------------- ------------------------------------
Title: Chief Financial Officer Title: Treasurer
------------------------------- -----------------------------------
THE GUARANTOR
EXECUTED, as a DEED AND ) /s/ ALAN H. LUND /s/ PAMELA S. HENDRY
SIGNED and DELIVERED by ) ----------------- ---------------------
INTERNATIONAL LEASE FINANCE ) Alan H. Lund Pamela S. Hendry
CORPORATION ) Executive Vice Vice President
as Guarantor acting through its duly ) President and Treasurer
authorised officer )
in the presence of: )
/s/ LEE McLERNON
-----------------------
D.L. McLernon
<PAGE> 211
SUBORDINATED LENDER
INTERNATIONAL LEASE FINANCE
CORPORATION
By: /s/ ALAN H. LUND By: /s/ PAMELA S. HENDRY
------------------------------- --------------------------------------
Name: Alan H. Lund Name: Pamela S. Hendry
------------------------------ ------------------------------------
Title: Executive Vice President Title: Vice President and Treasurer
----------------------------- -----------------------------------
<PAGE> 1
EXHIBIT 12
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Earnings
Net income............................ $201,943 $196,437 $ 251,774 $ 338,684 $ 369,352
Add:
Provision for income taxes......... 110,064 141,909 143,165 187,475 192,922
Fixed charges...................... 421,170 592,519 655,958 754,246 778,817
Less:
Capitalized interest............... 44,610 51,091 50,368 48,818 54,297
-------- -------- ---------- ---------- ----------
Earnings as adjusted (A).............. $688,567 $879,774 $1,000,529 $1,231,587 $1,286,794
======== ======== ========== ========== ==========
Preferred dividend requirements....... $ 6,890 $ 13,096 $ 16,599 $ 16,348 $ 16,965
Ratio of income before provision
for income taxes to net income... 155% 172% 157% 155% 152%
-------- -------- ---------- ---------- ----------
Preferred dividend factor on pretax
basis............................ 10,680 22,525 26,060 25,339 25,787
-------- -------- ---------- ---------- ----------
Fixed charges
Interest expense................... 376,560 541,428 573,599 642,321 639,964
Capitalized interest............... 44,610 51,091 50,368 48,818 54,297
Interest factor of rents........... -- -- 31,991 63,107 84,556
-------- -------- ---------- ---------- ----------
Fixed charges as adjusted (B)......... 421,170 592,519 655,958 754,246 778,817
-------- -------- ---------- ---------- ----------
Fixed charges and preferred stock
dividends (C)...................... $431,850 $615,044 $ 682,018 $ 779,585 $ 804,604
======== ======== ========== ========== ==========
Ratio of earnings to fixed charges ((A)
divided by (B))....................... 1.63x 1.48x 1.53x 1.63x 1.65x
======== ======== ========== ========== ==========
Ratio of earnings to fixed charges and
preferred stock dividends ((A) divided
by (C))............................... 1.59x 1.43x 1.47x 1.58x 1.60x
======== ======== ========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-74095) of International Lease Finance Corporation and in the
related Prospectus of our report dated February 9, 1999, with respect to the
consolidated financial statements and schedule of International Lease Finance
Corporation included in this Annual Report (Form 10-K) for the year ended
December 31, 1998.
PricewaterhouseCoopers LLP
Los Angeles, California
March 17, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-74095) of International Lease Finance Corporation and in the
related Prospectus of our report dated February 19, 1997, with respect to the
consolidated statements of income, shareholders' equity, and cash flows for the
year ended December 31, 1996 and the related schedule of International Lease
Finance Corporation and subsidiaries included in this Annual Report (Form 10-K)
for the year ended December 31, 1998.
ERNST & YOUNG LLP
Century City,
Los Angeles, California
March 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-30-1998
<CASH> 52,723
<SECURITIES> 0
<RECEIVABLES> 340,344
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 16,860,789
<DEPRECIATION> 1,988,359
<TOTAL-ASSETS> 14,872,430
<CURRENT-LIABILITIES> 0
<BONDS> 10,373,242
0
400,000
<COMMON> 3,582
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,379,632
<SALES> 1,853,983
<TOTAL-REVENUES> 2,045,666
<CGS> 0
<TOTAL-COSTS> 843,428
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 639,964
<INCOME-PRETAX> 562,274
<INCOME-TAX> 192,922
<INCOME-CONTINUING> 369,352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 369,352
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
