Form 6-K Fly Leasing Ltd For: Nov 13
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
Date of Report: November 13, 2020
Commission File Number: 001-33701
(Exact Name of registrant as specified in its charter)
West Pier Business Campus
Dun Laoghaire
County Dublin, A96 N6T7, Ireland
(Address of principal executive office)
Indicate by check mark whether registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Exhibits
The following documents, which are attached as exhibits hereto, are incorporated by reference herein.
Exhibit
|
Title
|
99.1
|
Fly Leasing Limited’s interim report for the three and nine months ended September 30, 2020
|
4.1
|
Aircraft Mortgage and Security Agreement dated as of October 15, 2020 among Fly Willow Funding Limited, Fly Leasing Limited, Fly Willow Aircraft Holdings DAC, the additional grantors referred to therein, and
Bank of Utah as Collateral Agent.
|
4.2
|
Term Loan Credit Agreement dated as of October 15, 2020 among Fly Willow Funding Limited, as Borrower, Fly Leasing Limited, as a Guarantor Party, Fly Willow Aircraft Holdings DAC, as a Guarantor Party, each
other guarantor party referred to therein, the lenders identified therein, Royal Bank of Canada, as Administrative Agent and Bank of Utah, as Collateral Agent.
|
4.3
|
Servicing Agreement dated as of October 15, 2020 among BBAM US LP, BBAM Aviation Services Limited and Fly Leasing Limited.
|
4.4
|
Form of Servicing Agreement among BBAM US LP, BBAM Aviation Services Limited and each company thereof.
|
This report on Form 6-K is hereby incorporated by reference into Fly Leasing Limited’s Registration Statement on Form F-3, as amended (Reg. No. 333-157817), first filed with the Securities and Exchange Commission on March
10, 2009; Registration Statement on Form F-3, as amended (Reg. No. 333-187305), first filed with the Securities and Exchange Commission on March 15, 2013; Registration Statement on Form F-3 (Reg. No. 333-234700), first filed with the Securities and
Exchange Commission on November 14, 2019; and Registration Statement on Form F-3 (Reg. No. 333-248082), first filed with the Securities and Exchange Commission on August 18, 2020.
i
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Fly Leasing Limited
(Registrant)
|
|||
Date: November 13, 2020
|
By:
|
/s/ Colm Barrington | |
Colm Barrington
|
|||
Chief Executive Officer and Director
|
ii
EXHIBIT INDEX
Exhibit
|
Title
|
Fly Leasing Limited’s interim report for the three and nine months ended September 30, 2020
|
|
Aircraft Mortgage and Security Agreement dated as of October 15, 2020 among Fly Willow Funding Limited, Fly Leasing Limited, Fly Willow Aircraft Holdings DAC, the additional grantors referred to therein, and
Bank of Utah as Collateral Agent.
|
|
Term Loan Credit Agreement dated as of October 15, 2020 among Fly Willow Funding Limited, as Borrower, Fly Leasing Limited, as a Guarantor Party, Fly Willow Aircraft Holdings DAC, as a Guarantor Party, each
other guarantor party referred to therein, the lenders identified therein, Royal Bank of Canada, as Administrative Agent and Bank of Utah, as Collateral Agent.
|
|
Servicing Agreement dated as of October 15, 2020 among BBAM US LP, BBAM Aviation Services Limited and Fly Leasing Limited.
|
|
Form of Servicing Agreement among BBAM US LP, BBAM Aviation Services Limited and each company thereof.
|
iii
Exhibit 99.1
PRELIMINARY NOTE
This Interim Report should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Interim Report and with our Annual Report on Form 20-F, for the year ended December 31, 2019.
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and are presented in U.S. Dollars. These statements and discussion
below contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, objectives, expectations and intentions and other statements
contained in this Interim Report that are not historical facts, as well as statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning. Such statements address
future events and conditions concerning matters such as, but not limited to, our earnings, cash flow, liquidity and capital resources, compliance with debt and other restrictive financial and operating covenants, interest rates, dividends, and
acquisitions and dispositions of aircraft and other aviation assets. These statements are based on current beliefs or expectations and are inherently subject to significant uncertainties and changes in circumstances, many of which are beyond our
control. Actual results may differ materially from these expectations due to changes in political, economic, business, competitive, market and regulatory factors. Additional or unforeseen effects from the COVID-19 pandemic and the global economic
climate may give rise to or amplify many of these factors. The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations and financial condition will depend on future
developments, which are highly uncertain and cannot be predicted. We believe that these factors include, but are not limited to those described in Part II “Other Information – Item 1A. Risk Factors” in this Interim Report and under Item 3 “Key
Information — Risk Factors” and elsewhere in our Annual Report on Form 20-F, for the year ended December 31, 2019.
Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward looking statements to reflect events, developments or circumstances after the date of this document, a
change in our views or expectations, or to reflect the occurrence of future events.
Unless the context requires otherwise, when used in this Interim Report, (1) the term “Fly” refers to Fly Leasing Limited; (2) the terms “Company,” “we,” “our” and “us” refer to Fly and its subsidiaries; (3) the term
“B&B Air Funding” refers to our subsidiary, Babcock & Brown Air Funding I Limited; (4) all references to our shares refer to our common shares held in the form of American Depositary Shares, or ADSs; (5) the term “BBAM LP” refers to BBAM
Limited Partnership and its subsidiaries and affiliates; (6) the term “BBAM” refers to BBAM Aircraft Management LP, BBAM Aircraft Management (Europe) Limited, BBAM Aviation Services Limited and BBAM US LP, collectively; and (7) the term “Manager”
refers to Fly Leasing Management Co. Limited, the Company’s manager.
All percentages and weighted average characteristics of the aircraft in our portfolio have been calculated using net book values as of the date specified.
1
INDEX
Page
|
|
PART I FINANCIAL INFORMATION
|
|
3
|
|
28
|
|
40
|
|
41
|
|
PART II OTHER INFORMATION
|
|
42
|
|
42
|
|
44
|
|
44
|
|
44 |
|
44
|
|
45
|
PART I — FINANCIAL INFORMATION
Item 1. |
Financial Statements
|
Fly Leasing Limited
Consolidated Balance Sheets
AT SEPTEMBER 30, 2020 (UNAUDITED) AND DECEMBER 31, 2019 (AUDITED)
(Dollars in thousands, except par value data)
September 30, 2020
|
December 31, 2019
|
|||||||
Assets
|
||||||||
Cash and cash equivalents
|
$
|
285,124
|
$
|
285,565
|
||||
Restricted cash and cash equivalents
|
22,354
|
52,738
|
||||||
Rent receivables, net
|
57,075
|
14,264
|
||||||
Investment in finance lease, net
|
10,713
|
11,639
|
||||||
Flight equipment held for sale, net
|
—
|
144,119
|
||||||
Flight equipment held for operating lease, net
|
2,699,341
|
2,720,000
|
||||||
Maintenance rights
|
285,869
|
290,958
|
||||||
Deferred tax asset, net
|
14,383
|
11,675
|
||||||
Fair value of derivative assets
|
4,183
|
4,824
|
||||||
Other assets, net
|
118,659
|
129,377
|
||||||
Total assets
|
$
|
3,497,701
|
$
|
3,665,159
|
||||
Liabilities
|
||||||||
Accounts payable and accrued liabilities
|
$
|
29,080
|
$
|
22,746
|
||||
Rentals received in advance
|
9,847
|
16,391
|
||||||
Payable to related parties
|
3,763
|
10,077
|
||||||
Security deposits
|
38,934
|
40,726
|
||||||
Maintenance payment liability, net
|
203,499
|
219,371
|
||||||
Unsecured borrowings, net
|
620,713
|
619,407
|
||||||
Secured borrowings, net
|
1,509,449
|
1,695,525
|
||||||
Deferred tax liability, net
|
64,011
|
57,935
|
||||||
Fair value of derivative liabilities
|
50,315
|
27,943
|
||||||
Other liabilities
|
75,460
|
76,761
|
||||||
Total liabilities
|
2,605,071
|
2,786,882
|
||||||
Shareholders’ equity
|
||||||||
Common shares, $0.001 par value; 499,999,900 shares authorized; 30,481,069 and 30,898,410 shares issued and outstanding at September 30, 2020 and December 31, 2019,
respectively
|
31
|
31
|
||||||
Manager shares, $0.001 par value; 100 shares authorized, issued and outstanding
|
—
|
—
|
||||||
Additional paid-in capital
|
509,738
|
516,254
|
||||||
Retained earnings
|
420,003
|
380,392
|
||||||
Accumulated other comprehensive loss, net
|
(37,142
|
)
|
(18,400
|
)
|
||||
Total shareholders’ equity
|
892,630
|
878,277
|
||||||
Total liabilities and shareholders’ equity
|
$
|
3,497,701
|
$
|
3,665,159
|
The accompanying notes are an integral part of these consolidated financial statements.
Fly Leasing Limited
Consolidated Statements of Income (Loss)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)
(Dollars in thousands, except per share data)
Three months
ended
September 30, 2020
|
Three months
ended
September 30, 2019
|
Nine months
ended
September 30, 2020
|
Nine months
ended
September 30, 2019
|
|||||||||||||
Revenues
|
||||||||||||||||
Operating lease revenue
|
$
|
59,259
|
$
|
94,706
|
$
|
225,816
|
$
|
328,581
|
||||||||
Finance lease revenue
|
137
|
153
|
423
|
469
|
||||||||||||
Gain on sale of aircraft
|
—
|
38,934
|
31,717
|
82,632
|
||||||||||||
Interest and other income
|
688
|
5,241
|
3,645
|
9,088
|
||||||||||||
Total revenues
|
60,084
|
139,034
|
261,601
|
420,770
|
||||||||||||
Expenses
|
||||||||||||||||
Depreciation
|
32,589
|
33,881
|
96,197
|
108,769
|
||||||||||||
Interest expense
|
24,381
|
33,580
|
76,820
|
107,198
|
||||||||||||
Selling, general and administrative
|
7,656
|
8,013
|
22,413
|
26,173
|
||||||||||||
Provision for uncollectible operating lease receivables
|
1,000
|
—
|
3,000
|
—
|
||||||||||||
Loss (gain) on derivatives
|
(638
|
)
|
2,537
|
(66
|
)
|
2,809
|
||||||||||
Fair value loss on marketable securities
|
2,345
|
—
|
12,840
|
—
|
||||||||||||
Loss on extinguishment of debt
|
—
|
1,620
|
850
|
5,330
|
||||||||||||
Maintenance and other costs
|
1,188
|
623
|
3,404
|
2,846
|
||||||||||||
Total expenses
|
68,521
|
80,254
|
215,458
|
253,125
|
||||||||||||
Net income (loss) before provision (benefit) for income taxes
|
(8,437
|
)
|
58,780
|
46,143
|
167,645
|
|||||||||||
Provision (benefit) for income taxes
|
(370
|
)
|
7,076
|
6,532
|
16,926
|
|||||||||||
Net income (loss)
|
$
|
(8,067
|
)
|
$
|
51,704
|
$
|
39,611
|
$
|
150,719
|
|||||||
Weighted average number of shares:
|
||||||||||||||||
Basic
|
30,481,069
|
30,873,297
|
30,575,646
|
31,846,836
|
||||||||||||
Diluted
|
30,481,069
|
30,987,394
|
30,575,646
|
31,954,204
|
||||||||||||
Earnings (loss) per share:
|
||||||||||||||||
Basic
|
$
|
(0.26
|
)
|
$
|
1.67
|
$
|
1.30
|
$
|
4.73
|
|||||||
Diluted
|
$
|
(0.26
|
)
|
$
|
1.67
|
$
|
1.30
|
$
|
4.72
|
The accompanying notes are an integral part of these consolidated financial statements.
Fly Leasing Limited
Consolidated Statements of Comprehensive Income (Loss)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)
(Dollars in thousands)
Three months
ended
September 30, 2020
|
Three months
ended
September 30, 2019
|
Nine months
ended
September 30, 2020
|
Nine months
ended
September 30, 2019
|
|||||||||||||
Net income (loss)
|
$
|
(8,067
|
)
|
$
|
51,704
|
$
|
39,611
|
$
|
150,719
|
|||||||
Other comprehensive income (loss), net of tax
|
||||||||||||||||
Change in fair value of derivatives, net of deferred tax(1)
|
3,128
|
(2,917
|
)
|
(18,207
|
)
|
(23,968
|
)
|
|||||||||
Reclassification from other comprehensive income (loss) into earnings due to derivatives that no longer qualified for hedge accounting treatment, net of deferred tax(2)
|
(539
|
)
|
2,117
|
(535
|
)
|
2,781
|
||||||||||
Comprehensive income (loss)
|
$
|
(5,478
|
)
|
$
|
50,904
|
$
|
20,869
|
$
|
129,532
|
(1) |
The associated deferred tax was $648 and ($3,002) for the three and nine months ended September 30, 2020, respectively. The associated deferred tax was ($526) and ($4,399) for the three and nine months ended
September 30, 2019, respectively.
|
(2) |
The associated deferred tax was ($77) and ($76) for the three and nine months ended September 30, 2020, respectively. The associated deferred tax was $327 and $416 for the three and nine months ended
September 30, 2019, respectively.
|
The accompanying notes are an integral part of these consolidated financial statements.
Fly Leasing Limited
Consolidated Statement of Shareholders’ Equity
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 (UNAUDITED)
(Dollars in thousands)
Manager
Shares
|
Common Shares
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss, net
|
Total
Shareholders’
Equity
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||
Balance December 31, 2019
|
100
|
$
|
—
|
30,898,410
|
$
|
31
|
$
|
516,254
|
$
|
380,392
|
$
|
(18,400
|
)
|
$
|
878,277
|
|||||||||||||||||
Shares repurchased
|
—
|
—
|
(417,341
|
)
|
—
|
(6,516
|
)
|
—
|
—
|
(6,516
|
)
|
|||||||||||||||||||||
Net income
|
—
|
—
|
—
|
—
|
—
|
38,072
|
—
|
38,072
|
||||||||||||||||||||||||
Net change in the fair value of derivatives, net of deferred tax of ($3,578)(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
(19,598
|
)
|
(19,598
|
)
|
||||||||||||||||||||||
Reclassification from other comprehensive loss into earnings due to derivatives that no longer qualified for hedge accounting treatment
|
—
|
—
|
—
|
—
|
—
|
—
|
1
|
1
|
||||||||||||||||||||||||
Balance March 31, 2020
|
100
|
—
|
30,481,069
|
31
|
509,738
|
418,464
|
(37,997
|
)
|
890,236
|
|||||||||||||||||||||||
Net income
|
—
|
—
|
—
|
—
|
—
|
9,606
|
—
|
9,606
|
||||||||||||||||||||||||
Net change in the fair value of derivatives, net of deferred tax of ($72)(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
(1,737
|
)
|
(1,737
|
)
|
||||||||||||||||||||||
Reclassification from other comprehensive loss into earnings due to derivatives that no longer qualified for hedge accounting treatment, net of deferred tax of $1(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
3
|
3
|
||||||||||||||||||||||||
Balance June 30, 2020
|
100
|
—
|
30,481,069
|
31
|
509,738
|
428,070
|
(39,731
|
)
|
898,108
|
|||||||||||||||||||||||
Net loss |
—
|
—
|
—
|
—
|
—
|
(8,067
|
)
|
—
|
(8,067
|
)
|
||||||||||||||||||||||
Net change in the fair value of derivatives, net of deferred tax of $648(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
3,128
|
3,128
|
||||||||||||||||||||||||
Reclassification from other comprehensive loss into earnings due to derivatives that no longer qualified for hedge accounting treatment, net of deferred tax of ($77)(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
(539
|
)
|
(539
|
)
|
||||||||||||||||||||||
Balance September 30, 2020
|
100
|
$
|
—
|
30,481,069
|
$
|
31
|
$
|
509,738
|
$
|
420,003
|
$
|
(37,142
|
)
|
$
|
892,630
|
(1) |
See Note 10 to Notes to Consolidated Financial Statements.
|
The accompanying notes are an integral part of these consolidated financial statements.
Fly Leasing Limited
Consolidated Statement of Shareholders’ Equity
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 (UNAUDITED)
(Dollars in thousands)
Manager
Shares
|
Common Shares
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss, net
|
Total
Shareholders’
Equity
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||
Balance December 31, 2018
|
100
|
$
|
—
|
32,650,019
|
$
|
33
|
$
|
549,123
|
$
|
154,347
|
$
|
(1,393
|
)
|
$
|
702,110
|
|||||||||||||||||
Reclassification from prior period losses into other comprehensive loss due to adoption of new accounting guidance, net of deferred tax of $52(1)
|
—
|
—
|
—
|
—
|
—
|
168
|
(168
|
)
|
—
|
|||||||||||||||||||||||
Adjusted balance January 1, 2019
|
100
|
—
|
32,650,019
|
33
|
549,123
|
154,515
|
(1,561
|
)
|
702,110
|
|||||||||||||||||||||||
Shares repurchased
|
—
|
—
|
(197,592
|
)
|
(1
|
)
|
(2,694
|
)
|
—
|
—
|
(2,695
|
)
|
||||||||||||||||||||
Net income
|
—
|
—
|
—
|
—
|
—
|
44,965
|
—
|
44,965
|
||||||||||||||||||||||||
Net change in the fair value of derivatives, net of deferred tax of $1,333(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
(6,938
|
)
|
(6,938
|
)
|
||||||||||||||||||||||
Reclassification from other comprehensive loss into earnings due to derivatives that no longer qualified for hedge accounting treatment, net of deferred tax of $37(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
461
|
461
|
||||||||||||||||||||||||
Balance March 31, 2019
|
100
|
—
|
32,452,427
|
32
|
546,429
|
199,480
|
(8,038
|
)
|
737,903
|
|||||||||||||||||||||||
Shares issued in connection with SARs exercised
|
—
|
—
|
56,218
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Shares repurchased
|
—
|
—
|
(1,470,353
|
)
|
(1
|
)
|
(24,379
|
)
|
—
|
—
|
(24,380
|
)
|
||||||||||||||||||||
Net income
|
—
|
—
|
—
|
—
|
—
|
54,050
|
—
|
54,050
|
||||||||||||||||||||||||
Net change in the fair value of derivatives, net of deferred tax of $2,540(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
(14,113
|
)
|
(14,113
|
)
|
||||||||||||||||||||||
Reclassification from other comprehensive loss into earnings due to derivatives that no longer qualified for hedge accounting treatment, net of deferred tax of $52(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
203
|
203
|
||||||||||||||||||||||||
Balance June 30, 2019
|
100
|
—
|
31,038,292
|
31
|
522,050
|
253,530
|
(21,948
|
)
|
753,663
|
|||||||||||||||||||||||
Shares issued in connection with SARs exercised
|
—
|
—
|
202,610
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Shares repurchased
|
—
|
—
|
(342,492
|
)
|
—
|
(5,795
|
)
|
—
|
—
|
(5,795
|
)
|
|||||||||||||||||||||
Net income
|
—
|
—
|
—
|
—
|
—
|
51,704
|
—
|
51,704
|
||||||||||||||||||||||||
Net change in the fair value of derivatives, net of deferred tax of $526(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
(2,917
|
)
|
(2,917
|
)
|
||||||||||||||||||||||
Reclassification from other comprehensive loss into earnings due to derivatives that no longer qualified for hedge accounting treatment, net of deferred tax of $327(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
2,117
|
2,117
|
||||||||||||||||||||||||
Balance September 30, 2019
|
100
|
$
|
—
|
30,898,410
|
$
|
31
|
$
|
516,255
|
$
|
305,234
|
$
|
(22,748
|
)
|
$
|
798,772
|
(1) |
See Note 10 to Notes to Consolidated Financial Statements.
|
The accompanying notes are an integral part of these consolidated financial statements.
Fly Leasing Limited
Consolidated Statements of Cash Flows
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)
(Dollars in thousands)
Nine months ended
|
||||||||
September 30, 2020
|
September 30, 2019
|
|||||||
Cash Flows from Operating Activities
|
||||||||
Net income
|
$
|
39,611
|
$
|
150,719
|
||||
Adjustments to reconcile net income to net cash flows provided by operating activities:
|
||||||||
Gain on sale of aircraft
|
(31,717
|
)
|
(82,632
|
)
|
||||
Depreciation
|
96,197
|
108,769
|
||||||
Amortization of debt discounts and debt issuance costs
|
5,484
|
7,786
|
||||||
Amortization of lease incentives and other items
|
3,026
|
4,843
|
||||||
Provision for uncollectible operating lease receivables
|
3,000
|
—
|
||||||
Fair value loss on marketable securities
|
12,840
|
—
|
||||||
Loss on extinguishment of debt
|
850
|
5,330
|
||||||
Provision for deferred income taxes
|
6,121
|
15,963
|
||||||
Security deposits and maintenance payment liability recognized into earnings
|
(2,487
|
)
|
(26,145
|
)
|
||||
Cash receipts from maintenance rights
|
2,725
|
1,741
|
||||||
Other
|
(112
|
)
|
5,121
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Rent receivables
|
(51,285
|
)
|
(10,995
|
)
|
||||
Other assets
|
1,390
|
(5,280
|
)
|
|||||
Payable to related parties
|
(6,314
|
)
|
2,576
|
|||||
Accounts payable, accrued liabilities and other liabilities
|
7,806
|
12,468
|
||||||
Net cash flows provided by operating activities
|
87,135
|
190,264
|
||||||
Cash Flows from Investing Activities
|
||||||||
Purchase of flight equipment
|
(74,128
|
)
|
(114,826
|
)
|
||||
Proceeds from sale of aircraft, net
|
160,271
|
651,488
|
||||||
Payments for aircraft improvement
|
(15,298
|
)
|
(3,059
|
)
|
||||
Payments for lessor maintenance obligations
|
(357
|
)
|
(1,843
|
)
|
||||
Purchase of equity certificates
|
—
|
(7,425
|
)
|
|||||
Other
|
(1,540
|
)
|
740
|
|||||
Net cash flows provided by investing activities
|
68,948
|
525,075
|
||||||
Cash Flows from Financing Activities
|
||||||||
Security deposits received
|
4,009
|
1,169
|
||||||
Security deposits returned
|
—
|
(1,546
|
)
|
|||||
Maintenance payment liability receipts
|
17,359
|
48,631
|
||||||
Maintenance payment liability disbursements
|
(10,109
|
)
|
(14,975
|
)
|
||||
Debt extinguishment costs
|
(20
|
)
|
(194
|
)
|
||||
Debt issuance costs
|
—
|
(342
|
)
|
|||||
Repayment of secured borrowings
|
(191,734
|
)
|
(474,659
|
)
|
||||
Shares repurchased
|
(6,517
|
)
|
(32,844
|
)
|
||||
Net cash flows used in financing activities
|
(187,012
|
)
|
(474,760
|
)
|
Nine months ended
|
||||||||
September 30, 2020
|
September 30, 2019
|
|||||||
Effect of exchange rate changes on unrestricted and restricted cash and cash equivalents
|
$
|
104
|
$
|
(55
|
)
|
|||
Net (decrease) increase in unrestricted and restricted cash and cash equivalents
|
(30,825
|
)
|
240,524
|
|||||
Unrestricted and restricted cash and cash equivalents at beginning of period
|
338,303
|
281,080
|
||||||
Unrestricted and restricted cash and cash equivalents at end of period
|
$
|
307,478
|
$
|
521,604
|
||||
Reconciliation to Consolidated Balance Sheets:
|
||||||||
Cash and cash equivalents
|
$
|
285,124
|
$
|
432,747
|
||||
Restricted cash and cash equivalents
|
22,354
|
88,857
|
||||||
Unrestricted and restricted cash and cash equivalents
|
$
|
307,478
|
$
|
521,604
|
The accompanying notes are an integral part of these consolidated financial statements.
Fly Leasing Limited
Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2020 (unaudited)
1. ORGANIZATION
Fly Leasing Limited (“Fly”) is a Bermuda exempted company that was incorporated on May 3, 2007, under the provisions of Section 14 of the Companies Act 1981 of Bermuda. Fly was formed to acquire, finance, lease and sell commercial jet aircraft
directly or indirectly through its subsidiaries (Fly and its subsidiaries collectively, the “Company”).
Although Fly is organized under the laws of Bermuda, it is a resident of Ireland for tax purposes and is subject to Irish corporation tax on its income in the same way, and to the same extent, as if it were organized under the laws of Ireland.
In accordance with Fly’s amended and restated bye-laws, Fly issued 100 shares (“Manager Shares”) with a par value of $0.001 to Fly Leasing Management Co. Limited (the “Manager”) for no consideration. Subject to the provisions of Fly’s amended
and restated bye-laws, the Manager Shares have the right to appoint the nearest whole number of directors to Fly which is not more than 3/7th of the number of directors comprising the board of directors. The Manager Shares are not entitled to
receive any dividends, are not convertible into common shares and, except as provided for in Fly’s amended and restated bye-laws, have no voting rights.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION
Fly is a holding company that conducts its business through its subsidiaries. Fly directly or indirectly owns all of the common shares of its consolidated subsidiaries. The consolidated financial statements presented are prepared in accordance
with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of Fly and all of its subsidiaries. In instances where it is the primary beneficiary, the Company consolidates a Variable
Interest Entity (“VIE”). Fly is deemed the primary beneficiary when it has both the power to direct the activities of the VIE that most significantly impact the economic performance of such VIE, and it bears the significant risk of loss and
participates in gains of the VIE. All intercompany transactions and balances have been eliminated. The consolidated financial statements are stated in U.S. Dollars, which is the principal operating currency of the Company.
The Company’s interim financial statements reflect all normally recurring adjustments that are necessary to fairly state the results for the interim periods presented. Certain information and footnote disclosures required by U.S. GAAP for
complete annual financial statements have been omitted and, therefore, the Company’s interim financial statements should be read in conjunction with its Annual Report on Form 20-F for the year ended December 31,
2019, filed with the SEC on February 28, 2020 (the "2019 Annual Report"). The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of those for a full fiscal year.
The Company has one operating and reportable segment which is aircraft and aircraft equipment leasing.
Certain amounts in prior period consolidated financial statements have been reclassified to conform to the current period presentation.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The use of
estimates is or could be a significant factor affecting the reported carrying values of rent receivables, flight equipment, deferred tax assets, liabilities and reserves. To the extent available, the Company utilizes industry specific resources,
third-party appraisers and other materials to support management’s estimates, particularly with respect to flight equipment. Despite management’s best efforts to accurately estimate such amounts, actual results could differ from those estimates.
RISKS AND UNCERTAINTIES
The Company encounters several types of risk in the course of its business, including credit, market, aviation industry and capital market risks. Credit risk addresses a lessee’s or derivative counterparty’s inability or unwillingness to make
contractually required payments. Market risk reflects the change in the value of derivatives and credit facilities due to changes in interest rate spreads or other market factors, including the value of collateral underlying the Company’s credit
facilities. Aviation industry risk is the risk of a downturn in the commercial aviation industry, as a result of global, regional or industry-specific factors, which could adversely impact a lessee’s ability to make payments, increase the risk of
unscheduled lease terminations and depress lease rates and the value of the Company’s aircraft and aircraft equipment. Capital market risk is the risk that the Company is unable to obtain capital at reasonable rates to fund the growth of its
business or to refinance existing credit facilities.
COVID-19 PANDEMIC
On January 30, 2020, the spread of COVID-19 was declared a Public Health Emergency of International Concern by the World Health Organization (“WHO”), and on March 11, 2020, the WHO characterized the COVID-19 outbreak as a pandemic. The COVID-19
pandemic and the measures that governments and private parties have implemented in response to the pandemic have caused significant economic disruption, and will likely continue to have a material adverse effect on the demand for worldwide air
travel, the airline industry and demand for commercial jet aircraft globally. The Company is unable to predict how long these conditions will persist, especially in light of the resurgence of COVID-19 in certain
countries, what additional restrictions and other measures may be implemented by governments or private parties to reduce the spread of COVID-19 or otherwise dissuade air travel in the future as a result of the pandemic, which could cause a
worsening of the negative effects of the COVID-19 pandemic on the airline industry and the Company’s business, results of operations, financial condition, cash flows, and growth prospects. The longer the COVID-19 pandemic persists, the
more material the ultimate effects are likely to be.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which amends its guidance on the impairment of financial instruments. The standard adds to U.S. GAAP an
impairment model, known as the current expected credit loss model, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes its estimate of lifetime expected credit losses as an allowance for most
financial assets measured at amortized cost and certain other instruments, including trade and other receivables, investment in finance leases and off-balance sheet credit exposures. ASU 2016-13 does not apply to operating lease receivables. The
FASB believes the new accounting standard will result in more timely recognition of losses. The standard is applied on a modified retrospective approach. The Company adopted the guidance effective January 1, 2020. The adoption of the standard did
not have a material effect on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes the
following disclosure requirements from Topic 820:
• |
The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;
|
• |
The policy for timing of transfers between levels; and
|
• |
The valuation processes for Level 3 fair value measurements.
|
The following disclosure requirements were added to Topic 820:
• |
The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements at the end of the reporting period; and
|
• |
The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.
|
The Company adopted ASU 2018-13 effective January 1, 2020. The adoption of the standard did not have a material effect on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference
Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions to all entities, subject to meeting certain
criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Modifications of contracts within the scope of Topics 310, Receivables, and 470, Debt, should be accounted for by prospectively adjusting the effective interest rate. Modifications of contracts within
the scope of Topics 840, Leases, and 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments
of the lease classification and the discount rate (for example, the incremental borrowing rate) or remeasurements of lease payments that otherwise would be required under those Topics for modifications not accounted for as separate contracts.
Modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract
under Subtopic 815-15, Derivatives and Hedging—Embedded Derivatives. Entities electing to utilize expedients are required to disclose the nature of and reason for their elections to apply expedients in each interim and annual financial statement period in the fiscal year of adoption.
The optional amendments are available for all entities from March 12, 2020 through December 31, 2022. The Company has elected to apply the hedge accounting expedients effective April 1, 2020. The election did not have a material effect on
the Company’s consolidated financial statements. The Company will continue to evaluate the impact of the guidance and may apply other elections as applicable.
In April 2020, the FASB issued a question-and-answer document regarding accounting for lease concessions related to the effects of the COVID-19 pandemic. The document provides that a company may elect to
account for lease concessions as if those concessions existed regardless of whether the enforceable rights and obligations for the concessions explicitly exist in the contract. Consequently, an entity will not have to analyze each contract to
determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance under Leases ASC 842, to those contracts. This election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original
contract. Both lessees and lessors may make this election. The Company has elected to apply the relief related to lease concessions effective April 1, 2020.
3. SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
|
||||||||
September 30, 2020
|
September 30, 2019
|
|||||||
(Dollars in thousands)
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$
|
64,420
|
$
|
88,043
|
||||
Taxes
|
726
|
163
|
||||||
Noncash Activities:
|
||||||||
Security deposits applied to rent receivables, other liabilities and maintenance payment liability
|
3,030
|
3,224
|
||||||
Maintenance payment liability applied to rent receivables and other liabilities
|
8,913
|
4,088
|
||||||
Other liabilities applied to maintenance payment liability and security deposits
|
2,243
|
2,457
|
||||||
Noncash investing activities:
|
||||||||
Aircraft improvement
|
7,204
|
4,940
|
||||||
Noncash activities in connection with purchase of flight equipment
|
1,211
|
11,807
|
||||||
Noncash activities in connection with sale of flight equipment
|
6,162
|
15,711
|
4. INVESTMENT IN FINANCE LEASE
At each of September 30, 2020 and December 31, 2019, the Company had one aircraft classified as an investment in finance lease, which had an implicit interest rate of
5%.
The Company’s net investment in finance lease consisted of the following (dollars in thousands):
September 30, 2020
|
December 31, 2019
|
|||||||
Total minimum lease payments receivable
|
$
|
8,250
|
$
|
9,600
|
||||
Estimated unguaranteed residual value of leased asset
|
4,227
|
4,227
|
||||||
Unearned finance income
|
(1,764
|
)
|
(2,188
|
)
|
||||
Net Investment in Finance Lease
|
$
|
10,713
|
$
|
11,639
|
Presented below are the contracted future minimum rental payments due under the non-cancellable finance lease, as of September 30, 2020.
(Dollars in
thousands)
|
||||
October 1 through December 31, 2020
|
$
|
450
|
||
Year ending December 31,
|
||||
2021
|
1,800
|
|||
2022
|
1,800
|
|||
2023
|
1,800
|
|||
2024
|
1,800
|
|||
2025
|
600
|
|||
Future minimum rental payments under finance lease
|
$
|
8,250
|
5. FLIGHT EQUIPMENT HELD FOR SALE
At September 30, 2020, the Company had no flight equipment held for sale. At December 31, 2019, the Company had six aircraft and two engines classified as flight equipment held for sale, all of which were sold during the
first quarter of 2020 for an aggregate gain on sale of aircraft of $31.7 million. During the three months ended September 30, 2019, the Company sold seven aircraft that had been classified as flight equipment held for sale and recognized an
aggregate gain on sale of aircraft of $34.2 million. During the nine months ended September 30, 2019, the Company sold a total of 19 aircraft that had been classified as flight equipment held for sale and recognized an aggregate gain on sale of
aircraft of $67.8 million.
6. FLIGHT EQUIPMENT HELD FOR OPERATING LEASE, NET
As of September 30, 2020, the Company had 78 aircraft and seven engines on operating lease to 38 lessees in 23 countries, and seven aircraft off-lease. As of December 31, 2019, the Company had 81 aircraft and seven
engines on operating lease to 39 lessees in 22 countries, and one aircraft off-lease.
During the nine months ended September 30, 2020, the Company capitalized $53.9 million of flight equipment purchased. During the nine months ended September 30, 2019, the Company capitalized $89.8 million of flight
equipment purchased.
During the three months ended September 30, 2019, the Company sold one aircraft held for operating lease and recognized a gain on sale of
aircraft of $4.7 million. During the nine months ended September 30, 2019, the Company sold six aircraft held for operating lease and recognized an aggregate gain
on sale of aircraft of $14.8 million.
Flight equipment held for operating lease, net, consists of the following (dollars in thousands):
September 30, 2020
|
December 31, 2019
|
|||||||
Cost
|
$
|
3,395,527
|
$
|
3,334,996
|
||||
Accumulated depreciation
|
(696,186
|
)
|
(614,996
|
)
|
||||
Flight equipment held for operating lease, net
|
$
|
2,699,341
|
$
|
2,720,000
|
The Company capitalized $27.8 million of major maintenance expenditures for the nine months ended September 30, 2020. The Company capitalized $8.0 million of major maintenance expenditures for the nine months ended
September 30, 2019.
The classification of the net book value of flight equipment held for operating lease, net and operating lease revenue by geographic region in the tables and discussion below is based on the principal operating location
of the lessees.
The distribution of the net book value of flight equipment held for operating lease by geographic region is as follows (dollars in thousands):
September 30, 2020
|
December 31, 2019
|
|||||||||||||||
Europe:
|
||||||||||||||||
Spain
|
$
|
156,189
|
6
|
%
|
$
|
161,474
|
6
|
%
|
||||||||
United Kingdom
|
44,286
|
2
|
%
|
52,212
|
2
|
%
|
||||||||||
France
|
68,677
|
3
|
%
|
71,175
|
3
|
%
|
||||||||||
Other
|
184,547
|
6
|
%
|
188,001
|
6
|
%
|
||||||||||
Europe — Total
|
453,699
|
17
|
%
|
472,862
|
17
|
%
|
||||||||||
Asia and South Pacific:
|
||||||||||||||||
India
|
453,883
|
17
|
%
|
542,312
|
20
|
%
|
||||||||||
Malaysia
|
394,568
|
15
|
%
|
406,777
|
15
|
%
|
||||||||||
Philippines
|
257,262
|
10
|
%
|
264,814
|
10
|
%
|
||||||||||
Indonesia
|
213,758
|
8
|
%
|
220,304
|
8
|
%
|
||||||||||
China
|
162,197
|
6
|
%
|
168,703
|
6
|
%
|
||||||||||
Other
|
110,526
|
3
|
%
|
113,713
|
4
|
%
|
||||||||||
Asia and South Pacific — Total
|
1,592,194
|
59
|
%
|
1,716,623
|
63
|
%
|
||||||||||
Mexico, South and Central America — Total
|
—
|
—
|
37,618
|
1
|
%
|
|||||||||||
North America — Total
|
91,342
|
3
|
%
|
95,910
|
4
|
%
|
||||||||||
Middle East and Africa:
|
||||||||||||||||
Ethiopia
|
295,630
|
11
|
%
|
303,057
|
11
|
%
|
||||||||||
Other
|
92,442
|
3
|
%
|
51,815
|
2
|
%
|
||||||||||
Middle East and Africa — Total
|
388,072
|
14
|
%
|
354,872
|
13
|
%
|
||||||||||
Off-lease — Total
|
174,034
|
7
|
%
|
42,115
|
2
|
%
|
||||||||||
Total flight equipment held for operating lease, net
|
$
|
2,699,341
|
100
|
%
|
$
|
2,720,000
|
100
|
%
|
The Company receives lease revenue from flight equipment under operating leases. Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and
the revenue can be reliably measured. If the revenue amounts do not meet these criteria, recognition is delayed until the criteria is met. Contingent rents are recognized as revenue when the contingency is resolved. Revenue is not recognized when
the Company determines that collection is not reasonably assured.
Rental income from aircraft and aircraft equipment is recognized on a straight-line basis over the initial term of the respective lease. Changes to the timing of cash rent
receipts, such as under rent deferral arrangements, do not generally affect the total amount of consideration to be received under the lease and therefore do not typically impact revenue recognition, provided
that the Company determines collection of rents is reasonably assured.
The Company maintains a provision for uncollectible operating lease receivables for losses it estimates will arise from its lessees’ inability to make their required lease
payments. The Company evaluates the collectability of rent receivables and determines the appropriate provision for uncollectible operating lease receivables based on historical experience and a review
of specific lessees. During the three and nine months ended September 30, 2020, the Company recorded a provision for uncollectible operating lease receivables of $1.0 million and $3.0 million, respectively.
The distribution of operating lease revenue by geographic region for the three months ended September 30, 2020 and 2019 is as follows (dollars in thousands):
Three months ended
September 30, 2020
|
Three months ended
September 30, 2019
|
|||||||||||||||
Europe:
|
||||||||||||||||
Spain
|
$
|
922
|
2
|
%
|
$
|
4,344
|
5
|
%
|
||||||||
United Kingdom
|
1,062
|
2
|
%
|
6,833
|
7
|
%
|
||||||||||
France
|
2,833
|
5
|
%
|
3,498
|
4
|
%
|
||||||||||
Other
|
2,068
|
2
|
%
|
4,941
|
5
|
%
|
||||||||||
Europe — Total
|
6,885
|
11
|
%
|
19,616
|
21
|
%
|
||||||||||
Asia and South Pacific:
|
||||||||||||||||
India
|
11,714
|
20
|
%
|
19,660
|
21
|
%
|
||||||||||
Malaysia
|
13,921
|
24
|
%
|
13,714
|
14
|
%
|
||||||||||
Philippines
|
(2,269
|
)
|
(4
|
%)
|
8,518
|
9
|
%
|
|||||||||
Indonesia
|
262
|
0
|
%
|
7,545
|
8
|
%
|
||||||||||
China
|
6,739
|
11
|
%
|
5,650
|
6
|
%
|
||||||||||
Other
|
3,214
|
6
|
%
|
3,681
|
4
|
%
|
||||||||||
Asia and South Pacific — Total
|
33,581
|
57
|
%
|
58,768
|
62
|
%
|
||||||||||
Mexico, South and Central America — Total
|
6,490
|
11
|
%
|
1,036
|
1
|
%
|
||||||||||
North America — Total
|
3,355
|
6
|
%
|
5,157
|
5
|
%
|
||||||||||
Middle East and Africa:
|
||||||||||||||||
Ethiopia
|
7,505
|
13
|
%
|
7,505
|
8
|
%
|
||||||||||
Other
|
1,443
|
2
|
%
|
2,624
|
3
|
%
|
||||||||||
Middle East and Africa — Total
|
8,948
|
15
|
%
|
10,129
|
11
|
%
|
||||||||||
Total Operating Lease Revenue
|
$
|
59,259
|
100
|
%
|
$
|
94,706
|
100
|
%
|
The distribution of operating lease revenue by geographic region for the nine months ended September 30, 2020 and 2019 is as follows (dollars in thousands):
Nine months ended
September 30, 2020
|
Nine months ended
September 30, 2019
|
|||||||||||||||
Europe:
|
||||||||||||||||
Spain
|
$
|
9,608
|
4
|
%
|
$
|
13,034
|
4
|
%
|
||||||||
United Kingdom
|
4,947
|
2
|
%
|
26,146
|
8
|
%
|
||||||||||
France
|
9,609
|
4
|
%
|
10,749
|
3
|
%
|
||||||||||
Other
|
10,205
|
5
|
%
|
15,448
|
5
|
%
|
||||||||||
Europe — Total
|
34,369
|
15
|
%
|
65,377
|
20
|
%
|
||||||||||
Asia and South Pacific:
|
||||||||||||||||
India
|
45,467
|
20
|
%
|
85,015
|
26
|
%
|
||||||||||
Malaysia
|
42,066
|
19
|
%
|
40,847
|
12
|
%
|
||||||||||
Philippines
|
14,143
|
6
|
%
|
25,816
|
8
|
%
|
||||||||||
Indonesia
|
13,791
|
6
|
%
|
26,101
|
8
|
%
|
||||||||||
China
|
16,680
|
7
|
%
|
18,221
|
6
|
%
|
||||||||||
Other
|
9,873
|
4
|
%
|
15,642
|
5
|
%
|
||||||||||
Asia and South Pacific — Total
|
142,020
|
62
|
%
|
211,642
|
65
|
%
|
||||||||||
Mexico, South and Central America — Total
|
8,453
|
4
|
%
|
4,391
|
1
|
%
|
||||||||||
North America — Total
|
10,336
|
5
|
%
|
16,440
|
5
|
%
|
||||||||||
Middle East and Africa:
|
||||||||||||||||
Ethiopia
|
22,514
|
10
|
%
|
22,514
|
7
|
%
|
||||||||||
Other
|
8,124
|
4
|
%
|
8,217
|
2
|
%
|
||||||||||
Middle East and Africa — Total
|
30,638
|
14
|
%
|
30,731
|
9
|
%
|
||||||||||
Total Operating Lease Revenue
|
$
|
225,816
|
100
|
%
|
$
|
328,581
|
100
|
%
|
In the three months ended September 30, 2020, Air India, AirAsia Berhad and Ethiopian Airlines each accounted for 10% or more of total operating lease revenue at 15%, 14%, and 13%, respectively. In the quarter, Aeromexico also accounted for 11% of total operating lease revenue, after taking into account end of lease income recognized upon the redelivery of one, and repossession of a second Boeing 737-700
aircraft. In the nine months ended September 30, 2020, Air India and AirAsia Berhad each accounted for 10% or more of total operating lease revenue at 12% and 11%, respectively. In the three months ended
September 30, 2019, Air India accounted for 10% or more of total operating lease revenue at 11%. In the nine months ended September 30, 2019, no customer accounted for 10% or more of total operating lease revenue.
As noted above, the COVID-19 pandemic has had a detrimental impact on the airline industry, causing a larger number of the Company’s lessees to fail to make rent and overhaul payments. This has led to the Company placing a number of lessees on
non-accrual status in the third quarter of 2020, which in turn has caused the operating lease revenue concentration of other lessees to increase.
At September 30, 2020, the Company had eight lessees, which leased a total of 16 aircraft, on non-accrual status, as the Company had determined that it was not probable
that the Company would receive the economic benefits of the leases, principally due to (i) the lessees’ failure to pay rent and overhaul payments on a timely basis and (ii) the lessees’ financial condition. During the three months ended September
30, 2020, the Company’s operating lease revenue was reduced by $2.6 million attributable to the eight non-accrual lessees. During the nine months ended September 30, 2020, the Company recognized $34.2 million of operating lease revenue from these lessees. At September 30, 2019, the Company had two lessees, which leased a total of three aircraft, on non-accrual status. During the three and nine months ended September 30, 2019, the Company
recognized $2.6 million and $9.0 million, respectively, of operating lease revenue from these lessees. Revenue from lessees on non-accrual status is recognized based on the lesser of straight-line rental income or cash received, including the
application of any cash security deposits and drawdowns on letters of credit.
During the three months ended September 30, 2020, the Company’s operating lease revenue was reduced by $22.5 million with the placement of four lessees on non-accrual status in the third quarter of 2020, of which $7.3 million relates to prior
periods.
During the nine months ended September 30, 2020, the Company executed agreements with 14 lessees to defer their rent payment obligations for 35 aircraft totaling $59.9 million due to the Company over the life of the leases. The Company has also
agreed to lease restructurings with certain of its lessees.
Presented below are the Company’s rent deferrals granted and scheduled deferral repayments as of September 30, 2020.
Rent Deferrals
Granted
|
Scheduled Deferral
Repayments
|
|||||||
(Dollars in thousands)
|
||||||||
January 1 through September 30, 2020
|
$
|
39,703
|
$
|
1,620
|
||||
October 1 through December 31, 2020
|
10,742
|
3,179
|
||||||
Year ending December 31, 2021
|
9,442
|
21,754
|
||||||
Thereafter
|
—
|
33,334
|
||||||
Total
|
$
|
59,887
|
$
|
59,887
|
Total operating lease revenue for the three and nine months ended September 30, 2020 and 2019 includes the following (dollars in thousands):
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
2020
|
September 30,
2019
|
September 30,
2020
|
September 30,
2019
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Operating lease revenue:
|
||||||||||||||||
Operating lease rental revenue
|
$
|
54,253
|
$
|
96,084
|
$
|
219,631
|
$
|
302,520
|
||||||||
End of lease income
|
6,320
|
—
|
8,974
|
30,387
|
||||||||||||
Amortization of lease incentives
|
(1,017
|
)
|
(1,402
|
)
|
(2,334
|
)
|
(4,353
|
)
|
||||||||
Amortization of lease premium, discounts and other
|
(297
|
)
|
24
|
(455
|
)
|
27
|
||||||||||
Total operating lease revenue
|
$
|
59,259
|
$
|
94,706
|
$
|
225,816
|
$
|
328,581
|
As of September 30, 2020 and December 31, 2019, the weighted average remaining lease term of the Company’s aircraft held for operating lease was 4.9 years and 5.4 years, respectively.
Leases are entered into with specified lease terms and may provide the lessee with an option to extend the lease term. The Company’s leases do not typically provide for early termination or purchase options.
For the three months ended September 30, 2020, the Company recognized $54.3 million of operating lease rental revenue, $10.0 million of which was from leases with
variable rates. For the nine months ended September 30, 2020, the Company recognized $219.6 million of operating lease rental revenue, $31.4 million of which was from leases with variable rates. Variable rates are rents that reset based on changes
in LIBOR. Presented below are the contracted future minimum rental payments, inclusive of rents due from lessees on non-accrual status and rent deferrals, due under non-cancellable operating leases for flight equipment held for operating lease as
of September 30, 2020. For leases that have floating rental rates, the future minimum rental payments assume that LIBOR as of September 30, 2020 is held constant for the duration of the lease.
(Dollars in
thousands)
|
||||
October 1 through December 31, 2020
|
$
|
73,311
|
||
Year ending December 31,
|
||||
2021
|
311,118
|
|||
2022
|
269,127
|
|||
2023
|
217,963
|
|||
2024
|
200,043
|
|||
2025
|
177,655
|
|||
Thereafter
|
318,471
|
|||
Future minimum rental payments under operating leases
|
$
|
1,567,688
|
7. MAINTENANCE RIGHTS
Changes in maintenance right assets during the nine months ended September 30, 2020 and 2019 are as follows (dollars in thousands):
Nine months ended
|
||||||||
September 30, 2020
|
September 30, 2019
|
|||||||
Maintenance rights, beginning balance
|
$
|
290,958
|
$
|
298,207
|
||||
Acquisitions
|
19,780
|
36,798
|
||||||
Capitalized to aircraft improvements
|
(7,204
|
)
|
(3,661
|
)
|
||||
Cash receipts from maintenance rights
|
(2,725
|
)
|
(1,741
|
)
|
||||
Maintenance rights associated with aircraft sold
|
(14,940
|
)
|
(73,199
|
)
|
||||
Maintenance rights, ending balance
|
$
|
285,869
|
$
|
256,404
|
8. UNSECURED BORROWINGS
Balance as of
|
||||||||
September 30, 2020
|
December 31, 2019
|
|||||||
(dollars in thousands)
|
||||||||
Outstanding principal balance:
|
||||||||
2021 Notes
|
$
|
325,000
|
$
|
325,000
|
||||
2024 Notes
|
300,000
|
300,000
|
||||||
Total outstanding principal balance
|
625,000
|
625,000
|
||||||
Unamortized debt discounts and loan costs
|
(4,287
|
)
|
(5,593
|
)
|
||||
Unsecured borrowings, net
|
$
|
620,713
|
$
|
619,407
|
On October 3, 2014, the Company sold $325.0 million aggregate principal amount of unsecured 6.375% Senior Notes due 2021 (the “2021 Notes”). On
October 16, 2017, the Company sold $300.0 million aggregate principal amount of unsecured 5.250% Senior Notes due 2024 (the “2024 Notes”).
The 2021 Notes and 2024 Notes are senior unsecured obligations of the Company and rank pari passu in right of payment with any existing and future senior unsecured indebtedness of the Company. The 2021
Notes have a maturity date of October 15, 2021 and the 2024 Notes have a maturity date of October 15, 2024.
Interest on the 2021 Notes and 2024 Notes is payable semi-annually on April 15 and October 15 of each year. As of September 30, 2020 and December 31, 2019, accrued interest on unsecured borrowings totaled $16.8 million and $7.7 million,
respectively.
Pursuant to the indentures governing the 2021 Notes and 2024 Notes, the Company is subject to restrictive covenants which relate to dividend payments, incurrence of debt and issuance of guarantees, incurrence of liens, repurchases of common
shares, investments, disposition of aircraft, consolidation, merger or sale of the Company and transactions with affiliates. The Company is also subject to certain operating covenants, including reporting requirements. The Company’s failure to
comply with any of the covenants under the indentures governing the 2021 Notes or 2024 Notes could result in an event of default which, if not cured or waived, may result in the acceleration of the indebtedness thereunder and other indebtedness
containing cross-default or cross-acceleration provisions. Certain of these covenants will be suspended if the 2021 Notes or 2024 Notes obtain an investment grade rating. As of September 30, 2020, the
Company was not in default under the indentures governing the 2021 Notes or the 2024 Notes.
For more information about Fly's unsecured borrowings, refer to Note 9 of the 2019 Annual Report.
9. SECURED BORROWINGS
The Company’s secured borrowings, net as of September 30, 2020 and December 31, 2019 are presented below (dollars in thousands):
Outstanding principal balance
as of
|
Weighted average
interest rate(1) as of
|
||||||||||||||||
September 30,
2020(2)
|
December 31,
2019(2)
|
September
30, 2020 |
December 31,
2019
|
Maturity
date
|
|||||||||||||
Nord LB Facility
|
$
|
62,158
|
$
|
65,290
|
2.00
|
%
|
3.59
|
%
|
May 2021
|
||||||||
2012 Term Loan
|
368,561
|
385,364
|
3.35
|
%
|
4.15
|
%
|
August 2025
|
||||||||||
Magellan Acquisition Limited Facility
|
258,778
|
278,684
|
3.95
|
%
|
4.11
|
%
|
December 2025
|
||||||||||
Fly Aladdin Acquisition Facility
|
235,285
|
272,343
|
4.83
|
%
|
4.85
|
%
|
June 2023
|
||||||||||
Fly Aladdin Engine Funding Facility
|
41,173
|
42,339
|
4.95
|
%
|
4.95
|
%
|
December 2021 – April 2022
|
||||||||||
Other Aircraft Secured Borrowings
|
560,505
|
673,463
|
3.22
|
%
|
4.07
|
%
|
March 2021 – June 2028
|
||||||||||
Total outstanding principal balance
|
1,526,460
|
1,717,483
|
|||||||||||||||
Unamortized debt discounts and loan costs
|
(17,011
|
)
|
(21,958
|
)
|
|||||||||||||
Total secured borrowings, net
|
$
|
1,509,449
|
$
|
1,695,525
|
(1) |
Represents the contractual interest rates and effect of derivative instruments and excludes the amortization of debt discounts and debt issuance costs.
|
(2) |
As of September 30, 2020 and December 31, 2019, accrued interest on secured borrowings totaled $5.4 million and $9.2 million, respectively.
|
The Company is subject to restrictive covenants under its secured borrowings which relate to the incurrence of debt, issuance of guarantees, incurrence of liens or other encumbrances, the acquisition, substitution, disposition and re-lease of
aircraft, maintenance, registration and insurance of its aircraft, restrictions on modification of aircraft and capital expenditures, and requirements to maintain concentration limits.
The Company’s loan agreements include events of default that are customary for these types of secured borrowings. The Company’s failure to comply with any restrictive covenants, or any other operating covenants, may trigger an event of default
under the relevant loan agreement. In addition, certain of the Company’s loan agreements contain cross-default provisions that could be triggered by a default under another loan agreement.
As of September 30, 2020, the Company was not in default under any of its secured borrowings.
For more information about the Company's secured borrowings, refer to Note 10 of the 2019 Annual Report.
Securitization Notes
On March 14, 2019, B&B Air Funding redeemed all remaining aircraft lease-backed Class G-1 notes (the “Securitization Notes”) issued on October 2, 2007 and with an original maturity date of November 14,
2033, in the aggregate principal amount then-outstanding of $63.8 million. In connection with the redemption, the Company expensed approximately $1.9 million of debt extinguishment costs.
Nord LB Facility
As of September 30, 2020, the Company had $62.2 million principal amount outstanding under its non-recourse debt facility with Norddeutsche Landesbank Gironzentrale (the “Nord LB Facility”), which was
secured by three aircraft. The Nord LB Facility is structured with loans secured by each aircraft individually. The loans are cross-collateralized and contain cross-default provisions. Borrowings are
secured by Fly’s equity interests in the aircraft owning subsidiaries, the related leases, and certain deposits. The loans under the Nord LB Facility bear interest at one-month LIBOR plus a margin of 1.85%
until the maturity date of May 14, 2021.
Under the terms of the Nord LB Facility, the Company applies 95% of lease rentals collected towards interest and principal. If no lease rental payments are collected in the applicable period for any financed aircraft, then no payment is due
under the loan associated with that aircraft during such period. Any unpaid interest increases the principal amount of the associated loan.
2012 Term Loan
As of September 30, 2020, the Company had $368.6 million principal amount outstanding under its senior secured term loan (the “2012 Term Loan”), which was secured by 30 aircraft. Fly has guaranteed all
payments under the 2012 Term Loan. The maturity date of the 2012 Term Loan is August 9, 2025. The 2012 Term Loan can be prepaid in whole or in part at par.
The 2012 Term Loan bears interest at three-month LIBOR plus a margin of 1.75%.
The 2012 Term Loan requires that the Company maintain a maximum loan-to-value ratio (“LTV”) of 70.0% based on the lower of the mean or median of half-life adjusted base values of the financed aircraft as determined by three independent
appraisers on a semi-annual basis. The 2012 Term Loan also includes certain customary covenants, including reporting requirements and maintenance of credit ratings.
Magellan Acquisition Limited Facility
As of September 30, 2020, the Company had $258.8 million principal amount outstanding in loans and notes under its term loan facility (the “Magellan Acquisition Limited Facility”), which was secured by
nine aircraft. Fly has guaranteed all payments under this facility. The Magellan Acquisition Limited Facility has a maturity date of December 8, 2025.
The interest rate on the loans is based on one-month LIBOR plus an applicable margin of 1.65% per annum. The interest rate on the notes is a fixed rate of 3.93% per annum.
The facility contains financial and operating covenants, including a covenant that Fly maintain a tangible net worth of at least $325.0 million, as well as customary reporting requirements. The borrower is required to
maintain (i) an interest coverage ratio and (ii) a LTV ratio of (a) 75% through December 8, 2020, (b) 70% from December 9, 2020 through December 8, 2022, (c) 65% from December 9, 2022 through December 8, 2024 and (d) 60% thereafter. The LTV is
based on the lower of the average half-life adjusted current market value and base value of all aircraft financed under the facility as determined by three independent appraisers on an annual basis. Upon the occurrence of certain conditions,
including a failure by Fly to maintain a minimum liquidity of at least $25.0 million, the borrower will be required to deposit certain amounts of maintenance reserves and security deposits received into pledged accounts. Also, upon the occurrence
of a breach of the interest coverage ratio, all cash collected will be applied to repay the outstanding principal balance of the loans and notes until such breach is cured.
Fly Acquisition III Facility
On October 22, 2019, the Company paid in full the outstanding principal balance under a revolving credit facility (the “Fly Acquisition III Facility”) with an original maturity date of February 26, 2022. The Company had paid commitment fees of
0.50% to 0.75% per annum to the lenders on the undrawn amount of their commitments during the availability period under the Fly Acquisition III Facility, which expired on February 26, 2019.
The interest rate under the facility was based on one-month LIBOR plus an applicable margin of (i) 2.00% through February 26, 2019 and (ii) 2.50%, from February 27, 2019 through the repayment date of the facility.
As of September 30, 2020, the Company had an aggregate of $235.3 million principal amount outstanding of Series B loans under its term loan facility (the “Fly
Aladdin Acquisition Facility”), which were secured by 14 aircraft. Series B loans have a maturity date of June 15, 2023. During the nine months ended September 30, 2019, the Company repaid Series A loans in full and a portion of Series B loans and
expensed approximately $2.0 million of debt extinguishment costs.
The interest rate on Series B loans is based on three-month LIBOR, plus an applicable margin of 1.80% per annum. The Company makes scheduled quarterly payments of principal and interest on the loans in accordance with a fixed amortization
schedule.
Borrowings are secured by the aircraft and related leases, and the equity and beneficial interests in the aircraft owning and leasing subsidiaries. In addition, Fly has provided a guaranty of certain of the representations, warranties and
covenants under the Fly Aladdin Acquisition Facility (including, without limitation, the borrowers’ special purpose covenants), as well as the obligations, upon the occurrence of certain conditions, to deposit maintenance reserves and security
deposits received into pledged accounts.
The facility contains operating covenants, including covenants that the borrowers maintain a (i) debt service coverage ratio and (ii) LTV ratio of (a) 68% through December 14, 2020, (b) 65% from December 15, 2020
through June 14, 2021, (c) 63.5% from June 15, 2021 through December 14, 2021, (d) 62% from December 15, 2021 through June 14, 2022, (e) 60% from June 15, 2022 through December 14, 2022 and (f) 58% thereafter. The LTV is based on the average of the
half-life adjusted current market value of all financed aircraft as determined by three independent appraisers on a semi-annual basis.
Upon the occurrence of certain events, including a breach of the debt service coverage ratio continuing for two consecutive quarterly payment dates, Fly will be required to deposit, or cause the borrowers to deposit, all maintenance reserves and
security deposits received under the associated leases into pledged accounts. Also, upon the occurrence of a breach of the LTV ratio and certain other events, all cash collected will be applied to repay the outstanding principal balance of Series B
loans until such breach is cured. The LTV ratio was breached in the third quarter of 2020. As a consequence of entering into deferral agreements with the Company’s lessees, in the fourth quarter of 2020, the debt
service coverage ratio was breached for two consecutive quarterly payment dates, requiring the Company to deposit approximately $7.6 million in cash maintenance reserves and
security deposits received under the associated leases into pledged accounts.
Fly Aladdin Engine Funding Facility
As of September 30, 2020, the Company had $41.2 million principal amount outstanding under a term loan facility (the “Fly Aladdin Engine Funding Facility”), which was secured by seven engines. Fly has
guaranteed all payments under this facility. The loans have maturity dates ranging from December 31, 2021 to April 30, 2022.
The interest rates for the borrowings range from 4.94% to 4.96% per annum, per engine. The Company is required to make scheduled monthly payments of principal and interest in accordance with an amortization schedule.
The loans are secured by the engines and related leases and the Company’s equity and beneficial interests in the engine owning entities. The Fly Aladdin Engine Funding Facility contains customary covenants, including various reporting
requirements. A violation of any of these covenants could result in a default under the Fly Aladdin Engine Funding Facility.
Other Aircraft Secured Borrowings
The Company has entered into other aircraft secured borrowings to finance the acquisition of aircraft, one of which is denominated in Euros. As of September 30, 2020, the Company had $560.5 million
principal amount outstanding of other aircraft secured borrowings, which were secured by 13 aircraft. Of this amount, $286.9 million was recourse to Fly.
These borrowings are structured as individual loans secured by pledges of the Company’s rights, title and interests in the financed aircraft and leases. In addition, Fly may provide guarantees of its subsidiaries’ obligations under certain of
these loans and may be subject to financial and operating covenants in connection therewith. One aircraft secured borrowing with a scheduled maturity date in December 2020 has been extended for 90 days. The maturity dates of other aircraft secured
borrowings range from March 2021 to June 2028.
10. DERIVATIVES
Derivatives are used by the Company to manage its exposure to identified risks, such as interest rate and foreign currency exchange fluctuations. The Company uses interest rate swap contracts to hedge variable interest payments due on borrowings
associated with aircraft with fixed rate rentals. As of September 30, 2020, the Company had $916.5 million of floating rate debt associated with aircraft with fixed rate rentals.
Interest rate swap contracts allow the Company to pay fixed interest rates and receive variable interest rates with the swap counterparty based on either the one-month or three-month LIBOR applied to the notional amounts over the life of the
contracts. As of September 30, 2020 and December 31, 2019, the Company had interest rate swap contracts with notional amounts aggregating $714.0 million and $804.9 million, respectively. The unrealized
fair value loss on the interest rate swap contracts, reflected as derivative liabilities, was $50.3 million and $27.9 million as of September 30, 2020 and December 31,
2019, respectively.
To mitigate its exposure to foreign currency exchange fluctuations, the Company entered into a cross currency swap contract in 2018 in conjunction with a lease in which a portion of the lease rental is denominated in Euros. Pursuant to such
cross currency swap, the Company receives U.S. dollars based on a fixed conversion rate through the maturity date of the swap contract. Over the remaining life of the cross currency swap contract, the Company expects to receive $51.2 million in
U.S. dollars. The unrealized fair value gain, reflected as a derivative asset, was $4.2 million and $4.8 million as of September 30, 2020 and December 31, 2019, respectively.
During the three and nine months ended September 30, 2020, the Company recorded $4.4 million and $9.7 million, respectively, of interest expense
in the consolidated statements of income (loss) from its interest rate swap contracts. The Company also recognized $0.2 million and $1.0 million, respectively, of rental revenue, included in operating lease revenue in the consolidated statements of
income (loss), under its cross currency swap contract during the three and nine months ended September 30, 2020.
During the three and nine months ended September 30, 2019, the Company recorded $0.8 million and $1.5 million, respectively, of interest expense in the consolidated statements of income (loss) from its
interest rate swap contracts. The Company also recognized $0.4 million and $1.0 million, respectively, of rental revenue, included in operating lease revenue in the consolidated statements of income (loss), under its cross currency swap contract
during the three and nine months ended September 30, 2019.
The Company determines the fair value of derivative instruments using a discounted cash flow model. The model incorporates an assessment of the risk of non-performance by the swap counterparty in valuing derivative assets and an evaluation of
the Company’s credit risk in valuing derivative liabilities.
The Company considers in its assessment of non-performance risk, if applicable, netting arrangements under master netting agreements, any collateral requirement, and the derivative payment priority in the Company’s debt agreements. The valuation
model uses various inputs including contractual terms, interest rate curves and credit spreads.
Designated Derivatives
Certain of the Company’s interest rate derivatives have been designated as cash flow hedges. Changes in fair value of these derivatives are recorded as a component of accumulated other comprehensive income (loss), net of a provision for income
taxes. Changes in the fair value of these derivatives are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
As of September 30, 2020, the Company had the following designated derivative instruments classified as derivative liabilities on its balance sheet (dollars in thousands):
Type
|
Quantity
|
Maturity Date
|
Hedge
Interest
Rate
|
Swap
Contract
Notional
Amount
|
Credit Risk
Adjusted Fair
Value
|
Loss Recognized
in Accumulated
Comprehensive
Loss, Net of Deferred Tax
|
||||||||||||
Interest rate swap contracts
|
30
|
2/9/23-12/8/25
|
2.28%-3.13%
|
$
|
699,370
|
$
|
(47,132
|
)
|
$
|
(40,380
|
)
|
|||||||
Accrued interest
|
—
|
(2,292
|
)
|
—
|
||||||||||||||
Total – designated derivative liabilities
|
30
|
$
|
699,370
|
$
|
(49,424
|
)
|
$
|
(40,380
|
)
|
Dedesignated Derivatives
As of September 30, 2020, the Company’s cross currency swap no longer qualified for hedge accounting and was dedesignated. The Company had the following dedesignated derivative instrument classified as a derivative asset on its balance sheet as
of September 30, 2020 (dollars in thousands):
Type
|
Quantity
|
Maturity Date
|
Contracted
Fixed
Conversion
Rate to U.S.
Dollar
|
Total
Contracted
USD to be
Received
|
Credit Risk
Adjusted
Fair Value
|
Gain Recognized in
Accumulated
Comprehensive
Loss, Net of Deferred Tax
|
||||||||||||
Cross currency swap contract
|
1
|
11/26/25
|
1 Euro to $1.3068
|
$
|
51,164
|
$
|
4,169
|
$
|
3,113
|
|||||||||
Accrued rent
|
—
|
14
|
—
|
|||||||||||||||
Total - dedesignated derivative asset
|
1
|
$
|
51,164
|
$
|
4,183
|
$
|
3,113
|
Certain of the Company’s interest rate swap contracts no longer qualify for hedge accounting and have been dedesignated. As of September 30, 2020, the Company had the following dedesignated derivative
instruments classified as derivative liabilities on its balance sheet (dollars in thousands):
Type
|
Quantity
|
Maturity Date
|
Hedge
Interest
Rate
|
Swap
Contract
Notional
Amount
|
Credit Risk
Adjusted Fair
Value
|
Loss Recognized
in Accumulated
Comprehensive
Loss, Net of Deferred Tax
|
||||||||||||
Interest rate swap contracts
|
3
|
6/15/23
|
2.66%-2.68%
|
$
|
14,643
|
$
|
(822
|
)
|
$
|
(244
|
)
|
|||||||
Accrued interest
|
—
|
(69
|
)
|
—
|
||||||||||||||
Total – dedesignated derivative liabilities
|
3
|
$
|
14,643
|
$
|
(891
|
)
|
$
|
(244
|
)
|
During the three and nine months ended September 30, 2020, the Company reclassified $0.5 million of accumulated comprehensive gain, net of deferred tax, to gain on derivatives.
During the three months ended September 30, 2019, the Company reclassified $2.1 million of accumulated comprehensive loss, net of deferred tax, to loss on derivatives. During the nine months ended September 30, 2019, the Company reclassified
$2.3 million of accumulated comprehensive loss, net of deferred tax, to loss on derivatives. The Company also reclassified $0.5 million to interest expense.
During the nine months ended September 30, 2019, one interest rate swap contract matured and two other interest rate swap contracts were terminated.
11. INCOME TAXES
Fly is a tax resident of Ireland and has wholly-owned subsidiaries in Ireland, France, Luxembourg, Australia and Malta that are tax residents in those jurisdictions. In general, Irish resident companies pay corporation tax at the rate of 12.5%
on trading income and 25.0% on non-trading income. Historically, most of the Company’s operating income has been trading income in Ireland.
The Company's effective tax rates were 4.4% and 14.2% for the three and nine months ended September 30, 2020, respectively, and 12.0% and 10.1% for the three and nine months
ended September 30, 2019, respectively. The difference between the statutory and effective tax rate in each period is primarily attributable to changes in valuation allowances and the amount of income earned by the Company in different
tax jurisdictions. During the nine months ended September 30, 2019, the Company recorded a benefit for an interest payment made by a subsidiary that previously did not meet the recognition threshold. The Company utilized this benefit as group
relief to offset income tax on repatriated earnings for which a deferred tax liability was previously recorded. During the three and nine months ended September 30, 2019, the Company also reduced the tax liability it expects to pay in connection
with its unrepatriated Australian earnings by $1.0 million.
The Company recognizes a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not (likelihood of more than 50 percent) that some portion, or all, of its deferred tax asset will not be realized. Future
realization of a deferred tax asset depends on the existence of sufficient taxable income of the appropriate character in the carryforward period under the tax law.
The Company had no unrecognized tax benefits as of September 30, 2020 or December 31, 2019.
In August 2019, the Company’s board of directors approved a $50.0 million share repurchase program which expired in September 2020. Under this program, the Company was able to make share repurchases from time
to time in the open market or in privately negotiated transactions.
During the nine months ended September 30, 2020, Fly repurchased 417,341 shares at an average price of $15.57 per share, or $6.5 million, before commissions and fees. During
the three months ended September 30, 2019, Fly repurchased 342,492 shares at an average price of $16.83 per share, or $5.8 million, before commissions and fees. During the nine months ended September 30, 2019, Fly repurchased 2,010,437 shares at an
average price of $16.29 per share, or $32.8 million, before commissions and fees.
No dividends were declared or paid during the three and nine months ended September 30, 2020 and 2019.
13. SHARE-BASED COMPENSATION
On April 29, 2010, the Company adopted the 2010 Omnibus Incentive Plan (“2010 Plan”) permitting the issuance of up to 1,500,000 share grants in the form of (i) stock appreciation rights (“SARs”); (ii) restricted stock units (“RSUs”); (iii)
nonqualified stock options; and (iv) other stock-based awards. The Company has issued all shares available under the 2010 Plan. Since June 30, 2015, all SARs and RSUs granted under the 2010 Plan have
vested. During the three months ended September 30, 2019, 555,569 SARs were exercised at a weighted average price of $12.84 per share. During the nine months ended September 30, 2019, 782,955 SARs were
exercised at a weighted average price of $12.73 per share. At September 30, 2020, there were 14,025 SARs outstanding and exercisable at a weighted average exercise price of $12.95 per share.
14. EARNINGS (LOSS) PER SHARE
The following table sets forth the calculation of basic and diluted earnings per common share using the two-class method, in which dividends attributable to SARs, if any, are deducted from net income (loss) in determining
net income (loss) attributable to common shareholders (dollars in thousands, except per share data):
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Numerator
|
||||||||||||||||
Net income (loss) attributable to common shareholders
|
$
|
(8,067
|
)
|
$
|
51,704
|
$
|
39,611
|
$
|
150,719
|
|||||||
Denominator
|
||||||||||||||||
Weighted average shares outstanding-Basic
|
30,481,069
|
30,873,297
|
30,575,646
|
31,846,836
|
||||||||||||
Dilutive common equivalent shares:
|
||||||||||||||||
SARs
|
—
|
114,097
|
—
|
107,368
|
||||||||||||
Weighted average shares outstanding-Diluted
|
30,481,069
|
30,987,394
|
30,575,646
|
31,954,204
|
||||||||||||
Earnings (loss) per share:
|
||||||||||||||||
Basic
|
||||||||||||||||
Distributed earnings
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
Undistributed income (loss)
|
$
|
(0.26
|
)
|
$
|
1.67
|
$
|
1.30
|
$
|
4.73
|
|||||||
Basic earnings (loss) per share
|
$
|
(0.26
|
)
|
$
|
1.67
|
$
|
1.30
|
$
|
4.73
|
|||||||
Diluted
|
||||||||||||||||
Distributed earnings
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
Undistributed income (loss)
|
$
|
(0.26
|
)
|
$
|
1.67
|
$
|
1.30
|
$
|
4.72
|
|||||||
Diluted earnings (loss) per share
|
$
|
(0.26
|
)
|
$
|
1.67
|
$
|
1.30
|
$
|
4.72
|
Basic earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is
calculated by dividing net income (loss) available to common shareholders by the sum of the weighted average number of common shares outstanding and the potential number of dilutive common shares outstanding during the period, excluding the effect
of any anti-dilutive securities.
SARs granted by the Company that contain non-forfeitable rights to receive dividend equivalents are deemed participating securities (see Note 13). Net income (loss) available to common shareholders is determined by
reducing the Company’s net income (loss) for the period by dividend equivalents paid on vested SARs during the period.
15. COMMITMENTS AND CONTINGENCIES
From time to time, the Company contracts with third-party service providers to perform maintenance or overhaul activities on its off-lease aircraft.
In 2016, the Company entered into agreements with third-party lessors to guarantee the residual value of three aircraft subject to twelve-year leases (“RVGs”) and received residual value guarantee fees totaling $6.6 million, which are being
amortized over a twelve-year period. The third-party lessors may exercise their rights under the RVGs by issuing a notice eleven months prior to the respective lease maturity requiring the Company to purchase the aircraft on such date. The RVGs
will terminate if not exercised accordingly. During each of the three and nine months ended September 30, 2020 and 2019, the Company recognized income of $0.1 million and $0.4 million, respectively.
On February 28, 2018, the Company agreed to acquire 21 Airbus A320neo family aircraft to be leased to AirAsia Group Berhad (“AirAsia”) and its affiliated airlines as the aircraft deliver from the manufacturer (“Portfolio B”). The first of these
aircraft was delivered in the fourth quarter of 2019. The Company also acquired options to purchase up to 20 Airbus A320neo family aircraft, not subject to lease, delivering from the manufacturer (“Portfolio C”). The Company did not exercise its
options with respect to any of the Portfolio C aircraft delivering in 2019. In August 2019, the Company exercised options with respect to eight Portfolio C aircraft to be delivered in 2020 and 2021. The Company has options remaining to purchase up
to nine Portfolio C aircraft delivering between 2021 and 2025. Due to the impact of COVID-19, the Company expects that the delivery of the Portfolio B and Portfolio C aircraft will be delayed, and that no aircraft will
deliver under these agreements in the next 12 months.
16. RELATED PARTY TRANSACTIONS
BBAM is entitled to receive a servicing fee equal to 3.5% of the aggregate amount of rents actually collected, plus an administrative fee of $1,000 per aircraft per month. Under the 2012 Term Loan, the Magellan Acquisition Limited Facility and
the Fly Aladdin Acquisition Facility, BBAM is also entitled to an administrative fee of $10,000 per month. Under the Fly Aladdin Engine Funding Facility, BBAM is entitled to receive a servicing fee equal to 3.5% of monthly rents actually collected
and an administrative fee equal to $1,000 per month. In connection with the repayment of the Fly Acquisition III Facility in October 2019, the servicing agreement, which also entitled BBAM to an administrative fee of $10,000 per month, was
terminated.
For the three and nine months ended September 30, 2020, BBAM received servicing and administrative fees totaling $2.3 million and $8.8 million, respectively. For the three
and nine months ended September 30, 2019, BBAM received servicing and administrative fees totaling $3.8 million and $11.8 million, respectively.
BBAM also is entitled to receive an acquisition fee of 1.5% of the gross acquisition cost for any aviation asset purchased by the Company, and a disposition fee of 1.5% of the gross proceeds for any aviation asset sold by the Company. During the nine months ended September 30, 2020, the Company incurred $1.1 million of acquisition fees, respectively, payable to BBAM. During the three and nine months ended September 30, 2019, the Company incurred
$0.8 million and $1.7 million of acquisition fees, respectively, payable to BBAM. During the nine months ended September 30, 2020, the Company incurred disposition fees of $2.9 million, payable to
BBAM. During the three and nine months ended September 30, 2019, the Company incurred disposition fees of $4.3 million and $11.4 million, respectively, payable to BBAM.
In addition, Fly pays an annual management fee to the Manager as compensation for providing the services of the chief executive officer, the chief financial officer and other personnel, and for certain corporate overhead costs related to the
Company. The management fee is adjusted each calendar year by (i) 0.3% of the change in the book value of the Company’s aircraft portfolio during the preceding year, up to a $2.0 billion increase over $2.7 billion and (ii) 0.25% of the change in
the book value of the Company’s aircraft portfolio in excess of $2.0 billion, with a minimum management fee of $5.0 million. The management fee is also subject to an annual CPI adjustment applicable to the prior calendar year. For the three and nine months ended September 30, 2020, the Company incurred management fees of $2.0 million and $5.9 million, respectively. For the three and nine months ended September 30, 2019, the Company incurred
management fees of $2.4 million and $7.2 million, respectively.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. The hierarchy levels give the
highest priority to quoted prices in active markets and the lowest priority to unobservable data. Fair value measurements are disclosed by level within the following fair value hierarchy:
Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 — Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for
the duration of the instrument’s anticipated life.
Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the
valuation technique and the risk inherent in the inputs to the model.
The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, derivative instruments, accounts payable and borrowings. Fair value of an asset is defined as the
price a seller would receive in a current transaction between knowledgeable, willing and able parties. A liability’s fair value is defined as the amount that an obligor would pay to transfer the liability to a new obligor, not the amount that would
be paid to settle the liability with the creditor.
Where available, the fair value of the Company’s investment in equity certificates, notes payable and debt facilities is based on observable market prices or parameters or derived from such prices or parameters (Level 2). For the three and nine months ended September 30, 2020, the Company recognized an unrealized fair value loss of $2.3 million and $12.8 million, respectively, on its investment in equity certificates to write down the equity
certificates to estimated fair value.
Where observable prices or inputs are not available, valuation models are applied, using the net present value of cash flow streams over the term using estimated market rates for similar instruments and remaining terms (Level 3). These valuation
techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity. The Company determines the fair value of its derivative
instruments using a discounted cash flow model which incorporates an assessment of the risk of non-performance by the swap counterparty and an evaluation of its credit risk in valuing derivative liabilities. The valuation model uses various inputs
including contractual terms, interest rate curves, credit spreads and measures of volatility.
The Company also measures the fair value for certain assets and liabilities on a non-recurring basis, when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of
assets may not be recoverable. Assets subject to these measurements include Fly’s investment in an unconsolidated subsidiary and flight equipment held for operating lease, net. Fly accounts for its investment in an unconsolidated subsidiary under
the equity method and records impairment when its fair value is less than its carrying value and the Company determines that the decline is other-than-temporary (Level 3).
The Company records flight equipment at fair value when the carrying value may not be recoverable. Such fair value measurements are based on management’s best estimates and judgment and use Level 3 inputs which include assumptions as to future
cash flows associated with the use of an aircraft and eventual disposition of such aircraft. The Company will record an impairment charge if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the
carrying amount of the asset.
The carrying amounts and fair values of certain of the Company’s debt instruments are as follows (dollars in thousands):
As of September 30, 2020
|
As of December 31, 2019
|
|||||||||||||||
Principal
Amount
Outstanding
|
Fair Value
|
Principal
Amount Outstanding |
Fair Value
|
|||||||||||||
2012 Term Loan
|
$
|
368,561
|
$
|
334,469
|
$
|
385,364
|
$
|
385,364
|
||||||||
Magellan Acquisition Limited Facility
|
258,778
|
239,046
|
278,684
|
278,684
|
||||||||||||
Fly Aladdin Acquisition Facility
|
235,285
|
194,365
|
272,343
|
272,343
|
||||||||||||
2021 Notes
|
325,000
|
307,548
|
325,000
|
331,207
|
||||||||||||
2024 Notes
|
300,000
|
238,140
|
300,000
|
314,070
|
As of September 30, 2020 and December 31, 2019, the categorized assets and liabilities measured at fair value on a recurring basis, based upon the lowest level of significant inputs to the valuations are as
follows (dollars in thousands):
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
September 30, 2020:
|
||||||||||||||||
Derivative assets
|
—
|
$
|
4,183
|
—
|
$
|
4,183
|
||||||||||
Derivative liabilities
|
—
|
50,315
|
—
|
50,315
|
||||||||||||
Investment in equity certificates
|
—
|
3,208
|
—
|
3,208
|
||||||||||||
December 31, 2019:
|
||||||||||||||||
Derivative assets
|
—
|
$
|
4,824
|
—
|
$
|
4,824
|
||||||||||
Derivative liabilities
|
—
|
27,943
|
—
|
27,943
|
||||||||||||
Investment in equity certificates
|
—
|
16,048
|
—
|
16,048
|
18. SUBSEQUENT EVENTS
On October 15, 2020, the Company, through a wholly-owned subsidiary, entered into a $180.0 million senior secured term loan (the "2020 Term Loan") with a consortium of lenders. The 2020 Term Loan will mature on the earlier of (i) October 15,
2025 and (ii) the date falling 30 days prior to the maturity of the Company’s 2024 Notes if not redeemed. The 2020 Term Loan was issued at a discount of 4.5%. The 2020 Term Loan bears interest at LIBOR plus a margin of 6.00%, with a LIBOR floor of
1.00% and requires quarterly principal payments of 1.25% of the original loan amount. The 2020 Term Loan will be secured by 11 aircraft that are currently owned by the Company and its subsidiaries. The 2020 Term Loan
is guaranteed by the Company. The Company also entered into a servicing agreement with BBAM, pursuant to which it will pay an administrative fee of $10,000 per month as well as servicing fees of 3.5% of
monthly rent actually collected, plus $1,000 per aircraft per month. The Company will also pay BBAM a sales fee of 1.5% of the aggregate gross proceeds received with respect to the sale of any aircraft.
Subsequent to September 30, 2020, the Company repurchased $103.0 million of its 2021 Notes in private transactions.
Subsequent to September 30, 2020, the Company entered into agreements to sell two aircraft.
Item 2. |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our (i) consolidated financial statements and related notes included elsewhere in this
Interim Report and (ii) Annual Report on Form 20-F for the year ended December 31, 2019. The consolidated financial statements have been prepared in accordance with U.S. GAAP and are presented in U.S.
dollars. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes
in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. See “Preliminary Note.”
Overview
Fly Leasing Limited is a Bermuda exempted company that was incorporated on May 3, 2007, under the provisions of Section 14 of the Companies Act 1981 of Bermuda. We are principally engaged in purchasing commercial aircraft and aircraft equipment,
which we lease under multi-year contracts to a diverse group of airlines throughout the world.
Although we are organized under the laws of Bermuda, we are a resident of Ireland for tax purposes and are subject to Irish corporation tax on our income in the same way, and to the same extent, as if we were organized under the laws of Ireland.
For the three and nine months ended September 30, 2020, we had net income (loss) of ($8.1) million and $39.6 million or diluted earnings (loss) per share of ($0.26) and $1.30, respectively. Net cash flows provided by
operating activities for the nine months ended September 30, 2020 totaled $87.1 million. Net cash flows provided by investing activities totaled $68.9 million and net cash flows used in financing activities totaled $187.0 million for the nine
months ended September 30, 2020.
On February 28, 2018, we agreed to acquire 21 Airbus A320neo family aircraft to be leased to AirAsia Group Berhad (“AirAsia”) and its affiliated airlines as the aircraft deliver from the manufacturer (“Portfolio B”). The first of these aircraft
delivered in the fourth quarter of 2019. We also acquired options to purchase up to 20 Airbus A320neo family aircraft, not subject to lease (“Portfolio C”). We did not exercise our options with respect to any of the Portfolio C aircraft delivering
in 2019. In August 2019, we exercised options with respect to eight Portfolio C aircraft to be delivered in 2020 and 2021. We have options remaining to purchase up to nine Portfolio C aircraft delivering between 2021 and 2025. Due to the impact of
COVID-19, we expect that the delivery of the Portfolio B and Portfolio C aircraft will be delayed, and that no aircraft will deliver under these agreements in the next 12 months.
Sale of Six Aircraft to Horizon III
On October 31, 2019, we agreed to sell six aircraft to Horizon Aircraft Finance III Limited and Horizon Aircraft Finance III LLC (together, “Horizon III”) for an aggregate base purchase price of $150.5 million, subject to adjustment based on
rents and maintenance reserves in respect of the aircraft (the “Horizon III Transaction”). We delivered one aircraft to Horizon III during the fourth quarter of 2019 and the remaining five aircraft during the first quarter of 2020. The aircraft in
Horizon III’s portfolio are serviced and managed by affiliates of BBAM LP, whose affiliates also manage and service our aircraft portfolio. We also purchased $3.1 million, or 3%, of the equity certificates issued by Horizon III Limited in
connection with the Horizon III Transaction, which are subject to a seven-year lock-up agreement.
On October 15, 2020, we entered into a $180.0 million senior secured term loan (the "2020 Term Loan") with a consortium of lenders. The 2020 Term Loan will mature on the earlier of (i) October 15, 2025 and (ii) the
date falling 30 days prior to the maturity of our unsecured 5.250% senior notes due 2024 if not redeemed. The 2020 Term Loan was issued at a discount of 4.5%. The 2020 Term Loan bears interest at LIBOR plus a margin of 6.00%, with a LIBOR floor
of 1.00% and requires quarterly principal payments of 1.25% of the original loan amount. The 2020 Term Loan will be secured by 11 aircraft that are currently owned by our subsidiaries. We have
guaranteed all payments under the 2020 Term Loan.
Market Conditions
The airline industry is cyclical, and subject to macroeconomic, geopolitical and other risks which may negatively impact airline profitability or create volatility in the aircraft leasing market. Global passenger air traffic grew and the
airline industry was profitable in every year from 2012 to 2019. However, because of the continuing effects of the COVID-19 pandemic on air travel, global passenger air traffic and load factors have declined significantly in 2020 and are not
expected to recover to pre-pandemic levels until at least 2024. As of October 27, 2020, the International Air Transport Association (“IATA”) predicted that 2021 airline revenues will merely reach approximately 50% of pre-crisis expectations, with
airlines continuing to experience negative cash flows through 2021.
The COVID-19 pandemic has severely and negatively impacted the financial health of some airlines and already has led some airlines to enter bankruptcy proceedings. For example, one of our lessees, Aeromexico, entered bankruptcy proceedings in
June 2020 and rejected its lease of our aircraft. The longer the pandemic persists, the more material the ultimate effects on the financial health of airlines are likely to be. In addition, when the Boeing 737
MAX aircraft returns to service and Boeing resumes deliveries, market lease rates for competing current generation narrow-body aircraft may be adversely impacted due to the increased supply of aircraft. Finally, uncertainty about
geopolitical events and pressures such as environmental impact concerns, Brexit and ongoing U.S.-China trade tensions could affect the economic health of airlines and the aircraft leasing market. These and other factors, known and unknown, may
adversely affect the airline industry and the airline leasing market in 2020 and beyond.
Long term, we believe world air traffic will recover, and coupled with airlines’ need to renew their fleets, will fuel demand for commercial aircraft and as a result will drive growth in the aircraft leasing market.
Impact of COVID-19 Pandemic on Operations
Fly and BBAM have implemented a comprehensive set of actions to support our operations during the COVID-19 pandemic. As of September 30, 2020, the principal offices of Fly and BBAM were closed in compliance with local shelter-in-place orders.
However, BBAM has since re-opened one of its principal offices as permitted by local measures at a limited capacity with the implementation of new protocols to comply with the local health and safety guidelines. BBAM continues to implement
work-from-home policies and other measures intended to maintain the health and safety of employees and contractors and to support its, and our, operational needs until such orders and other restrictions are completely lifted.
Critical Accounting Policies and Estimates
Fly prepares its consolidated financial statements in accordance with U.S. GAAP, which requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. The use of estimates is a significant factor affecting the reported carrying values of flight equipment, deferred tax assets, liabilities and reserves. We utilize third party appraisers and industry valuation professionals,
where possible, to support estimates, particularly with respect to flight equipment. Despite our best efforts to accurately estimate such amounts, actual results could differ from those estimates. We have made no significant changes in our critical
accounting policies and significant estimates from those disclosed in our Annual Report on Form 20-F for the year ended December 31, 2019, filed with the SEC on February 28, 2020 (the "2019 Annual Report").
It is likely that there will be negative effects of the COVID-19 pandemic that we cannot presently predict, including near term effects, which may have a material adverse effect on our results of operations, financial condition and cash flows.
Due to worldwide government-imposed travel restrictions, significantly reduced flight schedules, and a severe decline in passenger demand for air travel, we have been in active discussions with our impacted lessees and we have entered into
agreements to defer lease payments or restructure leases with some of our lessees. As a result, we anticipate that the decline in our cash rent collections and operating lease rental revenue will continue for the remainder of 2020 and into 2021.
Our estimates of the amount of rent ultimately collectible from our lessees, which impacts revenue recognition, have a higher degree of uncertainty due to the COVID-19 pandemic, and these estimates could change in the near term. Further, the impact
of COVID-19 on the airline industry may result in changes to our assumptions used to evaluate impairment of flight equipment, including the level of future rents, the residual value of the flight equipment and estimated downtime between re-leasing
events. During the nine months ended September 30, 2020, we have recorded a provision for uncollectible operating lease receivables of $3.0 million. Future changes to our assumptions, which could be
caused by airline bankruptcies or otherwise, could result in further provisions for uncollectible operating lease receivables or impairment charges, and these charges could be material.
Operating Results
As of September 30, 2020, we had 86 aircraft and seven engines in our portfolio. Of the 86 aircraft, 78 were on operating lease, one was classified as an investment in finance lease and seven aircraft were
off-lease. As of September 30, 2019, we had 92 aircraft and seven engines in our portfolio. Of the 92 aircraft, 84 were held for operating lease, one was classified as an investment in finance lease, six
were classified as flight equipment held for sale and one aircraft was off-lease.
We classify flight equipment as held for sale when we commit to and commence a plan of sale that is reasonably expected to be completed within one year and satisfies other criteria. We recognize revenue from each aircraft until the date that
such aircraft is delivered to the purchaser and cease to recognize depreciation as of the date the aircraft is classified as flight equipment held for sale.
During the nine months ended September 30, 2020, we sold six aircraft and two engines as the result of an aircraft part-out for an aggregate gain on sale of aircraft of $31.7 million. During the nine months ended
September 30, 2019, we sold 25 aircraft and recognized an aggregate gain on sale of aircraft of $82.6 million.
We receive lease revenue from flight equipment under operating leases. Revenue is recognized to the extent that it is probable that the economic benefits will flow to us and the revenue can be reliably measured. If the revenue amounts do not
meet these criteria, recognition is delayed until the criteria is met. Contingent rents are recognized as revenue when the contingency is resolved. Revenue is not recognized when we determine that collection is not reasonably assured.
We maintain a provision for uncollectible operating lease receivables for losses we estimate will arise from our lessees’ inability to make their required lease payments. We
evaluate the collectability of rent receivables and determine the appropriate provision for uncollectible operating lease receivables based on historical experience and a review of specific lessees.
During the three and nine months ended September 30, 2020, we recorded a provision for uncollectible operating lease receivables of $1.0 million and $3.0 million, respectively.
At September 30, 2020, we had eight lessees, which leased a total of 16 aircraft, on non-accrual status, as we had determined that it was not probable that we would receive the economic benefits of the
leases, principally due to (i) the lessees’ failure to pay rent and overhaul payments on a timely basis and (ii) the lessees’ financial condition. During the three
months ended September 30, 2020, our operating lease revenue was reduced by $2.6 million attributable to the eight non-accrual lessees. During the nine months ended September 30, 2020, we recognized $34.2 million of operating lease revenue
from these lessees. At September 30, 2019, we had two lessees, which leased a total of three aircraft, on non-accrual status. During the three and nine months ended
September 30, 2019, we recognized $2.6 million and $9.0 million, respectively, of operating lease revenue from these lessees.
During the three months ended September 30, 2020, our operating lease revenue was reduced by $22.5 million with the placement of four lessees on non-accrual status in the third quarter of 2020, of which $7.3 million relates to prior periods.
During the nine months ended September 30, 2020, we executed agreements with 14 lessees to defer their rent payment obligations for 35 aircraft totaling $59.9 million due to us over the
life of the leases. These deferrals are for an average of nine months with approximately half of the deferrals to be repaid by the end of 2021. We have also agreed to lease restructurings with certain of our lessees.
Presented below are the rent deferrals granted and scheduled deferral repayments as of September 30, 2020. There can be no assurance that our lessees will make their payments in accordance with the deferral terms during the expected repayment
periods or at all.
Rent Deferrals
Granted
|
Scheduled Deferral
Repayments
|
|||||||
(Dollars in thousands)
|
||||||||
January 1 through September 30, 2020
|
$
|
39,703
|
$
|
1,620
|
||||
October 1 through December 31, 2020
|
10,742
|
3,179
|
||||||
Year ending December 31, 2021
|
9,442
|
21,754
|
||||||
Thereafter
|
—
|
33,334
|
||||||
Total
|
$
|
59,887
|
$
|
59,887
|
We expect that we may grant additional payment deferrals and extend the periods of repayment, and if the financial conditions of our airline customers do not improve, we may agree to further accommodations with some
of our lessees.
We therefore anticipate a continued decline in our cash rent collections and operating lease revenue as compared to the prior year periods for the remainder of 2020 and into 2021. For the three months ended September 30, 2020, we collected 53%
of our pre-deferral contracted rent. For the three months ended June 30, 2020, we collected 47% of our pre-deferral contracted rent.
Rental income from aircraft and aircraft equipment is recognized on a straight-line basis over the initial term of the respective lease. Changes to the timing of cash rent receipts,
such as under rent deferral arrangements, do not generally affect the total amount of consideration to be received under the lease and therefore do not typically impact revenue recognition, provided
that we determine collection of rents is reasonably assured.
Management’s discussion and analysis of operating results presented below pertain to the consolidated statements of income (loss) of Fly for the three and nine months ended September 30, 2020 and 2019.
Consolidated Statements of Income (Loss) for the three months ended September 30, 2020 and 2019
Three months ended
|
||||||||
September 30,
2020
|
September 30,
2019
|
|||||||
(Dollars in thousands)
|
||||||||
Revenues
|
||||||||
Operating lease revenue
|
$
|
59,259
|
$
|
94,706
|
||||
Finance lease revenue
|
137
|
153
|
||||||
Gain on sale of aircraft
|
—
|
38,934
|
||||||
Interest and other income
|
688
|
5,241
|
||||||
Total revenues
|
60,084
|
139,034
|
||||||
Expenses
|
||||||||
Depreciation
|
32,589
|
33,881
|
||||||
Interest expense
|
24,381
|
33,580
|
||||||
Selling, general and administrative
|
7,656
|
8,013
|
||||||
Provision for uncollectible operating lease receivables
|
1,000
|
—
|
||||||
Loss (gain) on derivatives
|
(638
|
)
|
2,537
|
|||||
Fair value loss on marketable securities
|
2,345
|
—
|
||||||
Loss on extinguishment of debt
|
—
|
1,620
|
||||||
Maintenance and other costs
|
1,188
|
623
|
||||||
Total expenses
|
68,521
|
80,254
|
||||||
Net income (loss) before provision (benefit) for income taxes
|
(8,437
|
)
|
58,780
|
|||||
Provision (benefit) for income taxes
|
(370
|
)
|
7,076
|
|||||
Net income (loss)
|
$
|
(8,067
|
)
|
$
|
51,704
|
Three months ended
|
||||||||||||
September 30,
2020
|
September 30,
2019
|
Increase/
(Decrease)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Operating lease revenue:
|
||||||||||||
Operating lease rental revenue
|
$
|
54,253
|
$
|
96,084
|
$
|
(41,831
|
)
|
|||||
End of lease income
|
6,320
|
—
|
6,320
|
|||||||||
Amortization of lease incentives
|
(1,017
|
)
|
(1,402
|
)
|
385
|
|||||||
Amortization of lease premium, discounts and other
|
(297
|
)
|
24
|
(321
|
)
|
|||||||
Total operating lease revenue
|
$
|
59,259
|
$
|
94,706
|
$
|
(35,447
|
)
|
For the three months ended September 30, 2020, operating lease revenue totaled $59.3 million, a decrease of $35.4 million compared to the three months ended September 30, 2019. The decrease was primarily due to (i) a decrease of $22.8 million from lessees on non-accrual, (ii) a decrease of $18.5 million in lease revenue from aircraft sold in 2019 and 2020,
(iii) a decrease of $4.7 million in lease revenue resulting from lease extensions, lease restructurings and remarketings, and (iv) a decrease of $2.1 million in lease
revenue related to leases with floating rate rents. The decrease was partially offset by (i) an increase in lease revenue of $6.4 million from aircraft purchased in 2019 and 2020, and (ii) an increase of $6.3 million from end of lease income recognized. During
the three months ended September 30, 2020, our operating lease revenue was reduced by $22.5 million with the placement of four lessees on non-accrual status in the third quarter of 2020, of which $7.3 million relates to prior periods.
We did not sell any aircraft during the three months ended September 30, 2020. During the three months ended September 30, 2019, we sold eight aircraft and recognized an aggregate gain on sale of aircraft of
$38.9 million.
Interest and other income totaled $0.7 million for the three months ended September 30, 2020, a decrease of $4.6 million compared to the three months ended September 30, 2019. The decrease was primarily due to lower interest earned on deposits in bank accounts and our unconsolidated subsidiary recognizing a gain on sale of its
last aircraft during the third quarter of 2019.
Depreciation expense was $32.6 million for the three months ended September 30, 2020, a decrease of $1.3 million compared to the three
months ended September 30, 2019. The decrease was primarily due to a reduction in depreciation on aircraft sold in 2019 and 2020 and stoppage of depreciation on aircraft classified as flight
equipment held for sale in 2019. This decrease was partially offset by depreciation on aircraft acquired in 2019 and 2020.
Interest expense totaled $24.4 million for the three months ended September 30, 2020, a decrease of $9.2 million compared to the three months ended September 30, 2019. The decrease was primarily due to a reduction in interest resulting from debt repayments associated with aircraft sales and repayment of the Fly Acquisition III Facility in October 2019.
The decrease was slightly offset by an increase in swap interest expense.
Selling, general and administrative expenses were $7.7 million for the three months ended September 30, 2020, a decrease of $0.4 million compared to the three months ended September 30, 2019. The decrease was primarily due to a decrease of $1.9 million in servicing and management fees paid to BBAM and our Manager due to a decrease in fleet size and rental revenue, partially offset by an
increase of $0.9 million in realized and unrealized foreign currency losses and an increase of $0.5 million in general corporate costs.
During the three months ended September 30, 2020, we recorded a provision for uncollectible operating lease receivables of $1.0 million. We did not record any provision for
uncollectible operating lease receivables during the three months ended September 30, 2019.
During the three months ended September 30, 2020, we recognized a gain on derivatives of $0.6 million due to the dedesignation event of our cross currency swap as a cash flow hedge, causing a portion of unrealized gain to be reclassified from
accumulated other comprehensive income to the consolidated statements of income (loss). During the three months ended September 30, 2019, we recognized a loss on derivatives of $2.5 million, primarily due to interest rate swap contracts that no
longer qualify for hedge accounting treatment due to debt repayments associated with aircraft sales and the early repayment of the Fly Acquisition III Facility.
For the three months ended September 30, 2020, we recognized an unrealized fair value loss on marketable securities of $2.3 million related to the write down of our equity certificates to estimated fair value. After the write-down, the carrying value of our investment in equity certificates was reduced to $3.2 million as of September 30, 2020. We expect the fair value
of our investment in equity certificates to remain volatile while the COVID-19 pandemic continues to affect the market for such securities.
During the three months ended September 30, 2019, we incurred debt extinguishment costs totaling $1.6 million, of which $1.5 million were non-cash write-offs, due primarily to debt repayments
associated with aircraft sales. We did not incur any debt extinguishment costs during the three months ended September 30, 2020.
Maintenance and other costs were $1.2 million for three months ended September 30, 2020, an increase of $0.6 million compared to the three months ended September 30, 2019. The increase was primarily due to an increase in
aircraft redelivery and storage costs, offset slightly by a decrease in legal costs relating to aircraft repossession.
Benefit for income taxes was $0.4 million for the three months ended September 30, 2020, compared to provision for income taxes of $7.1 million for the three months ended September 30, 2019. We are tax resident in Ireland and expect to pay the corporation tax rate of 12.5% on trading income and 25.0% on non-trading income. Our effective tax rates were 4.4% and 12.0% for the
three months ended September 30, 2020 and 2019, respectively. The difference between the statutory and effective tax rate in each period is primarily attributable to changes in valuation allowances and
the amount of income earned by us in different tax jurisdictions. In addition, during the three months ended September 30, 2019, our expected Australian tax liability was reduced by $1.0 million.
Consolidated Statements of Income for the nine months ended September 30, 2020 and 2019
Nine months ended
|
||||||||
September 30,
2020
|
September 30,
2019
|
|||||||
(Dollars in thousands)
|
||||||||
Revenues
|
||||||||
Operating lease revenue
|
$
|
225,816
|
$
|
328,581
|
||||
Finance lease revenue
|
423
|
469
|
||||||
Gain on sale of aircraft
|
31,717
|
82,632
|
||||||
Interest and other income
|
3,645
|
9,088
|
||||||
Total revenues
|
261,601
|
420,770
|
||||||
Expenses
|
||||||||
Depreciation
|
96,197
|
108,769
|
||||||
Interest expense
|
76,820
|
107,198
|
||||||
Selling, general and administrative
|
22,413
|
26,173
|
||||||
Provision for uncollectible operating lease receivables
|
3,000
|
—
|
||||||
Loss (gain) on derivatives
|
(66
|
)
|
2,809
|
|||||
Fair value loss on marketable securities
|
12,840
|
—
|
||||||
Loss on extinguishment of debt
|
850
|
5,330
|
||||||
Maintenance and other costs
|
3,404
|
2,846
|
||||||
Total expenses
|
215,458
|
253,125
|
||||||
Net income before provision for income taxes
|
46,143
|
167,645
|
||||||
Provision for income taxes
|
6,532
|
16,926
|
||||||
Net income
|
$
|
39,611
|
$
|
150,719
|
Nine months ended
|
||||||||||||
September 30,
2020
|
September 30,
2019
|
Increase/
(Decrease)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Operating lease revenue:
|
||||||||||||
Operating lease rental revenue
|
$
|
219,631
|
$
|
302,520
|
$
|
(82,889
|
)
|
|||||
End of lease income
|
8,974
|
30,387
|
(21,413
|
)
|
||||||||
Amortization of lease incentives
|
(2,334
|
)
|
(4,353
|
)
|
2,019
|
|||||||
Amortization of lease premium, discounts and other
|
(455
|
)
|
27
|
(482
|
)
|
|||||||
Total operating lease revenue
|
$
|
225,816
|
$
|
328,581
|
$
|
(102,765
|
)
|
For the nine months ended September 30, 2020, operating lease revenue totaled $225.8 million, a decrease of $102.8 million compared to the nine months ended September 30, 2019. The decrease was primarily due to (i) a
decrease of $69.5 million in lease revenue from aircraft sold in 2019 and 2020, (ii) a decrease of $26.7 million from lessees on non-accrual, (iii) a decrease of $21.4 million from end of lease income recognized, (iv) a decrease of $5.6 million
from lower lease rates on lease extensions, lease restructurings and remarketings, and (v) a decrease of $4.8 million in lease revenue related to leases with floating rate rents. The decrease was partially offset by (i) an increase in lease revenue
of $23.7 million from aircraft purchased in 2019 and 2020 and (ii) a decrease of $2.0 million in lease incentive amortization.
During the nine months ended September 30, 2020, we sold six aircraft and two engines as a result of an aircraft part-out and recognized
an aggregate gain on sale of aircraft of $31.7 million. During the nine months ended September 30, 2019, we sold 25 aircraft and recognized an aggregate
gain on sale of aircraft of $82.6 million.
Interest and other income totaled $3.6 million for the nine months ended September 30, 2020, a decrease of $5.4 million compared to the nine months ended September 30, 2019. The decrease was primarily due to lower interest earned on
deposits in bank accounts and our unconsolidated subsidiary recognizing a gain on sale of its last aircraft during the third quarter of 2019.
Depreciation expense was $96.2 million for the nine months ended September 30, 2020, a decrease of $12.6 million compared to the nine
months ended September 30, 2019. The decrease was primarily due to a reduction in depreciation on aircraft sold in 2019 and 2020 and stoppage of depreciation on aircraft classified as flight
equipment held for sale in 2019. This decrease was partially offset by depreciation on aircraft acquired in 2019 and 2020.
Interest expense totaled $76.8 million for the nine months ended September 30, 2020, a decrease of $30.4 million compared to the nine months ended September 30, 2019. The decrease was primarily due to (i) a reduction in interest resulting from debt repayments associated with aircraft sales, redemption of the Securitization Notes in March 2019 and
repayment of the Fly Acquisition III Facility in October 2019 and (ii) termination of the Fly Acquisition III Facility commitment fees upon expiry of the commitment period on February 26, 2019. The decrease was slightly offset by an increase in
swap interest expense.
Selling, general and administrative expenses were $22.4 million for the nine months ended September 30, 2020, a decrease of $3.8 million compared to the nine months ended
September 30, 2019. The decrease was primarily due to (i) a decrease of $4.3 million in servicing and management fees paid to BBAM and our Manager due to a decrease in fleet size and rental revenue, and (ii) a decrease of $0.6 million in
legal fees relating to fleet activity. The decrease was partially offset by an increase of $0.9 million in realized and unrealized foreign currency losses.
During the nine months ended September 30, 2020, we recorded a provision for uncollectible operating lease receivables of $3.0 million. We did not record any provision for
uncollectible operating lease receivables during the nine months ended September 30, 2019.
During the nine months ended September 30, 2019, we recognized a loss on derivatives of $2.8 million, primarily due to interest rate swap contracts that no longer qualify for hedge accounting treatment due
to debt repayments associated with aircraft sales and the early repayment of the Fly Acquisition III Facility.
For the nine months ended September 30, 2020, we recognized an unrealized fair value loss on marketable securities of $12.8 million related to the write down of our equity certificates to estimated fair value. After the write-down, the carrying value of our investment in equity certificates was reduced to $3.2 million as of September 30, 2020. We expect the fair value
of our investment in equity certificates to remain volatile while the COVID-19 pandemic continues to affect the market for such securities.
During the nine months ended September 30, 2020, we incurred debt extinguishment costs totaling $0.9 million due to debt repayments. During the nine months ended
September 30, 2019, we incurred debt extinguishment costs totaling $5.3 million, of which $5.1 million were non-cash write-offs, due to (i) debt repayments associated with aircraft sales and (ii) the redemption of the Securitization Notes.
Maintenance and other costs were $3.4 million for nine months ended September 30, 2020, an increase of $0.6 million compared to the nine months ended September 30, 2019. The increase was primarily due to an increase in
aircraft redelivery and storage costs, offset slightly by a decrease in legal costs relating to aircraft repossession.
Provision for income taxes was $6.5 million and $16.9 million for the nine months ended September 30, 2020 and 2019, respectively. We are tax resident in Ireland and expect to
pay the corporation tax rate of 12.5% on trading income and 25.0% on non-trading income. Our effective tax rates were 14.2% and 10.1% for the nine months ended
September 30, 2020 and 2019, respectively. The difference between the statutory and effective tax rate in each period is primarily attributable to changes in valuation allowances and the amount of income earned by us in different tax jurisdictions. During the nine months ended September 30, 2019, we also recorded a benefit for an interest payment made by a subsidiary that previously did not meet the recognition threshold. We utilized
this benefit as group relief to offset income tax on repatriated earnings for which a deferred tax liability was previously recorded. In addition, during the nine months ended September 30, 2019, our expected Australian tax liability was reduced by
$1.0 million.
Liquidity and Capital Resources
Overview
Our business is very capital intensive, requiring significant investment to maintain and expand our fleet. We have pursued a strategy of disciplined fleet growth. During the nine months ended September 30,
2020, we spent $73.3 million to acquire flight equipment. In 2019, we spent $331.5 million to acquire flight equipment.
We also have pursued opportunistic aircraft sales to rejuvenate our fleet. During the nine months ended September 30, 2020, we sold six aircraft and two engines as the result of an aircraft part-out. In
2019, we sold 35 aircraft. Subsequent to September 30, 2020, we entered into agreements to sell two aircraft.
We finance our business with unrestricted cash, cash generated from flight equipment leases, aircraft sales and debt financings. At September 30, 2020, we had $285.1 million of unrestricted cash.
In recent years, our debt financing strategy has been to diversify our lending sources and to utilize both secured and unsecured debt financing. Unsecured borrowings provide us with greater operational flexibility. Secured, recourse debt
financing enables us to take advantage of favorable pricing and other terms compared to secured non-recourse debt, which we also continue to utilize.
Our 2021 Notes will mature on October 15, 2021. Subsequent to September 30, 2020, we repurchased $103.0 million of our 2021 Notes in private transactions. Subject to market conditions, we plan to make additional repurchases and redeem the
remaining principal balance of the 2021 Notes in advance of their maturity date.
On October 15, 2020, we consummated the 2020 Term Loan, a $180.0 million secured term loan with a consortium of lenders. The 2020 Term Loan will mature on the earlier of (i) October 15, 2025 and (ii) the date falling 30 days prior to the
maturity of our 2024 Notes if not redeemed. The 2020 Term Loan was issued at a discount of 4.5%. The 2020 Term Loan bears interest at LIBOR plus a margin of 6.00%, with a LIBOR floor of 1.00% and requires quarterly principal payments of 1.25% of
the original loan amount. We expect to receive proceeds from the 2020 Term Loan, net of issue discount and expenses, in the amount of $169.2 million in the fourth quarter of 2020. The proceeds will be used for general corporate purposes, including
the repayment of debt.
The 2020 Term Loan will be secured by 11 aircraft, including seven aircraft which had previously been secured by our 2012 Term Loan and four unencumbered aircraft. We were not required to repay any debt associated with those seven aircraft and
they have been removed from the collateral pool associated with the 2012 Term Loan.
Following completion of the financing of the collateral pool under the 2020 Term Loan and the anticipated transfers of certain unencumbered aircraft into the 2012 Term Loan, we will have a total of nine
unencumbered aircraft with a net book value at September 30, 2020 of approximately $200.0 million.
Our sources of operating cash flows are principally management fees, distributions and interest payments made to us by our subsidiaries. These payments by our subsidiaries may be restricted by applicable local laws and debt covenants.
We cannot predict the full extent to which COVID-19 will adversely impact our business, results of operations, financial condition, cash flows and growth prospects. The ultimate impact of COVID-19 will depend on certain developments, including,
among others, the impact of the pandemic on our lessees and the magnitude and duration of the crisis. The longer the pandemic persists, the more material the ultimate effects are likely to be. The COVID-19 pandemic has already negatively impacted
the financial health of airlines and has led some airlines to enter bankruptcy proceedings. We have agreed with many of our lessees to defer their payment obligations to us under their leases or other lease restructurings. There can be no assurance that our lessees will make their payments in accordance with the deferral terms during the expected repayment periods or at all. We may also experience lessee defaults, requiring us to repossess and remarket or
dispose of aircraft or engines earlier than anticipated. The return condition of the repossessed aircraft may not be as expected and we may incur unexpected maintenance costs associated with bringing the aircraft to airworthiness.
In addition, the demand for leased aircraft and engines is severely constrained. This supply and demand imbalance is likely to depress lease rates for, and the value of, the aircraft and engines in our portfolio. We may
be unable to remarket or sell aircraft or engines timely and on terms favorable to us, or at all, which could result in significant storage, maintenance and reconfiguration expenses, and loss of revenues, which may have a material adverse effect on
our business, results of operations, financial condition and cash flows.
However, we continue to expect that funds we receive from our subsidiaries, together with our cash on hand, cash from operations, and cash from financing activities will satisfy our liquidity needs through at least the next twelve months.
Our liquidity plans are subject to a number of risks and uncertainties, including those described under Item 3 “Key Information — Risk Factors” of our 2019 Annual
Report and Item 1A. Risk Factors of this report.
Cash Flows for the nine months ended September 30, 2020 and 2019
We generated cash from operations of $87.1 million and $190.3 million for the nine months ended September 30, 2020 and 2019, respectively, a decrease of $103.2 million.
Cash provided by investing activities was $68.9 million and $525.1 million for the nine months ended September 30, 2020 and 2019, respectively. During the nine months ended September 30, 2020, we used $74.1 million of cash to purchase flight equipment. During the nine months ended September 30, 2020, we sold six aircraft and two engines as the result of an aircraft part-out for net cash proceeds of $160.3 million. During the nine months ended September 30, 2019, we used $114.8 million of cash to purchase flight equipment and $7.4 million to purchase equity certificates. During the nine months ended September 30, 2019,
we sold 25 aircraft for net cash proceeds of $651.5 million. Payments for aircraft improvement totaled $15.3 million and $3.1 million for the nine months ended September 30, 2020 and 2019, respectively.
Cash used in financing activities for the nine months ended September 30, 2020 and 2019 totaled $187.0 million and $474.8 million, respectively. During the nine months ended
September 30, 2020, we (i) made repayments on our secured borrowings totaling $191.7 million, largely in connection with aircraft sales and (ii) used $6.5 million to repurchase 417,341 shares.
These payments were partially offset by (i) security deposit receipts from our lessees of $4.0 million and (ii) net maintenance reserve receipts of $7.3 million. During
the nine months ended September 30, 2019, we (i) made repayments on our secured borrowings totaling $474.7 million largely in connection with aircraft sales and (ii) used $32.8 million to repurchase 2,010,437 shares. These payments were partially
offset by net maintenance reserve receipts of $33.7 million.
Under our leases, the lessee is generally responsible for maintenance and repairs, airframe and engine overhauls, and compliance with return conditions of aircraft on lease. In connection with the lease of a used aircraft we may agree to
contribute additional amounts to the cost of certain major overhauls or modifications, which usually reflect the usage of the aircraft prior to the commencement of the lease. In many cases, we also agree to share with our lessees the cost of
compliance with airworthiness directives. We are not obligated to pay maintenance claims submitted by lessees who are in default under their lease agreement.
We generally expect that the aggregate maintenance reserve and lease end adjustment payments we receive from lessees will meet the aggregate maintenance contributions and lease end adjustment payments that we will be required to make. During the nine months ended September 30, 2020, we received $17.4 million of maintenance payments from lessees and made maintenance payment disbursements of $10.1 million.
In August 2019, our board of directors approved a $50.0 million share repurchase program which expired in September 2020. Under this program, Fly was able to make share repurchases from time to time in the open market or in privately negotiated
transactions. During the nine months ended September 30, 2020, we repurchased 417,341 shares at an average price of $15.57 per share, or $6.5 million, before commissions and fees.
We finance our business with unsecured and secured borrowings. As of September 30, 2020, we were not in default under any of our borrowings.
Unsecured Borrowings
On October 3, 2014, we sold $325.0 million aggregate principal amount of unsecured 6.375% Senior Notes due 2021 (the “2021 Notes”). On October 16, 2017, we sold
$300.0 million aggregate principal amount of unsecured 5.250% Senior Notes due 2024 (the “2024 Notes”).
The 2021 Notes and 2024 Notes are senior unsecured obligations of ours and rank pari passu in right of payment with any existing and future senior unsecured indebtedness of ours. The 2021 Notes have a
maturity date of October 15, 2021 and the 2024 Notes have a maturity date of October 15, 2024.
Interest on the 2021 Notes and 2024 Notes is payable semi-annually on April 15 and October 15 of each year. As of September 30, 2020 and December 31, 2019, accrued interest on unsecured borrowings
totaled $16.8 million and $7.7 million, respectively.
Pursuant to the indentures governing the 2021 Notes and 2024 Notes, we are subject to restrictive covenants which relate to dividend payments, incurrence of debt and issuance of guarantees, incurrence of liens, repurchases of common shares,
investments, disposition of aircraft, consolidation, merger or sale of our company and transactions with affiliates. We are also subject to certain operating covenants, including reporting requirements. Our failure to comply with any of the
covenants under the indentures governing the 2021 Notes or 2024 Notes could result in an event of default which, if not cured or waived, may result in the acceleration of the indebtedness thereunder and other indebtedness containing cross-default
or cross-acceleration provisions. Certain of these covenants will be suspended if the 2021 Notes or 2024 Notes obtain an investment grade rating.
Secured Borrowings
As of September 30, 2020, we had $1.5 billion principal amount outstanding on our secured borrowings.
We are subject to restrictive covenants under our secured borrowings which relate to the incurrence of debt, issuance of guarantees, incurrence of liens or other encumbrances, the acquisition, substitution, disposition and re-lease of aircraft,
maintenance, registration and insurance of our aircraft, restrictions on modification of aircraft and capital expenditures, and requirements to maintain concentration limits.
Our loan agreements include events of default that are customary for these types of secured borrowings. Our failure to comply with any restrictive covenants, or any other operating covenants, may trigger an event of default under the relevant
loan agreement. In addition, certain of our loan agreements contain cross-default provisions that could be triggered by a default under another loan agreement.
Securitization Notes
On March 14, 2019, B&B Air Funding redeemed all remaining aircraft lease-backed Class G-1 notes (the “Securitization Notes”) issued on October 2, 2007 and with an original maturity date of November 14,
2033, in the aggregate principal amount then-outstanding of $63.8 million. In connection with the redemption, we expensed approximately $1.9 million of debt extinguishment costs.
Nord LB Facility
As of September 30, 2020, we had $62.2 million principal amount outstanding under our non-recourse debt facility with Norddeutsche Landesbank Gironzentrale (the “Nord LB Facility”), which was secured by three aircraft. The Nord LB Facility is structured with loans secured by each aircraft individually. The loans are cross-collateralized and contain cross-default provisions. Borrowings are secured by Fly’s
equity interests in the aircraft owning subsidiaries, the related leases, and certain deposits.
The loans under the Nord LB Facility bear interest at one-month LIBOR plus a margin of 1.85% until the maturity date of May 14, 2021. As of September 30, 2020 and December 31, 2019, the blended weighted average
interest rate for the facility was 2.00% and 3.59%, respectively, excluding the amortization of debt discounts and debt issuance costs.
Under the terms of the Nord LB Facility, we apply 95% of lease rentals collected towards interest and principal. If no lease rental payments are collected in the applicable period for any financed aircraft, then no payment is due under the loan
associated with that aircraft during such period. Any unpaid interest increases the principal amount of the associated loan.
In the event we sell any of the financed aircraft, substantially all sale proceeds (after payment of certain expenses) must first be used to repay the debt associated with such aircraft and then to repay the outstanding amounts which finance the
remaining aircraft. In addition, any maintenance reserve amounts retained by us will be used to prepay the Nord LB Facility, provided such reserves are not required for future maintenance of such aircraft.
2012 Term Loan
As of September 30, 2020, we had $368.6 million principal amount outstanding under our senior secured term loan (the “2012 Term Loan”), which was secured by 30 aircraft.
Fly has guaranteed all payments under the 2012 Term Loan. The maturity date of the 2012 Term Loan is August 9, 2025. The 2012 Term Loan can be prepaid in whole or in part at par.
The 2012 Term Loan bears interest at three-month LIBOR plus a margin of 1.75%. The weighted average interest rate on all outstanding amounts was 3.35% and 4.15% as of September 30, 2020 and December 31, 2019,
respectively, excluding the amortization of debt discounts and debt issuance costs.
The 2012 Term Loan requires that we maintain a maximum loan-to-value ratio (“LTV”) of 70.0% based on the lower of the mean or median of half-life adjusted base values of the financed aircraft as determined by three independent appraisers on a
semi-annual basis. The 2012 Term Loan also includes certain customary covenants, including reporting requirements and maintenance of credit ratings.
2020 Term Loan
On October 15, 2020, we entered into a $180.0 million senior secured term loan (the "2020 Term Loan") with a consortium of lenders. The 2020 Term Loan will mature on the earlier of (i) October
15, 2025 and (ii) the date falling 30 days prior to the maturity of the 2024 Notes if not redeemed. The 2020 Term Loan was issued at a discount of 4.5%. The 2020 Term Loan bears interest at LIBOR plus a margin of 6.00%, with a LIBOR floor of
1.00% and requires quarterly principal payments of 1.25% of the original loan amount. The 2020 Term Loan can be prepaid in whole or in part on or after October 15, 2021 without any prepayment premium. We
have guaranteed the 2020 Term Loan.
The 2020 Term Loan will be secured by 11 aircraft, including seven aircraft which had previously been
secured by the 2012 Term Loan and four unencumbered aircraft. We were not required to repay any debt associated with those seven aircraft and they have been removed from the collateral pool associated with the 2012 Term Loan.
The 2020 Term Loan includes certain customary covenants, including reporting requirements, maintenance of credit ratings and maintenance of insurance. In addition, we are required to maintain
a minimum liquidity level of at least $100 million for as long as the 2021 Notes remain outstanding, the failure of which will result in a step-up in margin by 2.00% per annum. The aggregate principal amount outstanding as measured on a
quarterly basis must not exceed 70.0% of the lower of the mean or median of the half-life adjusted base values of the financed aircraft, as determined by three independent appraisers (the “LTV Test”). We are required to seek new appraisals
semi-annually.
Upon the sale of an aircraft, we may substitute aircraft into the 2020 Term Loan subject to certain conditions. The substitute aircraft must have an appraised value equal to or greater than
the aircraft removed from the 2020 Term Loan. In addition, we must be in compliance with specified concentration limits, including aircraft type, geographic and lessee concentration limits, as well as the LTV Test after such sale, removal or
substitution.
Magellan Acquisition Limited Facility
As of September 30, 2020, we had $258.8 million principal amount outstanding in loans and notes under our term loan facility (the “Magellan Acquisition Limited Facility”), which was secured by nine
aircraft. Fly has guaranteed all payments under this facility. The Magellan Acquisition Limited Facility has a maturity date of December 8, 2025.
The interest rate on the loans is based on one-month LIBOR plus an applicable margin of 1.65% per annum. The interest rate on the notes is a fixed rate of 3.93% per annum. The weighted average interest rate on all outstanding amounts was 3.95% and 4.11% as of September 30, 2020 and December 31, 2019, excluding the amortization of debt discounts and debt issuance costs.
The facility contains financial and operating covenants, including a covenant that Fly maintain a tangible net worth of at least $325.0 million, as well as customary reporting requirements. The borrower is required to maintain (i) an interest
coverage ratio and (ii) a LTV of (a) 75% through December 8, 2020, (b) 70% from December 9, 2020 through December 8, 2022, (c) 65% from December 9, 2022 through December 8, 2024 and (d) 60% thereafter. The LTV is based on the lower of the average
half-life adjusted current market value and base value of all aircraft financed under the facility as determined by three independent appraisers on an annual basis. Upon the occurrence of certain conditions, including a failure by Fly to maintain a
minimum liquidity of at least $25.0 million, the borrower will be required to deposit certain amounts of maintenance reserves and security deposits received into pledged accounts. Also, upon the occurrence of a breach of the interest coverage
ratio, all cash collected will be applied to repay the outstanding principal balance of the loans and notes until such breach is cured.
Fly Acquisition III Facility
On October 22, 2019, we paid in full the outstanding principal balance under a revolving credit facility (the “Fly Acquisition III Facility”) with an original maturity date of February 26, 2022. We had paid commitment fees of 0.50% to 0.75% per
annum to the lenders on the undrawn amount of their commitments during the availability period under the Fly Acquisition III Facility, which expired on February 26, 2019.
The interest rate under the facility was based on one-month LIBOR plus an applicable margin of (i) 2.00% through February 26, 2019 and (ii) 2.50%, from February 27, 2019 through the repayment date of the facility.
Fly Aladdin Acquisition Facility
As of September 30, 2020, we had an aggregate of $235.3 million principal amount outstanding of Series B loans under our term loan facility (the “Fly Aladdin
Acquisition Facility”), which were secured by 14 aircraft. Series B loans have a maturity date of June 15, 2023. During the nine months ended September 30, 2019, we repaid Series A loans in full and a portion of Series B loans and expensed
approximately $2.0 million of debt extinguishment costs.
The interest rate on Series B loans is based on three-month LIBOR, plus an applicable margin of 1.80% per annum. The weighted average interest rate on all outstanding amounts was 4.83% and 4.85% as of
September 30, 2020 and December 31, 2019, respectively, excluding the amortization of debt discounts and debt issuance costs. We make scheduled quarterly payments of principal and interest on the loans in accordance with a fixed
amortization schedule.
Borrowings are secured by the aircraft and related leases, and the equity and beneficial interests in the aircraft owning and leasing subsidiaries. In addition, Fly has provided a guaranty of certain of the representations, warranties and
covenants under the Fly Aladdin Acquisition Facility (including, without limitation, the borrowers’ special purpose covenants), as well as the obligations, upon the occurrence of certain conditions, to deposit maintenance reserves and security
deposits received into pledged accounts.
The facility contains operating covenants, including covenants that the borrowers maintain a (i) debt service coverage ratio and (ii) LTV ratio of (a) 68% through December 14, 2020, (b) 65% from December 15, 2020 through June 14, 2021, (c) 63.5%
from June 15, 2021 through December 14, 2021, (d) 62% from December 15, 2021 through June 14, 2022, (e) 60% from June 15, 2022 through December 14, 2022 and (f) 58% thereafter. The LTV is based on the average of the half-life adjusted current
market value of all financed aircraft as determined by three independent appraisers on a semi-annual basis.
Upon the occurrence of certain events, including a breach of the debt service coverage ratio continuing for two consecutive quarterly payment dates, Fly will be required to deposit, or cause the borrowers to deposit, all maintenance reserves and
security deposits received under the associated leases into pledged accounts. Also, upon the occurrence of a breach of the LTV ratio and certain other events, all cash collected will be applied to repay the outstanding principal balance of Series B
loans until such breach is cured. The LTV ratio was breached in the third quarter of 2020. As a consequence of entering into deferral agreements with our lessees, in the fourth quarter of 2020, the debt service
coverage ratio was breached for two consecutive quarterly payment dates, requiring us to deposit approximately $7.6 million in cash maintenance reserves and security deposits received under the associated leases into pledged accounts.
Fly Aladdin Engine Funding Facility
As of September 30, 2020, we had $41.2 million principal amount outstanding under a term loan facility (the “Fly Aladdin Engine Funding Facility”), which was secured by seven engines. Fly has guaranteed
all payments under this facility. The loans have maturity dates ranging from December 31, 2021 to April 30, 2022.
The interest rates for the borrowings range from 4.94% to 4.96% per annum, per engine. The weighted average interest rate on all outstanding amounts was 4.95% as of each of September 30, 2020 and December 31,
2019, excluding the amortization of debt discounts and debt issuance costs. We are required to make scheduled monthly payments of principal and interest in accordance with an amortization schedule.
The loans are secured by the engines and related leases and our equity and beneficial interests in the engine owning entities. The Fly Aladdin Engine Funding Facility contains customary covenants, including various reporting requirements. A
violation of any of these covenants could result in a default under the Fly Aladdin Engine Funding Facility.
Other Aircraft Secured Borrowings
We have entered into other aircraft secured borrowings to finance the acquisition of aircraft, one of which is denominated in Euros. As of September 30, 2020, we had $560.5 million principal amount
outstanding of other aircraft secured borrowings, which were secured by 13 aircraft. Of this amount, $286.9 million was recourse to Fly. The weighted average interest rate on all outstanding amounts was 3.22% and 4.07% as of September 30, 2020 and December 31, 2019, respectively, excluding the amortization of debt discounts and debt issuance costs.
These borrowings are structured as individual loans secured by pledges of our rights, title and interests in the financed aircraft and leases. In addition, Fly may provide guarantees of its subsidiaries’
obligations under certain of these loans and may be subject to financial and operating covenants in connection therewith. One aircraft secured borrowing with a scheduled maturity date in December 2020 has been extended for 90 days. The maturity
dates of other aircraft secured borrowings range from March 2021 to June 2028.
During nine months ended September 30, 2020, we purchased flight equipment for an aggregate of $73.3 million.
We expect to make capital expenditures from time to time in connection with improvements to our aircraft. These expenditures include the cost of major overhauls and modifications. In general, the costs of operating an aircraft, including capital
expenditures, increase with the age of the aircraft. As of September 30, 2020, the weighted average age of our portfolio was 8.3 years.
On February 28, 2018, we agreed to acquire 21 Airbus A320neo family aircraft to be leased to AirAsia Group Berhad and its affiliated airlines as the aircraft deliver from the manufacturer. The first of these aircraft
was delivered in the fourth quarter of 2019. We also acquired options to purchase up to 20 Airbus A320neo family aircraft, not subject to lease (“Portfolio C”). We did not exercise our options with respect to any of the Portfolio C aircraft
delivering in 2019. In August 2019, we exercised options with respect to eight Portfolio C aircraft to be delivered in 2020 and 2021. We have options remaining to purchase up to nine Portfolio C aircraft delivering between 2021 and 2025. Due to the
impact of COVID-19, we expect that the delivery of the Portfolio B and Portfolio C aircraft will be delayed, and that no aircraft will deliver under these agreements in the next 12 months. We expect to fund aircraft acquisitions using cash on hand
and secured borrowings.
Inflation
The effects of inflation on our operating expenses have been minimal. We do not consider inflation to be a significant risk to direct expenses in the current economic environment.
Item 3. |
Interest Rate Risk
Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax
policies, U.S. and international economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate
exposures relate to our lease agreements and our floating rate debt obligations. As of September 30, 2020, we had 79 lease agreements and seven engine lease agreements. 80 of these lease agreements had
fixed lease rates and six had floating lease rates based on LIBOR. Our floating rate indebtedness requires payments based on a variable interest rate index such as LIBOR. Therefore, increases in interest rates may reduce our net income by
increasing the cost of our debt without any corresponding proportional increase in rents or cash flow from our leases.
We have entered into interest rate swap contracts to mitigate the interest rate fluctuation risk associated with our debt. We expect that these interest rate swap contracts will significantly reduce the additional interest expense that would be
caused by an increase in variable interest rates.
Sensitivity Analysis
The following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts on our financial condition and results of operations. A
sensitivity analysis is constrained by several factors, including the necessity to conduct the analysis based on a single point in time and by the inability to include the complex market reactions that normally would arise from the market shifts.
Although the following results of a sensitivity analysis for changes in interest rates may have some limited use as a benchmark, they should not be viewed as a forecast. This hypothetical disclosure also is selective in nature and addresses only
the potential impacts on our financial instruments and our variable rate leases. It does not include a variety of other potential factors that could affect our business as a result of changes in interest rates.
Assuming we do not hedge our exposure to interest rate fluctuations, a hypothetical 100 basis-point increase or decrease in our variable interest rates would have increased or decreased our interest expense by $12.6 million on an annualized
basis. A hypothetical 100 basis-point increase would have increased our revenues by $3.7 million on an annualized basis. A hypothetical 100 basis-point decrease would have decreased our revenues by $1.3
million on an annualized basis.
The fair value of our interest rate swap contracts is affected by changes in interest rates and credit risk of the parties to the swap. We determine the fair value of our derivative instruments using a discounted cash flow model which
incorporates an assessment of the risk of non-performance by the swap counterparty and an evaluation of Fly’s credit risk in valuing derivative liabilities. The valuation model uses various inputs including contractual terms, interest rate curves,
credit spreads, and measures of volatility. Changes in the fair value of a derivative that is designated and qualifies as an effective cash flow hedge are recorded in accumulated other comprehensive income (loss), net of tax, until earnings are
affected by the variability of cash flows of the hedged item. Any derivative gains and losses that do not qualify for hedge accounting treatment are recognized directly into income (loss). As of September 30,
2020, the fair value of our interest rate swap derivative liabilities, excluding accrued interest, was $48.0 million. A 100 basis-point increase in the interest rate would reduce the fair value of our derivative liabilities by
approximately $20.5 million. A 100 basis-point decrease in the interest rate would increase the fair value of our derivative liabilities by approximately $21.5 million.
Foreign Currency Exchange Risk
We receive substantially all of our revenue in U.S. Dollars. We have two leases pursuant to which we receive a portion of the rent amount in Euros. For these leases, a 10% increase or decrease in the Euro to U.S. Dollar exchange rate would
increase or decrease the annual rental revenue by $1.2 million.
In 2018, we entered into a cross currency swap contract to mitigate our exposure to foreign currency exchange fluctuations in conjunction with one of these leases. As of September 30, 2020, the fair
value of our cross currency swap derivative asset was $4.2 million. A 10% increase or decrease in the Euro to U.S. Dollar exchange rate would decrease or increase the fair value of our derivative asset by approximately $4.7 million, respectively.
As of September 30, 2020, we had one aircraft secured borrowing denominated in Euros. During the nine months ended September 30, 2020, we recorded an unrealized
foreign currency exchange loss of $0.7 million associated with this borrowing, resulting primarily from a decrease in value of the U.S. Dollar relative to the Euro. A 10% increase or decrease in the Euro to U.S. Dollar exchange rate on the Euro
denominated borrowing at September 30, 2020 would have resulted in a $1.5 million unrealized foreign exchange loss or gain, respectively.
We pay substantially all of our expenses in U.S. Dollars. However, we incur some of our expenses in other currencies, primarily the Euro. Changes in the value of the U.S. Dollar relative to the Euro and other currencies may increase the U.S.
Dollar cost to us to pay such expenses. The portion of our business conducted in other currencies could increase in the future, which could expand our exposure to losses arising from currency fluctuations. Volatility in foreign exchange rates could
have a material impact on our results of operations.
Item 4. |
Controls and Procedures
|
Not applicable.
PART II — OTHER INFORMATION
We are not currently a party to any litigation or other legal proceeding that may have a material adverse impact on our business or operations. However, we are and may continue to be subject to various claims and legal actions arising in the
ordinary course of business.
The information under “Risk Factors” under the heading Item 3. “Key Information” in our Annual Report on Form 20-F for the year ended December 31, 2019, filed with the SEC on February 28, 2020, includes a discussion of
our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our Form 20-F. Except as presented below, there have been no material changes from the risk factors
described in our Form 20-F. Capitalized terms used below but not defined herein have the meaning given to such terms in our Form 20-F.
Our Form 20-F is accessible on the SEC’s website at www.sec.gov as well as our website at www.flyleasing.com. The information on our website or that can be accessed through our website neither constitutes a part of this
interim report nor is incorporated by reference herein.
The COVID-19 pandemic and measures implemented in response to the pandemic may have a material adverse effect on us. The longer the pandemic persists, the more material the ultimate
effects are likely to be. It is likely that there will be negative effects that we cannot presently predict, including near term effects, which may have a material adverse effect on our business, results of operations, financial condition, cash
flows and growth prospects.
On January 30, 2020, the spread of COVID-19 was declared a Public Health Emergency of International Concern by the World Health Organization (“WHO”), and on March 11, 2020, the WHO characterized the COVID-19 outbreak as a pandemic. The COVID-19 pandemic and the measures governments and private parties have implemented in response to the pandemic, including travel restrictions, quarantines,
shelter-in-place or total lock-down orders, social distancing measures, and other business limitations and shutdowns, have caused significant economic disruption and have had, and are likely to continue to have, a material adverse effect on the
demand for worldwide air travel, the airline industry and demand for commercial jet aircraft globally, all of which have had and likely will continue to have an adverse effect on our business, results of operations, financial condition, cash
flows and growth prospects. The longer the COVID-19 pandemic persists, the more material the ultimate effects are likely to be. It is likely that there will be negative effects that we cannot presently predict, which may have a material adverse
effect on us.
Airlines around the world have experienced a material decline in demand for their services as well as materially increased cancellations for pre-paid trips compared to historic norms, which is having, and is likely to
continue to have, a material adverse effect on our lessees’ ability to fulfill their obligations under their leases to us. Moreover, governments around the world have implemented restrictions on air travel and may implement additional restrictions
and other measures dissuading air travel in the future as a result of the pandemic, worsening the negative effects of the COVID-19 pandemic on the airline industry, our lessees and us.
During the nine months ended September 30, 2020, we executed agreements with 14 lessees to defer their
rent payment obligations for 35 aircraft totaling $59.9 million due to us over the life of the leases. These deferrals are for an average of nine months with approximately half of the deferrals to be repaid by the end of 2021. We have also agreed
to lease restructurings with certain of our lessees.
Presented below are the rent deferrals granted and scheduled deferral repayments as of September 30, 2020. There can be no assurance that our lessees will make their payments in accordance with the deferral terms during the expected repayment
periods or at all.
Rent Deferrals
Granted
|
Scheduled Deferral
Repayments
|
|||||||
(Dollars in thousands)
|
||||||||
January 1 through September 30, 2020
|
$
|
39,703
|
$
|
1,620
|
||||
October 1 through December 31, 2020
|
10,742
|
3,179
|
||||||
Year ending December 31, 2021
|
9,442
|
21,754
|
||||||
Thereafter
|
—
|
33,334
|
||||||
Total
|
$
|
59,887
|
$
|
59,887
|
We expect that we may grant additional payment deferrals and extend the periods of repayment, and if the financial conditions of our airline customers do not improve, we may agree to further accommodations with some of our lessees.
We therefore anticipate a continued decline in our cash rent collections and operating lease revenue for the remainder of 2020 and into 2021. For the three months ended September 30, 2020, we collected 53% of our pre-deferral contracted rent.
If we determine that the collectability of lessee rental payments, including those subject to deferral agreements, is not reasonably assured, our results of operations will be negatively affected. Rental income from aircraft and aircraft
equipment is recognized on a straight-line basis over the initial term of the respective lease, and changes to the timing of cash rent receipts, such as under rent deferral arrangements, do not typically impact revenue recognition provided that we
determine collection of rents is reasonably assured. However, if we determine that collection is not reasonably assured, we are required to recognize rental revenues using a cash rather than an accrual accounting method. Under the cash method, we
recognize revenue based on the lesser of the straight-line rental income or the lease payments collected from the lessee, including security deposit amounts held.
During the three months ended September 30, 2020, our operating lease revenue was reduced by $22.5 million with the placement of four lessees on non-accrual status in the
third quarter of 2020, of which $7.3 million relates to prior periods. In addition, as of September 30, 2020, we had recorded a general provision for uncollectible operating lease receivables of $3.0 million. Placing additional lessees on
non-accrual status or recording further provisions for uncollectible operating lease receivables could materially reduce our reported revenue and net income and negatively impact our financial condition.
In addition to deferrals of lease rents, the significant decline in air travel has resulted in decreased usage of our aircraft by lessees, which is likely to reduce future supplemental maintenance rent and end-of-lease compensation payable to
us. Reductions in such payments would adversely affect our cash flows and may adversely affect our results of operations.
We expect that, even under current market conditions, our liquidity is sufficient to satisfy our anticipated operational and other business needs over the next 12 months, and that we will not suffer a default or event of
default under any of our indebtedness.
As a consequence of entering into deferral agreements with our lessees, we have made and expect that we will continue to make principal and interest payments under certain secured borrowings from operating cash. In addition, in the fourth quarter of 2020, we have deposited approximately $7.6 million in cash maintenance reserves and security deposits into pledged accounts associated with aircraft financed
under the Fly Aladdin Acquisition Facility.
We have borrowed additional secured, recourse indebtedness to support our liquidity position during the COVID-19 pandemic, which may exacerbate the risks identified in the “Risk Factors” section of our Annual Report on Form 20-F for the year
ended December 31, 2019, filed with the SEC on February 28, 2020, including those set forth under the heading “—Risks Related to our Indebtedness”. On October 15, 2020, through a wholly-owned subsidiary, we
entered into a $180 million senior secured term loan (the "2020 Term Loan") with a consortium of lenders, as described in greater detail in our Report of Foreign Private Issuer on Form 6-K, dated October 15, 2020. We expect to receive
proceeds from the 2020 Term Loan, net of issue discount and expenses, in the amount of $169.2 million in the fourth quarter of 2020. The 2020 Term Loan is guaranteed by us.
We have experienced and may continue to experience lessee defaults as a result of the effects of the COVID-19 pandemic on our lessees, requiring us to repossess and remarket or dispose of aircraft or engines earlier than
anticipated. The costs of repossession have increased in the current environment. Even if we are successful in repossessing aircraft, we may not be able to export or deregister the aircraft promptly or may otherwise incur unexpected maintenance or
storage costs associated with repossessed aircraft that we are unable to place with another operator. Lessee defaults and related expenses could result in significant expenses and loss of revenues, which may have a material adverse effect on our
business, results of operations, financial condition and cash flows.
Further, as of September 30, 2020, 26 airlines globally had initiated bankruptcy or similar proceedings, and current market conditions have increased the likelihood that other airlines will experience bankruptcy. In June 2020, one of our
lessees, Aeromexico entered bankruptcy proceedings and rejected its lease of our aircraft. The rejection of our aircraft, especially older aircraft, in bankruptcy or similar proceedings increases the likelihood that we may recognize impairment
charges with respect to such aircraft. In addition, any bankruptcy, insolvency, reorganization or other restructuring of our lessees may result in the grounding of our aircraft, negotiating reductions in lease rentals or lease restructurings or
rejection of our leases, all of which could drive potential impairment, depress aircraft market value and adversely affect our ability to timely re-lease or sell aircraft at favorable rates, if at all.
In addition, in response to the effects that the COVID-19 pandemic is having on airlines globally, many airlines have incurred and may continue to incur significant amounts of indebtedness. If our customers’
liquidity is materially diminished as a result of market conditions or their increased debt service obligations, they might not be able to timely meet their payment obligations under our leases or fulfill their other contractual commitments to
us.
Under current market conditions, demand for leased aircraft and engines is severely constrained. This supply and demand imbalance is likely to depress lease rates for, and the value of, the aircraft and engines in our
portfolio. We may be unable to remarket or sell aircraft or engines timely and on terms favorable to us, or at all, which could result in significant storage, maintenance and reconfiguration expenses, and loss of revenue, which may have a material
adverse effect on our business, results of operations, financial condition and cash flows.
The effects of the COVID-19 pandemic on airlines’ demand for new aircraft and engines and on the ability of manufacturers to supply new aircraft and engines may have a material adverse effect on our results of
operations and our growth prospects. Boeing and Airbus have reported customer order cancellations and deferrals, as well as delivery delays, due to the impact of COVID-19. We expect that the deliveries of the Portfolio B and Portfolio C
aircraft which we agreed to acquire in connection with the AirAsia transactions will be delayed, and that no aircraft will deliver under these agreements in the next twelve months. These delivery delays have adversely impacted our results of
operations and further delays with these deliveries or further adverse impacts of COVID-19 upon sale-and-leaseback opportunities with other airlines may have a material adverse effect on our results of operations
and growth prospects.
Additionally, the COVID-19 pandemic has led our Servicer to adopt remote working arrangements (which continue to remain in place for the principal offices of Fly and BBAM), and it is possible that such changes, or other
new processes, procedures or controls that we adopt in response to the COVID-19 pandemic, may negatively affect our operations or internal controls over financial reporting. We also depend on certain key officers and employees, and should any of
them become ill and unable to work, it could impact our productivity and business continuity.
The ultimate impact COVID-19 may have on our operational and financial performance is currently uncertain and will depend on the impact of COVID-19 on airlines worldwide, including our customers, the duration and spread
of the pandemic, the impact of COVID-19 on overall long-term demand for air travel, and other factors that we cannot predict. For example, we are unable to predict whether the COVID-19 pandemic will result in permanent changes to the airline
industry, with such changes including but not limited to, a permanent reduction in passenger air travel demand as a result of increased usage of "virtual" and "teleconferencing" products as a substitute for business travel and more broadly a
general reluctance to travel by consumers, each of which could have a material impact on the airline industry, our lessees, and our business.
All of the foregoing may have a material adverse effect on our business, results of operations, financial condition, cash flows and growth prospects. In addition, to the extent that the COVID-19 pandemic
adversely affects our business, it also may have the effect of exacerbating the risks identified in the “Risk Factors” section of our Annual Report on Form 20-F for the year ended December 31, 2019, filed with the SEC on February 28, 2020,
including those set forth under the heading “—Risks Related to our Business.”
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
None.
Item 3. |
Defaults Upon Senior Securities
|
None.
Item 4. |
Mine Safety Disclosures
|
None.
Item 5. |
Other Information
|
None.
Item 6. |
Exhibits
|
Exhibit |
Title |
99.1
|
Fly Leasing Limited’s interim report for the three and nine months ended September 30, 2020
|
4.1
|
Aircraft Mortgage and Security Agreement dated as of October 15, 2020 among Fly Willow Funding Limited, Fly Leasing Limited, Fly Willow Aircraft Holdings DAC, the additional grantors referred to therein, and
Bank of Utah as Collateral Agent.
|
4.2
|
Term Loan Credit Agreement dated as of October 15, 2020 among Fly Willow Funding Limited, as Borrower, Fly Leasing Limited, as a Guarantor Party, Fly Willow Aircraft Holdings DAC, as a Guarantor Party, each
other guarantor party referred to therein, the lenders identified therein, Royal Bank of Canada, as Administrative Agent and Bank of Utah, as Collateral Agent.
|
4.3
|
Servicing Agreement dated as of October 15, 2020 among BBAM US LP, BBAM Aviation Services Limited and Fly Leasing Limited.
|
4.4
|
Form of Servicing Agreement among BBAM US LP, BBAM Aviation Services Limited and each company thereof.
|
45
Exhibit 4.1
EXECUTION VERSION
Dated as of October 15, 2020
FLY WILLOW FUNDING LIMITED,
FLY LEASING LIMITED,
and
THE ADDITIONAL GRANTORS REFERRED TO HEREIN
as the Grantors
and
BANK OF UTAH,
as the Collateral Agent
AIRCRAFT MORTGAGE AND SECURITY
AGREEMENT
TABLE OF CONTENTS
Page
|
||
Article I DEFINITIONS
|
1
|
|
Section 1.01.
|
Definitions
|
1
|
Section 1.02.
|
Construction and Usage
|
7
|
Article II SECURITY
|
8
|
|
Section 2.01.
|
Grant of Security
|
8
|
Section 2.02.
|
Security for Obligations
|
11
|
Section 2.03.
|
Representations and Warranties of the Grantors
|
11
|
Section 2.04.
|
Grantors Remain Liable
|
13
|
Section 2.05.
|
Delivery of Collateral
|
13
|
Section 2.06.
|
As to the Assigned Documents
|
14
|
Section 2.07.
|
As to Beneficial Interest Collateral
|
15
|
Section 2.08.
|
Further Assurances
|
16
|
Section 2.09.
|
Place of Perfection; Records
|
18
|
Section 2.10.
|
Voting Rights; Dividends; Etc
|
18
|
Section 2.11.
|
Transfers and Other Liens; Additional Shares or Interests
|
19
|
Section 2.12.
|
Collateral Agent Appointed Attorney-in-Fact
|
19
|
Section 2.13.
|
Collateral Agent May Perform
|
20
|
Section 2.14.
|
Covenant to Pay
|
20
|
Section 2.15.
|
Delivery of Collateral Supplements
|
20
|
Section 2.16.
|
Operational Covenants
|
21
|
Section 2.17.
|
Insurance
|
23
|
Section 2.18.
|
As to Irish Law
|
23
|
Section 2.19.
|
Irish Charge Over Shares
|
24
|
Section 2.20.
|
[Reserved]
|
24
|
Section 2.21.
|
[Reserved].
|
24
|
Section 2.22.
|
Other Jurisdiction Share Charge
|
24
|
Section 2.23.
|
Investment of Security Funds
|
24
|
Section 2.24.
|
Covenant Regarding Control
|
24
|
Section 2.25.
|
Security Documents
|
24
|
- i -
Article III REMEDIES
|
25
|
|
Section 3.01.
|
Remedies
|
25
|
Section 3.02.
|
Priority of Payments
|
26
|
Article IV SECURITY INTEREST ABSOLUTE
|
26
|
|
Section 4.01.
|
Security Interest Absolute
|
26
|
Article V THE COLLATERAL AGENT
|
27
|
|
Section 5.01.
|
Authorization and Action
|
27
|
Section 5.02.
|
Absence of Duties
|
27
|
Section 5.03.
|
Representations or Warranties
|
28
|
Section 5.04.
|
Reliance; Agents; Advice of Counsel
|
28
|
Section 5.05.
|
Cape Town Convention
|
29
|
Section 5.06.
|
No Individual Liability
|
29
|
Article VI SUCCESSOR COLLATERAL AGENT
|
29
|
|
Section 6.01.
|
Resignation and Removal of the Collateral Agent
|
29
|
Section 6.02.
|
Appointment of Successor
|
30
|
Article VII INDEMNITY AND EXPENSES
|
31
|
|
Section 7.01.
|
Indemnity
|
31
|
Section 7.02.
|
Secured Parties' Indemnity
|
31
|
Section 7.03.
|
No Compensation from Secured Parties
|
32
|
Section 7.04.
|
Collateral Agent Fees
|
32
|
Article VIII MISCELLANEOUS
|
32
|
|
Section 8.01.
|
Amendments; Waivers; Etc
|
32
|
Section 8.02.
|
Addresses for Notices
|
33
|
Section 8.03.
|
No Waiver; Remedies
|
35
|
Section 8.04.
|
Severability
|
35
|
Section 8.05.
|
Continuing Security Interest; Assignments
|
35
|
Section 8.06.
|
Release and Termination
|
35
|
Section 8.07.
|
Currency Conversion
|
36
|
Section 8.08.
|
Governing Law
|
36
|
Section 8.09.
|
Jurisdiction; Consent to Service of Process
|
37
|
Section 8.10.
|
Counterparts
|
37
|
Section 8.11.
|
Table of Contents, Headings, Etc
|
37
|
Section 8.12.
|
Non-Invasive Provisions
|
37
|
Section 8.13.
|
Limited Recourse
|
39 |
- ii -
SCHEDULES
Schedule I
|
Aircraft, Airframes and Engines
|
|
Schedule II
|
Pledged Stock, Pledged Beneficial Interest and Pledged Membership Interests
|
|
Schedule III
|
Trade Names
|
|
Schedule IV
|
Chief Place of Business and Chief Executive or Registered Office
|
|
Schedule V
|
Insurance
|
EXHIBITS
Exhibit A-1
|
Form of Collateral Supplement
|
Exhibit A-2
|
Form of Grantor Supplement
|
Exhibit B
|
Form of Consent and Agreement
|
Exhibit C
|
Form of FAA Aircraft Mortgage
|
Exhibit D
|
Form of FAA Aircraft Mortgage and Lease Security Assignment
|
Exhibit E
|
Form of FAA Lease Security Assignment
|
Exhibit F-1
|
Form of Notice of Assignment
|
Exhibit F-2
|
Form of Lessee Acknowledgment
|
Exhibit G
|
Form of Irish Charge Over Shares
|
Exhibit H
|
Form of Cayman Islands Charge Over Shares
|
- iii -
This AIRCRAFT MORTGAGE AND SECURITY AGREEMENT (this "Agreement"), dated as of October 15, 2020, is made among (i) FLY WILLOW FUNDING LIMITED, an exempted
company incorporated with limited liability under the laws of the Cayman Islands (the "Borrower"), (ii) FLY LEASING LIMITED, a company incorporated under the laws of Bermuda ("FLL"),
(iii) FLY WILLOW AIRCRAFT HOLDINGS DAC, a designated activity company incorporated under the laws of Ireland ("FWAH"), (iv) the ADDITIONAL GRANTORS who from time to time become
grantors under this Agreement (together with the Borrower, FLL, FWAH, the "Grantors"), and (v) BANK OF UTAH, a Utah corporation ("Bank of Utah"), not in its individual
capacity except as expressly provided herein, as the collateral agent (in such capacity, and together with any permitted successor or assign thereto or any permitted replacement thereof, the "Collateral Agent").
PRELIMINARY STATEMENTS:
(1) The Borrower, FLL, FWAH, the lenders from time to time party thereto (the "Lenders"), Royal Bank of Canada, as the administrative agent (in such
capacity, the "Administrative Agent") and the Collateral Agent have entered into the Term Loan Credit Agreement, dated as of the date hereof (the "Credit Agreement"),
pursuant to which the Lenders have made the Loans to the Borrower;
(2) the Grantors may from time to time grant additional security for the benefit of the Secured Parties, all in accordance with, and subject to the terms and conditions of this Agreement;
(3) the Grantors have agreed pursuant to the Credit Agreement, and it is a condition precedent to the making of the Loans by the Lenders to the Borrower under the Credit Agreement, that
the Grantors grant the security interests required by this Agreement;
(4) each Grantor will derive substantial direct and indirect benefit from the transactions described above; and
(5) Bank of Utah is willing to act as the Collateral Agent under this Agreement.
NOW, THEREFORE, in consideration of the premises, each Grantor hereby agrees with the Collateral Agent for its respective benefit and the benefit of the other Secured Parties as follows:
ARTICLE I
Section 1.01. Definitions. (a) Certain Defined Terms. For the purposes of this
Agreement, the following terms have the meanings indicated below:
"2009 Act" has the meaning set forth in Section 2.18.
"Account Collateral" has the meaning specified in Section 2.01(i).
- 1 -
"Acquisition Agreement" means any agreement to provide warranties in connection with any agreement pursuant to which a Pool Aircraft has been or will be
acquired by a Lessor Subsidiary to the extent permitted to be assigned without third party consent.
"Additional Grantor" has the meaning specified in Section 8.01(b).
"Agreed Currency" has the meaning specified in Section 8.07.
"Agreement" has the meaning specified in the recital of parties to this Agreement.
"Aircraft Documents" means all technical data, manuals and log books, and all inspection, modification and overhaul records and other service, repair,
maintenance and technical records that are required pursuant to applicable law to be maintained with respect to the relevant Pool Aircraft, and such term shall include all additions, renewals, revisions and replacements of any such materials from
time to time made, or required to be made, pursuant to applicable law, and in each case in whatever form and by whatever means or medium (including, without limitation, microfiche, microfilm, paper or computer disk) such materials may be maintained
or retained by the relevant Lessee.
"Aircraft Objects" means, collectively, the Aircraft Objects (as defined in the Protocol) described on Schedule I hereto and in any Collateral Supplement or
Grantor Supplement.
"Aircraft Purchase Collateral" has the meaning specified in Section 2.01(d).
"Airframe" means, individually, each of the airframes described on Schedule I hereto and in any Collateral Supplement or Grantor Supplement.
"Assigned Agreement Collateral" has the meaning specified in Section 2.01(c).
"Assigned Agreements" has the meaning specified in Section 2.01(c)(i).
"Assigned Documents" means, collectively, the Assigned Agreements, the Assigned Leases and the Acquisition Agreements included in the Aircraft Purchase
Collateral.
"Assigned Leases" has the meaning specified in Section 2.01(b).
"Bank of Utah" has the meaning specified in the preliminary statements of this Agreement.
"Beneficial Interest Collateral" has the meaning specified in Section 2.01(e).
"Borrower" has the meaning specified in the preliminary statements of this Agreement.
"Cape Town Lease" means any Lease (including any Lease between Grantors) that has been entered into, extended, assigned or novated after March 1, 2006 (or
such later date as the Cape Town Convention may be given effect under the law of any applicable jurisdiction) (A) with a Cape Town Lessee or (B) where the related Aircraft Object is registered in a "Contracting State".
"Cape Town Lessee" means a lessee under a Lease that is "situated in" a "Contracting State".
- 2 -
"Certificated Security" means a certificated security (as defined in Section 8-102(a)(4) of the UCC) other than a Government Security.
"Chattel Paper Original" has the meaning specified in Section 2.05.
"Collateral" has the meaning specified in Section 2.01.
"Collateral Agent" has the meaning specified in the recital of parties to this Agreement.
"Collateral Supplement" means a supplement to this Agreement in substantially the form attached as Exhibit A-1 executed and delivered by a Grantor.
"Credit Agreement" has the meaning specified in the preliminary statements to this Agreement.
"Eligible Institution" means (a) Bank of Utah in its capacity as the Collateral Agent under this Agreement; (b) any bank not organized under the laws of the
United States of America so long as it has either (i) a long-term unsecured debt rating of A or better by Standard & Poor's and A2 or better by Moody's or (ii) a short-term unsecured debt rating of A-1+ by Standard & Poor's and P-1 or
better by Moody's; or (c) any bank organized under the laws of the United States of America or any state thereof, or the District of Columbia (or any branch of a foreign bank licensed under any such laws), so long as it (i) has either (A) a
long-term unsecured debt rating of AA (or the equivalent) or better by each of Standard & Poor's and Moody's or (B) a short-term unsecured debt rating of A-1+ by Standard & Poor's and P-1 by Moody's and (ii) can act as a securities
intermediary under the New York Uniform Commercial Code.
"Engine" means, individually, each of the aircraft engines described on Schedule I hereto or in any Collateral Supplement or Grantor Supplement.
"Equity Collateral" has the meaning specified in Section 2.07(a).
"Event of Default" means any Event of Default (as defined in the Credit Agreement).
"Excluded Property" shall mean (a) proceeds of public liability insurance (or government or other Person (including the Manufacturer, the Lessee and any
sublessee of the Lessee) indemnities in lieu thereof) paid or payable as a result of insurance claims made, or losses suffered, by any Grantor or their Affiliates, (b) proceeds of insurance maintained by any Grantor, the Servicers or their
respective Affiliates for its or their own account or benefit (whether directly or through a Grantor) and not required by the Loan Documents, (c) the proceeds of any requisition for hire not required to be paid to the Collateral Agent, (d) any
general, Tax or other indemnity payments, expenses, reimbursements and similar payments and interest in respect thereof paid or payable in favor of any Grantor or their Affiliates or their respective successors or assigns, officers, directors,
employees, agents, managers and servants, including any such payments pursuant to any Lease, except to the extent such Grantor or Affiliate owes such amounts in respect of the same claim to a Secured Party, (e) any security interest held by a
Grantor or any of its Affiliates in any assets of a Lessee or any sublessee thereof or of any of their Affiliates, other than the Security Deposit under a Lease, or a letter of credit in lieu thereof, which secures obligations owed by such Lessee,
sublessee or Affiliate pursuant to a grant of collateral not under the applicable Lease, (f) any interest that pursuant to a Lease may from time to time accrue in respect of any of the amounts described in clauses (a) through (d) above, (g) the
proceeds from the enforcement of any right to enforce the payment of any amount described in clauses (a) to (f) above, and (h) any right to exercise any election or option or make any decision or determination, or to give or receive any notice,
consent, waiver or approval, or to take any other action in respect of, but in each case, only to the extent relating to, any Excluded Property.
- 3 -
"FAA" means the Federal Aviation Administration of the United States of America.
"FAA Aircraft Mortgage" means an FAA Aircraft Mortgage substantially in the form attached as Exhibit C.
"FAA Aircraft Mortgage and Lease Security Assignment" means an FAA Aircraft Mortgage and Lease Security Assignment substantially in the form attached as
Exhibit D.
"FAA Lease Security Assignment" means the Lease Security Assignment in substantially the form attached as Exhibit E hereto.
"Government Security" means any security issued or guaranteed by the United States of America or an agency or instrumentality thereof that is maintained in
book-entry on the records of the Federal Reserve Bank of New York and is subject to Revised Book-Entry Rules.
"Grantor Supplement" means a supplement to this Agreement in substantially the form attached as Exhibit A-2 executed and delivered by a Grantor.
"Grantors" has the meaning specified in the recital of parties to this Agreement.
"Instrument" means any "instrument" as defined in Section 9-102(a)(47) of the UCC.
"Insurances" means, in relation to each Pool Aircraft, any and all contracts or policies of insurance and reinsurance complying with the provisions of
Schedule V hereto or an indemnity from a Governmental Authority as indemnitor, as appropriate, and required to be effected and maintained in accordance with this Agreement.
"International Registry" means the International Registry under the Cape Town Convention.
"Investment Collateral" has the meaning specified in Section 2.01(h).
"Lease Assignment Documents" means, in respect of any Assigned Lease, (a) any agreement providing for the novation thereof to substitute, or the assignment
thereof to, a Grantor as the lessor, (b) any agreement or instrument supplemental to this Agreement for the purpose of effecting and/or perfecting the assignment of, and the grant of a lien upon, such Assigned Lease in favor of the Collateral Agent
under any applicable law (other than the law of the State of New York), (c) any notice provided to the applicable Lessee of the assignment thereof pursuant to this Agreement and/or such supplement, (d) any acknowledgment of such assignment by such
Lessee and (e) any undertaking of quiet enjoyment given by the Collateral Agent in respect thereof.
- 4 -
"Lease Collateral" has the meaning specified in Section 2.01(b).
"Lenders" has the meaning specified in the preliminary statements to this Agreement.
"Lessee Acknowledgment" has the meaning set forth in Section 2.16(e)(ii).
"Lessee Notice" has the meaning set forth in Section 2.16(e)(ii).
"Membership Interest Collateral" has the meaning specified in Section 2.01(g).
"Moody's" means Moody's Investors Service, Inc.
"Parts" means all appliances, parts, components, instruments, appurtenances, accessories, furnishings, seats and other equipment of whatever nature (other
than (a) Engines or engines, and (b) any appliance, part, component, instrument, appurtenance, accessory, furnishing, seat or other equipment that would qualify as a removable part and is leased by a Lessee from a third party or is subject to a
security interest granted to a third party), that may from time to time be installed or incorporated in or attached or appurtenant to any Airframe or any Engine or removed therefrom.
"Pledged Beneficial Interest" means all of the beneficial interest in certain Grantors (other than the Borrower) described in the attached Schedule II or in
any Collateral Supplement or Grantor Supplement.
"Pledged Equity Interests" means the Pledged Beneficial Interest, the Pledged Membership Interest and the Pledged Stock.
"Pledged Equity Party" means each Lessor Subsidiary, and each Intermediate Lessee.
"Pledged Membership Interest" means all of the membership interest in certain Grantors (other than the Borrower) described in the attached Schedule II or in
any Collateral Supplement or Grantor Supplement.
"Pledged Stock" means all of the outstanding shares of capital stock and/or issued share capital in certain Grantors (other than the Borrower) described in
the attached Schedule II or in any Collateral Supplement or Grantor Supplement.
"Protocol" means the Protocol to the Convention on Matters Specific to Aircraft Equipment, as in effect in any applicable jurisdiction from time to time.
"Received Currency" has the meaning specified in Section 8.07.
"Related Collateral Documents" means a letter of credit, third-party or bank guarantee or cash collateral provided by or on behalf of a Lessee to secure such
Lessee's obligations under a Lease, in each case to the extent assignable without the consent of a third party.
"Relevant Collateral" has the meaning specified in Section 2.07(a).
"Relevant FAA Aircraft Mortgages" means, collectively, the FAA Aircraft Mortgages.
- 5 -
"Relevant FAA Aircraft Mortgages and Lease Security Assignments" means, collectively, the FAA Aircraft Mortgage and Lease Security Assignments.
"Relevant FAA Lease Security Assignments" means, collectively, the FAA Lease Security Assignments.
"Required Cape Town Registrations" has the meaning set forth in Section 2.08(e).
"Revised Book-Entry Rules" means 31 C.F.R. § 357 (Treasury bills, notes and bonds); 12 C.F.R. § 615 (book-entry securities of the Farm Credit
Administration); 12 C.F.R. §§ 987 (book-entry securities of the Federal Home Loan Banks); 24 C.F.R. § 81 (book-entry securities of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation); 12 C.F.R. § 1511
(book-entry securities of the Resolution Funding Corporation); 31 C.F.R. § 354 (book-entry securities of the Student Loan Marketing Association); and any substantially comparable book-entry rules of any other Federal agency or instrumentality of
the United States.
"Secured Obligations" has the meaning assigned to the term "Obligations" in the Credit Agreement.
"Secured Party" means any of or, in the plural form, all of the Collateral Agent, the Lenders, the Administrative Agent and the Hedge Counterparties.
"Securities Account" means a securities account as defined in Section 8-501(a) of the UCC maintained in the name of the Collateral Agent as "entitlement
holder" (as defined in Section 8-102(a)(7) of the UCC) on the books and records of a Securities Intermediary whose "securities intermediary's jurisdiction" (within the meaning of Section 8-110(e) of the UCC) is the State of New York. For all
purposes under this Agreement and the other Loan Documents, the LTV Securities Account shall be a Securities Account.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
"Stock Collateral" has the meaning specified in Section 2.01(f).
"Third Party Event" has the meaning specified in Section 2.16(a).
"UCC" means the Uniform Commercial Code as in effect on the date of determination in the State of New York; provided that
if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such perfection or effect of perfection or non-perfection.
"Uncertificated Security" means an uncertificated security (as defined in Section 8‑102(a)(18) of the UCC) other than a Government Security.
(b) Terms Defined in the Cape Town Convention. The following terms shall have the respective meanings ascribed thereto in the Cape Town Convention:
"Administrator", "Contracting State", "Contract of Sale", "International Interest", "Professional User Entity", "Prospective International Interest", "situated in" and "Transacting User Entity".
- 6 -
(c) Terms Defined in the Credit Agreement. For all purposes of this Agreement, all capitalized terms used but not defined in this Agreement shall
have the respective meanings assigned to such terms in the Credit Agreement.
(a) A term has the meaning assigned to it and an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP or IFRS.
(b) The terms "herein", "hereof" and other words of similar import refer to this Agreement as a whole and
not to any particular Article, Section or other subdivision.
(c) Unless otherwise indicated in context, all references to Articles, Sections, Schedules or Exhibits refer to an Article or Section of, or a Schedule or Exhibit to, this Agreement.
(d) To the extent that they refer to or concern the Borrower, any references in this Agreement to "director" or "directors"
shall be read as to mean "manager" or "managers" respectively.
(e) Words of the masculine, feminine or neuter gender shall mean and include the correlative words of other genders, and words in the singular shall include the plural, and vice versa.
(f) The terms "include", "including" and similar terms shall be construed as if followed by the phrase
"without limitation".
(g) References in this Agreement to an agreement or other document (including this Agreement) include references to such agreement or document as amended, replaced or otherwise modified
(without, however, limiting the effect of the provisions of this Agreement with regard to any such amendment, replacement or modification), and the provisions of this Agreement apply to successive events and transactions. References to any Person
shall include such Person's successors in interest and permitted assigns.
(h) References in this Agreement to any statute or other legislative provision shall include any statutory or legislative modification or re-enactment thereof, or any substitution therefor,
and references to any governmental Person shall include reference to any governmental Person succeeding to the relevant functions of such Person.
(i) References in this Agreement to the Loans include the conditions applicable to the Loans and any reference to any amount of money due or payable by reference to the Loans shall include
any sum covenanted to be paid by any Grantor under this Agreement in respect thereof.
- 7 -
(j) References in this Agreement to any action, remedy or method of judicial proceeding for the enforcement of the rights of creditors or of security shall be deemed to include, in respect
of any jurisdiction other than the State of New York, references to such action, remedy or method of judicial proceeding for the enforcement of the rights of creditors or of security available or appropriate in such jurisdiction as shall most
nearly approximate such action, remedy or method of judicial proceeding described or referred to in this Agreement.
(k) Where any payment is to be made, funds applied or any calculation is to be made hereunder on a day which is not a Business Day, unless any Loan Document otherwise provides, such payment
shall be made, funds applied and calculation made on the next succeeding Business Day, and payments shall be adjusted accordingly; provided, however, that no additional interest shall be due in respect of such delay.
ARTICLE II
Section 2.01. Grant of Security. To secure the Secured Obligations, each Grantor hereby assigns and pledges to the Collateral
Agent, for its benefit and the benefit of the other Secured Parties, and hereby grants to the Collateral Agent for its benefit and the benefit of the other Secured Parties a security interest in, all of such Grantor's right, title and interest in
and to the following, whether now owned or hereafter acquired (collectively, the "Collateral"):
(a) with respect to each Grantor, all of such Grantor's right, title and interest in and to (i) each Pool Aircraft, including the Airframe and Engines as the same is now and will hereafter
be constituted, and in the case of such Engines, whether or not any such Engine shall be installed in or attached to the Airframe or any other airframe, together with (ii) all Parts of whatever nature, which are from time to time included within
the definitions of "Airframe" or "Engines", including all substitutions, renewals and replacements of and additions, improvements, accessions and accumulations to the Airframe and Engines (other than additions, improvements, accessions and
accumulations which constitute appliances, parts, instruments, appurtenances, accessories, furnishings or other equipment excluded from the definition of Parts), (iii) all Aircraft Documents and (iv) any money or non-money proceeds of an Airframe
or Engine arising from the total or partial loss or destruction of such Airframe or its Engine or its total or partial confiscation, condemnation or requisition;
(b) with respect to each Grantor, all of such Grantor's right, title and interest in and to all Leases to which such Grantor is or may from time to time be party with respect to the Pool
Aircraft and any leasing arrangements (including, without limitation, all Intermediate Leases) among Grantors with respect to such Leases together with all Related Collateral Documents (all such Leases and Related Collateral Documents, the "Assigned Leases"), including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due under or pursuant to such Assigned Leases, (ii) all rights of such Grantor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to such Assigned Leases, (iii) claims of such Grantor for damages arising out of or for breach or default under such Assigned Leases, (iv) all rights under any such Assigned
Lease with respect to any subleases of the Pool Aircraft subject to such Assigned Lease and (v) the right of such Grantor to terminate such Assigned Leases and to compel performance of, and otherwise to exercise all remedies under, any Assigned
Lease, whether arising under such Assigned Leases or by statute or at law or in equity (the "Lease Collateral");
- 8 -
(c) with respect to each Grantor, all of the following (the "Assigned Agreement Collateral"):
(i) all of such Grantor's right, title and interest in and to all security assignments, cash deposit agreements and other security agreements executed in its favor in respect of any Pool
Aircraft (including any Airframe and any Engine) or in respect of or pursuant to any Assigned Lease, and in the Servicing Agreement, in each case as such agreements may be amended or otherwise modified from time to time (collectively, the "Assigned Agreements"); and
(ii) all of such Grantor's right, title and interest in and to all property of whatever nature, in each case pledged, assigned or transferred to it or mortgaged or charged in its favor
pursuant to any Assigned Agreement;
(d) with respect to each Grantor, all of such Grantor's right, title and interest in and to the Acquisition Agreements (the "Aircraft Purchase Collateral");
(e) with respect to each Grantor, all of the following (the "Beneficial Interest Collateral"):
(i) the Pledged Beneficial Interest, all certificates, if any, from time to time representing all of such Grantor's right, title and interest in the Pledged Beneficial Interest, any
contracts and instruments pursuant to which any such Pledged Beneficial Interest are created or issued and all distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Beneficial Interest; and
(ii) all of such Grantor's right, title and interest in all additional beneficial interests in any Pledged Equity Party from time to time acquired by such Grantor in any manner, including
the beneficial interests in any Pledged Equity Party that may be formed from time to time, the trust agreements and any other contracts and instruments pursuant to which any such Pledged Equity Party is created or issued, and all certificates, if
any, from time to time representing such additional beneficial interests and all distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all such
additional beneficial interests;
(f) with respect to each Grantor, all of the following (the "Stock Collateral"):
(i) the Pledged Stock and the certificates representing such Pledged Stock, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Stock; and
(ii) all additional shares of the capital stock of any other Pledged Equity Party from time to time acquired by such Grantor in any manner, including the capital stock of any other
Pledged Equity Party that may be formed from time to time, and all certificates, if any, representing such additional shares of the capital stock and all dividends, cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all such additional shares;
- 9 -
(g) with respect to each Grantor, all of the following (the "Membership Interest Collateral"):
(i) the Pledged Membership Interests, all certificates, if any, from time to time representing all of such Grantor's right, title and interest in the Pledged Membership Interests, any
contracts and instruments pursuant to which any such Pledged Membership Interests are created or issued and all distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Membership Interests; and
(ii) all of such Grantor's right, title and interest in all additional membership interests in any other Pledged Equity Party from time to time acquired by such Grantor in any manner,
including the membership interests in any other Pledged Equity Party that may be formed from time to time, and all certificates, if any, from time to time representing such additional membership interests and all distributions, cash, instruments
and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all such additional membership interests;
(h) all other "investment property" (as defined in Section 9-102(a)(49) of the UCC) of such Grantor (but not, for the avoidance of doubt, shares in the Borrower) in respect of any Lessor
Subsidiary or any Intermediate Lessee (the "Investment Collateral") including written notification of all interest, dividends, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the then existing Investment Collateral, but excluding any loans or advances made, or dividends or other amounts paid, by any Grantor to any Borrower Party;
(i) with respect to each Grantor, all of the following (the "Account Collateral"):
(i) all monies and securities from time to time deposited or credited, or required to be deposited or credited, into any Securities Account pursuant to the terms of this Agreement or any
other Loan Document, including all Eligible Accounts;
(ii) all cash, Investment Securities and other financial assets held in any Eligible Account by the Collateral Agent or an Eligible Institution; all Cash Collateral; and all security
entitlements with respect thereto; and
(iii) each Securities Account (including the LTV Securities Account);
(j) with respect to each Grantor, all of such Grantor's right, title and interest in and to the personal property identified in a Grantor Supplement or a Collateral Supplement executed and
delivered by such Grantor to the Collateral Agent; and
- 10 -
(k) all proceeds of any and all of the foregoing Collateral (including proceeds that constitute property of the types described in subsections (a), (b), (c), (d), (e), (f), (g), (h), (i)
and (j) of this Section 2.01);
provided that the Collateral shall not include any Excluded Property; provided,
further, that notwithstanding any of the foregoing provisions, so long as no Event of Default shall have occurred and be continuing, each Grantor shall have the
right, to the exclusion of the Collateral Agent, to (i) all distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Equity Collateral
and (ii) the Investment Collateral, and once paid by a Grantor to a non-Grantor shall be free and clear of the Lien hereof and shall not constitute Collateral. The foregoing proviso shall in no event give rise to any right on behalf of any
Borrower Party to cause the release of Cash Collateral from the LTV Securities Account other than pursuant to a Release Request or Section 2.12 of the Credit Agreement, and subject to all related terms and conditions in the Loan Documents.
Section 2.02. Security for Obligations. This Agreement secures the payment and performance of all Secured Obligations of the
Borrower Parties to each Secured Party (subject to the subordination provisions of this Agreement) and shall be held by the Collateral Agent in trust for the Secured Parties. Without limiting the generality of the foregoing, this Agreement secures
the payment of all amounts that constitute part of the Secured Obligations and would be owed by any Grantor to any Secured Party but for the fact that Secured Obligations are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Grantor.
Section 2.03. Representations and Warranties of the Grantors. Each Grantor represents and warrants as of the date of this
Agreement, each Release Date and as of each date on which such Grantor subjects a new Pool Aircraft to this Agreement solely with respect to such Pool Aircraft and such Grantor, as follows:
(a) Each Pool Aircraft is either legally and beneficially owned by a Lessor Subsidiary or legally owned by a Lessor Subsidiary and beneficially owned by a Borrower Party, in each case,
except to the extent of the Local Requirements Exception. The Grantors are the legal and beneficial owners of the other Collateral. None of the Collateral has been pledged, assigned, sold or otherwise encumbered other than pursuant to the terms
of the Loan Documents and except for Permitted Liens, and no Collateral is described in (i) any UCC Financing Statements filed against any Borrower Party other than UCC Financing Statements which have been terminated and the UCC Financing
Statements filed in connection with Permitted Liens or (ii) any other mortgage registries, including the International Registry (which for the avoidance of doubt, shall not include any Contract of Sale in favor of any Grantor), or filing records
that may be applicable to the Collateral in any other relevant jurisdiction, other than such filings or registrations that have been terminated or that have been made in connection with Permitted Liens, this Agreement or any other security document
in favor of the Collateral Agent for the benefit of the Secured Parties, or, with respect to the Leases, in favor of the Borrower Parties or the Lessee thereunder.
(b) This Agreement creates a valid and (upon the taking of the actions required hereby) perfected security interest in favor of the Collateral Agent in the Collateral as security for the
Secured Obligations, subject in priority to no other Liens (other than Permitted Liens (other than, in the case of priority, the Permitted Lien described in clause (p) of the definition of Permitted Liens)), and all filings and other actions
necessary to perfect and protect such security interest as a first priority security interest of the Collateral Agent have been (or in the case of future Collateral will be) duly taken (except that only the Express Perfection Requirements shall be
required to be satisfied), enforceable against the applicable Borrower Parties and creditors of and purchasers from such Borrower Parties.
- 11 -
(c) No Grantor has any trade names except as set forth on Schedule III hereto.
(d) No consent of any other Person and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other third party
(including, for the avoidance of doubt, the International Registry) is required under the laws of the United States, Ireland and the Cayman Islands, or any Other Relevant Jurisdiction either (i) for the grant by such Grantor of the assignment and
security interest granted hereby, (ii) for the execution, delivery or performance of this Agreement by such Grantor or (iii) for the perfection or maintenance of the pledge, assignment and security interest created hereby, except for (subject to
the last sentence of the definition of Express Perfection Requirements) of (A) with respect to each Pool Aircraft whose country of registration is the United States of America, the filing with the FAA, in due form, for recordation where applicable,
pursuant to Section 40102 and Section 44101 through Section 44112 of Title 49, United States Code, "Transportation," of any and all title, registration and financing documentation necessary to accomplish the purposes of this Agreement, including,
without limitation, each of the Relevant FAA Aircraft Mortgages, each of the Relevant FAA Aircraft Mortgages and Lease Assignments and/or each of the Relevant FAA Lease Security Assignments, as applicable, with respect to such Pool Aircraft and/or
the related Assigned Lease, (B) the Required Cape Town Registrations, (C) the filing of financing and continuation statements under the UCC and (D) the applicable Irish filings pursuant to Section 2.08(f).
(e) The chief place of business, organizational identification number or company registration number (if applicable) and chief executive or registered office of such Grantor and the office
where such Grantor keeps records of the Collateral are located at the address specified opposite the name of such Grantor on the attached Schedule IV. If such Grantor is the lessor under a Cape Town Lease, it has the right to assign the
International Interest provided for in such Cape Town Lease and all associated rights in respect of such Cape Town Lease that form part of the Collateral.
(f) The Pledged Stock constitutes the percentage of the issued and outstanding shares of capital stock of the issuers thereof indicated on the attached Schedule II. The Pledged Membership
Interests constitute the percentage of the membership interest of the issuer thereof, as indicated on Schedule II hereto. The Pledged Beneficial Interests constitute the percentage of the beneficial interest of the issuer thereof indicated on
Schedule II hereto.
(g) The Pledged Stock, the Pledged Membership Interests and the Pledged Beneficial Interests have been duly authorized and validly issued and are fully paid up and nonassessable.
(h) The Pledged Stock and the Pledged Membership Interests constitute "certificated securities" within the meaning of Section 8-102(4) of the UCC. Any Certificated Security or Instrument
evidencing the Pledged Stock, the Pledged Beneficial Interests, the Pledged Membership Interests and any Investment Collateral have been delivered to the Collateral Agent in accordance with Section 2.05 and 2.07. The Pledged Stock and the Pledged
Membership Interest either (i) are in bearer form, (ii) have been indorsed by an effective indorsement to the Collateral Agent or in blank or (iii) have been registered in the name of the Collateral Agent. None of the Pledged Stock, the Pledged
Beneficial Interests and the Pledged Membership Interest that constitute or evidence the Collateral have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any person other than the Collateral Agent.
Any Pledged Beneficial Interests either (i) constitute "certificated securities" within the meaning of Section 8‑102(a)(4) of the UCC, have been delivered to the Collateral Agent and are either (1) are in bearer form, (2) have been indorsed, by an
effective indorsement, to the Collateral Agent or in blank or (3) have been registered in the name of the Collateral Agent or (ii) a fully executed "control agreement" has been delivered to the Collateral Agent with respect to such Pledged
Beneficial Interests.
- 12 -
(i) A true and complete copy of each Assigned Agreement in effect on the date hereof has been delivered (or will be delivered within no more than ten (10) Business Days) to the Collateral
Agent. Each Assigned Document upon its inclusion in the Collateral will have been duly authorized, executed and delivered by the relevant Grantors, will be in full force and effect and will be binding upon and enforceable against all parties
thereto in accordance with their terms.
Section 2.04 .Grantors Remain Liable. Anything contained herein to the contrary notwithstanding, (a) each Grantor shall remain
liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the
Collateral Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) in each case, unless the Collateral Agent or any other Secured
Party, expressly in writing or by operation of law, assumes or succeeds to the interests of any Grantor hereunder, no Secured Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of
this Agreement, nor shall any Secured Party be obligated to perform any of the obligations or duties of any Grantor under the contracts and agreements included in the Collateral or to take any action to collect or enforce any claim for payment
assigned under this Agreement.
Section 2.05. Delivery of Collateral. Subject to the last sentence of this Section 2.05, all certificates or instruments
representing or evidencing any Collateral, if deliverable, shall be delivered to and held by or on behalf of the Collateral Agent and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to evidence the security interests granted thereby. The Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, to
transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of the Pledged Equity Interests, subject only to the revocable rights specified in Section 2.10(a). In addition, the Collateral Agent shall have the
right at any time, upon the occurrence and during the continuance of an Event of Default, to exchange certificates or instruments representing or evidencing any Collateral for certificates or instruments of smaller or larger denominations. To the
extent that any Assigned Lease constitutes "tangible chattel paper" (as defined in Section 9-102(a)(78) of the UCC), the Grantors shall, if it has an original of such Assigned Lease in its possession, cause the original of such Assigned Lease (the
"Chattel Paper Original") to be delivered to the Collateral Agent promptly (and in any case no later than ten (10) Business Days) after the execution and delivery of such Assigned Lease by all its parties.
Notwithstanding anything else to the contrary in any Loan Document, no Grantor shall be required to deliver to the Collateral Agent any letter of credit issued pursuant to an Assigned Lease.
- 13 -
Section 2.06. As to the Assigned Documents. (a) Upon the inclusion of any Assigned Document (other than an Assigned Lease) in the Collateral, the relevant
Grantor will deliver to the Collateral Agent a consent, in substantially the form of Exhibit B and executed by each party to such Assigned Document (other than any other Grantor) or (where the terms of such Assigned Document expressly provide for a
consent to its assignment for security purposes to substantially the same effect as Exhibit B) will give due notice to each such other party to such Assigned Document of its assignment pursuant to this Agreement. Upon the inclusion of any Assigned
Lease in the Collateral, promptly after its receipt thereof from the relevant Lessee party thereto, the relevant Grantor will deliver to the Collateral Agent (to the extent required in accordance with the Express Perfection Requirements) (i) such
consents, acknowledgments and/or notices as are provided for in the related Lease Assignment Documents and (ii) such consents, acknowledgments and/or notices as are necessary or customary under the terms of such Assigned Lease and under the
applicable law of the jurisdiction governing such Assigned Lease and the jurisdiction in which the relevant lessee is principally located or the applicable Pool Aircraft is registered in order to effect and perfect the assignment of, and grant of a
lien upon, such Assigned Lease pursuant to this Agreement (including, with respect to each Assigned Lease which constitutes an International Interest (A) where the applicable Lessee is situated for purposes of the Cape Town Convention in a
jurisdiction that is a Contracting State or (B) the related Aircraft Object is registered in a Contracting State, registration of such International Interest and the assignment thereof at the International Registry) and/or to assure the payment of
all amounts under such Assigned Lease to the appropriate Securities Account in accordance with the terms of the Credit Agreement. Upon the written request of any Grantor, the Collateral Agent (solely in its capacity as such) will execute such
undertakings of quiet enjoyment in favor of the Lessee under any Assigned Lease as are provided for in the Lease Assignment Documents or as are substantially to the same effect as the undertakings of quiet enjoyment provided for in such Assigned
Lease.
(b) Upon (i) the inclusion of any Assigned Document in the Collateral or (ii) the amendment or replacement of any Assigned Document or the entering into of any new Assigned Document, the
relevant Grantor will deliver within ten (10) Business Days of such inclusion a copy thereof to the Collateral Agent and will take such other action as may be necessary to perfect the lien of this Agreement as to such Assigned Document such that
the security interest therein granted to the Collateral Agent is senior to that of any other creditor of the Borrower or as otherwise reasonably requested by the Collateral Agent (provided that only the
Express Perfection Requirements shall be required to be satisfied).
(c) Each Grantor shall, at its expense:
(i) use reasonable commercial efforts, in accordance with Leasing Company Practice to (A) perform and observe all the terms and provisions of the Assigned Documents to be performed or
observed by it, (B) enforce the Assigned Documents in accordance with their terms and (C) after an Event of Default has occurred and is continuing take all such action to such end as may be from time to time reasonably requested by the Collateral
Agent; and
(ii) furnish to the Collateral Agent promptly upon receipt copies of each amendment, supplement or waiver to a Lease received by such Grantor under or pursuant to the Assigned Documents,
and from time to time, subject to the provisions of the applicable Assigned Document, relating to the Lessee's obligation to furnish such information and subject to any confidentiality provisions therein, (A) furnish to the Collateral Agent such
information and reports regarding the Collateral as the Collateral Agent may reasonably request and (B) upon reasonable request of the Collateral Agent make to each other party to any Assigned Document such demands and requests for information and
reports or for action as such Grantor is entitled to make thereunder.
- 14 -
(d) So long as no Event of Default shall have occurred and be continuing, and notwithstanding any provision to the contrary in this Agreement, each Grantor shall be entitled, to the
exclusion of the Collateral Agent but subject always to the terms of the Loan Documents (x) to exercise and receive, directly or indirectly through one or more agents, any of the claims, rights, powers, privileges, remedies and other benefits
under, pursuant to, with respect to or arising out of the Assigned Documents and (y) to take any action or to not take any action, directly or indirectly through one or more agents, related to the Assigned Documents and the lessees or
counterparties thereunder, including entering into, amending, supplementing, terminating, granting waivers, performing, enforcing, compelling performance of, exercising all remedies (whether arising under any Assigned Document or by statute or at
law or in equity or otherwise) under, exercising rights, elections or options or taking any other action under or in respect of, granting or withholding notices, waivers, approvals and consents in respect of, receiving all payments under, dealing
with any credit support or collateral security in respect of, or taking any other action in respect of, the Assigned Documents and contacting or otherwise having any dealings with any lessee or counterparty thereunder; provided, however, (i) so long as any Assigned Lease remains in effect, no Grantor will abrogate any right, power or privilege granted expressly in favor of the Collateral Agent or any other
Secured Party under any Lease Assignment Document and (ii) during the continuance of an Event of Default, all such rights of each Grantor shall cease, and all such rights shall become vested in the Collateral Agent, which shall thereupon have the
sole right to exercise or refrain from exercising such rights.
Section 2.07.As to Beneficial Interest Collateral. (a) All Stock Collateral, Membership Interest Collateral and Beneficial
Interest Collateral (collectively, the "Equity Collateral") and all Investment Collateral (together with the Equity Collateral, the "Relevant Collateral") shall be
delivered to the Collateral Agent as follows:
(i) in the case of each Certificated Security or Instrument, by (A) causing the delivery of such Certificated Security or Instrument to the Collateral Agent, registered in the name of the
Collateral Agent or duly endorsed by an appropriate person to the Collateral Agent or in blank and, in each case, held by the Collateral Agent, or (B) if such Certificated Security or Instrument is registered in the name of any Securities
Intermediary on the books of the issuer thereof or on the books of any Securities Intermediary, by causing such Securities Intermediary to continuously credit by book entry such Certificated Security or Instrument to a Securities Account maintained
by such Securities Intermediary in the name of the Collateral Agent and confirming in writing to the Collateral Agent that it has been so credited;
- 15 -
(ii) in the case of each Uncertificated Security, by (A) causing such Uncertificated Security to be continuously registered on the books of the issuer thereof in the name of the
Collateral Agent or (B) if such Uncertificated Security is registered in the name of a Securities Intermediary on the books of the issuer thereof or on the books of any securities intermediary of a Securities Intermediary, by causing such
Securities Intermediary to continuously credit by book entry such Uncertificated Security to a Securities Account maintained by such Securities Intermediary in the name of the Collateral Agent and confirming in writing to the Collateral Agent that
it has been so credited; and
(iii) in the case of each Government Security registered in the name of any Securities Intermediary on the books of the Federal Reserve Bank of New York or on the books of any securities
intermediary of such Securities Intermediary, by causing such Securities Intermediary to continuously credit by book entry such security to the Securities Account maintained by such Securities Intermediary in the name of the Collateral Agent and
confirming in writing to the Collateral Agent that it has been so credited.
(b) Each Grantor and the Collateral Agent hereby represents, with respect to the Relevant Collateral, that it has not entered into, and hereby agrees that it will not enter into, any
agreement (i) with any of the other parties hereto or any Securities Intermediary specifying any jurisdiction other than the State of New York as the "securities intermediary's jurisdiction" within the meaning of Section 8-110(e) of the UCC in
connection with any Securities Account with any Securities Intermediary referred to in Section 2.07(a) for purposes of 31 C.F.R. Section 357.11(b), Section 8-110(e) of the UCC or any similar state or Federal law, or (ii) with any other person
relating to such account pursuant to which it has agreed that any Securities Intermediary may comply with entitlement orders made by such person. The Collateral Agent represents that it will, by express agreement with each Securities Intermediary,
provide for each item of property constituting Relevant Collateral held in and credited to the Securities Account, including cash, to be treated as a "financial asset" within the meaning of Section 8-102(a)(9)(iii) of the UCC for the purposes of
Article 8 of the UCC.
(c) Without limiting the foregoing, each Grantor and the Collateral Agent agree, and the Collateral Agent shall cause each Securities Intermediary, to take such different or additional
action as may be required in order to maintain the perfection and priority of the security interest of the Collateral Agent in the Relevant Collateral in the event of any change in applicable law or regulation, including Articles 8 and 9 of the UCC
and regulations of the U.S. Department of the Treasury governing transfers of interests in Government Securities.
Section 2.08. Further Assurances. (a) Each Grantor agrees that from time to time, at the expense of such Grantor, such Grantor
shall promptly execute and deliver all further instruments and documents, and take all further action (including under the laws of any foreign jurisdiction), that may be necessary, or that the Collateral Agent may reasonably request, in order to
perfect and protect any pledge, assignment or security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral (except that only
the Express Perfection Requirements shall be required to be satisfied). Without limiting the generality of the foregoing, each Grantor shall: (i) mark conspicuously its applicable records pertaining to the Collateral with a legend, indicating that
such Collateral is subject to the security interest granted hereby; (ii) if any Collateral shall be evidenced by an instrument or "tangible chattel paper" (as defined in Section 9-102(a)(78) of the UCC) (other than a promissory note, unless an
Event of Default shall have occurred and be continuing), deliver and pledge to the Collateral Agent hereunder such note or instrument or tangible chattel paper duly indorsed and accompanied by duly executed instruments of transfer or assignment in
blank; (iii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, that may be necessary, or as the Collateral Agent may reasonably request, in order to perfect and preserve the
pledge, assignment and security interest granted or purported to be granted hereby and (iv) execute, file, record, or register such additional documents and supplements to this Agreement, including any further assignments, security agreements,
pledges, grants and transfers, as may be required under the laws of any foreign jurisdiction or as the Collateral Agent may reasonably request, to create, attach, perfect, validate, render enforceable, protect or establish the priority of the
security interest and lien of this Agreement (except that only the Express Perfection Requirements shall be required to be satisfied).
- 16 -
(b) Each Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Collateral without
the signature of such Grantor where permitted by law. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.
(c) Each Grantor shall furnish or cause to be furnished to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail.
(d) Each Grantor shall, prior to or simultaneously with any Person becoming a lessor of any Pool Aircraft, cause such Person to enter into a Grantor Supplement.
(e) Each Grantor shall ensure that at all times an individual shall be appointed as administrator with respect to such Grantor for purposes of the International Registry and shall register
or cause to be registered (or if the Collateral Agent is making such registration, without relieving each Grantor of such obligation, consent to such registration) with the International Registry (collectively, the "Required
Cape Town Registrations"): (i) the International Interest provided for hereunder with respect to each Aircraft Object in respect of Pool Aircraft where the relevant Grantor is situated in a Contracting State or if such Aircraft Object is
registered in a Contracting State; (ii) the International Interest provided for in any Cape Town Lease to which such Grantor is a lessor or lessee; (iii) the assignment to the Collateral Agent of each International Interest described in clause (ii)
and assigned to the Collateral Agent hereunder; and (iv) the Contract of Sale with respect to any Pool Aircraft by which title to such Pool Aircraft is conveyed by or to such Grantor, but only if the seller under such Contract of Sale is situated
in a Contracting State or if such Aircraft Object is registered in a Contracting State and if such seller agrees to such registration. To the extent that (A) the Collateral Agent's consent is required for any such registration, or (B) the
Collateral Agent is required to initiate any such registration, the Collateral Agent shall ensure that such consent or such initiation of such registration is effected, and no Grantor shall be in breach of this Section should the Collateral Agent
fail to do so in a proper fashion (it being understood and agreed that in no event shall the Collateral Agent be liable for any failure to so register as a result of such Grantor's failure to provide any necessary information required for such
registration in a timely manner or if such information is inaccurate or incomplete). It is understood and agreed that International Interests provided for hereunder shall be registered in the name of the Collateral Agent in the order of priority
provided for in clauses (a) and (b) of Section 3.02. The parties hereto agree that for the purposes of the definition of Prospective International Interest in the Cape Town Convention, the making of the Loans by the Lenders shall constitute the
stated event upon which the Borrower has created or provided for an International Interest in the Aircraft Objects and Assigned Leases.
- 17 -
(f) With respect to each Pool Aircraft that is registered in the United States of America, each Grantor shall, so long as such Pool Aircraft is so registered, and (i) in the case of a Pool
Aircraft that is not subject to an Assigned Lease, register and record with the FAA the Relevant FAA Aircraft Mortgages with respect to such Pool Aircraft and (ii) in the case of a Pool Aircraft that is subject to an Assigned Lease, register and
record with the FAA the Relevant FAA Aircraft Mortgages and Lease Security Assignments with respect to such Pool Aircraft. Each Grantor shall, if at any time after the filing with the FAA of a Relevant FAA Aircraft Mortgage with respect to a Pool
Aircraft such Pool Aircraft becomes subject to an Assigned Lease, register and record with the FAA the Relevant FAA Lease Security Assignments with respect to such Aircraft. With respect to each Grantor incorporated under the laws of Ireland, such
Grantor shall cause each Security Document executed in respect of its Equity Interest or the relevant particulars to be filed in the Irish Companies Registration Office and, where applicable, the Irish Revenue Commissioners within 21 days of
execution thereof. With respect to each Grantor incorporated under the laws of the Cayman Islands, such Grantor shall ensure its register of mortgages and charges is updated to reflect the particulars of the security interests granted by it
created pursuant to this Agreement. With respect to each Grantor incorporated under the laws of any other acceptable jurisdiction (permitted in accordance with the Credit Agreement), such Grantor shall take all steps required under the laws of
such jurisdiction in order to ensure the validity, perfection, priority and enforceability of the security interests created thereby.
Section 2.09. Place of Perfection; Records. Each Grantor shall keep its chief place of business, registered office and chief
executive office and the office where it keeps its records concerning the Collateral at the location therefor specified in Schedule IV or, upon thirty (30) days' prior written notice to the Collateral Agent, at such other locations in a
jurisdiction where all actions required by Section 2.03(e) shall have been taken with respect to the Collateral. Subject to applicable confidentiality restrictions, each Grantor shall hold and preserve such records and shall permit representatives
of the Collateral Agent upon reasonable prior notice at any time during normal business hours reasonably to inspect and make abstracts from such records, all at the sole cost and expense of such Grantor.
Section 2.10. Voting Rights; Dividends; Etc. (a) So long as no Event of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to all or any part of the Relevant Collateral pledged by such Grantor for any
purpose not inconsistent with the terms of this Agreement, the charter documents of such Grantor or the Loan Documents; provided that such Grantor shall not exercise or shall refrain from exercising any such
right if such action would constitute a breach of its obligations under the Loan Documents; and
- 18 -
(ii) The Collateral Agent shall execute and deliver (or cause to be executed and delivered) to such Grantor all such proxies and other instruments as such Grantor may reasonably request
in writing and provide for the purpose of enabling such Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to Section 2.10(a)(i).
(b) After an Event of Default shall have occurred and be continuing, any and all distributions, dividends and interest paid in respect of the Relevant Collateral pledged by such Grantor,
including any and all (i) distributions, dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, such Relevant
Collateral; (ii) distributions, dividends and other distributions paid or payable in cash in respect of such Relevant Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus; and (iii) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, such Relevant Collateral shall be forthwith delivered to the Collateral Agent and, if received by
such Grantor, shall be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Grantor and be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary
endorsement).
(c) During the continuance of an Event of Default, all rights of each Grantor to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be
entitled to exercise pursuant to Section 2.10(a)(i) and 2.10(a)(ii) shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting
and other consensual rights.
Section 2.11. Transfers and Other Liens; Additional Shares or Interests. (a) No Grantor shall (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral or (ii) create or suffer to exist any Lien upon or with respect to any of the Collateral of such Grantor, in the case of clause (i) or (ii) other
than (x) the pledge, assignment and security interest created by this Agreement, (y) as otherwise provided or permitted herein or in any other Loan Document and (z) any Junior Lien in respect of the Junior Lien Collateral.
(b) Except as otherwise provided pursuant to the Loan Documents, the Grantors shall not issue, deliver or sell any shares, interests, participations or other equivalents except those pledged
hereunder and except to the extent of the Local Requirements Exception. Any beneficial interests, membership interests or capital stock or other securities or interests issued in respect of or in substitution for the Pledged Beneficial Interests,
the Pledged Membership Interests or the Pledged Stock shall be issued or delivered (with any necessary endorsement) to the Collateral Agent in accordance with Section 2.07.
Section 2.12. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints, as security for the Secured
Obligations, the Collateral Agent as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Collateral Agent's discretion during the
occurrence and continuance of an Event of Default, to take any action and to execute any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including:
- 19 -
(a) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;
(b) to receive, indorse and collect any drafts or other instruments and documents in connection included in the Collateral;
(c) to file any claims or take any action or institute any proceedings that the Collateral Agent may deem necessary for the collection of any of the Collateral or otherwise to enforce the
rights of the Collateral Agent with respect to any of the Collateral; and
(d) to execute and file any financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary, in order to perfect (except in the case
of the Beneficial Interest Collateral provided pursuant to Section 2.01(e)) and preserve the pledge, assignment and security interest granted hereby;
provided that the Collateral Agent's exercise of any such power shall be subject to Section 2.06(d).
Section 2.13. Collateral Agent May Perform. If any Grantor fails to perform any agreement contained in this Agreement, the
Collateral Agent may (but shall not be obligated to) after such prior notice as may be reasonable under the circumstances, itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection with
doing so shall be payable by the Grantors.
Section 2.14. Covenant to Pay. Each Grantor covenants with the Collateral Agent (for the benefit of the Secured Parties) that
it will pay or discharge any monies and liabilities whatsoever that are now, or at any time hereafter may be, due, owing or payable by such Grantor in any currency, actually or contingently, solely and/or jointly, and/or severally with another or
others, as principal or surety on any account whatsoever pursuant to the Loan Documents in accordance with their terms. Each Grantor agrees that no payment or distribution by such Grantor pursuant to the preceding sentence shall entitle such
Grantor to exercise any rights of subrogation in respect thereof until the related Secured Obligations shall have been paid in full. All such payments shall be made in accordance with Section 3.02.
Section 2.15. Delivery of Collateral Supplements. Upon the addition of any Pool Aircraft or the acquisition by any Grantor of
any Equity Collateral, each relevant Grantor shall concurrently execute and deliver to the Collateral Agent a Collateral Supplement duly completed with respect to such Collateral and shall take such steps with respect to the perfection of such
Collateral as are called for by this Agreement for Collateral of the same type; provided that the foregoing shall not be construed to impair or otherwise derogate from any restriction on any such action in
any Loan Document; and provided further that the failure of any Grantor to deliver any Collateral Supplement as to any such Collateral shall not impair the lien of this Agreement as to such Collateral.
- 20 -
Section 2.16. Operational Covenants. (a) Operation and Use. Each Grantor agrees that no Pool Aircraft will be
maintained, used or operated in violation of any law, rule or regulation (including airworthiness directives) of any government or Governmental Authority having jurisdiction over such Pool Aircraft or in violation of any airworthiness certificate,
license or registration relating to such Pool Aircraft issued by any such government, except for minor violations, and except to the extent any Grantor (or, if a Lease is then in effect with respect to such Pool Aircraft, any Lessee of such Pool
Aircraft) is contesting in good faith the validity or application of any such law, rule or regulation in any manner that does not involve any material risk of sale, forfeiture or loss of such Pool Aircraft or any material risk of subjecting any
Secured Party to criminal liability or materially impair the Liens created by this Agreement or any other Security Document; provided that the Borrower Parties shall only be entitled to contest mandatory
grounding orders if they (or the applicable Lessee) do not operate such Pool Aircraft during such contest. The Grantors will not operate any Pool Aircraft, or permit any Pool Aircraft to be operated or located, (i) in any area excluded from
coverage by any insurance required by the terms of Section 2.17 and Schedule V of this Agreement or (ii) in any war zone or recognized or threatened areas of hostilities unless covered by war risk insurance in accordance with Section 2.17 and
Schedule V of this Agreement, in either case unless indemnified by a government authority as provided therein or unless located there due to an emergency or an event outside the Lessee's control, but only for so long as such emergency or event
continues.
Notwithstanding the other provisions of this Section 2.16, no breach of Section 2.16 shall be deemed to have occurred by virtue of any act or omission of a Lessee or sub-lessee, or of any Person
claiming by or through a Lessee or a sub-lessee, or of any Person which has possession of the Pool Aircraft or any Engine for the purpose of repairs, maintenance, modification or storage, or by virtue of any requisition, seizure, or confiscation of
the Pool Aircraft (other than seizure or confiscation arising from a breach by the Grantors of this Section 2.16(a)) (each, a "Third Party Event"); provided that (i)
no Borrower Party consents or has consented to such Third Party Event; and (ii) the Grantor which is the lessor or owner of such Pool Aircraft promptly and diligently takes such commercially reasonable actions in accordance with Leasing Company
Practice in respect of such Third Party Event, including, as deemed appropriate (taking into account, inter alia, the laws of the jurisdictions in which the Pool Aircraft are located), seeking to compel
such Lessee or other relevant Person to remedy such Third Party Event or seeking to repossess the relevant Pool Aircraft or Engine.
(b) Identification of Collateral Agent's Interest. The Grantors agree to use commercially reasonable efforts to affix or cause the relevant Lessee
to affix, as applicable and to the extent permitted under the relevant Lease, as promptly as practicable after the Effective Date or relevant Release Date, as applicable, and thereafter to maintain in the cockpit of each Pool Aircraft, in a clearly
visible location, and on each Engine, a nameplate bearing the additional inscription "SUBJECT TO A SECURITY INTEREST IN FAVOR OF BANK OF UTAH, AS COLLATERAL AGENT" (such nameplate to be replaced, if necessary, with a nameplate reflecting the name
of any successor Collateral Agent).
(c) Registration. Each Grantor shall cause each Pool Aircraft to remain duly registered, under the laws of a country or jurisdiction that is not a
Prohibited Country or that is the country in which such Pool Aircraft is registered as of the date hereof, in the name of the relevant Grantor and reflecting the applicable Grantor (and, if applicable, the applicable Intermediate Lessee) as lessor,
in each case, if so permitted under the applicable registry; provided that a Pool Aircraft may be unregistered for a temporary period in connection with modification or maintenance of such Pool Aircraft.
The Collateral Agent agrees that it will cooperate with the relevant Grantor in changing the state of registration of any Pool Aircraft at the cost of the relevant Grantor and as the relevant Grantor may request, provided
that such request does not conflict with the relevant Grantor's obligations under the Loan Documents.
- 21 -
(d) Extension or Amendment of Leases. Upon execution of any amendment or extension of a Lease, the relevant Grantor shall comply with the
provisions of Sections 2.06 and 2.08 of this Agreement, as applicable, and shall deliver to the Collateral Agent:
(i) the Chattel Paper Original, if any, of such amendment or extension of the Lease (and any related Intermediate Lease); and
(ii) to the extent that such extension or amendment under applicable laws of the relevant jurisidiction requires amendments to the registration of the aircraft, copies of such legal
opinions with regard to compliance with the registration requirements of the relevant jurisdiction, to the extent that receiving such legal opinions is consistent with Leasing Company Practice.
(e) Replacement of Leases. Upon execution of any replacement Lease, the relevant Grantor shall comply with the provisions of Sections 2.06 and 2.08
of this Agreement, as applicable, and shall deliver the following to the Collateral Agent:
(i) the Chattel Paper Original, if any, of such replacement Lease (and any related Intermediate Lease);
(ii) a notice of assignment substantially in the form attached hereto as Exhibit F-1 (a "Lessee Notice") and (to the extent required under the
Express Perfection Requirements) an acknowledgment from the Lessee substantially in the form attached hereto as Exhibit F-2 (a "Lessee Acknowledgment"), or such forms of such notices as may be pre-agreed in
the relevant Lease (or are otherwise acceptable to the Collateral Agent), addressed to, or for the benefit of, the Collateral Agent with respect to such replacement Lease;
(iii) certificates of insurance from qualified brokers of aircraft insurance (or other evidence satisfactory to the Collateral Agent), evidencing all insurance required to be maintained
by the applicable Lessee, together with the endorsements required pursuant to Section 2.17 and Schedule V of this Agreement with respect to such replacement Lease;
(iv) promptly and in any case within 15 Business Days of the effectiveness of the leasing of such Pool Aircraft, a copy of such Lease (and any related Intermediate Lease), and an amended
and restated Schedule 3.17(b) to the Credit Agreement incorporating all information required under such schedule with respect to such replacement Lease (and any related Intermediate Lease); and
(v) with respect to any replacement Lease, copies of such legal opinions with regard to compliance with the registration requirements of the relevant jurisdiction, enforceability of such
Lease and such other matters customary for such transactions, in each case to the extent that receiving such legal opinions is consistent with Leasing Company Practice.
- 22 -
Section 2.17. Insurance. The relevant Grantor shall maintain, or procure that the relevant Lessee maintains, hull and third party liability insurance
policies, maintained with insurers or reinsured with reinsurers of recognized responsibility or pursuant to governmental indemnities, in respect of each Pool Aircraft in accordance with the terms of Schedule V hereto.
Section 2.18. As to Irish Law. (a) Notwithstanding anything to the contrary contained in this Agreement and in addition to and
without prejudice to any other rights or power of the Collateral Agent under this Agreement or under general law in any relevant jurisdiction, at any time that the Collateral Agent's remedies with respect to the Collateral shall become exercisable,
the Collateral Agent shall be entitled to appoint a receiver under this Agreement or under the Land and Conveyancing Law Reform Act 2009 of Ireland (as amended and as the same may be amended, modified or replaced from time to time, the "2009 Act") and such receiver shall have all such powers, rights and authority conferred under the 2009 Act, this Agreement and otherwise under the laws of Ireland without any limitation or restriction imposed by
the 2009 Act, including, without limitation, the restrictions contained in sections 108(1), 108(4) and 108(7) (Appointment of a Receiver) of the 2009 Act, or otherwise under the laws of Ireland which may be excluded or removed.
(b) Without prejudice to the foregoing above:
(i) The provisions of section 109 (Application of money received) of the 2009 Act shall not apply to a receiver appointed under the 2009 Act.
(ii) The provisions of section 97 of the 2009 Act (Taking possession), section 98 (Abandoned property), section 99(1) (Mortgagee in possession) and section 101 (Applications under
sections 97 and 100) shall not apply to a receiver appointed under the 2009 Act.
(iii) At any time after the security constituted by this Agreement has become enforceable and a receiver has been appointed under the 2009 Act:
(A) the statutory power of sale conferred by section 100 (Power of sale) of the 2009 Act shall apply free from restrictions contained in section 100(1), (2), (3) and (4) and without the
requirement to serve notice (as provided for in section 100(1)); and
(B) the incidental powers of sale conferred by section 102 (Incidental powers) will immediately arise and be exercisable by the Collateral Agent and/or any receiver appointed under the
2009 Act (as appropriate).
(c) The foregoing powers of appointment of a receiver are in addition to and not to the prejudice of all statutory and other powers of the Collateral Agent under the 2009 Act (as varied or
disapplied herein) or otherwise, and such powers will be and remain exercisable by the Collateral Agent in respect of any part of the Collateral in respect of which no appointment of a receiver by the Collateral Agent is for the time being
subsisting, notwithstanding that an appointment shall have subsisted and been withdrawn in respect of that part of the Collateral or shall be subsisting in respect of any other part of the Collateral.
- 23 -
(d) No purchaser or other Person will be bound or concerned to see or enquire whether the right of the Collateral Agent or any receiver appointed by the Collateral Agent to exercise any of
the powers conferred by this Agreement has arisen or not or be concerned with notice to the contrary or with the propriety of the exercise or purported exercise of such powers.
Section 2.19. Irish Charge Over Shares. Each Grantor undertakes with the Collateral Agent to enter into an Irish Charge Over
Shares in respect of, inter alia, the Equity Interests held by it of any Lessor Subsidiary and any Intermediate Lessee which is incorporated under the laws of Ireland.
Section 2.22.Other Jurisdiction Share Charge. Each Grantor undertakes with the Collateral Agent to enter into an a charge,
pledge or equivalent security agreement, in respect of, inter alia, the Equity Interest held by it of any Lessor Subsidiary and any Intermediate Lessee which is incorporated or organized under the laws of
any other acceptable jurisdiction (permitted in accordance with the Credit Agreement).
Section 2.23. Investment of Security Funds. Any monies deposited in the LTV Securities Account shall, until released to the
Borrower pursuant to Sections 2.03(c) or 2.12 of the Credit Agreement or applied as provided herein, be invested by the Collateral Agent at the written authorization and direction of the Borrower (except when an Event of Default has occurred and is
continuing or when the Borrower fails to give the Collateral Agent such written authorization and direction, during which time the Collateral Agent shall invest such funds in accordance with its automated cash investment system) from time to time
at the sole expense and risk of the Borrower in Investment Securities. All Investment Securities held by the Securities Intermediary shall either be (a) registered in the name of, payable to the order of, or specially endorsed to, the Securities
Intermediary or (b) held in an Eligible Account. Neither the Collateral Agent nor the Securities Intermediary shall be liable for any loss relating to any Investment Security made pursuant to this Section 2.23. The Borrower will promptly pay to
the Collateral Agent, on demand, the amount of any loss (net of any gains, including interest received) realized as the result of any such investment (together with any fees, commissions and other expenses, if any, incurred in connection with such
investment).
Section 2.24. Covenant Regarding Control. No Grantor shall cause nor permit any Person other than the Collateral Agent to have
"control" (as defined in Section 8-106 of the UCC) of any Securities Account, including, without limitation, the LTV Securities Account.
Section 2.25. Security Documents. Inconsistencies between this Agreement and any other Security Document shall be reconciled so
that terms and conditions in one agreement but not in the other are deemed to be supplementary, and not inconsistent, terms and conditions; provided, however, that in the event of a direct irreconcilable conflict between this Agreement and any other Security Document, this Agreement shall control unless the term creating such conflict is a term that is mandatorily
required by the laws of the applicable jurisdiction of the governing law of the relevant other Security Document in order for the Collateral Agent or any other Secured Party to enforce the term of such other Security Document, in which case such
term shall prevail in connection with enforcement of remedies thereunder in such jurisdiction; provided, further, however, that in any case, proceeds from the enforcement of remedies against Collateral under any Loan Document, including any Security Document, shall be applied and distributed as set forth herein.
- 24 -
ARTICLE III
Section 3.01. Remedies. Notwithstanding anything herein or in any other Loan Document to the contrary, if any Event of Default
shall have occurred and be continuing, and in each case subject to the quiet enjoyment rights of the applicable Lessee of any Pool Aircraft:
(a) The Collateral Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein (including, for the avoidance of doubt, the rights and
remedies of the Collateral Agent provided for in Section 2.10), all of the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected Collateral) and all of the rights and remedies under
applicable law and also may (i) require any Grantor to, and such Grantor hereby agrees that it shall at its expense and upon request of the Collateral Agent forthwith, assemble all or any part of the Collateral as directed by the Collateral Agent
and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties and (ii) without notice except as specified below, sell or cause the sale of the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable. Each
Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' prior notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.
(b) The Collateral Agent may, in addition to or in connection with any other remedies available hereunder or under any other applicable law, exercise any and all remedies granted under the
Cape Town Convention as it shall determine in its sole discretion. In connection therewith, the parties hereby agree to the extent permitted by the UCC that (i) Article 9(1) and Article 9(2) of the Convention, wherein the parties may agree or the
court may order that any Collateral shall vest in the Collateral Agent in or towards satisfaction of the Secured Obligations, shall not preclude the Collateral Agent from obtaining title to any Collateral pursuant to any other remedies available
under applicable law (including but not limited to Article 9-620 of the UCC); (ii) any surplus of cash or cash proceeds held by the Collateral Agent and remaining after payment in full of all the Secured Obligations owed to it shall be paid over to
the Grantors in accordance with Section 3.02 hereof; and (iii) the Collateral Agent may obtain from any applicable court, pending final determination of any claim resulting from an Event of Default, speedy relief in the form of any of the orders
specified in Article 13 of the Convention and Article X of the Protocol as the Collateral Agent shall determine in its sole and absolute discretion, subject to any procedural requirements prescribed by applicable laws.
- 25 -
(c) All cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in
accordance with Section 3.02. Any sale or sales conducted in accordance with the terms of this Section 3.01 shall be deemed conclusive and binding on each Grantor and the Secured Parties.
Section 3.02. Priority of Payments. The Collateral Agent hereby agrees that all cash proceeds received by the Collateral Agent
in respect of any Collateral pursuant to Section 3.01 hereof and any payments by any Grantor to the Collateral Agent following an Event of Default shall be paid by the Collateral Agent in the order of priority set forth below:
(a) first, to the Collateral Agent for the benefit of the Secured Parties, until payment in full in cash of the Secured Obligations then
outstanding; and
(b) second, all remaining amounts to the relevant Grantors or whomsoever may be lawfully entitled to receive such amounts.
ARTICLE IV
Section 4.01. Security Interest Absolute. A separate action or actions may be brought and prosecuted against each Grantor to
enforce this Agreement, irrespective of whether any action is brought against any other Grantor or whether any other Grantor is joined in any such action or actions. Except as otherwise provided in the Loan Documents, all rights of the Collateral
Agent and the security interests and Liens granted under, and all obligations of each Grantor under, until the Secured Obligations then outstanding are paid in full, this Agreement and each other Loan Document shall be absolute and unconditional,
irrespective of:
(a) any lack of validity or enforceability of any Loan Document, Assigned Document or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, the security for, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any
consent to any departure from any Loan Document or Assigned Document or any other agreement or instrument relating thereto;
(c) any taking, exchange, release or non-perfection of the Collateral or any other collateral or taking, release or amendment or waiver of or consent to departure from any guaranty, for all
or any of the Secured Obligations;
(d) any manner of application of Collateral, or proceeds thereof, to all or any of the Secured Obligations, or any manner of sale or other disposition of any Collateral for all or any of
the Secured Obligations or any other assets of the Grantors;
- 26 -
(e) any change, restructuring or termination of the corporate structure or existence of any Grantor; or
(f) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor or a third-party grantor of a security interest or a Person deemed to be a
surety.
ARTICLE V
The Collateral Agent and the Secured Parties agree among themselves as follows:
Section 5.01. Authorization and Action. (a) Each Secured Party by its acceptance of the benefits of this Agreement hereby
appoints and authorizes Bank of Utah as the initial Collateral Agent to take such action as trustee on behalf of the Secured Parties and to exercise such powers and discretion under this Agreement and the other Loan Documents as are specifically
delegated to the Collateral Agent by the terms of this Agreement and of the Loan Documents, and no implied duties and covenants shall be deemed to arise against the Collateral Agent. For the avoidance of doubt, each Secured Party by its acceptance
of the benefits of this Agreement hereby requests and instructs the Collateral Agent to enter into all Assigned Lease-related documents and instruments on this date and as may arise from time to time for the purpose of establishing and maintaining
its security interest for itself and for the benefit of the other Secured Parties in respect of any Assigned Lease.
(b) The Collateral Agent accepts such appointment and agrees to perform the same but only upon the terms of this Agreement (including any quiet enjoyment covenants given to the Lessees) and
agrees to receive and disburse all moneys received by it in accordance with the terms of this Agreement. The Collateral Agent in its individual capacity shall not be answerable or accountable under any circumstances, except for its own willful
misconduct or gross negligence (or simple negligence in the handling of funds or breach of any of its representations or warranties set forth in this Agreement) and the Collateral Agent shall not be liable for any action or inaction of any Grantor
or any other parties to any of the Loan Documents.
Section 5.02. Absence of Duties. The powers conferred on the Collateral Agent under this Agreement with respect to the
Collateral are solely to protect its interests in this Agreement and shall not impose any duty upon it, except as explicitly set forth herein, to exercise any such powers. Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it under this Agreement, the Collateral Agent shall not have any duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not any Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve or perfect rights against any parties or any other rights pertaining to
any Collateral. The Collateral Agent shall not have any duty to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of any Grantor or Lessee.
- 27 -
Section 5.03. Representations or Warranties. The Collateral Agent shall not make nor shall it be deemed to have made any representations or warranties as to
the validity, legality or enforceability of this Agreement, any other Loan Document or any other document or instrument or as to the correctness of any statement contained in any thereof, or as to the validity or sufficiency of any of the pledge
and security interests granted hereby, except that the Collateral Agent in its individual capacity hereby represents and warrants (a) that each such specified document to which it is a party has been or will be duly executed and delivered by one of
its officers who is and will at such time be duly authorized to execute and deliver such document on its behalf, and (b) this Agreement is or will be the legal, valid and binding obligation of the Collateral Agent in its individual capacity,
enforceable against the Collateral Agent in its individual capacity in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally.
Section 5.04. Reliance; Agents; Advice of Counsel. (a) The Collateral Agent shall not incur any liability to anyone as a result
of acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The
Collateral Agent may accept a copy of a resolution of the board or other governing body of any party to this Agreement or any Loan Document, certified by the Secretary or an Assistant Secretary thereof or other duly authorized Person of such party
as duly adopted and in full force and effect, as conclusive evidence that such resolution has been duly adopted by said board or other governing body and that the same is in full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically described in this Agreement, the Collateral Agent shall be entitled to receive and may for all purposes hereof conclusively rely, and shall be fully protected in acting or refraining from acting, on a
certificate, signed by an officer of any duly authorized Person, as to such fact or matter, and such certificate shall constitute full protection to the Collateral Agent for any action taken or omitted to be taken by them in good faith in reliance
thereon. The Collateral Agent shall assume, and shall be fully protected in assuming, that each other party to this Agreement is authorized by its constitutional documents to enter into this Agreement and to take all action permitted to be taken
by it pursuant to the provisions of this Agreement, and shall not inquire into the authorization of such party with respect thereto.
(b) The Collateral Agent may execute any of its powers hereunder or perform any duties under this Agreement either directly or by or through agents, including financial advisors, or
attorneys or a custodian or nominee, provided, however, that the appointment of any agent shall not relieve the Collateral
Agent of its responsibilities or liabilities hereunder.
(c) The Collateral Agent may consult with counsel and any opinion of counsel or any advice of such counsel shall be full and complete authorization and protection in respect of any action
taken or suffered or omitted by it under this Agreement in good faith and in accordance with such advice or opinion of counsel.
(d) The Collateral Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation under this
Agreement or in relation hereto, at the request, order or direction of any of the Secured Parties, pursuant to the provisions of this Agreement, unless such Secured Party shall have offered to the Collateral Agent reasonable security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby.
- 28 -
(e) The Collateral Agent shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or indemnity reasonably satisfactory to it against such risk or liability is not reasonably assured to it, and none of the
provisions contained in this Agreement shall in any event require the Collateral Agent to perform, or be responsible or liable for the manner of performance of, any obligations of any Grantor under any of the Loan Documents.
(f) If the Collateral Agent incurs expenses or renders services in connection with an exercise of remedies specified in Section 3.01, such expenses (including the fees and expenses of its
counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law or law relating to creditors' rights generally.
(g) The Collateral Agent shall not be charged with knowledge of an Event of Default unless the Collateral Agent obtains actual knowledge of such event or the Collateral Agent receives
written notice of such event from any of the Secured Parties.
(h) The Collateral Agent shall not have any duty to monitor the performance of any Grantor or any other party to the Loan Documents, nor shall the Collateral Agent have any liability in
connection with the malfeasance or nonfeasance by such parties. The Collateral Agent shall not have any liability in connection with compliance by any Grantor or any Lessee under a Lease with statutory or regulatory requirements related to the
Collateral, any Pool Aircraft or any Lease. The Collateral Agent shall not make or be deemed to have made any representations or warranties with respect to the Collateral, any Pool Aircraft or any Lease or the validity or sufficiency of any
assignment or other disposition of the Collateral, any Pool Aircraft or any Lease.
Section 5.05. Cape Town Convention. The Collateral Agent, during the term of this Agreement, shall establish and maintain a
valid and existing account as a Transacting User Entity with the International Registry and appoint an Administrator and/or a Professional User Entity to make registrations in regard to the Collateral as required by this Agreement.
Section 5.06. No Individual Liability. The Collateral Agent shall not have any individual liability in respect of all or any
part of the Secured Obligations, and all shall look, subject to the lien and priorities of payment provided herein and in the Loan Documents, only to the property of the Grantors (to the extent provided in the Loan Documents) for payment or
satisfaction of the Secured Obligations pursuant to this Agreement and the other Loan Documents.
ARTICLE VI
Section 6.01. Resignation and Removal of the Collateral Agent. The Collateral Agent may resign at any time without cause by
giving at least thirty (30) days' prior written notice to FLL and the Lenders. The Required Lenders may at any time remove the Collateral Agent without cause by an instrument in writing delivered to FLL, the Lenders and the Collateral Agent. No
resignation by or removal of the Collateral Agent pursuant to this Section 6.01 shall become effective prior to the date of appointment by the Required Lenders of a successor Collateral Agent and the acceptance of such appointment by such successor
Collateral Agent.
- 29 -
Section 6.02. Appointment of Successor. (a) In the case of the resignation or removal of the Collateral Agent, the Required Lenders shall promptly appoint
a successor Collateral Agent. So long as no Event of Default shall have occurred and be continuing, any such successor Collateral Agent shall as a condition to its appointment be reasonably acceptable to FLL. If a successor Collateral Agent shall
not have been appointed and accepted its appointment hereunder within sixty (60) days after the Collateral Agent gives notice of resignation, the retiring Collateral Agent, the Administrative Agent or the Required Lenders may petition any court of
competent jurisdiction for the appointment of a successor Collateral Agent. Any successor Collateral Agent so appointed by such court shall immediately and without further act be superseded by any successor Collateral Agent appointed as provided
in the first sentence of this paragraph within one year from the date of the appointment by such court.
(b) Any successor Collateral Agent shall execute and deliver to the relevant Secured Parties and the Borrower an instrument accepting such appointment. Upon the acceptance of any
appointment as Collateral Agent hereunder, a successor Collateral Agent, upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to this Agreement, and such other
instruments or notices, as may be necessary, or as the Administrative Agent may reasonably request in order to continue the perfection (if any) of the Liens granted or purported to be granted hereby, shall succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. The retiring Collateral
Agent shall take all steps necessary to transfer all Collateral in its possession and all its control over the Collateral to the successor Collateral Agent within ten (10) Business Days of the successor Collateral Agent accepting its appointment.
All actions under this paragraph (b) shall be at the expense of FLL; provided that if a successor Collateral Agent has been appointed as a result of the circumstances described in Section 6.02(d), any
actions under this paragraph (b) as relating to such appointment shall be at the expense of the successor Collateral Agent.
(c) The Collateral Agent shall be an Eligible Institution, if there be such an institution willing, able and legally qualified to perform the duties of the Collateral Agent hereunder and
unless such institution is an Affiliate of a Secured Party or an Event of Default has occurred and is continuing, reasonably acceptable to FLL.
(d) Any corporation into which the Collateral Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Collateral Agent shall be a party, or any corporation to which substantially all the business of the Collateral Agent may be transferred, shall be the Collateral Agent under this Agreement without further act.
- 30 -
ARTICLE VII
Section 7.01. Indemnity. (a) Each of the Grantors shall indemnify, defend and hold harmless the Collateral Agent (and its
officers, directors, employees, representatives and agents) from and against, any loss, liability or expense (including reasonable legal fees and expenses) incurred by it without negligence or bad faith on its part in connection with the acceptance
or administration of this Agreement and its duties hereunder, including the costs and expenses of defending itself against any claim or liability and of complying with any process served upon it or any of its officers in connection with the
exercise or performance of any of its powers or duties hereunder and hold it harmless against, any loss, liability or reasonable expense incurred without negligence or bad faith on its part. The Collateral Agent (i) must provide reasonably prompt
notice to the applicable Grantor of any claim for which indemnification is sought, provided that the failure to provide notice shall only limit the indemnification provided hereby to the extent of any
incremental expense or actual prejudice as a result of such failure; and (ii) must not make any admissions of liability or incur any significant expenses after receiving actual notice of the claim or agree to any settlement without the written
consent of the applicable Grantor, which consent shall not be unreasonably withheld. No Grantor shall be required to reimburse any expense or indemnity against any loss or liability incurred by the Collateral Agent through negligence or bad faith.
Each Grantor, as applicable, may, in its sole discretion, and at its expense, control the defense of the claim including, without limitation, designating counsel for the Collateral Agent and
controlling all negotiations, litigation, arbitration, settlements, compromises and appeals of any claim; provided that (i) the applicable Grantor may not agree to any settlement involving any indemnified
person that contains any element other than the payment of money and complete indemnification of the indemnified person without the prior written consent of the affected indemnified person, (ii) the applicable Grantor shall engage and pay the
expenses of separate counsel for the indemnified person to the extent that the interests of the Collateral Agent are in conflict with those of such Grantor and (iii) the indemnified person shall have the right to approve the counsel designated by
such Grantor which consent shall not be unreasonably withheld.
(b) Each Grantor shall within ten (10) Business Days after demand pay to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement (in accordance with fee arrangements agreed between the Collateral Agent and FLL), (ii) the custody,
preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent or any other Secured Party against such Grantor
hereunder or (iv) the failure by any Grantor to perform or observe any of the provisions hereof.
Section 7.02. Secured Parties' Indemnity. (a) The Collateral Agent shall be entitled to be indemnified (subject to the
limitations and requirements described in Section 7.01 mutatis mutandis) by the Lenders to the sole satisfaction of the Collateral Agent before proceeding to exercise any right or power under this Agreement
at the request or direction of the Administrative Agent.
- 31 -
(b) In order to recover under clause (a) above, the Collateral Agent: (i) must provide reasonably prompt notice to the Administrative Agent of any claim for which indemnification is sought, provided that the failure to provide notice shall only limit the indemnification provided hereby to the extent of any incremental expense or actual prejudice as a result of such failure; and (ii) must not make
any admissions of liability or incur any significant expenses after receiving actual notice of the claim or agree to any settlement without the written consent of the Administrative Agent which consent shall not be unreasonably withheld.
(c) The Administrative Agent may, in its sole discretion, and at its expense, control the defense of the claim including, without limitation, designating counsel for the Collateral Agent
and controlling all negotiations, litigation, arbitration, settlements, compromises and appeals of any claim; provided that (i) the Administrative Agent may not agree to any settlement involving any
indemnified person that contains any element other than the payment of money and complete indemnification of the indemnified person without the prior written consent of the affected indemnified person, (ii) the Administrative Agent shall engage and
pay the expenses of separate counsel for the indemnified person to the extent that the interests of the Collateral Agent are in conflict with those of the Administrative Agent and (iii) the indemnified person shall have the right to approve the
counsel designated by the Administrative Agent which consent shall not be unreasonably withheld.
(d) The provisions of Section 7.01 and this Section 7.02 shall survive the termination of this Agreement or the earlier resignation or removal of the Collateral Agent.
Section 7.03. No Compensation from Secured Parties. The Collateral Agent agrees that it shall have no right against the Secured
Parties for any fee as compensation for its services in such capacity.
Section 7.04. Collateral Agent Fees. In consideration of the Collateral Agent's performance of the services provided for under
this Agreement, the Grantors shall pay to the Collateral Agent an annual fee set forth under a separate agreement between FLL and the Collateral Agent and shall reimburse the Collateral Agent for reasonable expenses incurred including those
associated with the International Registry.
ARTICLE VIII
Section 8.01. Amendments; Waivers; Etc. (a) No amendment or waiver of any provision of this Agreement, and no consent to any
departure by any party from the provisions of this Agreement, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent and each party hereto. No failure on the part of the Collateral Agent to
exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The
Collateral Agent may, but shall have no obligation to, execute and deliver any amendment or modification which would affect its duties, powers, rights, immunities or indemnities hereunder.
- 32 -
(b) Upon the execution and delivery by any Person of a Grantor Supplement, (i) such Person shall be referred to as an "Additional Grantor" and shall be and become a Grantor hereunder, and
each reference in this Agreement to "Grantor" shall also mean and be a reference to such Additional Grantor, (ii) Annexes I, II, III and IV attached to each Grantor Supplement shall be incorporated into, become a part of and supplement Schedules I,
II, III and IV, respectively, and the Collateral Agent may attach such Annexes as supplements to such Schedules; and each reference to such Schedules shall be a reference to such Schedules as so supplemented and (iii) such Additional Grantor shall
be a Grantor for all purposes under this Agreement and shall be bound by the obligations of the Grantors hereunder.
(c) Upon the execution and delivery by a Grantor of a Collateral Supplement, Annexes I and II to each Collateral Supplement shall be incorporated into, become a part of and supplement
Schedules I and II, respectively, and the Collateral Agent may attach such Annexes as supplements to such Schedules; and each reference to such Schedules shall be a reference to such Schedules as so supplemented.
Section 8.02. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including
telecopier) and telecopied or delivered to the intended recipient at its address specified, as follows:
For each Grantor for whom Wells Fargo Trust Company, National Association acts as Owner Trustee:
299 South Main Street
5th Floor
MAC: U1228-051
Salt Lake City, Utah 84111
USA
Tel: +1 (801) 246-6000
Fax: +1 (801) 246-7142
Attention: Corporate Trust Lease Group
with a copy to:
50 California Street, 14th Floor
San Francisco, CA 94111
Attention: General Counsel
Fax: +1 (415) 618-3337
- 33 -
For each Grantor for whom Wilmington Trust SP Services (Dublin) Limited acts as Owner Trustee:
Wilmington Trust SP Services (Dublin) Limited
Fourth Floor
3 George's Dock
IFSC
Dublin 1
Ireland
Fax: +1 353 1 612 5550
Attention: Managing Director
Email: [email protected]
with a copy to:
BBAM Aviation Services Limited
West Pier Business Campus
Dun Laoghaire
Co. Dublin A96 N6T7, Ireland
Attention: General Counsel
Fax: +353 1 231 1901
For each other Grantor:
c/o Fly Leasing Limited
West Pier Business Campus
Dun Laoghaire
Co. Dublin A96 N6T7, Ireland
Attention: General Counsel
Fax: +353 1 231 1901
with a copy to:
BBAM US LP
50 California Street, 14th Floor
San Francisco, CA 94111
USA
Attention: General Counsel
Email: [email protected]
Fax: +1 415 618 3337
Telephone: +1 415 267 1600
- 34 -
For the Collateral Agent:
Bank of Utah
50 South 200 East, Suite 110
Salt Lake City, Utah 84111
USA
Tel: +1 801 924 3690
Fax: +1 801 924 3630
Attention: Corporate Trust Services
or, as to each party, at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section 8.02. Each such notice shall be
effective (a) on the date personally delivered to an authorized officer of the party to which sent, or (b) on the date transmitted by legible telecopier transmission with a confirmation of receipt.
Section 8.03. No Waiver; Remedies. No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
Section 8.04. Severability. If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.
Section 8.05. Continuing Security Interest; Assignments. Subject to Section 8.06, this Agreement shall create a continuing
security interest in the Collateral and shall (a) remain in full force and effect until the earlier of the payment in full in cash of the Secured Obligations then outstanding to the Secured Parties, (b) be binding upon each Grantor, its successors
and assigns and (c) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Secured Parties and their respective successors, permitted transferees and permitted assigns. Without limiting the generality
of the foregoing subsection (c), any Secured Party may assign or otherwise transfer all or any portion of its rights and obligations under any Loan Document to which it is a party in accordance with the terms thereof to any other permitted Person
or entity, and such other permitted Person or entity shall thereupon become vested with all the rights in respect thereof granted to such Secured Party herein or otherwise.
Section 8.06. Release and Termination. (a) Upon any sale, lease, transfer or other disposition or removal from the Designated
Pool of any item of Collateral in accordance with the terms of the Loan Documents, such item of Collateral will be deemed irrevocably and unconditionally released from the Lien hereof, and the Collateral Agent will, at such Grantor's expense,
execute and deliver to the Grantor of such item of Collateral such documents as such Grantor shall reasonably request and provide to the Collateral Agent to evidence the release of such item of Collateral from the assignment and security interest
granted hereby, and to the extent that (A) the Collateral Agent's consent is required for any deregistration of the interests in such released Collateral from the International Registry or other registry or (B) the Collateral Agent is required to
initiate any such deregistration, the Collateral Agent shall ensure that such consent or such initiation of such deregistration is effected. Any amounts released from the LTV Securities Account by the Collateral Agent pursuant to a Release Request
or Section 2.12 of the Credit Agreement, in each case in accordance with the terms and conditions of the Loan Documents, without further act, shall be deemed irrevocably and unconditionally released from the Lien hereof.
- 35 -
(b) Upon the payment in full in cash of the Secured Obligations then outstanding, the pledge, assignment and security interest granted by Section 2.01 hereof shall terminate, the
Collateral Agent shall cease to be a party to this agreement, and all provisions of this Agreement (except for this Section 8.06(b)) relating to the Secured Obligations, the Secured Parties or the Collateral Agent shall cease to be of any effect
insofar as they relate to the Secured Obligations, the Secured Parties or the Collateral Agent. Upon any such termination, the Collateral Agent will, at the relevant Grantor's expense, execute and deliver to each relevant Grantor such documents as
such Grantor shall prepare and reasonably request to evidence such termination.
(c) If, prior to the termination of this Agreement, the Collateral Agent ceases to be the Collateral Agent in accordance with the definition of "Collateral Agent" in Section 1.01, all
certificates, instruments or other documents being held by the Collateral Agent at such time shall, within five (5) Business Days from the date on which it ceases to be the Collateral Agent, be delivered to the successor Collateral Agent.
Section 8.07. Currency Conversion. If any amount is received or recovered by the Collateral Agent in a currency (the "Received Currency") other than the currency in which such amount was expressed to be payable (the "Agreed Currency"), then the amount in the Received Currency actually
received or recovered by the Collateral Agent, to the extent permitted by law, shall only constitute a discharge of the relevant Grantor to the extent of the amount of the Agreed Currency which the Collateral Agent was or would have been able in
accordance with its or his normal procedures to purchase on the date of actual receipt or recovery (or, if that is not practicable, on the next date on which it is so practicable), and, if the amount of the Agreed Currency which the Collateral
Agent is or would have been so able to purchase is less than the amount of the Agreed Currency which was originally payable by the relevant Grantor, such Grantor shall pay to the Collateral Agent for the benefit of the Secured Parties such amount
as it shall determine to be necessary to indemnify the Collateral Agent and the Secured Parties against any loss sustained by it as a result (including the cost of making any such purchase and any premiums, commissions or other charges paid or
incurred in connection therewith) and so that, to the extent permitted by law, (i) such indemnity shall constitute a separate and independent obligation of each Grantor distinct from its obligation to discharge the amount which was originally
payable by such Grantor and (ii) shall give rise to a separate and independent cause of action and apply irrespective of any indulgence granted by the Collateral Agent and continue in full force and effect notwithstanding any judgment, order, claim
or proof for a liquidated amount in respect of the amount originally payable by any Grantor or any judgment or order and no proof or evidence of any actual loss shall be required.
Section 8.08. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
- 36 -
Section 8.09. Jurisdiction; Consent to Service of Process. (a) To the extent permitted by applicable law, each party hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action
or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Secured Party may otherwise have to bring any action or proceeding relating to this Agreement
or the other Loan Documents against any Borrower Party or its properties in the courts of any jurisdiction.
(b) Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law,
the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.02. Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner permitted by law.
Section 8.10. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement (i) will become effective when the Lenders shall have received counterparts hereof that,
when taken together, bear the signatures of each of the other parties hereto and (ii) thereafter will be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy or e-mail will be effective as delivery of a manually executed counterpart of this Agreement.
Section 8.11. Table of Contents, Headings, Etc. The Table of Contents and headings of the Articles and Sections of this
Agreement have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof.
Section 8.12. Non-Invasive Provisions. (a) Notwithstanding any other provision of the Loan Documents, the Collateral Agent
agrees that, so long as no Event of Default shall have occurred and be continuing, 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 Pool Aircraft or Collateral related thereto 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 Pool Aircraft to the repair of the Pool Aircraft and the right to engage in pooling, leasing and similar actions, in each case in accordance with the terms
of this Agreement.
- 37 -
(b) Notwithstanding any other provision of the Loan Documents, the Collateral Agent agrees that, so long as no "Event of Default" (or similar term) under a Lease (as defined in such Lease)
shall have occurred and be continuing, 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 of the Lessee with respect to any Pool Aircraft or Collateral related thereto 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 Pool Aircraft to the repair of the Pool Aircraft and the right to engage in pooling, leasing and similar actions, in each case in accordance with the terms of such Lease.
(c) The Collateral Agent agrees to release any Lien the Collateral Agent may have upon any Engine upon (i) a Grantor providing the Collateral Agent with written notice of a transfer
thereof promptly after receipt of a notice thereof from the relevant Lessee and with a copy of the bill of sale or other instrument evidencing the transfer of title of such replacement Engine to a Grantor, (ii) in the case of the transfer of title
to an Engine initiated by a Grantor, the Grantor providing the Collateral Agent with a certificate of such transfer and a copy of the bill of sale or other instrument evidencing the transfer of title of a replacement Engine to a Grantor, or (iii)
upon the total loss payment or Loan repayment being received (or replacement aircraft being provided) in a case where the Airframe, but not such Engine, was the subject of a total loss; provided that, for
the avoidance of doubt, the Collateral Agent shall not release any Lien upon an Engine that is not replaced by a Grantor or a Lessee, unless such Engine is associated with an aircraft that was subject to a total loss or otherwise removed from the
Designated Pool. The Borrower shall at the request of the Collateral Agent execute a supplement to this Agreement to evidence that any such replacement Engine has become subject to the Lien of this Agreement and the Collateral Agent shall, at the
request of the Borrower, execute a supplement to this Agreement to evidence the release of the applicable Engine from the Lien of the Collateral Agent.
(d) The Lenders and the Collateral Agent agree that they will not claim, and upon the request of the relevant Grantor, the Collateral Agent 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 a Pool Aircraft which does not constitute an "engine" or "part" as defined in the applicable Lease.
(e) For the avoidance of doubt, the Collateral Agent agrees that the relevant Grantor may from time to time lease out an engine that is part of a Pool Aircraft or lease in an engine that
is not part of a Pool Aircraft as it determines in accordance with Leasing Company Practice.
- 38 -
Section 8.13. Limited Recourse. To the extent permitted by applicable law, no recourse under any obligation, covenant or
agreement of any party contained in this Agreement shall be had against any shareholder (not including any Grantor as a shareholder of any other Grantor hereunder), officer or director of the relevant party as such, by the enforcement of any
assessment or by any proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Agreement is a corporate obligation of the relevant party and no personal liability shall attach to or be incurred by the
shareholders (not including any Grantor as a shareholder of any other Grantor hereunder), officers or directors of the relevant party as such, or any of them under or by reason of any of the obligations, covenants or agreements of such relevant
party contained in this Agreement, or implied therefrom, and that any and all personal liability for breaches by such party of any of such obligations, covenants or agreements, either at law or by statute or constitution, of every such shareholder
(not including any Grantor as a shareholder of any other Grantor hereunder), officer or director is hereby expressly waived by the other parties as a condition of and consideration for the execution of this Agreement.
[The Remainder of this Page is Intentionally Left Blank]
- 39 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by its representative or officer thereunto duly authorized as of the date first above written.
In the case of Fly Willow Aircraft Holdings DAC, such party intends that this Agreement be executed and delivered as a Deed and have caused this Agreement to be so executed and delivered.
FLY WILLOW FUNDING LIMITED
|
||
By:
|
/s/ Vincent Cannon
|
|
Name: Vincent Cannon
|
||
Title: Director
|
- 40 -
FLY LEASING LIMITED
|
||
By:
|
/s/ Colm Barrington
|
|
Name: Colm Barrington
|
||
Title: Chief Executive Officer
|
- 41 -
SIGNED AND DELIVERED AS A DEED)
|
||
by:
|
||
/s/ Declan Cotter
|
||
Declan Cotter
|
||
as the duly authorised attorney of FLY WILLOW AIRCRAFT HOLDINGS DAC
|
||
in the presence of:
|
||
Signature of Witness:
|
/s/ Kerrie Coghlan
|
|
Name of Witness:
|
Kerrie Coghlan
|
|
Address of Witness:
|
Dublin
|
|
Ireland
|
||
Occupation of Witness:
|
E.A.
|
- 42 -
BANK OF UTAH, as the Collateral Agent
|
||
By:
|
/s/ Jon Croasmun
|
|
Name: Jon Croasmun
|
||
Title: Senior Vice President
|
- 43 -
Exhibit 4.2
EXECUTION VERSION
Dated as of October 15, 2020
FLY WILLOW FUNDING LIMITED,
as Borrower
FLY LEASING LIMITED,
as a Guarantor Party
FLY WILLOW AIRCRAFT HOLDINGS DAC,
as a Guarantor Party
EACH OTHER GUARANTOR PARTY REFERRED TO HEREIN,
THE LENDERS IDENTIFIED HEREIN,
ROYAL BANK OF CANADA,
as Administrative Agent
BANK OF UTAH,
as Collateral Agent
and
RBC CAPITAL MARKETS, LLC
and
MUFG BANK LTD.
As Joint Lead Arrangers
|
TERM LOAN CREDIT AGREEMENT
|
|
TABLE OF CONTENTS
|
|||
Page
|
|||
ARTICLE I DEFINITIONS
|
1
|
||
Section 1.01
|
Defined Terms
|
37
|
|
Section 1.02
|
Terms Generally
|
37
|
|
Section 1.03
|
Accounting Terms; Changes in GAAP or IFRS
|
37
|
|
Section 1.04
|
Times
|
37
|
|
ARTICLE II THE CREDITS
|
37
|
||
Section 2.01
|
Commitment
|
37
|
|
Section 2.02
|
Request to Borrow Loans; Request to Release Loans
|
37
|
|
Section 2.03
|
Funding of Loan; Release of Aggregated Requested Release Amount
|
38
|
|
Section 2.04
|
Interest
|
38
|
|
Section 2.05
|
Repayment of Loans; Evidence of Debt
|
39
|
|
Section 2.06
|
Optional and Mandatory Prepayments
|
40
|
|
Section 2.07
|
Fees
|
41
|
|
Section 2.08
|
Taxes; Additional Matters
|
41
|
|
Section 2.09
|
Payments Generally; Pro Rata Treatment; Sharing of Set-offs
|
46
|
|
Section 2.10
|
Changes to the Designated Pool; Intermediate Lessees; Lessor Subsidiaries
|
48
|
|
Section 2.11
|
Defaulting Lenders; Removal or Replacement of a Lender
|
54
|
|
Section 2.12
|
Release of LTV Cash Collateral
|
56
|
|
Section 2.13
|
LTV Securities Account
|
56
|
|
Section 2.14
|
LIBOR Replacement
|
57
|
|
(a)
|
Benchmark Replacement.
|
57
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES
|
59
|
||
Section 3.01
|
Organization, etc
|
59
|
|
Section 3.02
|
Authorization; Consents; No Conflict
|
59
|
|
Section 3.03
|
Validity and Binding Nature
|
60
|
|
Section 3.04
|
Financial Statements
|
60
|
|
Section 3.05
|
Litigation and Contingent Liabilities
|
60
|
|
Section 3.06
|
Security Interest
|
60
|
|
Section 3.07
|
Employee Benefit Plans
|
61
|
- i -
Section 3.08
|
Investment Company Act
|
61
|
|
Section 3.09
|
Regulation U
|
61
|
|
Section 3.10
|
Information
|
62
|
|
Section 3.11
|
Compliance with Applicable Laws, etc
|
62
|
|
Section 3.12
|
Insurance
|
62
|
|
Section 3.13
|
Taxes
|
62
|
|
Section 3.14
|
Borrower Party Information
|
63
|
|
Section 3.15
|
Solvency
|
63
|
|
Section 3.16
|
Sanctions
|
63
|
|
Section 3.17
|
Description of Aircraft and Leases, etc
|
63
|
|
Section 3.18
|
Ownership
|
63
|
|
Section 3.19
|
Use of Proceeds
|
63
|
|
Section 3.20
|
PATRIOT Act
|
64
|
|
Section 3.21
|
No Default or Event of Default
|
64
|
|
ARTICLE IV CONDITIONS
|
64
|
||
Section 4.01
|
Effective Date
|
64
|
|
Section 4.02
|
Release Date
|
67
|
|
Section 4.03
|
Quiet Enjoyment Letters
|
68
|
|
ARTICLE V COVENANTS
|
69
|
||
Section 5.01
|
Legal Existence and Good Standing
|
69
|
|
Section 5.02
|
Protection of Security Interest of the Lenders
|
69
|
|
Section 5.03
|
Ownership, Operation and Leasing of Pool Aircraft
|
70
|
|
Section 5.04
|
Limitation on Disposition of Aircraft and Equity Collateral
|
70
|
|
Section 5.05
|
Payment of Taxes or Other Claims
|
70
|
|
Section 5.06
|
Representations Regarding Operation
|
71
|
|
Section 5.07
|
Compliance with Laws, etc
|
71
|
|
Section 5.08
|
Notice of Adverse Claim or Loss
|
71
|
|
Section 5.09
|
Reporting Requirements
|
72
|
|
Section 5.10
|
Limitation on Transactions with Affiliates
|
76
|
|
Section 5.11
|
Inspections
|
76
|
|
Section 5.12
|
Use of Proceeds; Margin Regulations
|
76
|
|
Section 5.13
|
Insurance
|
76
|
|
Section 5.14
|
UNSC, EU and United States Sanctions and Export Restrictions
|
76
|
|
Section 5.15
|
Sanctions
|
77
|
- ii -
Section 5.16
|
Loan-to-Value Ratio; Average Age; Minimum Liquidity
|
77
|
|
Section 5.17
|
Mergers, Consolidations and Sales of Assets
|
78
|
|
Section 5.18
|
Limitation on Indebtedness
|
79
|
|
Section 5.19
|
Limitation on Business Activity
|
80
|
|
Section 5.20
|
Requirements Following Additions to Designated Pool
|
80
|
|
Section 5.21
|
Credit Rating
|
80
|
|
ARTICLE VI EVENTS OF DEFAULT
|
81
|
||
ARTICLE VII GUARANTY
|
83
|
||
Section 7.01
|
Guaranty
|
83
|
|
Section 7.02
|
Contribution
|
84
|
|
Section 7.03
|
Guaranty Absolute
|
84
|
|
Section 7.04
|
Waiver and Acknowledgements
|
87
|
|
Section 7.05
|
Subrogation
|
88
|
|
Section 7.06
|
Payment Free and Clear of Taxes
|
88
|
|
Section 7.07
|
No Waiver; Remedies
|
89
|
|
Section 7.08
|
Continuing Guaranty
|
89
|
|
Section 7.09
|
Subordination of Certain Intercompany Indebtedness
|
89
|
|
Section 7.10
|
Limit of Liability
|
89
|
|
ARTICLE VIII AGENTS
|
89
|
||
Section 8.01
|
Appointment of Agents
|
89
|
|
Section 8.02
|
Powers and Duties
|
90
|
|
Section 8.03
|
General Immunity
|
90
|
|
Section 8.04
|
Agents Entitled to Act as Lender
|
92
|
|
Section 8.05
|
Lenders' Representations, Warranties and Acknowledgement
|
92
|
|
Section 8.06
|
Right to Indemnity
|
92
|
|
Section 8.07
|
Successor Administrative Agent and Collateral Agent
|
93
|
|
Section 8.08
|
Security Documents and Guaranty
|
94
|
|
Section 8.09
|
Withholding Taxes
|
96
|
|
Section 8.10
|
Required Notice by Administrative Agent to Collateral Agent
|
96
|
|
ARTICLE IX MISCELLANEOUS
|
96
|
||
Section 9.01
|
Notice Generally
|
96
|
|
Section 9.02
|
Expenses
|
98
|
|
Section 9.03
|
Indemnity
|
99
|
|
Section 9.04
|
Set-Off
|
100 |
|
- iii -
Section 9.05
|
Amendments and Waivers
|
100
|
|
Section 9.06
|
Successors and Assigns; Participations Consent Rights of Joint Lead Arrangers to Actions by Collateral Agent
|
101
|
|
Section 9.07
|
Independence of Covenants
|
105
|
|
Section 9.08
|
Survival of Representations, Warranties and Agreements
|
105
|
|
Section 9.09
|
No Waiver; Remedies Cumulative
|
105
|
|
Section 9.10
|
Marshalling; Payments Set Aside
|
106
|
|
Section 9.11
|
Severability
|
106
|
|
Section 9.12
|
Obligations Several; Independent Nature of Lenders' Rights
|
106
|
|
Section 9.13
|
Headings
|
106
|
|
Section 9.14
|
Applicable Law
|
106
|
|
Section 9.15
|
Consent to Jurisdiction
|
107
|
|
Section 9.16
|
Waiver of Jury Trial
|
107
|
|
Section 9.17
|
Confidentiality
|
108
|
|
Section 9.18
|
Usury Savings Clause
|
108
|
|
Section 9.19
|
Counterparts; Electronic Execution
|
109
|
|
Section 9.20
|
Effectiveness Entire Agreement; Third Party Beneficiary
|
109
|
|
Section 9.21
|
PATRIOT Act
|
109
|
|
Section 9.22
|
Electronic Execution of Documents
|
110
|
|
Section 9.23
|
No Fiduciary Duty
|
110
|
SCHEDULES
|
|
Schedule 3.06
|
Permitted Liens
|
Schedule 3.14
|
Borrower Party Information
|
Schedule 3.17(a)
|
PS Pool Aircraft
|
Schedule 3.17(b)
|
Leases and Intermediate Leases
|
Schedule 9.01
|
Notices
|
EXHIBITS
|
|
Exhibit A-1
|
Loan Commitments and Applicable Percentages; Loan Designations
|
Exhibit B
|
Form of Mortgage
|
Exhibit C
|
Form of Assignment and Assumption
|
Exhibit D
|
Form of Borrower Party Request and Assumption Agreement
|
Exhibit E-1A
|
Form of Opinion of Clifford Chance US LLP
|
Exhibit E-1B
|
Form of Opinion of Conyers Dill & Pearman as to Bermuda law
|
Exhibit E-1C
|
Form of Opinion of Maples and Calder as to Cayman Islands law
|
Exhibit E-1D
|
Form of Opinion of In-House Counsel to the Borrower Parties
|
Exhibit F
|
Form of Note
|
- iv -
Exhibit G
|
Form of Administrative Questionnaire
|
Exhibit H
|
Form of Intercreditor Agreement
|
Exhibit I
|
Form of LTV Certificate
|
Exhibit J
|
Form of Release Request
|
ANNEXES
|
|
Annex 1
|
Reserved
|
Annex 2
|
Borrower Competitors
|
Annex 3
|
Perfection Exceptions
|
- v -
TERM LOAN CREDIT AGREEMENT (this "Agreement") dated as of October 15, 2020 among FLY WILLOW FUNDING LIMITED, an exempted company incorporated with limited liability under the
laws of the Cayman Islands (the "Borrower"), FLY LEASING LIMITED, a company incorporated under the laws of Bermuda ("FLL"), FLY WILLOW AIRCRAFT HOLDINGS DAC, a
designated activity company incorporated under the laws of Ireland ("FWAH"), certain Intermediate Lessees party hereto pursuant to Section 2.10(c), certain Lessor Subsidiaries party hereto pursuant to
Section 2.10(e), the lenders from time to time party to this Agreement (collectively, the "Lenders"), ROYAL BANK OF CANADA, as administrative agent (in such capacity, the "Administrative
Agent"), and BANK OF UTAH, not in its individual capacity, but solely as collateral agent (in such capacity, the "Collateral Agent") and securities intermediary.
WHEREAS, the Borrower desires to borrow funds under this Agreement subject to the terms and conditions set forth herein;
WHEREAS, certain Borrower Parties are willing to secure each of their and each other Borrower Parties' obligations under this Agreement and the other Loan Documents, by granting Liens on certain of their assets to
the Collateral Agent, for the benefit of the Secured Parties, as provided in the Security Documents;
WHEREAS, each of the Guarantor Parties is willing to jointly and severally guarantee the Obligations of the Borrower and each other Borrower Party and to secure its Guaranteed Obligations by granting Liens on the
Collateral held by such Guarantor Party to the Collateral Agent, for the benefit of the Secured Parties, as provided in the Security Documents;
WHEREAS, the Lenders are willing to make loans to the Borrower if the foregoing Obligations of the Borrower are guaranteed and secured as described above and subject to the other terms and conditions set forth
herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Section 1.01 Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
"2021 Notes" means the 6.375% senior notes due 2021 issued by FLL in the aggregate principal amount of $325,000,000.
"2024 Notes" means the 5.250% senior notes due 2024 issued by FLL in the aggregate principal amount of $300,000,000.
"Account Collateral" has the meaning set forth in the Mortgage.
"Administrative Agent" means the Person appointed at any time as administrative agent hereunder. The initial Administrative Agent is Royal Bank of Canada.
"Administrative Agent Fee Letter" means the amended and restated engagement letter dated October 9, 2020 between Royal Bank of Canada and FLL.
"Administrative Agent's Account" means account number 01269 4048922 of Royal Bank of Canada at at JP Morgan Chase Bank, New York, ABA number
021000021, Account Name: RBC Agency Services, Attn: Manager, Agency Services or such other account as the Administrative Agent notifies the Borrower and the Lenders in writing from time to time.
"Administrative Agent's Office" means Royal Bank of Canada, 20 King Street W, 4th Fl, Toronto, Ontario, M5H 1C4, or such other address as the
Administrative Agent notifies the Borrower and the Lenders in writing from time to time.
"Administrative Questionnaire" means an administrative questionnaire in substantially the form of Exhibit G or any other form approved by the Administrative Agent.
"Adverse Claim" means any Lien or any claim of ownership or other property right, other than Permitted Liens (it being agreed for purposes of clarification that a transfer of
an ownership interest or other right in a Pool Aircraft and any related Lease to a Person that is not a Borrower Party is not an Adverse Claim, subject to the Borrower Parties' maintaining compliance with Sections 2.10, 5.04 and 5.16).
"Affected Lender" has the meaning set forth in Section 2.08(g).
"Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under
common Control with such specified Person.
"Agent" means each of the Administrative Agent and the Collateral Agent.
"Agent Affiliates" has the meaning set forth in Section 9.01(b)(iii).
"Aggregate Commitments" means the aggregate Commitments of all the Lenders.
"Aggregate Requested Release Amount" means, in respect of a Release Date, (i) the aggregate principal amount of the Loans to be released to the Borrower in accordance with
Section 2.03(c) on such Release Date in respect of each related Pool Aircraft identified in the relevant Release Request plus (ii) the aggregate pro rata
investment earnings thereon.
"Agreement" has the meaning set forth in the introductory paragraph of this Agreement.
"Aircraft" means the PS Pool Aircraft and the Non-Pool Aircraft.
"Aircraft Assets" means the Aircraft Collateral and any related Security Deposits or Maintenance Rent.
"Aircraft Collateral" means all Collateral of the type described in clauses (a), (b), (c), (d), (j) and (k) of Section 2.01 of the Mortgage.
- 2 -
"Applicable Margin" means 6.00% per annum; provided that for any period in which the Base
Rate applies to the Loans, the Applicable Margin shall be 5.00% per annum.
"Applicable Non-U.S. Aviation Law" means, with respect to any Aircraft, any applicable law, rule or regulation (other than the FAA Act) of any Governmental Authority of any
jurisdiction not included in the United States or in any state, territory or possession of the United States governing the registration, ownership, operation, or leasing of all or any part of such Aircraft, or the creation, recordation,
maintenance, perfection or priority of Liens on all or any part of such Aircraft.
"Applicable Percentage" means with respect to any Lender at any time, the percentage of the Aggregate Commitments represented by such Lender's Commitment at such time. The
initial Applicable Percentage of each Lender is set forth opposite the name of such Lender in
Exhibit A-1 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
"Applicable Subsidiary Documents" has the meaning set forth in 2.10(g)(i).
"Appraisal" means with respect to any Pool Aircraft, a "desk top" appraisal of such Pool Aircraft by a Qualified Appraiser, which appraisal (x) is addressed to one or more
Borrower Parties and the Administrative Agent and (y) opines as to the half-life Base Value of such Pool Aircraft.
"Appraisal Date" means each sixth-month anniversary of the Effective Date.
"Appraised Value" means, with respect to any PS Pool Aircraft as of any LTV Determination Date, the value of such PS Pool Aircraft as of such date, calculated by taking the
lesser of the average and the median of the most recent Appraisals conducted with respect to such PS Pool Aircraft pursuant to Section 5.09(a)(viii); provided that notwithstanding any Appraisal to the
contrary:
(a) if, as of any date, (i) any PS Pool Aircraft (A) is leased to a lessee that is organized under the laws of or domiciled in a Prohibited Country (and, if the country in which a lessee is organized under
the laws of or domiciled in becomes a Prohibited Country as a result of the jurisdiction in which such lessee is organized under or domiciled becoming a Prohibited Country after the date the applicable Aircraft and Lease with such lessee were
included in the Designated Pool, the leasing of such PS Pool Aircraft to such lessee continues for the later of (x) more than 120 days and (y) the period the applicable Borrower Party is mandatorily prevented by operation of law from repossessing
such PS Pool Aircraft, but in no event longer than 180 days) or (B) is leased by a Borrower Party that is subject to a Specified Representation Deficiency pursuant to Section 2.10(g) that is continuing as of such date; (ii) the Express Perfection
Requirements are not satisfied as to any PS Pool Aircraft or any Lease, Intermediate Lease, Equity Collateral or other Collateral related to such PS Pool Aircraft; (iii) any Lien as to any PS Pool Aircraft (or as to any Lease, Equity Collateral, or
other Collateral, in each case related to such PS Pool Aircraft) is purported to be created under any Security Document shall not be or shall cease to be a valid and perfected Lien on such PS Pool Aircraft and/or related Collateral with the same
priority as and to the extent provided for under the applicable Security Documents except as a result of a sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents (it being understood and agreed
that, with respect to each applicable Aircraft Asset and any related Equity Collateral, only the Express Perfection Requirements shall apply); (iv) a Lessor Subsidiary shall cease to Own any PS Pool Aircraft, free and clear of all Liens (other than
Permitted Liens); and (v) any PS Pool Aircraft shall be of a type other than a Preferred Aircraft Type or shall suffer an Event of Loss; in each case such PS Pool Aircraft shall be deemed to have an Appraised Value of $0.00 as of such date;
- 3 -
(b) any PS Pool Aircraft which, as of any date, otherwise causes the Designated Pool to fail to meet the Pool Specifications, shall be deemed to have an Appraised Value not greater than the greatest value
that would permit such Aircraft to not cause the Designated Pool to fail to satisfy the Pool Specifications; and
(c) any PS Pool Aircraft which, as of any date, is subject to a contract providing for the consummation of a sale of such PS Pool Aircraft within six months of such date, shall be valued as of such date at
the purchase price to be paid to the applicable Borrower Party pursuant to such contract.
"Approved Electronic Communications" means any notice, demand, communication, information, document or other material that any Borrower Party provides to the Administrative
Agent pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Agents or the Lenders by means of electronic communications pursuant to Section 9.01(b).
"Arranger Entity" means each of RBC Capital Markets, LLC, MUFG Bank Ltd. and each of their respective Affiliates.
"Assigned Leases" has the meaning set forth in the Mortgage.
"Assignment and Assumption" means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by
Section 9.06), in substantially the form of Exhibit C or any other form approved by the Administrative Agent.
"Assignment Effective Date" has the meaning set forth in Section 9.06(b).
"Available Tenor" means, as of any date of determination and with respect to the then-current Benchmark, as applicable, any tenor for such Benchmark or payment period for
interest calculated with reference to such Benchmark, as applicable, that is or may be used for determining the length of an Interest Period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for
such Benchmark that is then-removed from the definition of "Interest Period" pursuant to Section 2.14(d).
"Average Age" means, at any time, the average age of all of the Pool Aircraft at such time, weighted by Base Values, as established by taking the lesser of the average and the
median of the most recent Appraisals delivered pursuant to Section 5.09(a)(viii).
- 4 -
"Base Rate" means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal
Funds Rate in effect on such day plus one-half of 1%. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective day of such change in the
Prime Rate or the Federal Funds Rate, respectively; provided, however, that notwithstanding the foregoing, the Base Rate
shall at no time be less than 3.0% per annum. On any day that Loans bearing interest at the Base Rate are outstanding, in no event shall the Base Rate be less than the sum of (i) the LIBO Rate (after
giving effect to any LIBO Rate "floor") that would be payable on such day for a Loan with a one-month interest period plus (ii) the difference between the Applicable Margin for Loans bearing interest at the
LIBO Rate and the Applicable Margin for Loans bearing interest at the Base Rate.
"Base Value" means, with respect to a PS Pool Aircraft, the value, expressed in dollars, of such Aircraft, determined on the basis of an open, unrestricted, stable market
environment with a reasonable balance of supply and demand and with full consideration of such Aircraft's "highest and best use," presuming an arm's length, cash transaction between willing, able and knowledgeable parties, acting prudently, with an
absence of duress and with a reasonable period of time available for remarketing, adjusted to account for the maintenance status of such Aircraft as set forth in the definition of Appraisal in this Section 1.01.
"Benchmark" means, initially, LIBO Rate; provided that if a Benchmark Transition Event, a Term SOFR Transition Event or an Early Opt-in Election, as applicable, and its related
Benchmark Replacement Date have occurred with respect to LIBO Rate or the then-current Benchmark, then "Benchmark" means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate
pursuant to Section 2.14(a).
"Benchmark Replacement" means, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable
Benchmark Replacement Date:
(1) the sum of: (a) Term SOFR and (b) the related Benchmark Replacement Adjustment;
(2) the sum of: (a) Daily Simple SOFR and (b) the related Benchmark Replacement Adjustment;
(3) the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower as the replacement for the then-current Benchmark for the applicable Corresponding Tenor
giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining
a benchmark rate as a replacement for the then-current Benchmark for U.S. dollar-denominated syndicated credit facilities at such time and (b) the related Benchmark Replacement Adjustment; provided that, in
the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion and approved by the
Borrower provided further that, notwithstanding anything to the contrary in this Agreement or in any other Loan Document, upon the occurrence of a Term SOFR Transition Event, the delivery of a Term SOFR
Notice and the consent of the Borrower, on the applicable Benchmark Replacement Date the "Benchmark Replacement" shall revert to and shall be deemed to be the sum of (a) Term SOFR and (b) the related Benchmark Replacement Adjustment, as set forth
in clause (1) of this definition (subject to the first proviso above).
- 5 -
If the Benchmark Replacement as determined pursuant to clause (1), (2) or (3) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the
other Loan Documents.
"Benchmark Replacement Adjustment" means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest
Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:
(1) for purposes of clauses (1) and (2) of the definition of "Benchmark Replacement," the first alternative set forth in the order below that can be determined by the
Administrative Agent:
(a) the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) as of the Reference Time such Benchmark
Replacement is first set for such Interest Period that has been selected or recommended by the Relevant Governmental Body for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for the applicable Corresponding
Tenor;
(b) the spread adjustment (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that would apply to
the fallback rate for a derivative transaction referencing the ISDA Definitions to be effective upon an index cessation event with respect to such Benchmark for the applicable Corresponding Tenor; and
(2) for purposes of clause (3) of the definition of "Benchmark Replacement," the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value
or zero) that has been selected by the Administrative Agent and the Borrower for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining
such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable Benchmark Replacement Date or (ii) any evolving or then-prevailing market
convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated
credit facilities; provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other information service that publishes such Benchmark Replacement Adjustment from time to time
as selected by the Administrative Agent in its reasonable discretion and approved by the Borrower.
- 6 -
"Benchmark Replacement Conforming Changes" means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the
definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation
notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides in its reasonable discretion (and with the approval of the Borrower) is
appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent
decides in its reasonable discretion that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of such Benchmark Replacement
exists, in such other manner of administration as the Administrative Agent decides in its reasonable discretion (and with the approval of the Borrower) is reasonably necessary in connection with the administration of this Agreement and the other
Loan Documents).
"Benchmark Replacement Date" means the earliest to occur of the following events with respect to the then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of "Benchmark Transition Event," the later of (a) the date of the public statement or publication of information
referenced therein and (b) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component
thereof);
(2) in the case of clause (3) of the definition of "Benchmark Transition Event," the date of the public statement or publication of information referenced therein; or
(3) in the case of an Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as the Administrative Agent has not received,
by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Required
Lenders.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement
Date will be deemed to have occurred prior to the Reference Time for such determination and (ii) the "Benchmark Replacement Date" will be deemed to have occurred in the case of clause (1) or (2) with respect
to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
"Benchmark Transition Event" means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(1) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has
ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to
provide any Available Tenor of such Benchmark (or such component thereof);
- 7 -
(2) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Board of Governors
of the Federal Reserve System, the NYFRB, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component)
or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all
Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such
Benchmark (or such component thereof); or
(3) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all
Available Tenors of such Benchmark (or such component thereof) are no longer representative.
For the avoidance of doubt, a "Benchmark Transition Event" will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set
forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
"Benchmark Unavailability Period" means the period (if any) (x) beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has
occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.14 and (y) ending at the time that a Benchmark Replacement has replaced
the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.14.
"Board of Directors" means either the board of directors of the Borrower or any committee of that board duly authorized to act hereunder.
"Borrower" has the meaning set forth in the introductory paragraph of this Agreement.
"Borrower Competitor" has the meaning set forth in Section 9.06(c).
"Borrower Parties" means the Borrower, FLL, FWAH, each Lessor Subsidiary, each Intermediate Lessee and each other Person that becomes a Borrower Party from time to time by
executing a Borrower Party Request and Assumption Agreement.
"Borrower Party Request and Assumption Agreement" means the Borrower Party Request and Assumption Agreement in substantially the form of Exhibit D.
"Borrowing" means a borrowing of the Loans under Section 2.01.
- 8 -
"Borrowing Request" means a request by the Borrower for a Borrowing in accordance with Section 2.02.
"Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Ireland are authorized or required by law to remain
closed; provided that, when used in connection with the determination of a LIBO Rate, the term "Business Day" shall mean any day other than a day on which banks are not open for dealings in dollar deposits
in the London interbank market or a day in which commercial banks in New York City are authorized or required by law to remain closed.
"Cape Town Convention" means, collectively, the Convention and the Protocol, together with all regulations and procedures issued in connection therewith, and all other rules,
amendments, supplements, modifications, and revisions thereto (in each case using the English language version).
"Cash Collateral" means LTV Cash Collateral and UPA Cash Collateral.
"Cayman FATCA Legislation" means the Cayman Islands IGA and the Cayman Islands Tax Information Authority Law (2017 Revision) (as amended
from time to time) together with regulations and guidance notes made pursuant to such Law (including the OECD Standard for Automatic Exchange of Financial Account Information – Common Reporting Standard).
"Cayman Islands IGA" means the Agreement between the Government of the Cayman Islands and the Government of the United States of America to Improve International Tax Compliance
and to Implement FATCA.
"Cayman Islands Share Charge" means any Cayman Islands law governed charge over shares in the capital of the Borrower or any other Borrower Party incorporated under the laws of
the Cayman Islands, entered into or to be entered into between a Guarantor Party and the Collateral Agent for the benefit of the Secured Parties in substantially the form of Exhibit H to the Mortgage.
"Certificated Security" has the meaning set forth in the Mortgage.
"Change in Law" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption of any law, rule, regulation or treaty, (b) any change in any
law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law but
compliance with which is customary for Persons which are subject to regulation by the relevant Governmental Authority) by any Governmental Authority.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning set forth in the Mortgage.
"Collateral Agent" has the meaning set forth in the introductory paragraph of this Agreement.
"Collateral Supplement" has the meaning set forth in the Mortgage.
- 9 -
"Commitment" means, as to each Lender, its obligation to make the Loans to the Borrower pursuant to Section 2.01 of this Agreement, in an aggregate principal amount at any one
time outstanding not to exceed the amount set forth opposite such Lender's name on Exhibit A-1 of this Agreement or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted
from time to time in accordance with this Agreement.
"Contracting State" has the meaning set forth in the Mortgage.
"Control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise. "Controlled" has the meaning correlative thereto.
"Convention" means the Convention on International Interests in Mobile Equipment signed in Cape Town, South Africa on November 16, 2001.
"Corresponding Tenor" with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same
length (disregarding business day adjustment) as such Available Tenor.
"Daily Simple SOFR" means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Administrative Agent in accordance
with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining "Daily Simple SOFR" for syndicated business loans; provided, that
if the Administrative Agent decides that any such convention is not administratively feasible for the Administrative Agent, then the Administrative Agent may establish another convention in its reasonable discretion (with the approval of the
Borrower).
"Debtor Relief Laws" means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
"Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of
Default.
"Default Excess" means, with respect to any Funds Defaulting Lender, (i) in the case of a failure to fund a Loan, the excess, if any, of such Defaulting Lender's pro rata share of the aggregate outstanding principal amount of Loans of all Lenders (calculated as if all Funds Defaulting Lenders (including such Funds Defaulting Lender) had funded all of their respective
Defaulted Loans) over the aggregate outstanding principal amount of all Loans actually funded by such Funds Defaulting Lender and (ii) in the case of a failure to fund its pro rata share of any payment
under Section 8.06, such Lender's pro rata share with respect to such participation or payment.
- 10 -
"Default Period" means, (x) with respect to any Funds Defaulting Lender, the period commencing on the date that such Lender became a Funds Defaulting Lender and ending on the
earliest of: (i) the date on which all Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable, (ii) the date on which (a) the Default Excess with respect to such Defaulting Lender shall
have been reduced to zero and/or such Defaulting Lender shall have paid all amounts required to be paid by it under Section 8.06, as the case may be, and (b) such Defaulting Lender shall have delivered to the Borrower and the Administrative Agent a
written reaffirmation of its intention to honor its obligations hereunder with respect to its Commitments, and (iii) the date on which the Borrower, the Administrative Agent and the Required Lenders waive all failures of such Defaulting Lender to
fund or make payments required hereunder in writing; and (y) with respect to any Insolvency Defaulting Lender, the period commencing on the date such Lender became an Insolvency Defaulting Lender and ending on the earliest of the following dates:
(i) the date on which all Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable and (ii) the date that such Defaulting Lender ceases to hold any portion of the Loans or Commitments.
"Defaulted Loans" means any Loan not made by any Lender when required hereunder.
"Defaulting Lender" means any Funds Defaulting Lender or Insolvency Defaulting Lender.
"Designated Pool" means, subject to Section 2.10, the pool of Aircraft consisting of the PS Pool Aircraft each of which (i) shall be noted by the Borrower on Schedule 3.17(a)
attached hereto, as amended, restated or supplemented from time to time pursuant to this Agreement and (ii) either (x) shall be Owned by a Lessor Subsidiary or (y) each of the Borrower Parties shall have good faith intention and, to FLL's and the
relevant Servicer's knowledge, the ability to satisfy each of the conditions under the Loan Documents (including the conditions set forth in Section 4.02 of this Agreement) such that such Aircraft will constitute a Pool Aircraft within a reasonable
period of time after the Effective Date.
"dollars," "Dollars" or "$" refers to lawful money of the United States.
"Early Opt-in Election" means, if the then-current Benchmark is LIBO Rate, the occurrence of:
(1) a notification by the Administrative Agent to (or the request by the Borrower to the Administrative Agent to notify) each of the other parties hereto that at least five currently outstanding U.S.
dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated
credit facilities are identified in such notice and are publicly available for review), and
(2) the joint election by the Administrative Agent and the Borrower to trigger a fallback from LIBO Rate and the provision by the Administrative Agent of written notice of such election to the Lenders.
"Effective Date" means the date on which each of the conditions specified in Section 4.01 is satisfied (or waived in accordance with Section 9.05).
- 11 -
"Eligible Account" means an account established by and with an Eligible Institution at the request of the Collateral Agent, which institution agrees, for all purposes of the
New York UCC including Article VIII thereof, that (a) such account shall be a "securities account" (as defined in Section 8-501 of the New York UCC), (b) such institution is a "securities intermediary" (as defined in Section 8-102(a)(14) of the New
York UCC), (c) all property credited to such account shall be treated as a "financial asset" (as defined in Section 8-102(9) of the New York UCC), (d) the Collateral Agent shall be the "entitlement holder" (as defined in Section 8-102(7) of the New
York UCC) in respect of such account, (e) it will comply with all entitlement orders issued by the Collateral Agent to the exclusion of the Borrower and each other Borrower Party, (f) it will waive or subordinate in favor of the Collateral Agent
all claims (including without limitation, claims by way of security interest, lien or right of set-off or right of recoupment), and (g) the "securities intermediary jurisdiction" (under Section 8-110(e) of the New York UCC) shall be the State of
New York.
"Eligible Assignee" means any Person (other than a natural Person) that is (i) a Lender, an Affiliate of any Lender or a Related Fund (any two or more Related Funds being
treated as a single Eligible Assignee for all purposes hereof), or (ii) a commercial bank, insurance company, investment or mutual fund or other entity that is an "accredited investor" (as defined in Regulation D under the Securities Act) and which
extends credit or buys loans in the ordinary course of business.
"Eligible Institution" has the meaning set forth in the Mortgage.
"Eligible Lease" means a lease containing terms and conditions and otherwise in a form consistent with Leasing Company Practice with respect to similar aircraft under lease,
taking into consideration, among other things, the identity of the relevant lessee (including operating experience), the age and condition of the applicable Pool Aircraft and the jurisdiction in which such Pool Aircraft will be operated or
registered. In addition, if any Lessee of a Pool Aircraft under a Lease otherwise constituting an Eligible Lease shall cause the Borrower or any Borrower Party to be in violation of Section 5.14 or Section 5.15, such Lease shall cease to be an
Eligible Lease until such violation is cured or the relevant Lease is otherwise terminated.
"Environmental Claim" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or
otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous
Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.
"Environmental Laws" means any and all current or future foreign or domestic, federal or state (or any subdivision of either of them), statutes, ordinances, orders, rules,
regulations, judgments, governmental authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to the Borrower Parties or any
Facility.
- 12 -
"Equity Collateral" has the meaning set forth in the Mortgage.
"Equity Interests" means shares of capital stock, issued share capital, share capital in an exempted company, partnership interests, membership interests in a limited liability
company, beneficial interests in a trust or other equity ownership interests in a Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with any Borrower Party, is treated as a single employer under Section 414(b) or (c)
of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event," as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which
the 30‑day notice period is waived); (b) the failure with respect to any Plan to satisfy the minimum funding standard (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(c)
of the Code or Section 302 of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Borrower Party or any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Plan (but in no event for PGBC premiums); (e) the receipt by any Borrower Party or any ERISA Affiliate from the PGBC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or
to appoint a trustee to administer any Plan; (f) the incurrence by any Borrower Party or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
any Borrower Party or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Borrower Party or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
"EU" has the meaning set forth in Section 3.16.
"Event of Loss" means with respect to any Pool Aircraft (a) if the same is subject to a Lease, a "Total Loss," "Casualty Occurrence" or "Event of Loss" or the like (however so
defined in the applicable Lease); or (b) if the same is not subject to a Lease, (i) its actual, constructive, compromised, arranged or agreed total loss, (ii) its destruction, damage beyond repair or being rendered permanently unfit for normal use
for any reason whatsoever, (iii) requisition for title, confiscation, forfeiture or any compulsory acquisition or seizure or requisition for hire (other than a confiscation, compulsory acquisition or seizure or requisition for hire for a
consecutive period not exceeding 180 days) by or under the order of any government (whether civil, military or de facto) or public or local authority in each case other than by the United States or (iv) its hijacking, theft or disappearance,
resulting in loss of possession by the owner or operator thereof for a period of 180 consecutive days or longer. An Event of Loss with respect to any Pool Aircraft shall be deemed to occur on the date on which such Event of Loss is deemed pursuant
to the relevant Lease to have occurred or, if such Lease does not so deem or if the relevant Aircraft is not subject to a Lease, (A) in the case of an actual total loss or destruction, damage beyond repair or being rendered permanently unfit, the
date on which such loss, destruction, damage or rendering occurs (or, if the date of loss or destruction is not known, the date on which the relevant Aircraft was last heard of); (B) in the case of a constructive, compromised, arranged or agreed
total loss, the earlier of (1) the date 30 days after the date on which notice claiming such total loss is issued to the insurers or brokers and (2) the date on which such loss is agreed or compromised by the insurers; (C) in the case of
requisition of title, confiscation, restraint, detention, forfeiture, compulsory acquisition or seizure, the date on which the same takes effect; (D) in the case of a requisition for hire, the expiration of a period of 180 days from the date on
which such requisition commenced (or, if earlier, the date upon which insurers make payment on the basis of such requisition); or (E) in the case of clause (iv) above, the final day of the period of 180 consecutive days referred to therein.
- 13 -
"Events of Default" has the meaning set forth in Article VI.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.
"Excluded Taxes" means, with respect to any Lender Party or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a)
Taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income Taxes), by the jurisdiction (i) under the Laws of which such recipient is organized or incorporated (or a country
that includes such jurisdiction) or (ii) in which its principal office is located or (iii) in which it is treated as primarily resident for net income Tax or franchise tax purposes, or (iv) in the case of any Lender, in which its applicable Lending
Office is located, (b) any branch profits taxes or backup withholding tax imposed by the United States or any similar Tax imposed by any other jurisdiction described in clause (a) above (other than any withholding tax imposed on the Borrower under
the laws of the Cayman Islands, (c) Taxes imposed or suffered as a result of a breach by such Lender Party of any of its obligations under any of the Loan Documents to which it is a party (other than (x) a breach of its obligations in Section
2.08(e)(ii)(A) as a result of a change in the Laws of a jurisdiction that is not described in clause (a)(i), (ii), (iii) or (iv) above or (y) a breach caused by the act or omission of any Borrower Party), (d) Taxes imposed or suffered as a result
of any misrepresentation made by such Lender Party in relation to any Loan Document to which it is a party (other than a misrepresentation caused by an act or omission of any Borrower Party), (e) any Tax that is attributable to such Lender's
designation of a new Lending Office (or that is imposed under applicable Laws in effect at the time of an assignment to such Lender) except to the extent that such Lender (or its assignor) was entitled, at the time of such Lender's designation of a
new Lending Office (or at the time of the assignment to such Lender), to receive additional amounts from the Borrower with respect to such Tax pursuant to Section 2.08(a)(ii), (f) any U.S. federal withholding Taxes imposed under FATCA, and (g)
interest, additions to tax and penalties in respect of a Tax described in any of clauses (a) through (f) above.
- 14 -
"Express Perfection Requirements" means, subject to the Perfection Exceptions, (a) with respect to each Pool Aircraft and the related Assigned Leases, the Required Cape Town
Registrations pursuant to Section 2.08(e) of the Mortgage, UCC Financing Statement filings, the execution and delivery to each Lessee of a Lessee Notice and exercising commercially reasonable efforts to, as promptly as practicable but in any event
within 120 days of becoming a Pool Aircraft, procure a Lessee Acknowledgement (provided that, if a Lessee Acknowledgement in respect of a Lessee cannot be procured after the relevant Borrower Parties have
exercised commercially reasonable efforts, then such Lessee Acknowledgement from such Lessee shall not be required; provided, however, that in such instance, the relevant Borrower Parties shall be required to provide to the Administrative Agent the insurance certificates and broker's letters of undertaking or other evidence reasonably satisfactory to the
Administrative Agent that the Collateral Agent has been named as "loss payee" (or a "contract party" with respect to AVN67B) in respect of the relevant hull insurance, and the Collateral Agent and the Administrative Agent have been named as
"additional insured" in respect of the relevant liability insurance obtained by such Lessee in respect of the relevant Pool Aircraft); (b) with respect to each Pool Aircraft whose country of registration is the United States and the related
Assigned Leases, the applicable FAA filings pursuant to Section 2.08(f) of the Mortgage; (c) with respect to any Relevant Collateral (including any Equity Collateral held by any relevant Borrower Party in any Lessor Subsidiary or any Intermediate
Lessee), subject to Section 2.07(c) of the Mortgage, (1) filing appropriate UCC Financing Statements in respect of such Relevant Collateral and (2) delivery of such Relevant Collateral to the Collateral Agent, which shall be satisfied (i) in the
case of each Certificated Security or Instrument by (A) causing the delivery of such Certificated Security or Instrument to the Collateral Agent, registered in the name of the Collateral Agent or duly endorsed by an appropriate person to the
Collateral Agent or in blank and, in each case, held by the Collateral Agent, or (B) if such Certificated Security or Instrument is registered in the name of any Securities Intermediary on the books of the issuer thereof or on the books of any
Securities Intermediary, by causing such Securities Intermediary to continuously credit by book entry such Certificated Security or Instrument to a Securities Account maintained by such Securities Intermediary in the name of the Collateral Agent
and confirming in writing to the Collateral Agent that it has been so credited; and (ii) in the case of each Uncertificated Security, by (A) causing such Uncertificated Security to be continuously registered on the books of the issuer thereof in
the name of the Collateral Agent or (B) if such Uncertificated Security is registered in the name of a Securities Intermediary on the books of the issuer thereof or on the books of any securities intermediary of a Securities Intermediary, by
causing such Securities Intermediary to continuously credit by book entry such Uncertificated Security to a Securities Account maintained by such Securities Intermediary in the name of the Collateral Agent and confirming in writing to the
Collateral Agent that it has been so credited; (d) with respect to the Equity Collateral in respect of a Borrower Party incorporated under the laws of Ireland, causing each Security Document executed by it and any related Irish Charge Over Shares
or, in each case, its relevant particulars to be filed in the Irish Companies Registration Office and, where applicable, the Irish Revenue Commissioners within 21 days of execution thereof, (e) with respect to the Equity Collateral in respect of a
Borrower Party incorporated under the laws of the Cayman Islands, all steps required under the laws of the Cayman Islands in order to ensure the validity, perfection, priority and enforceability of the security interests and charge granted pursuant
to the Security Documents (including any related Cayman Islands Share Charge); (f) with respect to the Equity Collateral in respect of a Borrower Party incorporated under the laws of another acceptable jurisdiction (as listed in the definition of
"Lessor Subsidiary"), all steps required under the laws of such jurisdiction in order to ensure the validity, perfection, priority and enforceability of the security interests and charge granted pursuant to the Security Documents and (g) with
respect to any Account Collateral, filing appropriate UCC Financing Statements in respect of such Account Collateral and the relevant Borrower Party granting the Collateral Agent "control" (within the meaning of Section 9-104 of the UCC) over the
related Securities Account. Notwithstanding anything to the contrary in any Loan Document, no Grantor shall be required to enter into any aircraft mortgage, lease assignment, security agreement or like instrument (other than the Mortgage) with
respect to any Pool Aircraft or any Assigned Lease unless, in a certain jurisdiction, the execution, delivery, filing, recordation or registration of a mortgage, security or lease assignment or like instrument is necessary in such jurisdiction with
respect to such Pool Aircraft or such Assigned Lease in order to make the Required Cape Town Registrations (provided that no Borrower Party shall be required to enter into any new Lease for the purpose of registering such Lease under the Cape Town
Convention).
- 15 -
"FAA" means the Federal Aviation Administration of the United States of America and any successor thereto.
"FAA Act" means 49 U.S.C. Subtitle VII, §§ 40101 et seq., as amended from time to time, any regulations promulgated thereunder and any
successor provisions.
"Facility" means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by any
Borrower Party or any of their respective predecessors or Affiliates.
"FATCA" means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially
more onerous to comply with) and any current or future regulations or official interpretations thereof or agreement entered into with a Governmental Authority thereunder.
"Federal Funds Rate" means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the NYFRB on the Business Day next succeeding such day; provided that (a) if such day is
not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Royal Bank of Canada on such day on such transactions as determined by the Administrative
Agent.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve System of the United States.
"Fee Letters" means (i) the Administrative Agent Fee Letter and (ii) the collateral agent fee proposal agreed to with the Borrower on or about September 16, 2020.
"Final Release Date" means the Release Date on which, immediately after giving effect thereto, there would be insufficient funds in the LTV Securities Account for the Borrower
to make any future Release Requests in accordance with the terms of this Agreement.
"Fiscal Year" means a fiscal year of FLL.
"FLL" has the meaning set forth in the introductory paragraph of this Agreement.
"FLL Materials" has the meaning set forth in Section 5.09(d).
- 16 -
"Floor" means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this
Agreement or otherwise) with respect to LIBO Rate.
"Foreign Pension Plan" means each Foreign Plan that is a "pension plan" (as defined in Section 3(2) of ERISA).
"Foreign Plan" means each "employee benefit plan" (as defined in Section 3(3) of ERISA) with respect to which any Borrower Party could have any actual or contingent liability,
other than a Plan.
"Funds Defaulting Lender" means any Lender who (i) other than at the direction or request of any regulatory agency or authority, defaults in its obligation to fund any Loan,
(ii) has notified the Borrower or the Administrative Agent in writing, or has made a public statement, that it does not intend to comply with its obligation to fund any Loan or its pro rata share of any
payment under Section 8.06, (iii) has failed to confirm that it will comply with its obligation to fund any Loan or its pro rata share of any payment under Section 8.06 within five Business Days after
written request for such confirmation from the Borrower or the Administrative Agent (which request may only be made after all conditions to funding have been satisfied; provided that such Lender shall cease
to be a Funds Defaulting Lender upon receipt of such confirmation by the Administrative Agent), or (iv) has failed to pay to the Administrative Agent or any other Lender any amount (other than its portion of any Loan or amounts required to be paid
under Section 8.06 or any other amount that is de minimis) due under any Loan Document within five Business Days of the date due, unless such amount is the subject of a good faith dispute.
"FWAH" has the meaning set forth in the introductory paragraph of this Agreement.
"FWAH Intercompany Loan" means each loan advanced by the Borrower to FWAH under and in accordance with the terms of the FWAH Master Subscription Agreement.
"FWAH Master Subscription Agreement" means the Master Subscription Agreement entered into by the Borrower, as lender, and FWAH under which an uncommitted facility up to the
Aggregate Commitments will be made available by the Borrower for the issuing of notes by FWAH.
"GAAP" means, for any Person, generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination and are consistently applied as to such Person.
"Governmental Authority" means the government of the United States, any other nation or any state, locality or political subdivision of the United States or any other nation,
and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
- 17 -
"Grantor" has the meaning set forth in the Mortgage.
"Grantor Supplement" has the meaning set forth in the Mortgage.
"Guaranteed Obligations" means in respect of the guarantee by each Guarantor Party set forth in Article VII of this Agreement, all Obligations, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising.
"Guarantor Party" has the meaning set forth in Section 7.01 of this Agreement.
"Guarantor Party Request and Assumption Agreement" means the Guarantor Party Request and Assumption Agreement in substantially the form of Exhibit D.
"Hazardous Materials" means any chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority or which may or could pose
a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment.
"Hazardous Materials Activity" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture,
possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of
any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.
"Hedge Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar
agreement or arrangement, each of which is for the purpose of hedging the interest rate exposure associated with any Borrower Party's operations and not for speculative purposes, entered into with a Hedge Counterparty.
"Hedge Counterparty" means any counterparty which is a party to a Hedge Agreement and has acceded to the Intercreditor Agreement;
provided, at the time of entering into a Hedge Agreement, no Hedge Counterparty shall be a Defaulting Lender.
"Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws
applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow.
"IFRS" means the international financial reporting standards as set by the International Accounting Standards Board.
"Increased‑Cost Lender" has the meaning set forth in Section 2.11(b).
- 18 -
"Indebtedness" means, with respect to any Person at any date of determination (without duplication), (a) all indebtedness of such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto), (d) all
the obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of purchasing such property or service or taking delivery and title thereto or the
completion of such services, and payment deferrals arranged primarily as a method of raising finance or financing the acquisition of such property or service, (e) all obligations of such Person under a lease of (or other agreement conveying the
right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP or IFRS, (f) all indebtedness of other Persons secured by a lien on any asset of such Person,
whether or not such indebtedness is assumed by such Person, (g) all indebtedness of other Persons guaranteed by such Person and (h) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap
or collar agreement or other similar agreement or arrangement, including any Hedge Agreement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured.
"Indemnified Liabilities" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, claims (including
Environmental Claims), actions, judgments, suits, costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any
Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding or
hearing commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity but excluding, for the
avoidance of doubt, Excluded Taxes), whether direct, indirect, special or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or
regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby (including the Lenders' agreement to make the Loans, the syndication of the credit facilities provided for herein or the use or intended use of the proceeds thereof, any
amendments, waivers or consents with respect to any provision of this Agreement or any of the other Loan Documents, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the
Collateral or the enforcement of the guaranty set forth in Article VII)); (ii) the Fee Letters delivered by any Agent or any Lender to the Borrower with respect to the transactions contemplated by this Agreement; or (iii) any Environmental Claim or
any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of any Borrower Party.
"Indemnified Taxes" means all Taxes (except Excluded Taxes) that are suffered or incurred by or imposed on any Lender Party, any Borrower Party, any Guarantor Party, any
Lessee, any Collateral, any Loan Document or any payment pursuant to any Loan Document in each case relating to or, arising directly or indirectly, as a result of the transactions described in or contemplated by the Loan Documents.
- 19 -
"Indemnitee" has the meaning set forth in Section 9.03(a).
"Information" has the meaning set forth in Section 9.17.
"Insolvency Defaulting Lender" means any Lender who (i) has been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its
assets to be, insolvent, (ii) becomes the subject of an insolvency, bankruptcy, dissolution, liquidation, winding up, restructuring or reorganization proceeding, or (iii) becomes the subject of an appointment of a receiver, intervenor or
conservator under the United States Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; provided that a Lender shall not be an Insolvency
Defaulting Lender solely by virtue of the ownership or acquisition by a Governmental Authority or an instrumentality thereof of any Equity Interest in such Lender or a parent company thereof.
"Instrument" has the meaning set forth in the Mortgage.
"Intercompany Loan" means any and all Indebtedness from time to time owing by the Borrower to any Borrower Party; including but not limited to the FWAH Intercompany Loans provided that such Borrower Party either (i) is an original party to the Intercreditor Agreement or (ii) has delivered a supplement to the Intercreditor Agreement whereby such Borrower Party has become a party
to, and each of its related Intercompany Loans, are made subject to the terms of the Intercreditor Agreement.
"Intercreditor Agreement" means the Intercreditor Agreement entered into on or about the date hereof among the Borrower, FLL, each other Borrower Party that becomes a party
thereto from time to time and the Collateral Agent, and each Junior Lien Representative that becomes a party thereto pursuant to the terms thereof, in substantially the form of Exhibit H hereto (in each case as amended, restated, amended and
restated, supplemented or otherwise modified from time to time).
"Intercreditor Confirmation" means, as to any Series of Junior Lien Debt, the written agreement of the holders of such Series of Junior Lien Debt, as set forth in the
indenture, credit agreement or other agreement governing such Series of Junior Lien Debt, for the benefit of all holders of Secured Debt and each Secured Debt Representative:
(a) that all Junior Lien Obligations will be and are secured equally and ratably with other Junior Lien Obligations by the Collateral, and subordinated to the Secured Obligations; and
(b) that the holders of Junior Lien Obligations in respect of such Series of Junior Lien Debt are bound by and consent to the provisions of the Intercreditor Agreement, including the provisions of Section 2(b)
of the Intercreditor Agreement setting forth the priority of payments and the provisions of Sections 4, 5 and 9 of the Intercreditor Agreement setting forth the subordination of the Junior Secured Obligations (as defined in the Intercreditor
Agreement) to the Secured Obligations.
- 20 -
"Interest Period" means (i) with respect to the initial Interest Period, the period commencing on the Effective Date and ending on the next Payment Date; (ii) with respect to
each subsequent Interest Period other than the last Interest Period prior to the Maturity Date, the period commencing on the last day of the preceding Interest Period and ending on the next Payment Date; and (iii) with respect to the last Interest
Period prior to the Maturity Date, the period commencing on the last day of the preceding Interest Period and ending on the Maturity Date.
"Intermediate Lease" means, in respect of any Pool Aircraft, each lease in effect or to be entered into between the relevant Lessor Subsidiary (as lessor) and an Intermediate
Lessee (as lessee) or an Intermediate Lessee (as lessor) and another Intermediate Lessee (as lessee), in each case, which is listed on Schedule 3.17(b) hereto, as such schedule is supplemented (or, if not so supplemented, required to be
supplemented) pursuant to the terms hereof from time to time, in each case together with all schedules, supplements and amendments thereto and each other document, agreement and instrument related thereto.
"Intermediate Lease Notice" has the meaning set forth in Section 2.10(c).
"Intermediate Lessee" means, in respect of any Lease of Pool Aircraft, a Grantor (that is also a Borrower Party) which (i) is organized or incorporated under the laws of
Delaware, Connecticut, Utah, Ireland, Bermuda, Australia, France, Switzerland, Singapore, the United Kingdom, Luxembourg, the Cayman Islands or any other jurisdiction reasonably acceptable to the Collateral Agent, (ii) subject to the Local
Requirements Exception, 100% of the Equity Interest therein is held by a Borrower Party (that is also a Grantor) and the Collateral Agent has a first priority perfected security interest (subject only to Permitted Liens) in the related Equity
Collateral and (iii) the Borrower may determine in accordance with the provisions of Section 2.10 shall enter into a Lease as lessor with the applicable Lessee or shall enter into an Intermediate Lease as lessor with another Intermediate Lessee or
is on the Effective Date a party to such a Lease or such an Intermediate Lease, as the case may be.
"International Registry" has the meaning given to it in the Cape Town Convention.
"Investment Security" means (a) any bond, note or other obligation which is a direct obligation of or guaranteed by the U.S. or any agency thereof (having original maturities
of no more than 90 days, or such lesser time as is required for the distribution of funds); (b) any obligation which is a direct obligation of or guaranteed by any State of the U.S. or any subdivision thereof or any agency of any such State or
subdivision (having original maturities of no more than 90 days, or such lesser time as is required for the distribution of funds), and which has the highest rating published by Moody's or S&P; or (c) any money market investment instrument
relying upon the credit and backing of any bank or trust company which is a member of the Federal Reserve System and which has a combined capital (including capital reserves to the extent not included in capital) and surplus and undivided profits
of not less than $500,000,000 (including the Collateral Agent and its Affiliates if such requirements as to Federal Reserve System membership and combined capital and surplus and undivided profits are satisfied), including, without limitation,
certificates of deposit, time and other interest-bearing deposits, bankers' acceptances, commercial paper, loan and mortgage participation certificates and documented discount notes accompanied by irrevocable letters of credit and money market
funds investing solely in securities backed by the full faith and credit of the United States.
- 21 -
"IPA Loan Amount" means the difference as of the Effective Date between (i) the initial aggregate principal amount of the Loans and (ii) the initial UPA Loan Amount.
"Ireland" means the Republic of Ireland.
"Irish Charge Over Shares" means any charge over shares or other Equity Interests by any Borrower Party in favor of the Collateral Agent, for the benefit of the Secured
Parties, with respect to the shares or other Equity Interests of any Borrower Party incorporated under the laws of Ireland, in substantially the form of Exhibit G to the Mortgage.
"ISDA Definitions" means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented
from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
"Joint Lead Arranger" means each of RBC Capital Markets, LLC and MUFG Bank Ltd.
"Junior Lien" means a Lien granted by any Borrower Party, at any time, upon any property of such Borrower Party that includes all or any portion of the Collateral, to secure
Junior Lien Obligations.
"Junior Lien Debt" means any indebtedness (including letters of credit and reimbursement obligations with respect thereto) of the Borrower that is secured on a junior basis to
the Obligations by any Junior Lien that was permitted to be incurred and so secured under each applicable Loan Document; provided that on or before the date on which such indebtedness is incurred by the
Borrower:
(a) such indebtedness is designated by the Borrower, in an officers' certificate (in the form of Exhibit B to the Intercreditor Agreement) delivered to each Junior Lien Representative, the Lenders, and each
Agent, as "Junior Lien Debt" for the purposes of the Loan Documents, which officer's certificate shall confirm that the requirements in this definition of "Junior Lien Debt" have been satisfied; provided that
the none of the Obligations may be designated as Junior Lien Debt;
(b) such indebtedness is governed by an indenture, credit agreement or other agreement that includes an Intercreditor Confirmation and does not include any covenants of the Borrower that are more restrictive
than the covenants of the Borrower set forth in the Loan Documents;
(c) the Junior Lien Representative for such indebtedness has executed and delivered to the Collateral Agent a supplement to the Intercreditor Agreement (in the form of Exhibit C to the Intercreditor
Agreement);
(d) all requirements set forth in the Intercreditor Agreement as to the confirmation, grant or perfection of the Junior Lien to secure such indebtedness or Junior Lien Obligations in respect thereof are
satisfied; and
(e) the maturity date of such indebtedness is later than the Maturity Date and the weighted average maturity of all Junior Lien Debt is later than the Maturity Date.
- 22 -
"Junior Lien Documents" means, collectively any indenture, credit agreement or other agreement governing each Series of Junior Lien Debt and the security documents related
thereto.
"Junior Lien Obligations" means Junior Lien Debt and all other "Obligations" in respect thereof (as defined in the indenture, credit agreement or other agreement governing such
Series of Junior Lien Debt).
"Junior Lien Representative" means the trustee, agent or representative of the holder of any Series of Junior Lien Debt who maintains the transfer register for such Series of
Junior Lien Debt and is appointed as a Junior Lien Representative (for purposes related to the administration of the security documents) pursuant to the indenture, credit agreement or other agreement governing such Series of Junior Lien Debt,
together with its successors in such capacity.
"Laws" means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed
duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
"Lease" means a lease agreement relating to any Pool Aircraft, which is listed on Schedule 3.17(b) hereto, as such schedule is supplemented (or, if not so supplemented,
required to be supplemented) pursuant to the terms hereof from time to time, between a Borrower Party (as lessor), and a lessee, in each case together with all schedules, supplements and amendments thereto and each other document, agreement and
instrument related thereto.
"Leasing Company Practice" means, in relation to an Aircraft and any particular issue or matter, the customary commercial practice of the Servicers, having regard to the
customary commercial practice that the Servicers applies under similar circumstances in respect of other aircraft owned and/or managed or serviced by it or any of its Affiliates and not subject to the Mortgage, as such practice may be required to
be adjusted by the requirements of this Agreement and the other Loan Documents, including the requirements in respect of Collateral.
"Lenders" has the meaning set forth in the introductory paragraph of this Agreement.
"Lender Parties" means each Lender, the Administrative Agent and the Collateral Agent.
"Lending Office" means, as to any Lender, the office or offices of such Lender described as such in such Lender's Administrative Questionnaire, or such other office or offices
as a Lender may from time to time notify the Borrower and the Administrative Agent.
"Lessee" means any lessee party to a Lease.
"Lessee Acknowledgement" has the meaning set forth in the Mortgage.
"Lessee Notice" has the meaning set forth in the Mortgage.
- 23 -
"Lessor Subsidiary" means any special purpose Person or vehicle (including trusts) which (a) is organized or incorporated under the laws of Delaware, Connecticut, Utah,
Ireland, Bermuda, Australia, France, Switzerland, Singapore, the United Kingdom, Luxembourg, the Cayman Islands or any other jurisdiction reasonably acceptable to the Collateral Agent (provided that such
other jurisdiction is a Contracting State), (b) holds legal title to (or is a conditional buyer under a title reservation agreement (within the meaning of the Cape Town Convention)) any Pool Aircraft, (c) 100% of the Equity Interest therein is held
by a Borrower Party or a Guarantor Party and the Collateral Agent has a first priority perfected security interest (subject only to Permitted Liens) in the related Equity Collateral and (d) has delivered a Borrower Party Request and Assumption
Agreement and a grantor supplement to the Mortgage and such other documents as may be required to become a party to any other applicable Security Document.
"Lessor Subsidiary Notice" has the meaning set forth in Section 2.10(e).
"LIBO Rate" means, for any Interest Period with respect to any Loan: (a) the rate of interest per annum, expressed on the basis of a year of 360 days, which is equal to the
offered rate that appears on the page of the Reuters LIBOR01 screen (or any successor thereto as may be selected by the Administrative Agent) set by ICE Benchmark Administration for deposits in Dollars with a term equivalent to such Interest
Period, determined as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, or (b) if the rates referenced in the preceding subsection (a) are not available, the rate per annum determined by
the Administrative Agent as the rate of interest, expressed on a basis of 360 days at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Loan being made, continued or
converted by the Administrative Agent and with a term and amount comparable to such Interest Period and principal amount of such Loan as would be offered by the Administrative Agent's London Branch to major banks in the offshore Dollar market at
their request at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period; provided, that if any such rate is below 1.00%, the LIBO Rate will be deemed to be 1.00%.
"Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the
case of securities, any purchase option, call or similar right of a third party with respect to such securities.
"Liquidity Event" means on a Test Date, a failure to meet the Minimum Liquidity Test.
"Litigation Actions" means all litigation, claims and arbitration proceedings, proceedings before any Governmental Authority or investigations which are pending or, to the
knowledge of a responsible officer of any Borrower Party, threatened against, any Borrower Party.
"Loan Documents" means this Agreement, the Security Documents, the Intercreditor Agreement, the Notes and each Borrower Party Request and Assumption Agreement.
- 24 -
"Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement (whether released from the LTV Securities Account pursuant to Section 2.03(c) or not).
"Loan-to-Value Ratio" means, as of any LTV Determination Date, the ratio of (i) the difference between (w) the aggregate outstanding principal amount of the Loans as of such
LTV Determination Date (after giving effect to any prepayment under Section 2.06 occurring on such LTV Determination Date) minus (x) the UPA Loan Amount (after giving pro
forma effect to any releases of the UPA Cash Collateral pursuant to Section 2.03(c) on such LTV Determination Date) minus (y) the sum of the LTV Cash Collateral in the LTV Securities Account then
held by the Securities Intermediary plus (z) the marked to market amount that would be owed to a Hedge Counterparty under any interest rate hedging obligation which constitutes a Secured Obligation should
such hedging obligation be unwound determined as of the last day of the calendar month preceding the LTV Determination Date divided by (ii) the aggregate Appraised Value of all Pool Aircraft included in the
Designated Pool as of such LTV Determination Date. For the avoidance of doubt, any payment or prepayment of the aggregate outstanding principal amount of the Loans on or before the applicable LTV Determination Date shall be taken into account in
the calculation of the Loan-to-Value Ratio as of such LTV Determination Date.
"Local Requirements Exception" means an exception for Equity Interests or title to a Pool Aircraft held by directors, trustees,
nominees, conditional vendors or similar persons under similar arrangements in order to meet local nationality or other local requirements regarding registration or ownership of aircraft or to minimize the impact of any Taxes on the Borrower or a
Lessee and which do not, or could not reasonably be expected to, have a Material Adverse Effect on the Collateral or any part thereof or the security interest of the Collateral Agent.
"LTV Cash Collateral" means cash and/or any Investment Security deposited or to be deposited with the Securities Intermediary in the LTV Securities Account to affect an LTV
Cure. For the avoidance of doubt, LTV Cash Collateral shall not include any UPA Cash Collateral.
"LTV Certificate" has the meaning set forth in Section 5.09(a)(vii).
"LTV Cure" has the meaning set forth in Section 5.16(c).
"LTV Determination Date" has the meaning set forth in Section 5.16(b).
"LTV Securities Account" has the meaning set forth in Section 2.13.
"Maintenance Rent" means, with respect to any Pool Aircraft, maintenance reserves, maintenance rent or other supplemental rent payments based on usage in respect of such Pool
Aircraft (or its engines or other parts) payable by the Lessee under the Lease for such Pool Aircraft for the purpose of paying, contributing to, reserving or calculating potential liability in respect of payments for future maintenance and repair
of such Pool Aircraft, indemnity payments and any other payments other than scheduled rent payments.
"Make-Whole Premium" means, an amount (as determined by an independent investment bank of national standing) equal to the excess, if any, of (a) the present value of the
remaining scheduled payments of principal and interest to maturity of the Loans being prepaid computed by discounting such payments on a semiannual basis on each payment date hereunder (assuming a 360-day year of twelve 30-day months) using a
discount rate equal to the Treasury Yield plus the 0.50% over (b) the outstanding principal amount of the Loans plus accrued interest to the date of determination.
- 25 -
"Material Adverse Effect" means (a) a material adverse effect on the business, assets, liabilities, operations, condition (financial or otherwise) or operating results of the
Borrower Parties and their Subsidiaries taken as a whole, the result of which is a material impairment of the ability of the Borrower Parties taken as a whole to perform any of their respective obligations under any Loan Document, (b) a material
impairment of the totality of the rights and remedies of, or benefits available to, any Lender Party under the Loan Documents or (c) a material adverse effect on the value of the Collateral taken as a whole.
"Material Agreement" means any contract or other arrangement to which any Borrower Party or any of its Subsidiaries is a party (other than the Loan Documents) for which breach
could reasonably be expected to have a Material Adverse Effect.
"Material Indebtedness" means any indebtedness of a Borrower Party for borrowed money (other than the Loans) in an aggregate principal amount exceeding $50,000,000. For
purposes hereof, any obligations of the Borrower in respect of the Material Agreements shall constitute "Material Indebtedness."
"Maturity Date" means the earlier of (i) the Payment Date occurring on October 15, 2025 and (ii) 30 days prior to the maturity date of
the 2024 Notes if not redeemed.
"Minimum Liquidity Test" has the meaning set forth in Section 5.16(f).
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means the Aircraft Mortgage and Security Agreement entered into on or about the date hereof by the Borrower Parties party thereto in favor of the Collateral Agent,
in substantially the form of Exhibit B hereto, together with any mortgage supplements delivered pursuant to Section 2.10(b) or Section 5.02(a) hereof (in each case as amended, restated, amended and restated, supplemented or otherwise modified from
time to time).
"Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Non-Consenting Lender" has the meaning set forth in Section 2.11(b).
"Non-Pool Aircraft" means, as of any date, any aircraft Owned directly or indirectly by FLL or any of its Subsidiaries that is not included in the Designated Pool as of such
date.
"Note" has the meaning set forth in Section 2.05(d).
"NYFRB" means the Federal Reserve Bank of New York.
"NYFRB’s Website" means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
- 26 -
"Obligations" means all principal of the Loans outstanding from time to time hereunder, all interest (including Post-Petition Interest) on the Loans, all other amounts now or
hereafter payable by any Borrower Party under any Loan Document or Hedge Agreement and any fees or other amounts now or hereafter payable by any Borrower Party to the Administrative Agent or the Collateral Agent for acting in its capacity as such
pursuant to a separate agreement among such parties, in each case, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.
"OFAC" has the meaning set forth in Section 3.16.
"Officer's Certificate" means a certificate signed by (i) with respect to any Borrower Party, the President, a Vice President, a member of the Board of Directors or any other
authorized senior officer, director or equivalent representative of such Borrower Party and (ii) with respect to any other Person, any authorized senior officer, director or equivalent representative of such Person.
"Operating Documents" means with respect to any corporation, exempted company, limited liability company, partnership, limited partnership, limited liability partnership,
exempted limited partnership, trust or other legally authorized incorporated or unincorporated entity, the bylaws, memorandum and articles of association, operating agreement, limited liability company agreement, partnership agreement, limited
partnership agreement, trust agreement or other applicable documents relating to the operation, governance or management of such entity.
"Organizational Documents" means with respect to any corporation, exempted company, limited liability company, partnership, limited partnership, limited liability partnership,
exempted limited partnership, trust or other legally authorized incorporated or unincorporated entity, the articles of incorporation, certificate of incorporation, memorandum and articles of association, articles of organization or of association,
certificate of limited partnership, certificate of trust, certificate of registration or other applicable organizational, constitutional or charter documents relating to the creation of such entity.
"Other Relevant Jurisdiction" means any jurisdiction in which a Lessor Subsidiary is organized as reasonably acceptable to the Collateral Agent in accordance with the terms of
clause (a) of the definition of "Lessor Subsidiary".
"Other Taxes" means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or
under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document (but excluding Taxes imposed by the Cayman Islands due to a registration or filing in the
Cayman Islands of this Agreement or any other Loan Document when such registration or filing is not required to maintain, preserve, establish or enforce the rights of a Lender or the Administrative Agent).
"Own" means, with respect to any Aircraft, to hold legal and sole ownership of such Aircraft directly or to hold 100% of the beneficial ownership of such Aircraft through a
Lessor Subsidiary or under a conditional sale or similar arrangement by which a Lessor Subsidiary is entitled to acquire title to such Aircraft upon payment of a nominal amount. The terms "Ownership" and "Owned by" have a correlative meaning.
- 27 -
"PATRIOT Act" has the meaning set forth in Section 4.01(u).
"Payment Date" means the three-month anniversary of the Effective Date, and thereafter, each successive three-month anniversary of the Effective Date to and including the
Maturity Date; provided that, if any such Payment Date is not a Business Day, then such Payment Date shall be the immediately succeeding Business Day (unless such succeeding Business Day would fall in the next calendar month, then the immediately
preceding Business Day).
"Perfection Exceptions" means the exceptions to the Express Perfection Requirements set forth in Annex 3; provided that, each of such
exceptions shall only apply so long as each of the applicable Borrower Parties are in compliance with each of their respective obligations under Annex 3.
"Permitted Liens" means:
(a) any Lien for Taxes if (i) such Taxes shall not be due and payable, or (ii) such Taxes are being disputed in good faith or contested in good faith by appropriate proceedings and reserves required by GAAP
or IFRS (as applicable) have been made therefor;
(b) any Lien in respect of any Pool Aircraft for any fees or charges of any airport or air navigation authority arising by statute or operation of law if (i) the payments for such fees or charges are not yet
due or payable or (ii) such fees or charges are being disputed in good faith or contested in good faith by appropriate proceedings and reserves required by GAAP or IFRS (as applicable) have been made therefor;
(c) in respect of any Pool Aircraft, any repairer's, carrier's or hangar keeper's, warehousemen's, mechanic's or materialmen's Lien or employee and other like Liens arising in the ordinary course of business
by operation of law or under customary terms of repair or modification agreements or any engine or parts-pooling arrangements or other similar Liens if the payment for such Liens (i) is not due and payable or (ii) is not overdue for payment having
regard to the relevant trade, in circumstances where no enforcement action against the Aircraft has yet been taken by the relevant holder of the Lien or (iii) is disputed in good faith or contested in good faith by appropriate proceedings and
reserves in accordance with GAAP or IFRS (as applicable) have been made therefor;
(d) any Lien created in favor of the Collateral Agent, for the benefit of the Secured Parties (as defined in the Mortgage), the Lender Parties or the Lenders pursuant to the Loan Documents;
(e) any Lien affecting any Pool Aircraft (other than a Lien for Taxes) arising out of judgments or awards against any of the relevant Borrower Parties with respect to which at the time the period to file an
appeal has not expired or an appeal is being presented in good faith and with respect to which within sixty (60) days thereafter there shall have been secured a stay of execution pending such appeal, and then only for the period of such stay, and
reserves required in accordance with GAAP or IFRS (as applicable) have been made therefor; provided that, in any case, no Event of Default has occurred and is continuing;
- 28 -
(f) any permitted lien or encumbrance, as defined under any lease of an Aircraft (other than Liens or encumbrances created by a Borrower Party except as described in this definition);
(g) the respective rights of a relevant Borrower Party and the lessee or any third party that owns or leases equipment installed on an Aircraft under
any lease relating to a Pool Aircraft, including any assignment of the relevant warranties relating to a Pool Aircraft (including restrictions on the relevant Borrower Party's right to grant a lien on or to transfer the applicable Lease or Pool
Aircraft) (and the rights of any sublessee under any permitted sublease relating to such lease) and the documents related thereto;
(h) the rights of insurers meeting the requirements of Section 2.17 of the Mortgage in respect of a Pool Aircraft, subject to insurance policies having been entered into in the ordinary course of business
and according to commercially reasonable terms;
(i) the interests of a voting or owner trustee, as applicable, or of an Intermediate Lessee in connection with the relevant Intermediate Lease;
(j) any Lien bonded against by any Borrower Party, any Lessee, or other similar third party security (which does not itself result in a Lien on a Pool Aircraft or any part thereof); provided that any such bonding or other similar third party security as against any Lessee is first approved by the Administrative Agent, acting reasonably;
(k) pledges of non-Aircraft Assets or deposits required under a Lease to secure payment obligations of the applicable Borrower Party under that Lease;
(l) any Lease entered into prior to the Effective Date, as supplemented and/or amended;
(m) any Eligible Lease;
(n) any Lien resulting directly from any Third Party Event, but only for so long as the Borrower and the applicable Borrower Party are complying with the requirements of the proviso to the last paragraph of
Section 2.16(a) of the Mortgage;
(o) any head lease, lease, conditional sale agreement or purchase option granted by a lessor or owner as to the purchase of the related Pool Aircraft under or in respect of any Lease (including to an
Affiliate of the Lessee) existing on the date of acquisition of such Pool Aircraft by the relevant Lessor Subsidiary or thereafter granted in accordance with Leasing Company Practice;
(p) any Junior Lien securing Junior Lien Obligations;
(q) any other Lien with the consent of all of the Lenders; and
- 29 -
(r) any Lien in respect of any Undelivered Pool Aircraft and any Leases and Relevant Collateral related thereto (but only for so long as such Undelivered Pool Aircraft shall constitute an Undelivered Pool
Aircraft).
"Person" means any natural person, corporation, exempted company, limited liability company, trust, joint venture, association, company, partnership, exempted limited
partnership, Governmental Authority or other entity.
"PGBC" means the Pension Guaranty Benefit Corporation.
"Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of
ERISA, and in respect of which any Borrower Party or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Platform" has the meaning set forth in Section 5.09.
"Pledged Equity Party" means the Borrower, each Lessor Subsidiary, and each Intermediate Lessee.
"Pool Aircraft" means, as of any date, any aircraft Owned by any Lessor Subsidiary and as to which each of the conditions set forth in Section 2.10, 4.01 or 4.02, as
applicable, have been satisfied or waived in accordance with the terms of this Agreement.
"Pool Specifications" is a collective reference to each of the following requirements with respect to the Designated Pool at any time:
(a) the aggregate Appraised Value of all Preferred Aircraft Types at such time shall be 100% of the aggregate Appraised Value of all PS Pool Aircraft at such time;
(b) the aggregate Appraised Value of all PS Pool Aircraft leased to a single Lessee at such time shall not exceed 30% of the aggregate Appraised Value of all PS Pool Aircraft at such time;
(c) the aggregate Appraised Value of all PS Pool Aircraft leased to Lessees based or domiciled in any single country at such time shall not exceed 30% (or if such country is the United States, 35%) of the
aggregate Appraised Value of all PS Pool Aircraft at such time;
(d) the aggregate Appraised Value of all PS Pool Aircraft leased to the two largest Lessees (by Appraised Value of PS Pool Aircraft) shall not exceed 40% of the aggregate Appraised Value of all PS Pool
Aircraft at such time; and
(e) the Average Age immediately following any addition to, removal from, or substitution of any Pool Aircraft included in the Designated Pool shall at such time not exceed the age that is equal to the sum of
(x) the Average Age on the Effective Date, plus (y) the amount of time elapsed since the Effective Date, plus (z) 12 months.
- 30 -
"Post-Petition Interest" means any interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, winding up,
restructuring or reorganization of any one or more of the Borrower Parties (or would accrue but for the operation of applicable Debtor Relief Laws), whether or not such interest is allowed or allowable as a claim in any such proceeding.
"Preferred Aircraft Types" means Aircraft of each of the following types: (a) Airbus A319, (b) Airbus A320, (c) Airbus A319neo, (d) Airbus A320neo, (e) Airbus A321-200, (f)
Airbus A321neo, (g) Boeing 737-700, (h) Boeing 737-800, (i) Boeing 737-900ER and (j) Boeing 737 MAX 7/MAX 8/ MAX 9/MAX 10; provided that in the case of any Aircraft of the type identified in (j), such
Aircraft shall have received and maintained type-certification from the FAA, the European Union Aviation Safety Agency and the aviation authority of the country of registration of such Aircraft prior to such Aircraft being included in the
Designated Pool.
"Prime Rate" means the rate of interest per annum determined by Royal Bank of Canada from time to time as its prime commercial lending rate for United States Dollar loans in
the United States for such day and notified to the Borrower. The Prime Rate is not necessarily the lowest rate that Royal Bank of Canada is charging any corporate customer.
"Prohibited Countries" has the meaning set forth in Section 3.16.
"Proposed Release Date" means a Business Day, as identified in a Release Request provided but revoked by the Borrower in accordance with Section 2.02(b), upon which date the
Aggregate Requested Release Amount was to be released to the Borrower, subject to the terms and conditions of this Agreement.
"Protocol" means the Protocol to the Convention on Matters Specific to Aircraft Equipment, as in effect in any applicable jurisdiction from time to time.
"PS Pool Aircraft" means the Pool Aircraft and the Undelivered Pool Aircraft.
"Public Lender" has the meaning set forth in Section 5.09.
"Qualified Aircraft" means one or more Aircraft that satisfy each of the following conditions: (i) each is subject to an Eligible
Lease, and (ii) in aggregate have the same or greater Appraised Value as the related Pool Aircraft for which each is being substituted pursuant to Section 2.10(b)(1).
"Qualified Appraiser" means, with respect to Appraisals used to calculate the LTV Ratio as of the Effective Date, each of AVITAS, Inc., BK Associates, Inc. and IBA Group Ltd.,
and with respect to Appraisals used to calculate the LTV Ratio as of each subsequent LTV Determination Date, such appraisal firms and any other independent aircraft appraisal expert of recognized standing, certified by ISTAT (or any successor or
similar organization), and selected and retained by FLL and approved by the Administrative Agent.
- 31 -
"Ratify" means, in relation to ratification by any jurisdiction of the Cape Town Convention, that any reservations made by such jurisdiction in ratifying the Cape Town
Convention are reasonably acceptable to the Collateral Agent, except that the Collateral Agent consents to the reservations to the Cape Town Convention made by the countries of registration of the Pool Aircraft set forth on Schedule 3.17(a) as of
the Effective Date and corresponding reservations made by other countries that ratify the Cape Town Convention after the Effective Date. The term "Ratified" has a correlative meaning.
"Records" means all Leases and other documents, books, records and other information (including, without limitation, computer programs, tapes, disks, data processing software
(to the extent permitted by any applicable licenses) and related property rights) directly related to the Leases and the Aircraft Assets related to the Pool Aircraft and the servicing thereof.
"Reference Time" with respect to any setting of the then-current Benchmark means (1) if such Benchmark is LIBO Rate, 11:00 a.m. (London time) on the day that is two Business
Days preceding the date of such setting, and (2) if such Benchmark is not LIBO Rate, the time determined by the Administrative Agent in its reasonable discretion.
"Register" has the meaning set forth in Section 2.05(c).
"Regulation D" means Regulation D of the Federal Reserve Board, as in effect from time to time.
"Related Fund" means, with respect to any Lender that is an investment fund, any other investment fund that invests in commercial loans and that is managed or advised by the
same investment advisor as such Lender or by an Affiliate of such investment advisor.
"Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any
Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the
air, soil, surface water or groundwater.
"Release Date" means a Business Day, as identified in a Release Request provided in accordance with Section 2.02(b), upon which date the Aggregate Requested Release Amount
shall be released to the Borrower, subject to the terms and conditions of this Agreement.
"Release Request" has the meaning set forth in Section 2.02(b).
"Relevant Collateral" has the meaning set forth in the Mortgage.
"Relevant Governmental Body" means the Board of Governors of the Federal Reserve System or the NYFRB, or a committee officially endorsed or convened by the Board of Governors
of the Federal Reserve System or the NYFRB, or any successor thereto.
"Relevant Release Parties" means in respect of a Release Date and the applicable Undelivered Pool Aircraft, (i) the Borrower, (ii) each related Lessor Subsidiary which holds
legal or beneficial title to such Undelivered Pool Aircraft, (iii) each related Person directly holding any of the Equity Interests in each such Lessor Subsidiary and each related Intermediate Lessee (if any) of such Undelivered Pool Aircraft and
(iv) each related Intermediate Lessee (if any) of such Undelivered Pool Aircraft.
- 32 -
"Replacement Lender" has the meaning set forth in Section 2.11(b).
"Required Cape Town Registrations" has the meaning set forth in the Mortgage.
"Required Lenders" means Lenders holding greater than 50% of (a) prior to the Loans being made on the Effective Date, the Aggregate Commitments and (b) thereafter, the
aggregate outstanding principal amount of the Loans; provided that the Commitments of, or outstanding principal amount held by, (i) any Defaulting Lender, or (ii) any Lender that is a Borrower Party or an
Affiliate thereof, shall be excluded for purposes of making a determination of Required Lenders.
"Requirement of Law" means, as to any Person, any Law applicable to or binding upon such Person or any of its property or to which such Person or any of its property is
subject, including, without limitation, each Applicable Non-U.S. Aviation Law applicable to such Person or the aircraft Owned or operated by it or as to which it has a contractual responsibility.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
"Sanctions" has the meaning set forth in Section 3.16.
"Secured Debt" means the Loans and the Junior Lien Debt.
"Secured Debt Representatives" means the Administrative Agent and each Junior Lien Representative.
"Secured Obligations" has the meaning set forth in the Mortgage.
"Secured Parties" has the meaning set forth in the Mortgage.
"Securities Account" has the meaning set forth in the Mortgage.
"Securities Act" means the Securities Act of 1933, as amended from time to time, and any successor statute.
"Securities Intermediary" has the meaning set forth in Section 2.13.
"Security Deposit" means any security deposits and any payments made to reinstate security deposits payable by any Lessee under a Lease.
"Security Documents" means the Mortgage, each Irish Charge Over Shares, each Cayman Islands Share Charge and each other agreement, supplement, instrument or document executed
and delivered pursuant to Section 2.10 or Section 5.02 to secure any of the Obligations.
"Series of Junior Lien Debt" means, severally, each issue or series of Junior Lien Debt for which a single transfer register is maintained and any other indebtedness under any
other indenture or credit facility that constitutes Junior Lien Obligations.
"Servicer Consent and Agreement" means the consent and agreement made or to be made between the Servicers, the Borrower Parties, the Administrative Agent and the Collateral
Agent.
- 33 -
"Servicers" means BBAM US LP and BBAM Aviation Services Limited.
"Servicing Agreement" means the servicing agreement dated on or about the date of this Agreement between the Servicers and FLL pursuant to which the Servicers have agreed to
provide Services in respect of the Pool Aircraft to the Borrower Parties.
"SOFR" means, with respect to any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day published by the SOFR Administrator on the
SOFR Administrator's Website on the immediately succeeding Business Day.
"SOFR Administrator" means the NYFRB (or a successor administrator of the secured overnight financing rate).
"SOFR Administrator's Website" means the NYFRB’s Website, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from
time to time.
"Specified Representation Deficiency" has the meaning set forth in Section 2.10(g).
"Step-Up Margin" means 2.00% per annum.
"subsidiary" means, with respect to any Person (the "parent") at any date, (a) any corporation, exempted company, limited liability
company, partnership, exempted limited partnership or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with
GAAP or IFRS (as applicable) as of such date and (b) any corporation, exempted company, limited liability company, partnership, exempted limited partnership or other entity (i) of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (ii) that is otherwise Controlled as of such
date, by the parent and/or one or more of its subsidiaries, and in the case of a Person which is a company incorporated in Ireland, shall include a subsidiary of such Person within the meaning of Section 7 of the Companies Act 2014 (as amended) of
Ireland.
"Subsidiary" means any direct or indirect subsidiary of a Borrower Party and includes a trust.
"Tax Account Reporting Rules" means, FATCA, the Cayman FATCA Legislation, and any laws, intergovernmental agreements or other guidance adopted pursuant to the global standard
for automatic exchange of financial account information issued by the OECD.
"Taxes" means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding and withholding pursuant to FATCA), assessments, fees
or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
"Temporary LTV Cash Collateral" has the meaning set forth in Section 5.16(e).
- 34 -
"Term SOFR" means, for the applicable Corresponding Tenor as of the applicable Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended
by the Relevant Governmental Body.
"Term SOFR Notice" means a notification by the Administrative Agent to the Lenders and the Borrower of the occurrence of a Term SOFR Transition
Event.
"Term SOFR Transition Event" means the determination by the Administrative Agent that (a) Term SOFR has been recommended for use by the Relevant Governmental Body, (b) the
administration of Term SOFR is administratively feasible for the Administrative Agent and (c) a Benchmark Transition Event has previously occurred resulting in a Benchmark Replacement in accordance with Section 2.14 that is not Term SOFR; provided, that notwithstanding anything to the contrary herein, a Term SOFR Transition Event shall not be deemed to occur without the written consent of the Borrower.
"Terminated Lender" has the meaning set forth in Section 2.11(b).
"Test Date" means the last day of each fiscal quarter of FLL.
"Third Party Event" has the meaning set forth in the Mortgage.
"Treasury Yield" means, at the date of determination, the interest rate (expressed as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent
yield) determined to be the per annum rate equal to the semiannual yield to maturity for United States Treasury securities maturing on the and trading in the public securities markets either as determined by interpolation between the most recent
weekly average yield to maturity for two series of United States Treasury securities trading in the public securities markets, (A) one maturing as close as possible to, but earlier than, the weighted average life of the Loans and (B) the other
maturing as close as possible to, but later than, the weighted average life of the Loans, in each case as published in the most recent H.15 Page or, if a weekly average yield to maturity for United States Treasury securities maturing on the
weighted average life of the Loans is reported in the most recent H.15 Page, such weekly average yield to maturity as published in such H.15 Page.
"UCC" means the Uniform Commercial Code in effect from time to time in the State of New York; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
"UCC Financing Statement" means any financing statement to be filed in any appropriate filing office in any UCC Jurisdiction and that (i) indicates the applicable Collateral by
any description which reasonably approximates the description contained in this Agreement and in the Mortgage as all applicable assets of the applicable Borrower Party or words of similar effect, regardless of whether any particular asset comprised
in such Collateral falls within the scope of Article 9 of the UCC or other similar provisions of the UCC Jurisdiction, and (ii) contains any other information required by part 5 of Article 9 of the UCC, or by any other applicable provision under
the laws of the UCC Jurisdiction, for the sufficiency or filing office acceptance of any financing statement or amendment; provided, however, that in addition to any financing statement to be filed in any appropriate filing office in any UCC Jurisdiction, UCC Financing Statements shall include at all times financing statements to be filed in the
District of Columbia.
- 35 -
"UCC Jurisdiction" means any Uniform Commercial Code jurisdiction in which the filing of a UCC Financing Statement is effective to perfect a security interest in the Collateral
under this Agreement, the Mortgage, or any other Loan Document.
"Unadjusted Benchmark Replacement" means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
"Uncertificated Security" has the meaning set forth in the Mortgage.
"Undelivered Pool Aircraft" means, as of any date, the pool of Aircraft Owned by a Borrower Party or any Affiliate thereof, satisfying each of the following conditions: (x) the
Borrower Parties shall each have a good faith intention and, to FLL's and the applicable Servicer's knowledge, the ability to satisfy each of the conditions under the Loan Documents (including the conditions set forth in Section 4.02 of this
Agreement) such that such Aircraft will constitute a Pool Aircraft within a reasonable period of time after the Effective Date and (y) such Aircraft shall be listed on Schedule 3.17(a) attached hereto, as amended, restated or supplemented from time
to time pursuant to the terms of this Agreement.
"United States" means the United States of America.
"Unrestricted Cash" means, at any time, the amount of cash and cash equivalents specified on FLL's consolidated balance sheet, excluding any thereof that are classified as
restricted.
"UNSC" has the meaning set forth in Section 3.16.
"UPA Cash Collateral" means cash and/or any Investment Security constituting UPA Loan Amounts (and any investment earnings thereon) held by the Securities Intermediary in the
LTV Securities Account.
"UPA Loan Amount" means the principal amount of the Loans related to the Undelivered Pool Aircraft transferred to the LTV Securities Account on the Effective Date (which amount
shall be designated as such on Exhibit A-1), as such amount may be reduced from time to time (i) pursuant to releases pursuant to Section 2.03(c) and (ii) by any investment losses thereon.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in
Part I of Subtitle E of Title IV of ERISA.
- 36 -
Section 1.02 Terms Generally. The definitions of terms herein (including those incorporated by reference to
another document) apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun includes 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 word "will" shall be construed to have the same meaning and effect as the word "shall." The words "principal amount" shall in respect of any Loan mean 100% of the principal
amount of the Loan, notwithstanding the proviso in Section 2.01(a). Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed
to include such Person's successors and assigns, (c) the words "herein," "hereof" and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and, in the case of any Schedule, as the same may be amended or supplemented in
accordance herewith from time to time, (e) the word "property" shall be construed to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, and (f) to the extent that they refer
to or concern the Borrower, any references in this Agreement to "director" or "directors" shall be read as to mean "manager" or "managers" respectively.
Section 1.03 Accounting Terms; Changes in GAAP or IFRS. Except as otherwise expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP or IFRS (as applicable) as in effect from time to time.
Section 1.04 Times. Except as otherwise expressly provided herein, all references to times are to such time in New York, New York.
THE CREDITS
Section 2.01 Commitment. (a) On the Effective Date, subject to the terms and conditions and relying on the representations and warranties set
forth herein, each Lender severally and not jointly, agrees to make a Loan to the Borrower in a principal amount equal to its Commitment; provided that the gross proceeds required to be funded by each Lender
with respect to its Loan shall be 95.5% of the principal amount of the Loan. The Loans hereunder are not revolving and amounts repaid or prepaid may not be reborrowed. The proceeds of any Loan made to the Borrower shall be simultaneously made
available to FWAH pursuant to an FWAH Intercompany Loan from the Borrower.
(b) Any undrawn portion of the Commitments shall automatically terminate immediately after the Borrowing on the Effective Date.
Section 2.02 Request to Borrow Loans; Request to Release Loans. (a) The Borrower shall request that the Lenders make the Loans by delivering to
the Administrative Agent a notice in writing (a "Borrowing Request") no later than 12:00 p.m., New York City time, at least three (3) Business Days before the Effective Date. Such Borrowing Request shall be
irrevocable and shall specify the aggregate amount of the Loans to be made on the Effective Date (which aggregate amount shall equal the amount of the Aggregate Commitments). Following the receipt of a Borrowing Request, the Administrative Agent
shall promptly notify each Lender thereof.
- 37 -
(b) The Borrower may from time to time request that the Collateral Agent release the Aggregate Requested Release Amount by delivering to the Administrative Agent and Collateral Agent a
notice in writing in the form attached hereto as Exhibit J (a "Release Request") no later than 12:00 p.m., New York City time, at least three (3) Business Days before a Release Date. Such Release Request
shall be revocable. Following the receipt of a Release Request, the Administrative Agent shall promptly notify each Lender thereof.
Section 2.03 Funding of Loan; Release of Aggregated Requested Release Amount. (a) Each Lender shall wire the principal amount of its Loan in
immediately available funds, by 12:00 noon, New York City time, on the Effective Date, to the Administrative Agent's Account.
(b) Upon satisfaction or waiver of the applicable conditions set forth in Section 4.01, promptly upon receipt from each Lender of an amount equal to such Lender's Commitment as described in
Section 2.03(a), the Administrative Agent shall (1) make an amount equal to the IPA Loan Amount available to the Borrower in like funds as received by the Administrative Agent by wire transfer of such funds to the account designated by the Borrower
in its Borrowing Request or such other account in accordance with instructions provided by the Borrower in writing prior to the Effective Date to (and reasonably acceptable to) the Administrative Agent and (2) transfer to the LTV Securities Account
the UPA Loan Amount. All amounts in the LTV Securities Account (including the UPA Loan Amount) shall be invested in Investment Securities in accordance with Section 2.23 of the Mortgage.
(c) Upon satisfaction or waiver of the applicable conditions set forth in Section 4.02, on a Release Date, the Collateral Agent (following notice to the Administrative Agent) shall direct
the Securities Intermediary to release from the LTV Securities Account to the Borrower the Aggregate Requested Release Amount to the account designated in the relevant Release Request; provided that, as of
such Release Date, the Loan-to-Value Ratio shall not exceed 70.0%; provided, further, that, on the Final Release Date, in
addition to the Aggregate Requested Release Amount, all other UPA Loan Amounts (if any) in the LTV Securities Account shall be released to the Borrower to the account designated in the relevant Release Request.
Section 2.04 Interest. (a) Subject to the provisions of this Section 2.04, the Loans (whether made available to the Borrower on the Effective
Date pursuant to Section 2.03(b)(1) or transferred to the LTV Securities Account pursuant to Section 2.03(b)(2) (whether released from the LTV Securities Account pursuant to Section 2.03(c) or not)) shall bear interest at a rate per annum equal to the LIBO Rate for the Interest Period in effect plus the Applicable Margin plus, if a Liquidity Event has
occurred and is continuing, the Step-Up Margin. Interest shall be computed on the basis of a year of 360 days and actual days elapsed, except that interest computed by reference to the Base Rate shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and actual days elapsed. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; provided that any Loan that is repaid on the same day on which it is made shall bear interest for one day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive
and binding for all purposes, absent manifest error.
- 38 -
(b) If the Borrower shall default in the payment of any principal of or interest on the Loans or any other amount due hereunder, by acceleration or otherwise, then, until such defaulted
amount shall have been paid in full, to the extent permitted by law, all such overdue amounts due from the Borrower under this Agreement and the other Loan Documents shall bear interest (after as well as before judgment), payable on demand, at a
rate equal to (i) the interest rate otherwise applicable to the Loans pursuant to this Section 2.04 plus (ii) 2.00% per annum.
(c) Interest accrued on the Loans shall be payable in arrears on each Payment Date, shall be calculated to include the first day of each Interest Period and to, but excluding, the last day
of each Interest Period and shall be paid into the Administrative Agent's Account; provided that (i) interest accrued pursuant to Section 2.04(b) shall be payable on demand and (ii) upon any repayment of the
Loans, interest accrued on the principal amount repaid shall be payable on the date of such repayment.
(d) The Administrative Agent shall determine, in accordance with the terms of this Agreement, each interest rate applicable to the Loans hereunder. The Administrative Agent shall promptly
notify the Borrower and the Lenders of each rate of interest so determined, and its determination thereof shall be prima facie evidence thereof.
Section 2.05 Repayment of Loans; Evidence of Debt. (a) The Borrower agrees to pay to the Lenders on each Payment Date by deposit into the
Administrative Agent's Account the outstanding principal amount of the Loans in quarterly installments equal to 1.25% of the original aggregate principal amount of the Loans funded on the Effective Date. To the extent not previously paid, all Loans
shall be due and payable on the Maturity Date. The unpaid principal amount of the Loans outstanding at any time shall be deemed reduced by any amounts paid by any Guarantor Party pursuant to Article VII on a dollar-for-dollar basis.
(b) Each Lender shall maintain on its internal records an account or accounts evidencing the Obligations of the Borrower to such Lender, including the amounts of the Loans made by it and
each repayment and prepayment in respect thereof. The entries made in the accounts maintained pursuant to this subsection (b) shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that any failure by any Lender to maintain such accounts or any error therein shall not affect the Borrower's obligation to repay the Loans
in accordance with the terms of this Agreement; provided, further, in the event of any inconsistency between the Register and any Lender's records, the recordations
in the Register shall govern.
(c) The Administrative Agent (or its agent or sub-agent appointed by it) shall maintain at the Administrative Agent's Office a register for the recordation of the names and addresses of
the Lenders and the Commitments and Loans of each Lender from time to time (the "Register"). The Register shall be available for inspection by the Borrower or any Lender (with respect to any entry relating
to such Lender's Loans) at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall record, or shall cause to be recorded, in the Register the Commitments and the Loans in accordance with the
provisions of Section 9.06, and each repayment or prepayment in respect of the principal amount of the Loans, and any such recordation shall be conclusive and binding on the Borrower and each Lender, absent manifest error; provided that, failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Commitments or the Borrower's Obligations in respect of any Loan. The Borrower hereby
designates the Administrative Agent to serve as the Borrower's agent solely for purposes of maintaining the Register as provided in this Section 2.05 and the Borrower hereby agrees that the Administrative Agent and its officers, directors,
employees, agents, sub-agents and affiliates shall constitute "Indemnitees."
- 39 -
(d) If so requested by any Lender by written notice to the Borrower (with a copy to the Administrative Agent) at any time, the Borrower shall, on the Effective Date (or, if such notice is
delivered after the Effective Date, promptly after the Borrower's receipt of such notice) execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to
Section 9.06) a promissory note, substantially in the form of Exhibit F hereto, evidencing the Loan made by the Lender on the Effective Date (each, a "Note").
(a) Optional Prepayments. The Borrower will have the right at any time to prepay the aggregate outstanding principal amount of the Loans in whole
or in part in amounts not less than $5,000,000 or increments of $500,000 in excess thereof and otherwise in accordance with the provisions of this Section by deposit into the Administrative Agent's Account (provided
that such payment may be made by release of funds in the LTV Securities Account if so elected by the Borrower in amounts not less than $5,000,000 or increments of $500,000 unless such payment is for all amounts remaining in the LTV
Securities Account). Prior to the one year anniversary of the Effective Date, any prepayment pursuant to this Section 2.06(a) shall be accompanied with payment of the applicable Make-Whole Premium.
(b) Mandatory Prepayments. (i) The Borrower shall prepay the aggregate outstanding principal amount of the Loans to the extent required pursuant
to Section 5.16. For the avoidance of doubt, payments made in order to comply with Section 5.16 may be in any amounts necessary for such compliance. (ii) The Borrower shall prepay the aggregate outstanding principal amount of the Loans in the
event that the Servicing Agreement is terminated and a replacement servicing agreement with terms (relating to the services and for the avoidance of doubt not relating to any fees) acceptable to the Required Lenders, acting reasonably, has not been
entered into with a servicer acceptable to the Required Lenders, acting reasonably, on or prior to the date of such termination; provided that where the Borrower has requested in writing (and such request
may be made prior to the date of such termination) that the Lenders consent to such new arrangements, the replacement servicer and servicing agreement shall be deemed to be acceptable to the Required Lenders if the Borrower has not received a
response within 30 days of such request and all references to "Servicer" and "Servicing Agreement" hereunder and under the other Loan Documents shall thereafter be to the replacement servicer and the replacement servicing agreement.
(c) Prepayment Application. Each prepayment of any principal amount of the Loans shall be accompanied by accrued interest on the amount being
prepaid to the date of such prepayment. Any partial prepayments of the Loans in accordance with Section 2.06(a) shall be applied to the then outstanding principal balance of the Loans. Any partial prepayments of the Loans in accordance with
Section 2.06(b) or Section 2.08(g) shall be applied pro rata to the then outstanding installments of principal of the Loans.
- 40 -
(d) Notice of Prepayments. The Borrower shall notify the Administrative Agent by telephone, facsimile or
email of any prepayment of the principal amount of the Loans hereunder not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment in the case of a prepayment under Section 2.06(a), and one Business Day before
the date of prepayment in the case of a prepayment under Section 2.06(b). Each such notice shall be irrevocable and shall specify the prepayment date, the aggregate principal amount of the Loans to be prepaid.
Section 2.07 Fees. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times specified in the
Administrative Agent Fee Letter. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.
(a) Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes. (i) Any and all payments by or on account of any obligation of
the Borrower hereunder or under any other Loan Document shall to the extent permitted by applicable Laws be made free and clear of and without reduction or withholding for any Taxes. If, however, applicable Laws require the Borrower or the
Administrative Agent, as the case may be, to withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance with such Laws as determined by the Borrower or the Administrative Agent, as the case may be, upon the basis of the
information and documentation to be delivered pursuant to subsection (e) below.
(ii) If the Borrower or the Administrative Agent, as the case may be, shall be required to withhold or deduct any Taxes from any payment, then (A)
the Borrower or the Administrative Agent, as the case may be, shall withhold or make such deductions as are required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Borrower or the
Administrative Agent, as the case may be, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with applicable Law, and (C) to the extent that the withholding or deduction is made on account of
Indemnified Taxes, the sum payable by the Borrower shall be increased as necessary so that after any such required withholding or the making of all such required deductions (including deductions applicable to additional sums payable under this
Section 2.08(a)(ii)(C)) the Administrative Agent or the Lender, as the case may be, receives an amount equal to the sum it would have received had no such withholding or deduction been made.
(b) Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes
to the relevant Governmental Authority in accordance with applicable Laws.
- 41 -
(c) Tax Indemnifications. Without limiting the provisions of subsection (a) or (b) above, the Borrower shall, and does hereby, indemnify the
Administrative Agent and each Lender, and shall make payment in respect thereof within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) withheld or deducted by the Borrower or the Administrative Agent from payments made under this Agreement (to the extent no increased payment has been made in accordance with Section
2.08(a)(ii)(C) on account of such withholding or deduction) or paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of any such payment or liability delivered to the Borrower by a Lender (with a copy to the
Administrative Agent), or by the Administrative Agent, on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(d) Evidence of Payments. Upon request by the Borrower, or the Administrative Agent, as the case may be,
after any payment of Taxes by the Borrower, by the Administrative Agent to a Governmental Authority as provided in this Section 2.08, the Borrower shall deliver to the Administrative Agent, or the Administrative Agent, shall deliver to the
Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably
satisfactory to the Borrower, the Administrative Agent.
(e) Status of Lenders; Tax Documentation. (i) Each Lender shall deliver to the Borrower and to the Administrative Agent, at the time or times
reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable Laws or by the taxing authorities of any jurisdiction and such other reasonably requested information as
will permit the Borrower or the Administrative Agent as the case may be, to determine (A) whether or not payments made hereunder or under any other Loan Document are subject to Taxes, (B) if applicable, the required rate of withholding or
deduction, (C) such Lender's entitlement to any available exemption from, or reduction of, applicable Taxes in respect of payments to be made to such Lender by the Borrower pursuant to this Agreement or otherwise to establish such Lender's status
for withholding tax purposes in the applicable jurisdiction and (D) the applicability of or compliance with any obligations in respect of the exchange of information by or on behalf of the Administrative Agent under or in connection with or in
respect of FATCA, the Cayman FATCA Legislation, or other Tax Account Reporting Rules; provided that, in such Lender's reasonable discretion, such documentation, or its completion, execution or submission,
would not prejudice the legal position of such Lender, including any of its lending offices, or cause such Lender or any of its lending offices to suffer any economic, legal, or regulatory disadvantage (unless indemnified against in a manner
reasonably satisfactory to the Lender), or would be either (x) commercially impracticable (including as a result of any existing confidentiality undertakings) or (y) contrary to the constitutional rules or regulations of the Lender or its lending
offices.
(ii) Each Lender shall promptly (A) notify the Borrower and the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction,
and (B) at the request and expense of the Borrower, take such steps as shall not be materially disadvantageous to it as determined in the sole good faith discretion of such Lender, and as may be reasonably necessary (including the re-designation of
its Lending Office) to avoid any requirement of applicable Laws of any jurisdiction that the Borrower and/or the Administrative Agent, as the case may be, make any withholding or deduction for Indemnified Taxes from amounts payable to such Lender.
- 42 -
(f) Treatment of Certain Refunds. Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to file for or
otherwise pursue on behalf of a Lender, any refund of Taxes withheld or deducted from funds paid for the account of such Lender, as the case may be. If the Administrative Agent or any Lender determines, in its sole discretion, that it has received
a refund (or credit or offset against an Excluded Tax in lieu of a cash refund of a Tax or Other Tax) of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section, it shall, except in the event (and for so long as) an Event of Default has occurred and is continuing, pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund (or credit or offset)), net of all Taxes resulting from such refund and out-of-pocket expenses incurred by the Administrative Agent
or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund (or credit or offset)); provided that the Borrower,
upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, or such
Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent or any Lender to make available its tax returns
(or any other information relating to its taxes that it deems confidential in its sole good faith discretion) to the Borrower or any other Person.
(g) Illegality; Impracticality; Increased Costs. (i) If any Lender determines that any Law has made it unlawful, or that any Governmental Authority
has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Loans, or to determine or charge interest rates based upon the LIBO Rate, or any Governmental Authority has imposed material restrictions on
the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, or the making, maintaining or continuation of its Loans has become impracticable, as a result of contingencies occurring after the
date hereof which materially and adversely affect the London interbank market or the position of such Lender in that market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, such Lender shall be an "Affected Lender" and any obligation of such Lender to make or continue Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such
determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), (A) in the case of illegality, only if it is possible to eliminate such illegality by converting
the Loans to Loans bearing interest based on the Base Rate, and in the case of impracticality or other circumstance described above not constituting illegality, all Loans of such Lender shall thereafter be converted to Loans that bear interest at a
rate equal to the Base Rate plus the Applicable Margin plus, if a Liquidity Event has occurred and is continuing, the Step-Up Margin either on the last day of the Interest Period therefore, if such Lender
may lawfully continue to maintain such Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans or (B) otherwise, solely in the case of illegality, prepay all Loans of such Lender either on the last day of
the Interest Period therefor, if such Lender may lawfully continue to maintain such Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment, the Borrower shall also pay accrued
interest on the amount so prepaid.
- 43 -
(h) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or
credit extended or participated in by, any Lender;
(ii) subject any Lender to any tax of any kind whatsoever with respect to this Agreement, or change the basis of taxation of payments to such Lender in respect thereof (except for
Indemnified Taxes or Other Taxes covered by Section 2.08 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender); or
(iii) impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement made by such Lender or participation therein; and the result of any
of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan (or of maintaining its obligation to make any Loan), or to reduce the amount of any sum received or receivable by such Lender under or in respect of the
Loan Documents then, within ten (10) Business Days after demand by such Lender, the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.
(i) If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender's holding company, if any, regarding capital requirements has
or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by such Lender to a
level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered.
(j) A certificate of a Lender setting forth in reasonable detail the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, for the amounts
specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) Business Days after
receipt thereof.
(k) Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender's right to demand such
compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than
six months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor (except that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof).
- 44 -
(l) The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds
or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good
faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least ten (10) days' prior notice (with a copy to the
Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice ten (10) days prior to the relevant Payment Date, such additional interest shall be due and payable ten (10) days from receipt of such notice.
(m) Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any
loss, cost or expense incurred by it as a result of:
(i) any conversion, payment or prepayment of any Loans on a day other than the last day of the Interest Period (whether voluntary, mandatory, automatic, by reason of acceleration, or
otherwise);
(ii) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay or borrow any Loans on the date or in the amount notified by the Borrower;
or
(iii) any assignment of a Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 9.06; (for the avoidance of
doubt, such loss, cost or expense shall exclude any loss of anticipated profits and shall include any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loans). For purposes of calculating amounts
payable by the Borrower to the Lenders under this clause (m), each Lender shall be deemed to have funded each Loan made by it at the LIBO Rate by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such Loan was in fact so funded, with the result that the Borrower's obligation to compensate each Lender for its loss, profit and expense as provided in this clause (m) shall be deemed to be in
the amount of the excess, if any, of the interest at such LIBO Rate on the applicable amount for the remainder of such Interest Period over interest at the LIBO Rate as it would be in effect if quoted on the applicable date on the applicable amount
for the remainder of the Interest Period.
- 45 -
(n) If any Lender requests compensation, the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender or if any Lender
gives a notice under this Section 2.08, then, without limiting the Borrower's rights under Section 2.11(b), such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or affiliates, if, in the good faith judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to this Section 2.08 in the
future, or eliminate the need for the notice pursuant to this Section 2.08, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(o) All of the Borrower's obligations under this Section 2.08 shall survive termination of the Aggregate Commitments, repayment of all other Obligations hereunder, and resignation of the
Administrative Agent.
Section 2.09 Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) All payments to be made by the Borrower shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders
to which such payment is owed, by wire transfer to the Administrative Agent's Account in Dollars and in immediately available funds not later than 11:00 a.m. on the date specified herein. Upon identification of receipt of funds, the Administrative
Agent shall promptly distribute to each Lender its Applicable Percentage in respect of the relevant Loans (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender's Lending Office. For
the avoidance of doubt, until such time as the Administrative Agent is able to identify receipt of funds from the Borrower, the Administrative Agent shall have no obligation to make payment to the Lenders. All payments received by the
Administrative Agent after 11:00 a.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business
Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected on computing interest or fees, as the case may be.
(b) If at any time insufficient funds are received by the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, the Administrative Agent shall
promptly apply the funds as follows: (i) first, to pay interest and fees then due hereunder ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such
parties and (ii) second, to pay principal then due hereunder ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.
(c) If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in this Article II, and such funds are not made available to the
Borrower by the Administrative Agent because the conditions to such Loan are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender,
without interest.
- 46 -
(d) Unless the Administrative Agent shall have received notice from a Lender prior to the Effective Date that such Lender does not intend to make available to the Administrative Agent such
Lender's share of such Loans, the Administrative Agent may assume that such Lender has made such share available to the Administrative Agent on such date in accordance with Section 2.03 and may, in its sole discretion, but shall not be obligated
to, make available to the Borrower a corresponding amount in reliance upon such assumption. In such event, if a Lender has not in fact made its share of the Loans available to the Administrative Agent, then the applicable Lender shall pay to the
Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount was made available to the Borrower to but excluding the date of payment to
the Administrative Agent, at the greater of (A) the Federal Funds Rate and (B) the customary rate set by the Administrative Agent for the correction of errors among banks for three Business Days and thereafter, the Base Rate, plus any
administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing. If such Lender pays its share of the applicable Loans to the Administrative Agent, then the amount so paid shall
constitute such Lender's Loan. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such
corresponding amount to the Administrative Agent together with interest thereon, for each day from and including the date such amount was made available to the Borrower to but excluding the date of payment to the Administrative Agent, at the Base
Rate plus the Applicable Margin. Nothing in this Section 2.09(d) shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that the Borrower may have against any Lender as a result of
any default by such Lender hereunder.
A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (d) shall be conclusive, absent manifest error.
(e) If the Required Lenders determine that for any reason (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and
Interest Period, (b) adequate and reasonable means do not exist for determining the LIBO Rate for any Interest Period, or (c) the LIBO Rate for any requested Interest Period with respect to a proposed Loan does not adequately and fairly reflect the
cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the interest rate applicable to the Loans shall be a rate equal to the Base Rate plus the Applicable Margin plus, if a Liquidity Event has occurred and is continuing, the Step-Up Margin until the Administrative Agent (upon the instruction of the Required Lenders)
revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a borrowing of the Loans.
(f) The obligations of the Lenders hereunder are several and not joint. All Loans shall be made, and all participations purchased, by the Lenders simultaneously on a pro rata basis in accordance with their respective Applicable Percentages, it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender's obligation to make a
Loan requested hereunder or purchase a participation required hereby nor shall any Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender's obligation to make a Loan requested hereunder
or purchase a participation required hereby.
- 47 -
(g) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Loans made by it resulting
in such Lender's receiving payment of a proportion of the aggregate amount of such Loans and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving
such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of
all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them; provided that:
(i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be
rescinded and the purchase price restored to the extent of such recovery, without interest; and
(ii) the provisions of this subsection (g) shall not be construed to apply to any payment made by or on behalf of the Borrower pursuant to and in accordance with the express terms of this
Agreement (including the application of funds arising from the existence of a Defaulting Lender), other than an assignment to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions this subsection (g) shall apply).
(a) Sale of Pool Aircraft. The Borrower may sell any Pool Aircraft if (i) the Borrower shall have provided
at least three (3) days' revocable prior written notice to the Administrative Agent (who shall promptly thereafter notify the Lender Parties) prior to any such sale of a Pool Aircraft, (ii) after giving pro forma
effect to such sale and prepayment of any Pool Aircraft, the Borrower shall be in compliance with Section 5.16(a), (iii) no Default or Event of Default shall have occurred and be continuing, (iv) after giving pro
forma effect to such sale, the Designated Pool shall continue to satisfy the Pool Specifications and (v) the Borrower shall have prepaid (or is concurrently therewith, prepaying) the Loans in accordance with Section 2.06(b) and (c) if such
prepayment is required after the Borrower has taken any other actions to comply with Section 5.16. Upon satisfaction of the conditions set forth in the preceding sentence with respect to any Pool Aircraft, the Collateral Agent's security interest
in, and Lien on, such Pool Aircraft (and any other Aircraft Assets directly related to such Pool Aircraft) and/or any related Equity Collateral shall be automatically released, and Schedule 3.17(a) shall be amended to reflect the removal of such
Pool Aircraft from the Designated Pool. The Collateral Agent shall promptly execute and deliver to the Borrower, at the Borrower's expense, all documents that the Borrower shall reasonably request to evidence its release of the security interests
in, and Liens on, the applicable Pool Aircraft (and any other Aircraft Assets directly related to such Pool Aircraft) and/or any related Equity Collateral.
- 48 -
(b) Substitution of a Qualified Aircraft for a Pool Aircraft; Addition of Non-Pool Aircraft to the Designated Pool.
(i) The Borrower may add any Qualified Aircraft to the Designated Pool at any time by substituting such Qualified Aircraft for a Pool Aircraft so long as it takes all actions to cause
(x) the owner thereof to comply with the conditions and obligations of a Lessor Subsidiary by the date the Qualified Aircraft becomes a Pool Aircraft and/or (y) the Qualified Aircraft to become a part of the Designated Pool; provided that:
(A) if such Qualified Aircraft is a Pool Aircraft, such Qualified Aircraft is Owned by a Lessor Subsidiary;
(B) the Borrower shall have provided three Appraisals of such Qualified Aircraft from Qualified Appraisers, each as of a date no later than the most recent Appraisals of the other PS Pool
Aircraft and after giving pro forma effect to such addition, the Borrower shall be in compliance with Section 5.16(a);
(C) if such Qualified Aircraft is a Pool Aircraft, each relevant Borrower Party shall have executed and delivered to the Administrative Agent and the Collateral Agent a Grantor Supplement
or a Collateral Supplement, as the case may be, and such certificates, opinions and documents (including UCC Financing Statements, charge documents and registrations and recordings with the FAA (if applicable) and the International Registry) as are
required to grant to the Collateral Agent, for the benefit of the Secured Parties, a perfected security interest in, and Lien on, such Qualified Aircraft and any other related Aircraft Asset, Equity Collateral and other Collateral of the relevant
Lessor Subsidiary (it being understood and agreed that, with respect to each applicable Aircraft Asset and any related Equity Collateral of the relevant Lessor Subsidiary, only the Express Perfection Requirements shall apply);
(D) if such Qualified Aircraft is a Pool Aircraft, the Borrower shall have delivered a Notice of Assignment to such Lessee in substantially the form of Exhibit F-1 to the Mortgage (or such
other form as has been agreed with the Collateral Agent), and shall have taken such other actions required by clause (a) of the definition of Express Perfection Requirements;
(E) immediately following such Qualified Aircraft becoming a Pool Aircraft, the Designated Pool shall continue to satisfy the Pool Specifications after giving pro forma effect to such addition; and
(F) no Default or Event of Default shall result from or remain in existence after such addition.
(ii) Other than in connection with a substitution of a Qualified Aircraft for a Pool Aircraft which such substitution shall be made in accordance with Section 2.10(b)(i) above, the
Borrower may add any Non-Pool Aircraft to the Designated Pool at any time so long as it takes all actions to cause (x) the owner thereof to comply with the conditions and obligations of a Lessor Subsidiary by the date the Aircraft becomes a Pool
Aircraft and/or (y) the Non-Pool Aircraft to become a part of the Designated Pool; provided that:
- 49 -
(A) if such Aircraft is a Pool Aircraft, such Aircraft is Owned by a Lessor Subsidiary;
(B) the Borrower shall have provided three Appraisals of such Aircraft from Qualified Appraisers, each as of a date no later than the most recent Appraisals of the other PS Pool Aircraft
and after giving pro forma effect to such addition, the Borrower shall be in compliance with Section 5.16(a);
(C) if such Aircraft is a Pool Aircraft, each relevant Borrower Party shall have executed and delivered to the Administrative Agent and the Collateral Agent a Grantor Supplement or a
Collateral Supplement, as the case may be, and such certificates, opinions and documents (including UCC Financing Statements, charge documents and registrations and recordings with the FAA (if applicable) and the International Registry) as are
required to grant to the Collateral Agent, for the benefit of the Secured Parties, a perfected security interest in, and Lien on, such Aircraft and any other related Aircraft Asset, Equity Collateral and other Collateral of the relevant Lessor
Subsidiary (it being understood and agreed that, with respect to each applicable Aircraft Asset and any related Equity Collateral of the relevant Lessor Subsidiary, only the Express Perfection Requirements shall apply);
(D) if such Aircraft is a Pool Aircraft, the Borrower shall have delivered a Notice of Assignment to such Lessee in substantially the form of Exhibit F-1 to the Mortgage (or such other
form as has been agreed with the Collateral Agent), and shall have taken such other actions required by clause (a) of the definition of Express Perfection Requirements;
(E) immediately following such Aircraft becoming a Pool Aircraft, the Designated Pool shall continue to satisfy the Pool Specifications after giving pro
forma effect to such addition; and
(F) no Default or Event of Default shall result from or remain in existence after such addition.
(c) Intermediate Lessees. In connection with (i) the replacement of any Lease of any Pool Aircraft, (ii)
the addition of Non-Pool Aircraft to the Designated Pool, or (iii) any Requirement of Law, a Lessor Subsidiary shall be entitled, by giving notice (an "Intermediate Lease Notice") to the Administrative Agent,
to enter into an Intermediate Lease with an Intermediate Lessee with respect to such Aircraft; provided that:
(i) each Intermediate Lessee shall have executed and delivered to the Administrative Agent and the Collateral Agent (1) at least three (3) days prior to entering into an Intermediate
Lease, a Borrower Party Request and Assumption Agreement, (2) a Grantor Supplement and (3) such certificates, opinions and documents (including UCC Financing Statements, charge documents and registrations and recordings with the FAA (if
applicable), the International Registry and/or any Applicable Non-U.S. Aviation Law) as are required to grant to the Collateral Agent, for the benefit of the Secured Parties, a perfected security interest in, and Lien on, the Collateral held by
such Intermediate Lessee or the Equity Collateral related to such Intermediate Lessee (it being understood and agreed that, with respect to each applicable Aircraft Asset and any related Equity Collateral of the relevant Intermediate Lessee, only
the Express Perfection Requirements shall apply);
- 50 -
(ii) such Intermediate Lessee shall have delivered a Notice of Assignment to such Lessee in substantially the form of Exhibit F-1 to the Mortgage (or such other form as has been agreed
with the Collateral Agent), and shall have taken such other actions required by clause (a) of the definition of Express Perfection Requirements.
(iii) if such Intermediate Lessee is incorporated under the laws of Ireland, within 21 days following the execution of the relevant Security Documents, the relevant Intermediate Lessee
and/or the relevant Borrower Party, as applicable, shall enter into an Irish Charge Over Shares and cause each such Security Document to be filed with the Irish Companies Registration Office and where applicable the Irish Revenue Commissioners and
in each case shall provide evidence of such filings reasonably satisfactory to the Administrative Agent;
(iv) [Reserved]; and
(v) if such Intermediate Lessee is incorporated under the laws of another acceptable jurisdiction (as listed in the definition of "Intermediate Lessee"),
the relevant Intermediate Lessee and/or the relevant Borrower Party or Guarantor Party, as applicable, shall enter into a charge, pledge or equivalent security agreement, in respect of the shares or other Equity Interests in the Intermediate Lessee
and shall take all steps required under the laws of such jurisdiction in order to ensure the validity, perfection, priority and enforceability of the security interests created thereby.
(d) Termination of Intermediate Lessee's Status. FLL may from time to time, upon not less than three (3)
days' revocable prior written notice from FLL to the Administrative Agent, at any time and from time to time cause the relevant Borrower Party to assign the Equity Interests in an Intermediate Lessee to any Person that is not a Borrower Party or
otherwise terminate an Intermediate Lessee's status as such, provided that such Intermediate Lessee is not party to an Intermediate Lease or a Lease or will not be at the time of such transfer or other
termination of such Intermediate Lessee's status as such takes effect. If an Intermediate Lessee's status is terminated as such, the Collateral Agent's security interests in, and Liens on, the assets of such Intermediate Lessee and the Equity
Collateral in respect of such Intermediate Lessee shall be automatically released. The Collateral Agent shall promptly execute and deliver to the Borrower, at the Borrower's expense, all documents that the Borrower shall reasonably request to
evidence its release of the security interests in and Liens on, the applicable assets released in accordance with the previous sentence.
(e) Lessor Subsidiaries. The Borrower shall be entitled, by giving notice (a "Lessor Subsidiary Notice") to the Administrative Agent, to permit a Pool Aircraft to be Owned by a Lessor Subsidiary (including by transferring such Ownership from a Borrower Party or Guarantor Party to a Lessor Subsidiary or from
one Lessor Subsidiary to another); provided that:
- 51 -
(i) each Lessor Subsidiary shall have executed and delivered to the Administrative Agent and the Collateral Agent (1) at least three (3) days prior to Owning a Pool Aircraft, a Borrower
Party Request and Assumption Agreement, (2) a Grantor Supplement and (3) such certificates, opinions and documents (including UCC Financing Statements, charge documents and registrations and recordings with the FAA (if applicable) and the
International Registry) as are required to grant to the Collateral Agent, for the benefit of the Secured Parties, a perfected security interest in, and Lien on, the Collateral held by such Lessor Subsidiary and the related Equity Collateral in
respect of such Lessor Subsidiary (it being understood and agreed that, with respect to each Aircraft Asset and the related Equity Collateral in respect of such Lessor Subsidiary, only the Express Perfection Requirements shall be required to be
satisfied);
(ii) a Borrower Party or Guarantor Party shall hold all of the Equity Interest in such Lessor Subsidiary and such Borrower Party or Guarantor Party shall have executed and delivered to the
Administrative Agent and the Collateral Agent (1) a Collateral Supplement, (2) the original Certificated Security or Instrument evidencing such Borrower Party's or Guarantor Party's ownership interest in such Lessor Subsidiary and (3) such
certificates, opinions and documents (including UCC Financing Statements and charge documents) as are required to grant to the Collateral Agent, for the benefit of the Secured Parties, a perfected security interest in, and Lien on, the Equity
Interests held by such Borrower Party or Guarantor Party in such Lessor Subsidiary;
(iii) such Lessor Subsidiary (or other relevant Borrower Party) shall have delivered a Notice of Assignment to the applicable Lessee in substantially the form of Exhibit F-1 to the Mortgage
(or such other form as has been agreed with the Collateral Agent), and shall have taken such other actions required by clause (a) of the definition of Express Perfection Requirements;
(iv) the Administrative Agent shall have received with respect to such Lessor Subsidiary such supporting incumbency certificates, opinions of counsel and other documents or information, in
form, content and scope reasonably satisfactory to them, as may be reasonably required by it;
(v) if such Lessor Subsidiary is incorporated under the laws of Ireland, within 21 days following the execution of the relevant Security Documents, the relevant Borrower Party shall enter
into an Irish Charge Over Shares in respect of the Equity Collateral of such Lessor Subsidiary and cause each such Irish Charge Over Shares and each such Security Document to be filed with the Irish Companies Registration Office and where
applicable the Irish Revenue Commissioners and in each case shall provide evidence of such filings reasonably satisfactory to the Administrative Agent; and
(vi) if such Lessor Subsidiary is incorporated under the laws of another acceptable jurisdiction (as listed in the definition of "Lessor Subsidiary"), the relevant Borrower Party shall
enter into a charge, pledge or equivalent security agreement, in respect of the shares or other Equity Interests in the Lessor Subsidiary and shall take all steps required under the laws of such jurisdiction in order to ensure the validity,
perfection, priority and enforceability of the security interests created thereby.
- 52 -
(f) Termination of Lessor Subsidiary's Status. FLL may from time to time, upon not less than three (3)
days' revocable prior written notice from FLL to the Administrative Agent, at any time and from time to time cause the relevant Borrower Party or Guarantor Party to assign the Equity Interests in a Lessor Subsidiary to any Person that is not a
Borrower Party or Guarantor Party or otherwise terminate a Lessor Subsidiary's status as such; provided that such Lessor Subsidiary (i) does not Own any Pool Aircraft (or hold the proceeds thereof) or will
not at the time such transfer or other termination of such Lessor Subsidiary's status as such takes effect and (ii) is not party to any Lease or Intermediate Lease or will not be at the time such transfer or other termination of such Lease or
Intermediate Lessee's status as such takes effect. If a Lessor Subsidiary's status is terminated as such, the Collateral Agent's security interests in, and Liens on, the assets of and the Equity Interest in such Lessor Subsidiary shall be
automatically released. The Collateral Agent shall promptly execute and deliver to FLL, at FLL's expense, all documents that FLL shall reasonably request to evidence its release of the security interests in and Liens on, the applicable assets
released in accordance with the previous sentence.
(g) Specified Representation Deficiency. Notwithstanding anything to the contrary herein, the status of
any Subsidiary of a Borrower Party as an Intermediate Lessee or Lessor Subsidiary shall terminate, for purposes of the calculation of the Loan-to-Value Ratio only (until the Specified Representation Deficiency with respect to such Subsidiary no
longer exists or the status of such Subsidiary as an Intermediate Lessee or Lessor Subsidiary, as applicable, is terminated as such for all purposes in accordance with this Agreement), immediately if, at any time, the relevant Borrower Party and
such Subsidiary are not able to make any of the representations set forth below with respect to such Subsidiary at such time and any Pool Aircraft leased by it shall immediately be deemed to have an Appraised Value of $0.00 (the occurrence of such
situation with respect to such Subsidiary, a "Specified Representation Deficiency"):
(i) Such Subsidiary is subject to civil and commercial laws with respect to its Obligations under this Agreement and the other Loan Documents to which it is a party (collectively as to
such Subsidiary, the "Applicable Subsidiary Documents"), and the execution, delivery and performance by such Subsidiary of the Applicable Subsidiary Documents constitute and will constitute private and
commercial acts and not public or governmental acts. Neither such Subsidiary nor any of its property has any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) under the laws of the jurisdiction in which such Subsidiary is organized and existing in respect of its obligations under the Applicable Subsidiary Documents.
(ii) The Applicable Subsidiary Documents are in proper legal form under the laws of the jurisdiction in which such Intermediate Lessee or Lessor Subsidiary, as applicable, is organized and
existing for the enforcement thereof against such Intermediate Lessee or Lessor Subsidiary, as applicable, under the laws of such jurisdiction, and to ensure the legality, validity, enforceability, priority or admissibility in evidence of the
Applicable Subsidiary Documents.
(iii) It is not necessary to ensure the legality, validity, enforceability, priority or admissibility in evidence of the Applicable Subsidiary Documents that the Applicable Subsidiary
Documents be filed, registered or recorded with, or executed or notarized before, any court or other authority in the jurisdiction in which such Subsidiary is organized and existing or that any registration charge or stamp or similar tax be paid at
such time on or in respect of the Applicable Subsidiary Documents or any other document, except for (A) any such filing, registration, recording, execution or notarization as has been made and (B) any charge or tax as has been timely paid.
- 53 -
(iv) There is no tax, levy, impost, duty, fee, assessment or other governmental charge, or any deduction or withholding, imposed by any Governmental Authority in or of the Subsidiary's
jurisdiction of organization or Tax residence or in which the Subsidiary has an office either (A) on or by virtue of the execution or delivery of the Applicable Subsidiary Documents or (B) on any payment to be made at such time by such Subsidiary
pursuant to the Applicable Subsidiary Documents, except (i) for Excluded Taxes described in clause (c), (d), (e) or (f) of the definition of such term or (ii) as has been disclosed to the Administrative Agent and is not material (as determined by
the Administrative Agent acting reasonably) or (iii) in the case of clause (A), as have been paid.
(v) The execution, delivery and performance of the Applicable Subsidiary Documents executed by such Subsidiary are, under applicable foreign exchange control regulations of the
jurisdiction in which such Subsidiary is organized and existing, not subject to any notification or authorization at such time except (A) such as have been made or obtained or (B) such as cannot be made or obtained until a later date (provided that any notification or authorization described in clause (B) shall be made or obtained as soon as is reasonably practicable).
The Borrower agrees to give prompt notice (not to exceed five (5) Business Days) to the Administrative Agent after it obtains knowledge of any Specified Representation Deficiency and, upon such
notice, will provide a LTV Certificate as of the date of such notice giving pro forma effect to removal of such Subsidiary as a Borrower Party.
(a) Defaulting Lenders. Anything contained herein to the contrary notwithstanding, in the event that any Lender becomes a Defaulting Lender, then
during any Default Period with respect to such Defaulting Lender, such Defaulting Lender shall be deemed not to be a "Lender" for purposes of any amendment, waiver or consent with respect to any provision of the Loan Documents that requires the
approval of the Required Lenders. During any Default Period with respect to a Funds Defaulting Lender that is not also an Insolvency Defaulting Lender, (a) any amounts that would otherwise be payable to such Funds Defaulting Lender with respect to
its Commitments under the Loan Documents (including, without limitation, voluntary and mandatory prepayments and fees) may, in lieu of being distributed to such Funds Defaulting Lender, at the written direction of the Borrower to the Administrative
Agent, be retained by the Administrative Agent and applied in the following order of priority: first, to the payment of any amounts owing by such Funds Defaulting Lender to the Administrative Agent and to
collateralize indemnification and reimbursement obligations of such Funds Defaulting Lender in an amount reasonably determined by the Administrative Agent, and second, to the payment of the Loans of other
Lenders (but not to the Loans of such Funds Defaulting Lender) as if such Funds Defaulting Lender had funded all Defaulted Loans of such Funds Defaulting Lender; and (b) the aggregate principal amount of all outstanding Loans as at any date of
determination shall be calculated as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender. During any Default Period with respect to an Insolvency Defaulting Lender, any amounts that would otherwise be payable to such
Insolvency Defaulting Lender under the Loan Documents (including, without limitation, voluntary and mandatory prepayments and fees) may, in lieu of being distributed to such Insolvency Defaulting Lender, at the written direction of the Borrower to
the Administrative Agent to the extent permitted under applicable law, be retained by the Administrative Agent to collateralize indemnification and reimbursement obligations of such Insolvency Defaulting Lender in an amount reasonably determined by
the Administrative Agent. No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this Section 2.11(a), performance by the Borrower of its obligations hereunder and the other Loan
Documents shall not be excused or otherwise modified as a result of any Lender becoming a Defaulting Lender or the operation of this Section 2.11(a). So long as any Lender is a Defaulting Lender, such Lender shall not be a Hedge Counterparty with
respect to any Hedge Agreement entered into while such Lender was a Defaulting Lender. The rights and remedies against a Defaulting Lender under this Section 2.11(a) are in addition to other rights and remedies which the Borrower may have against
such Defaulting Lender as a result of it becoming a Defaulting Lender and which the Administrative Agent or any Lender may have against such Defaulting Lender with respect thereto. The Administrative Agent shall not be required to ascertain or
inquire as to the existence of any Funds Defaulting Lender or Insolvency Defaulting Lender.
- 54 -
(b) Removal or Replacement of a Lender. Anything contained herein to the contrary notwithstanding, in the event that: (a) (i) any Lender (an "Increased‑Cost Lender") shall give notice to the Borrower that such Lender is an Affected Lender or that such Lender is entitled to receive payments under Section 2.08 or 2.09, (ii) the circumstances which have
caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments shall remain in effect and (iii) such Lender shall fail to withdraw such notice within five Business Days after the Borrower's request for such
withdrawal; or (b) (i) any Lender shall become a Defaulting Lender, (ii) the Default Period for such Defaulting Lender shall remain in effect, and (iii) such Defaulting Lender shall fail to cure the default as a result of which it has become a
Defaulting Lender within five Business Days after the Borrower's request that it cure such default; or (c) in connection with any proposed amendment, modification, termination, waiver or consent with respect to any of the provisions hereof as
contemplated by Section 9.05(b), the consent of the Required Lenders shall have been obtained but the consent of one or more of such other Lenders (each, a "Non‑Consenting Lender") whose consent is required
shall not have been obtained; then, with respect to each such Increased‑Cost Lender, Defaulting Lender or Non‑Consenting Lender (the "Terminated Lender"), the Borrower may, by giving written notice to the
Administrative Agent and any Terminated Lender of its election to do so, elect to cause such Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Loans and its Commitments, if any, in full to one or
more Eligible Assignees (each, a "Replacement Lender") in accordance with the provisions of Section 9.06 and the Borrower shall pay the fees, if any, payable thereunder in connection with any such assignment
from an Increased-Cost Lender, a Non-Consenting Lender or an Insolvency Defaulting Lender, and the Funds Defaulting Lender (if not also an Insolvency Defaulting Lender) shall pay the fees, if any, payable thereunder in connection with any such
assignment from such Defaulting Lender; provided, (1) on the date of such assignment, such Terminated Lender shall have received payment from the Replacement Lender (to the extent of outstanding principal)
or the Borrower (in the case of accrued interest and fees) in an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Terminated Lender, (B) an amount equal to all
unreimbursed advances that have been funded by such Terminated Lender, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued but theretofore unpaid fees, if any, owing to such Terminated
Lender pursuant to Section 2.07; (2) on the date of such assignment, the Borrower shall pay any amounts payable to such Terminated Lender pursuant to Section 2.08 or 2.09; or otherwise as if it were a prepayment and (3) in the event such Terminated
Lender is a Non‑Consenting Lender, each Replacement Lender shall consent, at the time of such assignment, to each matter in respect of which such Terminated Lender was a Non‑Consenting Lender. Upon the prepayment of all amounts owing to any
Terminated Lender and the termination of such Terminated Lender's Commitments, if any, such Terminated Lender shall no longer constitute a "Lender" for purposes hereof; provided, any rights of such Terminated Lender to indemnification hereunder
shall survive as to such Terminated Lender. Each Lender agrees that if the Borrower exercises its option hereunder to cause an assignment by such Lender as a Non-Consenting Lender or Terminated Lender, the Administrative Agent shall be entitled
(but not obligated) and is authorized by each Lender (which authorization is irrevocable and is coupled with an interest) to execute and deliver such documentation as may be required to give effect to an assignment in accordance with Section 9.06
on behalf of a Non-Consenting Lender or Terminated Lender and any such documentation so executed by the Administrative Agent shall be effective for purposes of documenting an assignment pursuant to Section 9.06.
- 55 -
Section 2.12 Release of LTV Cash Collateral. If the Loan-to-Value Ratio is less than 70.0% as most recently determined pursuant to Section 5.16, and the Collateral Agent
at such time holds any LTV Cash Collateral, then upon at least five (5) Business Days prior written notice of the Borrower to the Collateral Agent and the Administrative Agent and so long as no Default or Event of Default has occurred and is
continuing, the Collateral Agent (following notice to the Administrative Agent) shall issue an entitlement order to the Securities Intermediary directing the Securities Intermediary to distribute to the Borrower an amount of the LTV Cash Collateral
as requested by the Borrower, such that the Loan-to-Value Ratio does not exceed 70.0%, after giving pro forma effect to such distribution (but otherwise using the information used to determine such
Loan-to-Value Ratio).
Section 2.13 LTV Securities Account. Bank of Utah, as
securities intermediary (the "Securities Intermediary"), agrees to act as an Eligible Institution under this Agreement and the other Loan Documents in accordance with the provisions of this Agreement for the
purpose of holding any Cash Collateral. Except in its capacity as Securities Intermediary, Bank of Utah waives any claim or lien against any Eligible Account it may have, by operation of law or otherwise, for any amount owed to it by the Borrower
or any other Borrower Party. The Securities Intermediary hereby agrees that, notwithstanding anything to the contrary in the Loan Documents, (i) any amounts of Cash Collateral to be held by the Securities Intermediary and any investment earnings
thereon or other Investment Security will be credited to an Eligible Account with securities account no. 8005540-1 and account name "Fly Willow Funding Limited LTV Securities Account" (the "LTV Securities Account")
which constitutes a Securities Account for which it is a "securities intermediary" (as defined in Section 8-102(a)(14) of the NY UCC) and the Collateral Agent is the "entitlement holder" (as defined in Section 8-102(a)(7) of the NY UCC) of the
"securities entitlement" (as defined in Section 8-102(a)(17) of the NY UCC) with respect to each "financial asset" (as defined in Section 8-102(a)(9) of the NY UCC) credited to such Eligible Account, (ii) all such amounts, any Investment Security
and all other property acquired with cash credited to the LTV Securities Account will be credited to the LTV Securities Account, (iii) all items of property (whether cash, investment property, Investment Security, other investments, securities,
instruments or other property) credited to the LTV Securities Account will be treated as a "financial asset" under Article 8 of the NY UCC, (iv) its "securities intermediary's jurisdiction" (as defined in Section 8-110(e) of the NY UCC) with
respect to the LTV Securities Account is the State of New York, and (v) all securities, instruments and other property in order or registered form and credited to the LTV Securities Account shall be payable to or to the order of, or registered in
the name of, the Securities Intermediary or shall be indorsed to the Securities Intermediary or in blank, and in no case whatsoever shall any financial asset credited to the LTV Securities Account be registered in the name of the Borrower nor any
other Borrower Party, payable to or to the order of the Borrower nor any other Borrower Party or specially indorsed to the Borrower nor any other Borrower Party except to the extent the foregoing have been specially indorsed by the Borrower or any
other Borrower Party to the Securities Intermediary or indorsed in blank. The Collateral Agent agrees that it will hold (and will indicate clearly in its books and records that it holds) its "securities entitlement" to the "financial assets"
credited to the LTV Securities Account as agent for the benefit of the Secured Parties. The Borrower and each other Borrower Party acknowledges that, by reason of the Collateral Agent being the "entitlement holder" in respect of the LTV Securities
Account as provided above, the Collateral Agent shall have the sole right and discretion, subject only to the terms of the Loan Documents, to give all "entitlement orders" (as defined in Section 8-102(a)(8) of the NY UCC) with respect to the LTV
Securities Account and any and all financial assets and other property credited thereto to the exclusion of the Borrower and each other Borrower Party; provided, however, in no event shall the consent of the Borrower nor any other Borrower Party be
required as a condition to the Securities Intermediary complying with any such entitlement order of the Collateral Agent.
- 56 -
(i) Notwithstanding anything to the contrary herein or in any other Loan Document (and any Hedge Agreement shall be deemed not to be a "Loan Document" for purposes of this Section 2.14),
if a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any setting of the then-current Benchmark, then (x) if a Benchmark
Replacement is determined in accordance with clause (1) or (2) of the definition of "Benchmark Replacement" for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan
Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document (other than the Borrower's consent as required
herein) and (y) if a Benchmark Replacement is determined in accordance with clause (3) of the definition of "Benchmark Replacement" for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes
hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any
amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document (other than the Borrower's consent as required herein) so long as the Administrative Agent has not received, by such time, written notice of
objection to such Benchmark Replacement from Lenders comprising the Required Lenders.
- 57 -
(ii) Notwithstanding anything to the contrary herein or in any other Loan Document and subject to the proviso below in this paragraph, if a Term SOFR Transition Event and its related
Benchmark Replacement Date have occurred prior to the Reference Time in respect of any setting of the then-current Benchmark, then (subject to the written consent of the Borrower) the applicable Benchmark Replacement will replace the then-current
Benchmark for all purposes hereunder or under any Loan Document in respect of such Benchmark setting and subsequent Benchmark settings, without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan
Document; provided that, this clause (a)(ii) shall not be effective unless the Administrative Agent has delivered to the Lenders and the Borrower a Term SOFR Notice and the Borrower has consented to the effectiveness of this clause.
(b) Benchmark Replacement Conforming Changes. In connection with the implementation of a Benchmark Replacement, the Administrative Agent (with the
approval of the Borrower) will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark
Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(c) Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (i) any
occurrence of a Benchmark Transition Event, a Term SOFR Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any
Benchmark Replacement Conforming Changes, (iv) the removal or reinstatement of any tenor of a Benchmark pursuant to clause (d) below and (v) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or
election that may be made by the Administrative Agent, the Borrower or, if applicable, any Lender (or group of Lenders) pursuant to this Section 2.14, including any determination with respect to a tenor, rate or adjustment or of the occurrence or
non occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent
from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.14.
(d) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in
connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or LIBO Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information
service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of
information announcing that any tenor for such Benchmark is or will be no longer representative, then the Administrative Agent may modify the definition of "Interest Period" for any Benchmark settings at or
after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark
Replacement) or (B) is not, or is no longer, subject to an announcement that it is or will no longer be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of "Interest Period"
for all Benchmark settings at or after such time to reinstate such previously removed tenor; provided, that any such modification contemplated by this paragraph shall be subject to the consent of the
Borrower.
- 58 -
(e) Benchmark Unavailability Period. Upon the Borrower's receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower
may revoke any request for a Borrowing of, conversion to or continuation of Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a
request for a Borrowing of or conversion to Base Rate Loans. During any Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of Base Rate based upon the then-current
Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of Base Rate.
ARTICLE III
The Borrower and each other Borrower Party represents to the Lender Parties on the Effective Date (and, in the case of a Release Date, with respect to any of the below representations or warranties relating to any
Borrower Party that on such Release Date is also a Relevant Release Party, on such Release Date) that:
Section 3.01 Organization, etc. Each Borrower Party is a Person duly organized or incorporated, validly existing and, if applicable, in good
standing under the laws of the jurisdiction of its organization or incorporation (as applicable); and each Borrower Party has the power and authority to own its property and to carry on its business as now being conducted and is duly qualified and,
if applicable, in good standing as a foreign corporation, company, exempted company 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 3.02 Authorization; Consents; No Conflict. The execution and delivery by such Borrower Party of any Loan Document to which it is a party
and the performance of its obligations thereunder and the consummation of the transactions contemplated thereby (a) are within its organizational or constitutional powers and corporate objects, (b) have been duly authorized by all necessary
corporate action, (c) have received all necessary approvals, authorizations, consents, registrations, notices, exemptions and licenses (if any shall be required) from all other Governmental Authorities and other Persons, except in the case of 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, constitute a default under or conflict
with any provision of (i) Law, (ii) any judgment, decree or order to which such Borrower Party is a party or by which it is bound, (iii) its Operating Documents or Organizational Documents or (iv) any provision of any agreement or instrument
binding on such Borrower Party, or any agreement or instrument of which such Borrower Party is aware affecting the properties of such Borrower Party, 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 Adverse Claim on any of such Borrower Party's properties. Each of the Loan Documents to which
such Borrower Party is a party has been duly authorized, executed and delivered by such Borrower Party.
- 59 -
Section 3.03 Validity and Binding Nature. This Agreement and the other Loan Documents to which such Borrower Party is a party constitute (or will constitute when duly
executed and delivered) legal, valid and binding obligations of such Borrower Party, enforceable against such Borrower Party in accordance with their respective terms, subject to bankruptcy, insolvency, examinership, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles.
Section 3.04 Financial Statements. (a) FLL's audited consolidated financial statements as of December 31, 2019, a copy of which has been
furnished to each Lender, have been prepared in accordance with GAAP and fairly present the financial condition of FLL and its Subsidiaries as at such date and the results of their operations for the period then ended.
(b) FLL's unaudited consolidated financial statements as of June 30, 2020, a copy of which has been furnished to each Lender, have been prepared in accordance with GAAP and fairly present
the financial condition of FLL and its Subsidiaries as at such date and the results of their operations for the period then ended. As of the Effective Date, neither FLL nor any of its Subsidiaries has any contingent liability or liability for
taxes, long‑term lease or unusual forward or long‑term commitment that is not reflected in FLL's unaudited consolidated financial statements as of June 30, 2020 or the notes thereto and which in any such case is material in relation to the
business, operations, properties, assets, condition (financial or otherwise) or prospects of FLL and any of its Subsidiaries taken as a whole.
Section 3.05 Litigation and Contingent Liabilities. All Litigation Actions, taken as a whole, could not reasonably be expected to have a
Material Adverse Effect.
Section 3.06 Security Interest. (a) The Mortgage creates a valid and (upon the taking of the actions required hereby or thereby) perfected
security interest in favor of the Collateral Agent in the Collateral as security for the Secured Obligations, subject in priority to no other Liens (other than Permitted Liens (other than, in the case of priority, the Permitted Lien described in
clause (p) of the definition of Permitted Liens)), and all filings and other actions necessary to perfect and protect such security interest under the laws of the United States, Ireland, the Cayman Islands and Other Relevant Jurisdictions have been
(or in the case of future Collateral will be, or in the case of any Liens over Collateral created by a Person incorporated in Ireland will, within the statutorily prescribed period therefore, be) duly taken (it being understood and agreed that,
with respect to each applicable Aircraft Asset and any related Equity Collateral, only the Express Perfection Requirements shall apply), enforceable against the applicable Borrower Parties and creditors of and purchasers from such Borrower
Parties. Each relevant Lessor Subsidiary has good and marketable legal title to its respective Pool Aircraft, free and clear of Liens other than Permitted Liens. Schedule 3.06 hereto lists, (i) to the knowledge of the Borrower after due inquiry,
all Permitted Liens described in clause (e) or (j) of the definition of Permitted Liens on the Collateral existing as of the Effective Date and (ii) all Permitted Liens described in clause (n) of the definition of Permitted Liens on the Collateral
existing as of the Effective Date of which a responsible officer of the Borrower has received written notice.
- 60 -
(b) None of the Collateral has been pledged, assigned, sold or otherwise encumbered other than pursuant to the terms hereof or of the Security Documents and except for Permitted Liens, and
no Collateral is described in (i) any UCC Financing Statements filed against any Borrower Party other than UCC Financing Statements which have been terminated and the UCC Financing Statements filed in connection with Permitted Liens or (ii) any
other mortgage registries, including the International Registry, or filing records that may be applicable to the Collateral in any other relevant jurisdiction, other than such filings or registrations that have been terminated or that have been
made in connection with Permitted Liens, the Mortgage or any other Security Document in favor of the Collateral Agent, for the benefit of the Secured Parties, or, with respect to the Leases, in favor of the Borrower Parties or the Lessee
thereunder.
(c) The rights and obligations of each Borrower Party (as lessor) under the Leases to which it is a party with respect to the Pool Aircraft are held free and clear of any Adverse Claim
other than Permitted Liens, and such Borrower Party has the full right, corporate power and lawful authority to assign, transfer and pledge the same and interests therein as provided in the Mortgage and the other Security Documents.
Section 3.07 Employee Benefit Plans. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other
such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations of all underfunded Plans and Foreign Pension Plans
(based on assumptions used for financial purposes) did not, as of the date of the most recent financial statements reflecting any such amounts, exceed the fair market value of the assets of all such underfunded Plans and Foreign Pension Plans by an
amount that would reasonably be expected to result in a Material Adverse Effect. No event has occurred or is reasonably expected to occur with respect to any Foreign Plan that, when taken together with all other events for which liability is
reasonably expected to occur, could reasonably be expected to result in an Material Adverse Effect.
Section 3.08 Investment Company Act. No Borrower Party is a "registered investment company" or a company "controlled" by a "registered
investment company" or a "principal underwriter" of a "registered investment company," within the meaning of the Investment Company Act of 1940, as amended. No Borrower Party is subject to regulation under the Federal Power Act or the Investment
Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.
Section 3.09 Regulation U. No Borrower Party 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 Federal Reserve Board). No portion of the proceeds of any Loan will be used in any manner that causes or might cause such Loan or the application of
such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors or any other regulation thereof or to violate the Exchange Act.
- 61 -
Section 3.10
Information. (a) All written information furnished by or on behalf of any Borrower Party to any Lender Party in connection with this Agreement, any other Loan Document or the transactions contemplated hereby
or thereby, on the date furnished (and when taken in connection with previous information so furnished, for the purpose of completeness) shall have been, to the best of each Borrower Party's knowledge after due inquiry, true and accurate in every
material respect as of the date of such information, and none of such information contains any material misstatement of fact or omits to state any material fact necessary to make such information, in light of the circumstances under which it was
made or provided, not misleading; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes an opinion or forecast, each Borrower Party
represents only that it acted in good faith and utilized assumptions reasonable at the time made (based upon accounting principles consistent with the historical audited financial statements of FLL) and exercised due care in the preparation of such
information, report, financial statement, exhibit or schedule.
(b) All information furnished by any Borrower Party to any Lender Party on and after the date hereof shall be, to the best of such Borrower Party'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, in light of the
circumstances under which it was made or provided, not misleading; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes an opinion
or forecast, each Borrower Party represents only that it acted in good faith and utilized assumptions reasonable at the time made (based upon accounting principles consistent with the historical audited financial statements of FLL) and exercised
due care in the preparation of such information, report, financial statement, exhibit or schedule.
Section 3.11 Compliance with Applicable Laws, etc. Each Borrower Party is in compliance with the requirements of all applicable laws, rules,
regulations and orders of all Governmental Authorities (including ERISA) applicable to it, except for noncompliance that could not reasonably be expected to have a Material Adverse Effect. No Borrower Party is in default under any agreement or
instrument to which such Borrower Party 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.
Section 3.12 Insurance. Each relevant Borrower Party maintains, or has caused to be maintained, insurance as required by the Mortgage.
Section 3.13 Taxes. Each Borrower Party 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 contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be
required by IFRS or GAAP, as the case may be, have been established, and except where failure to file such returns or pay such Taxes, individually or in the aggregate, cannot reasonably be expected to have a Material Adverse Effect.
- 62 -
Section 3.14 Borrower Party Information. Schedule 3.14, as updated from time to time in writing to the Lender Parties, accurately sets forth
with respect to each Borrower Party (i) the location of its chief executive office or registered office, (as applicable), (ii) its jurisdiction of incorporation, (iii) its entity type or corporate form, and (iv) its employer or taxpayer
identification number (if any) or company registration number (as applicable) issued by its jurisdiction of incorporation. Each Borrower Party only has one jurisdiction of incorporation.
Section 3.15 Solvency. As of the Effective Date (and as also reflected on the FLL's consolidated balance sheet dated as of June 30, 2020), the
fair value of the assets of each of FLL and the other Borrower Parties taken as a whole, exceed their respective liabilities. As of the Effective Date, neither the Borrower Parties taken as a whole nor FLL nor any Pledged Equity Party,
individually, is or will be rendered insolvent as a result of the transactions contemplated by this Agreement and the other Loan Documents.
Section 3.16 Sanctions. None of the Borrower Parties, any of their Subsidiaries or to the knowledge of Borrower Parties, any director, officer,
employee, agent, affiliate or representative of any Borrower Party or any of its Subsidiaries is a Person that is (i) the subject of any sanctions administered or enforced by the U.S. Department of Treasury's Office of Foreign Assets Control ("OFAC"), the United Nations Security Council ("UNSC"), the European Union ("EU"), the Government of Ireland or other sanctions
authority relevant in the United States, Ireland or any other jurisdiction of incorporation or formation of any Borrower Party (collectively, "Sanctions"), or (ii) located, organized, incorporated or resident
in a country or territory that is the subject of comprehensive Sanctions that generally prohibit transactions with Persons or entities in such country (each, a "Prohibited Country"); or (iii) subject to
Sanctions as a result of being owned or controlled by a Person set forth in Section 3.16(i) or (ii).
Section 3.17 Description of Aircraft and Leases, etc. (a) Schedule 3.17(a) attached hereto, as amended from time to time pursuant to Section
2.10 and Section 5.09(a)(vii) hereof is a true and correct list of all PS Pool Aircraft, the Lessor Subsidiary (or with respect to an Undelivered Pool Aircraft, the Person) which Owns such PS Pool Aircraft and the country of registration of such PS
Pool Aircraft.
(b) Schedule 3.17(b) attached hereto, as supplemented from time to time pursuant to Section 2.16(d) and Section 2.16(e) of the Mortgage, is (i) a true and correct list of all Leases
(including, without limitation, any head leases) in effect with respect to the PS Pool Aircraft and the name and jurisdiction of organization or incorporation of the applicable Lessees, and (ii) true and correct list of all Intermediate Leases in
effect with respect to the Pool Aircraft and the name and jurisdiction of organization or incorporation of the applicable Intermediate Lessees.
Section 3.18 Ownership. A Lessor Subsidiary Owns each Pool Aircraft, and a Borrower Party or Guarantor Party holds 100% of the Equity Interest
in each Intermediate Lessee and each Lessor Subsidiary.
Section 3.19 Use of Proceeds. The proceeds of the Loans will be used by the Borrower (a) to pay all Indebtedness (other than as permitted by
Section 5.18) of each Borrower Party secured by the Collateral (including each of the Pool Aircraft, the other Aircraft Assets and the Equity Collateral), (b) to pay interest, fees and expenses payable on such Indebtedness or payable hereunder and
(c) for general corporate purposes.
- 63 -
Section 3.20 PATRIOT Act. To the extent applicable, each Borrower Party is in compliance, in all material respects, with (i) the Trading with
the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the
PATRIOT Act. No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else
acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
Section 3.21 No Default or Event of Default. No Event of Default or Default has occurred and is continuing.
Section 4.01 Effective Date. The obligations of each Lender to make its Loans hereunder shall not become effective until the date on which each
of the following conditions is satisfied (or waived in accordance with Section 9.05):
(a) The Borrower shall have paid all fees and other amounts due and payable to the Lender Parties or other Person in connection with the transactions contemplated under the Loan Documents
on or before the Effective Date, including all fees and other amounts due and payable to any other Person pursuant to any other agreement related to the transactions contemplated in the Loan Documents to the extent invoiced in reasonable detail.
(b) The Administrative Agent (or its counsel) shall have received from each Borrower Party and the Collateral Agent executed counterparts of this Agreement, including sufficient original
executed counterparts for each Lender.
(c) The Administrative Agent (or its counsel) shall have received from each party thereto executed counterparts of the Intercreditor Agreement.
(d) The LTV Securities Account shall have been established with the Securities Intermediary and such account shall constitute an Eligible Account.
(e) The Administrative Agent (or its counsel) shall have received a duly executed copy of the Servicing Agreement relating to the Pool Aircraft, which shall be in form and substance
satisfactory to the Administrative Agent.
(f) The Administrative Agent (or its counsel) shall have received the Servicer Consent and Agreement duly executed by the Servicers and the Borrower Parties.
(g) The Collateral Agent shall have received from each party thereto executed counterparts of (i) the Mortgage, (ii) the Cayman Islands Share Charge in respect of the Borrower and (iii)
each applicable Irish Charge Over Shares.
- 64 -
(h) The Administrative Agent shall have received a favorable written opinion(s) (addressed to each Lender Party and dated the Effective Date) of each of Clifford Chance US LLP with respect
to New York law, Conyers Dill & Pearman, with respect to Bermuda law, Maples and Calder, with respect to Cayman Islands law, and in-house counsel to the Borrower Parties with respect to no conflicts with its Material Agreements, substantially
in the form of Exhibit E-1A, E-1B, E-1C and E-1D (as applicable) hereto and from McCann Fitzgerald, with respect to Irish law (in the form agreed between the Borrower, the Administrative Agent and the Collateral Agent), as to such matters as any
Lender Party may reasonably request, including non-contravention of any indenture, agreement, mortgage, deed of trust or other instrument to which either Borrower or FLL is a party or by which it is bound or any of its properties are subject
(including, but not limited to, any Lease), and, in the case of each opinion required by this subsection, covering such other matters relating to either the Borrower or FLL, the Loan Documents, the Collateral or the transactions contemplated
thereby as any Lender Party shall reasonably request.
(i) The Collateral Agent shall have received UCC Financing Statements from each Grantor, naming such Grantor as debtor, naming the Collateral Agent (for the benefit of the Secured Parties)
as secured party and describing the applicable Collateral (such UCC Financing Statements to be satisfactory to the Collateral Agent).
(j) The Administrative Agent shall have received such documents and certificates as the Lender Parties or their respective counsel may reasonably request relating to the organization or
incorporation, existence and, if applicable, good standing of the Borrower, FWAH and FLL, the authorization of the transactions contemplated by the Loan Documents and any other legal matters relating to the Borrower, FWAH and FLL, the Loan
Documents, the Collateral or the transactions contemplated hereby or thereby, all in form and substance reasonably satisfactory to the Lender Parties and their counsel.
(k) The Administrative Agent and the Collateral Agent shall have received the results of a recent Lien, tax and judgment search in each relevant jurisdiction, including without limitation
each jurisdiction in which each Borrower Party is organized or incorporated, each jurisdiction in which each Pool Aircraft is registered, and the International Registry with respect to each Borrower Party and the Collateral, revealing no Liens on
any of the assets of any Borrower Party or the Collateral, other than Permitted Liens.
(l) All consents and approvals required to be obtained by the Borrower Parties from any Governmental Authority or other Person in connection with the transactions contemplated by the Loan
Documents shall have been obtained, and all applicable waiting periods and appeal periods shall have expired, in each case without the imposition of any burdensome condition.
(m) The Administrative Agent shall have received a certificate from the Chief Financial Officer or Chief Executive Officer of FLL, in form and substance reasonably satisfactory to it, with
respect to the Borrower Parties, taken as a whole, corresponding to the representations in Article III.
- 65 -
(n) The representations and warranties of the Borrower Parties contained in Article III of this Agreement and contained in each other Loan Document shall be true and correct on and as of
the Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and an Officer's Certificate of FLL shall so certify on
and as of the Effective Date to the Administrative Agent.
(o) Immediately prior to and immediately after giving effect to the Loans, no Default or Event of Default shall have occurred and be continuing, and an Officer's Certificate of FLL shall
so certify on and as of the Effective Date to the Administrative Agent.
(p) The Administrative Agent shall have received three Appraisals of each PS Pool Aircraft in form and substance satisfactory to it. Such Appraisals shall (i) have been conducted by a
Qualified Appraiser prior to the Effective Date and (ii) show that the aggregate Appraised Value of all Pool Aircraft as of the Effective Date is sufficient to cause the Loan-to-Value Ratio to be less than or equal to 70.0%.
(q) The Administrative Agent shall have received a duly completed, executed and delivered LTV Certificate certifying that the aggregate Appraised Value of all Pool Aircraft as of the
Effective Date is sufficient to cause the Loan-to-Value Ratio to be less than or equal to 70.0%.
(r) The Administrative Agent shall have received evidence satisfactory to it that each of the Pool Aircraft is Owned by a Lessor Subsidiary as of the Effective Date.
(s) The Collateral Agent, for the benefit of the Secured Parties, shall have a first priority perfected security interest in the Collateral (subject only to Permitted Liens) (it being
understood and agreed that, with respect to each Aircraft Asset and the related Equity Collateral, only the Express Perfection Requirements shall be required to be satisfied.
(t) Each Lender who requests a Note (or the Administrative Agent, on behalf of each such Lender) shall have received a signed original of a Note with respect to its Loan, duly executed by
the Borrower.
(u) At least 10 days (or such shorter period accepted by the Lenders) prior to the Effective Date, the Lenders shall have received all documentation and other information required by bank
regulatory authorities under applicable "know-your-customer" and anti-money laundering rules and regulations, including the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (Title III
of Pub. L. 107-56 (signed into law October 26, 2001) the "PATRIOT Act").
(v) The Administrative Agent shall have received evidence that the Indebtedness (other than any Indebtedness permitted pursuant to Section 5.18) of any Borrower Party (or any Affiliate
thereof) secured by any Collateral shall have been paid in full.
Promptly after the Effective Date occurs, the Administrative Agent shall notify each other Lender Party and each Borrower Party thereof, and such notice shall be conclusive and binding.
- 66 -
Without limiting the generality of the provisions of Section 8.03, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed
to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Effective Date specifying its objection thereto.
Section 4.02 Release Date. The obligations of the Collateral Agent to release the Aggregate Requested Release Amount from the LTV Securities
Account pursuant to a Release Request hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.05):
(a) The Administrative Agent and the Collateral Agent shall have received a duly completed, executed and delivered Release Request.
(b) The Administrative Agent shall have received a duly completed, executed and delivered Borrower Party Request and Assumption Agreement from each Relevant Release Party that is not then
a Borrower Party.
(c) The Administrative Agent shall have received an accession instrument (in form and substance satisfactory to the Administrative Agent) to the Intercreditor Agreement executed and
delivered by each Relevant Release Party that provided any Intercompany Loan to the Borrower and is not then a party to the Intercreditor Agreement.
(d) The Borrower shall be in compliance with the Loan-to-Value Ratio and the Administrative Agent shall have received a duly
completed, executed and delivered LTV Certificate certifying that (i) the aggregate Appraised Value of all Pool Aircraft immediately after giving effect to the release is sufficient to cause the Loan-to-Value Ratio to be less than or equal to
70.0%, and (ii) the Loan-to-Value Ratio (calculated for these purposes using only (x) the Undelivered Pool Aircraft to which the Release relates, in place of all Pool Aircraft and (y) the relevant UPA Loan Amounts, in place of the principal amount
of the Loans) is less than or equal to 66.3%.
(e) The Collateral Agent shall have received the following documents or instruments: (i) the relevant Lessor Subsidiary that holds legal title to each Undelivered Pool Aircraft (or is a
conditional buyer under a title reservation agreement (within the meaning of the Cape Town Convention)) described in the relevant Release Request and any applicable Intermediate Lessee shall have executed and delivered a Grantor Supplement or
Collateral Supplement, as the case may be, (ii) the relevant Person or Persons pledging the Equity Collateral related to each relevant Lessor Subsidiary shall have executed and delivered a Grantor Supplement or Collateral Supplement, as the case
may be, in respect of such Equity Collateral and, if such Lessor Subsidiary is organized or incorporated in Ireland, the Cayman Islands or any Other Relevant Jurisdiction, an Irish Charge Over Shares, a Cayman Islands Share Charge or a charge,
pledge or equivalent security agreement in such Other Relevant Jurisdiction as applicable, in respect of such Equity Collateral, and (iii) if applicable, the relevant Person pledging the Equity Collateral related to each relevant Intermediate
Lessee shall have executed and delivered a Grantor Supplement or Collateral Supplement, as the case may be, in respect of such Equity Collateral and, if any such Intermediate Lessee is organized or incorporated in Ireland, the Cayman Islands or any
Other Relevant Jurisdiction, an Irish Charge Over Shares, a Cayman Islands Share Charge or a charge, pledge or equivalent security agreement in such Other Relevant Jurisdiction as applicable, in respect of such Equity Collateral.
- 67 -
(f) The Administrative Agent shall have received legal opinions from special counsel to the Relevant Release Parties in the jurisdiction where the relevant Pool Aircraft is registered,
confirming (subject to customary exceptions and with usual assumptions) that (a) the relevant Pool Aircraft is properly registered in such jurisdiction and (b) there are no Liens of record with respect to the relevant Pool Aircraft.
(g) The Borrower shall have paid all fees and other amounts due and payable to the Administrative Agent and the Collateral Agent in connection with the transactions contemplated under the
Loan Documents on or before the relevant Release Date, including all fees, expenses and other amounts (including the reasonable fees and expenses of legal counsel) due and payable to any other Person pursuant to any other agreement related to the
Release Date and the transactions contemplated thereby.
(h) The representations and warranties of the Borrower Parties contained in Article III of this Agreement and contained in each other Loan Document shall be true and correct on and as of
the relevant Release Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and an Officer's Certificate of FLL shall so
certify on and as of the relevant Release Date to the Administrative Agent.
(i) Immediately prior to and immediately after giving effect to the release of the Aggregate Requested Release Amount, no Default or Event of Default shall have occurred and be continuing,
and an Officer's Certificate of FLL shall so certify on and as of the relevant Release Date to the Administrative Agent.
(j) The Administrative Agent shall have received evidence of each Grantor's compliance with Section 2.17 of the Mortgage that is reasonably acceptable to the Administrative Agent.
Without limiting the generality of the provisions of Section 8.03, for purposes of determining compliance with the conditions specified in this Section 4.02, each Lender that has signed this Agreement shall be deemed
to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Effective Date specifying its objection thereto.
Section 4.03 Quiet Enjoyment Letters. If requested by the Borrower, the Collateral Agent shall have provided a quiet enjoyment letter (in the
reasonable form provided to the Collateral Agent by the Borrower) relating to each Lease of each Pool Aircraft as of the Effective Date or relevant Release Date, as applicable.
- 68 -
ARTICLE V
Until all the principal of and interest on the Loans and all fees payable hereunder have been paid in full, each relevant Borrower Party covenants and agrees with each Lender Party that:
Section 5.01 Legal Existence and Good Standing. Except as permitted under Section 2.10 or Section 5.17, such Borrower Party shall do or cause
to be done all things necessary to preserve and keep in full force and effect its corporate existence and the rights (charter and statutory) and franchises of the Borrower Parties; provided, however, that no Borrower Party will be required to preserve any such right or franchise if it shall determine that the preservation thereof is no longer desirable in the
conduct of the business of such Borrower Party and that the loss thereof is not disadvantageous in any material respect to the Lenders or the Administrative Agent.
Section 5.02 Protection of Security Interest of the Lenders. (a) Such Borrower Party shall deliver to the Collateral Agent such additional
supplements to the Mortgage, charges, consents and other similar instruments, agreements, certificates, opinions and documents (including UCC Financing Statements and charge documents) as the Collateral Agent or the Administrative Agent may
reasonably request to effectuate the terms hereof and under and in accordance with the Security Documents and thereby to:
(i) (A) grant, maintain, protect and evidence security interests in favor of the Collateral Agent, for the benefit of the Secured Parties, and (B) take all actions necessary to perfect
security interests in favor of the Collateral Agent in accordance with (1) the laws of the United States, the Cayman Islands and any Other Relevant Jurisdiction (or any instrumentality thereof) (including but not limited to the filing of UCC
Financing Statements in the appropriate locations, including the District of Columbia, and appropriate offices and registrations and recordings with the FAA, the Irish Companies Registration Office and the International Registry), (2) the Cape Town
Convention and (3) the laws of any other jurisdiction applicable to such Borrower Party (in the reasonable judgment of the Collateral Agent), in any or all present and future property of each relevant Borrower Party which would constitute
Collateral under and in accordance with the terms of the Security Documents prior to the Liens or other interests of any Person, except to the extent Permitted Liens may have priority; and
(ii) otherwise establish, maintain, protect and evidence the rights provided to the Collateral Agent, for the benefit of the Secured Parties, under and in accordance with the terms hereof
and of the Security Documents including anything that may be necessary or advisable under (A) the laws of the United States, the Cayman Islands or any Other Relevant Jurisdiction (or any instrumentality thereof), (B) the Cape Town Convention and
(C) the laws of any other jurisdiction applicable to the Borrower Party (in the judgment of the Collateral Agent); provided, however,
that, with respect to the security interest in any Collateral, only the Express Perfection Requirements shall apply.
- 69 -
(b) No Borrower Party shall change its name, identity or corporate structure (within the meaning of Article 9 of the UCC) unless such Borrower Party shall have given the Collateral Agent
at least thirty (30) days' prior written notice thereof; provided that, upon the Collateral Agent's request in any case in which, in the Collateral Agent's reasonable opinion, such change of name, identity
or corporate structure would or could make the Mortgage, the other Security Documents, any filings or registrations or any financing statement or continuation statement filed pursuant to the terms hereof or any other Loan Documents misleading
within the meaning of Section 9-402(7) of the UCC or any other applicable law, such Borrower Party shall promptly file appropriate amendments to all previously made filings or registrations and all previously filed financing statements and
continuation statements.
(c) Each Borrower Party shall give the Collateral Agent at least thirty (30) days' prior written notice of any change of such Borrower Party's jurisdiction of incorporation.
(d) Each Borrower Party shall furnish to the Collateral Agent from time to time such statements and schedules further identifying and describing the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail.
(a) other than in connection with a sale, transfer or other disposition permitted under Section 5.04, permit any Person other than a Borrower Party or a Guarantor Party (except to the
extent of the Local Requirements Exception) to own beneficially any Pool Aircraft, nor permit any Person other than a Lessor Subsidiary (except to the extent of the Local Requirements Exception) to hold title to any Pool Aircraft;
(b) other than in connection with a sale, transfer or other disposition permitted under Section 5.04, permit any Person other than a Borrower Party (except to the extent of the Local
Requirements Exception) to hold any portion of the Equity Interest in any Intermediate Lessee or any Lessor Subsidiary;
(c) enforce or amend, replace or waive any term of, or otherwise modify, any Lease with respect to any Pool Aircraft in a manner other than in a manner consistent with Leasing Company
Practice; and
(d) amend, vary, modify or supplement or waive any term of, the Servicing Agreement that relates to the performance (but not in any case with respect to any compensation or fees related to
such performance) of the "Services" (as defined therein) without the prior written consent of the Administrative Agent.
Section 5.04 Limitation on Disposition of Aircraft and Equity Collateral. Except as expressly provided in Section 2.10(a), no Borrower Party
shall sell, transfer or otherwise dispose of any Pool Aircraft. Except as provided in Section 2.10(d) or (f), no Borrower Party shall sell, transfer or otherwise dispose of any of its Equity Interest in any Intermediate Lessee or any Lessor
Subsidiary.
Section 5.05 Payment of Taxes or Other Claims. Each Borrower Party will pay or discharge or cause to be paid or discharged, before the same
shall become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon such Borrower Party or any of its Subsidiaries, and (ii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a
lien upon the property of such Borrower Party or any of its Subsidiaries; provided, however, that such Borrower Party shall
not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings.
- 70 -
Section 5.06
Representations Regarding Operation. No Borrower Party shall represent or hold out, or consent to any Lessee to represent or hold out, any Lender Party as (i) the owner or lessor of any PS Pool Aircraft,
(ii) carrying goods or passengers on any PS Pool Aircraft or (iii) being in any way responsible for any operation of carriage (whether for hire or reward or gratuitously) with respect to any PS Pool Aircraft.
Section 5.07 Compliance with Laws, etc. Each Borrower Party shall comply in all material respects with all Requirements of Law (including ERISA
or any laws applicable to any Foreign Plan), rules, regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications, and privileges except to the extent that the failure so to comply with such laws,
rules and regulations or the failure so to preserve and maintain such existence, rights, franchises, qualifications, and privileges is caused by a Third Party Event (and only for so long as the Borrower and the applicable Borrower Party are
complying with the requirements of the proviso to the last paragraph of Section 2.16(a) of the Mortgage) or would not materially adversely affect the Collateral, the collectability of monies owed under the Leases or the ability of such Borrower
Party to perform its obligations under the Loan Documents.
Without limiting the foregoing, each Borrower Party shall obtain all governmental (including regulatory) registrations, certificates, licenses, permits and authorizations required to be obtained by it in connection
with the Loan Documents and for the Pool Aircraft Owned or leased by it, including a current certificate of airworthiness for each Pool Aircraft (issued by the applicable aviation authority and in the appropriate category for the nature of
operations of such Pool Aircraft) unless such Pool Aircraft is not subject to a Lease or is undergoing maintenance or modification or would not materially adversely affect the Collateral, the collectability of monies owed under the Leases or the
ability of such Borrower Party to perform its obligations under the Loan Documents, in which case all appropriate governmental (including regulatory) registrations, certificates, licenses, permits and authorizations shall be maintained.
Section 5.08 Notice of Adverse Claim or Loss. Each Borrower Party shall notify the Administrative Agent (who shall then promptly notify the
Lender Parties) promptly after a responsible officer of the Borrower obtains knowledge thereof, in writing and in reasonable detail, (i) of any Adverse Claim known to it made or asserted against any of the Collateral (other than Permitted Liens),
(ii) of the occurrence of any event which would have a material adverse effect on the assignments and security interests granted by the Borrower Parties under any Loan Document, (iii) of any loss, theft, damage, or destruction to any Pool Aircraft
if the potential cost of repair or replacement of such asset (without regard to any insurance claim related thereto) may exceed the greater of the damage notification threshold under the relevant Lease and $5,000,000; and (iv) as soon as such
Borrower Party becomes aware of any settlement offer received by such Borrower Party with respect to any claim of damage or loss in excess of $10,000,000 with respect to a Pool Aircraft.
- 71 -
Section 5.09 Reporting Requirements. (a) FLL shall furnish, or cause to be furnished, to the Administrative Agent:
(i) (unless FLL is a public reporting company and the following are available on its website at www.flyleasing.com within the specified 90 day time period) as soon as available and in any
event within 90 days after the end of each Fiscal Year, a copy of the audited consolidated financial statements, prepared in accordance with GAAP or IFRS, for such year of FLL and its consolidated subsidiaries, certified by any firm of nationally
recognized independent certified public accountants (which financial statements shall be unqualified as to going concern and scope of audit);
(ii) (unless FLL is a public reporting company and the following are available on its website at www.flyleasing.com within the specified 60 day time period) as soon as available and in
any event within 60 days after the end of each of the first three quarters of each Fiscal Year, with respect to FLL and its consolidated subsidiaries, unaudited consolidated balance sheets as of the end of such quarter and as at the end of the
previous Fiscal Year, and consolidated statements of income for such quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter prepared in accordance with GAAP or IFRS, certified by the
officer in charge of financial matters of FLL identifying such balance sheets or statements as being the balance sheets or statements of FLL described in this paragraph (ii) and stating that the information set forth therein fairly presents the
consolidated financial condition of FLL and its consolidated subsidiaries as of the last day of such quarter of such Fiscal Year in conformity with GAAP or IFRS, subject to year-end adjustments and omissions of footnotes and subject to the
auditors' yearend report;
(iii) concurrently with each delivery of financial statements under clause (i) or (ii) above (or its financial statements becoming publicly available as provided above), an Officer's
Certificate of FLL (A) certifying as to whether to his or her knowledge an Event of Default has occurred and is continuing and, if an Event of Default has occurred and is continuing, specifying the details thereof and any action taken or proposed
to be taken with respect thereto, and (B) stating whether any change in GAAP or IFRS (as applicable) or in the application thereof has occurred since the date of FLL's most recent audited financial statements referred to in Section 3.04 or
delivered pursuant to this Section and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;
(iv) as soon as possible and in any event within two (2) Business Days after he or she obtains knowledge of the occurrence and continuance of a Default or an Event of Default (including,
for the avoidance of doubt, by receipt of a notice of any default under any Material Indebtedness which with the passing of time or giving of notice or otherwise could reasonably be expected to lead to an Event of Default under Section 6(f)), an
Officer's Certificate of FLL setting forth complete details of such Default or Event of Default, and the action, if any, which the Borrower Parties have taken or propose to take with respect thereto;
(v) promptly, from time to time, subject to applicable confidentiality restrictions such other information, documents, Records or reports respecting the Pool Aircraft, the Leases, the
Aircraft Assets or the condition or operations, financial or otherwise, of the Borrower Parties or any of their Subsidiaries which are reasonably available to it and which the Administrative Agent may, from time to time, reasonably request;
- 72 -
(vi) prompt written notice of the issuance by any court or governmental agency or authority of any injunction, order, decision or other restraint prohibiting, or having the effect of
prohibiting, the performance of any Borrower Party's obligations hereunder or under any other Loan Document, or invalidating, or having the effect of invalidating, any provision of this Agreement, or any other Loan Document, or the initiation of
any litigation or similar proceeding seeking any such injunction, order, decision or other restraint, in each case, of which a responsible officer has knowledge;
(vii) on or prior to each LTV Determination Date, an Officer's Certificate of FLL in substantially the form of Exhibit I (an "LTV Certificate")
setting forth in detail reasonably satisfactory to the Administrative Agent (i) computations of the Loan-to-Value Ratio as of such LTV Determination Date, (ii) if applicable, the LTV Cure that was or will be, as applicable, undertaken by the
Borrower pursuant to Section 5.16 (including, if applicable, the Non-Pool Aircraft that the Borrower has added or will add to the Designated Pool to effectuate such LTV Cure) and (iii) a complete list of all PS Pool Aircraft comprising the
Designated Pool (which such list will reference whether an Aircraft is a Pool Aircraft or an Undelivered Pool Aircraft separately) as of such LTV Determination Date (which list shall replace Schedule 3.17(a) hereto upon delivery of such LTV
Certificate), together with three Appraisals, each conducted by a Qualified Appraiser, in substance reasonably satisfactory to the Administrative Agent, of any Aircraft added (or being proposed to be added pursuant to an LTV Cure) to the Designated
Pool since the immediately preceding LTV Determination Date; provided, however, no Aircraft may be removed from Schedule 3.17(a) (and any such removal shall be ineffective) unless the Borrower shall be in compliance with Section 5.16;
(viii) as soon as is available and in any case within ten Business Days after the Appraisal Date, three Appraisals of each Pool Aircraft from Qualified Appraisers and, at any time during the
continuance of an Event of Default, at the request of the Administrative Agent, Appraisals of the Pool Aircraft specified in such request from Qualified Appraisers. Each Appraisal shall be conducted (i) by a Qualified Appraiser, (ii) at the sole
cost and expense of the Borrower and (iii) no more than thirty (30) days prior to the date such Appraisal is furnished;
(ix) promptly upon the occurrence of (i) any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse
Effect or (ii) any event (other than an event occurring in the ordinary course) that, alone or together with any other such events that have occurred, could reasonably be expected to result in liability in respect of a Foreign Plan that would have
a Material Adverse Effect, notification of the occurrence of such event and the proposed action to be taken by the relevant Borrower Parties with respect thereto; and
(x) as soon as reasonably practicable following request by the Administrative Agent provide the Administrative Agent with duly executed copies of any Hedge Agreements entered into.
- 73 -
(b) The Lender Parties are hereby authorized to deliver a copy of any such financial or other information delivered hereunder to any other Lender Party, to any Governmental Authority
having jurisdiction over any such Person or any Borrower Party pursuant to any written request therefor or in the ordinary course of examination of loan files, to any rating agency in connection with their respective ratings of commercial paper
issued by the Lenders or to any other Person who shall acquire or consider the assignment of, or acquisition of any interest in, any Obligation permitted by this Agreement; provided that such Person (not
including any Governmental Authority or any rating agency) agrees in writing to the confidentiality provisions set forth in Section 9.17.
(c) Documents required to be delivered pursuant to this Section 5.09 may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which
FLL posts such documents, or provides a link thereto on FLL's website on the Internet at a website address provided to the Administrative Agent; or (ii) on which such documents are posted on FLL's behalf on an Internet or intranet website, if any,
to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent, in accordance with (d) below); provided that: (i)
FLL shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests FLL to deliver such paper copies and (ii) the FLL shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of
the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every
instance FLL shall be required to provide paper copies of the certificates required by Section 5.09(a)(iv) to the Administrative Agent. Except for the items in subsections (iv) and (vii) of 5.09(a), the Administrative Agent shall have no
obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by FLL with any such request for delivery, and each Lender shall be solely responsible
for requesting delivery to it or maintaining its copies of such documents.
(d) Each Borrower Party shall provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the
Administrative Agent pursuant to the Loan Documents, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that
(i) relates to the payment of any principal or other amount due under the Loan Documents prior to the scheduled date therefor, (ii) provides notice of any default or event of default under any Loan Document, or (iii) is required to be delivered to
satisfy any condition precedent to the effectiveness of any Loan Document and/or any borrowing or other extension of credit thereunder (all such non-excluded communications being referred to herein collectively as "Communications"),
by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to [email protected]. In addition, each Borrower Party agrees to continue to provide the Communications to the Administrative Agent
in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent.
- 74 -
FLL hereby acknowledges that (a) the Administrative Agent and/or an Arranger Entity will make available to the Lenders information provided by or on behalf of FLL hereunder, including the
Communications, (collectively, "FLL Materials") by posting the FLL Materials on IntraLinks or another similar electronic system (the "Platform") and (b) certain of the
Lenders (each, a "Public Lender") may have personnel who do not wish to receive non-public information with respect to FLL or the other Borrower Parties that is material to Persons (other than the Lenders and
their participants) who may be engaged in investment and other market-related activities with respect to such Persons' securities. FLL hereby agrees that it will use commercially reasonable efforts to identify that portion of the FLL Materials
that may be distributed to the Public Lenders and that (w) all such FLL Materials shall be clearly and conspicuously marked "PUBLIC" which, at a minimum, shall mean that the word "PUBLIC" shall appear prominently on the first page thereof; (x) by
marking FLL Materials "PUBLIC," FLL shall be deemed to have authorized the Administrative Agent, any Arranger Entity and the Lenders to treat such FLL Materials as not containing any non-public information (although it may be sensitive and
proprietary) with respect to FLL or the other Borrower Parties that is material to Persons (other than the Lenders and their participants) engaged in investment and other market-related activities with respect to such Persons' securities for
purposes of United States federal and state securities laws (provided, however, that to the extent such FLL Materials
constitute Information, they shall be treated as set forth in Section 9.17); (y) all FLL Materials marked "PUBLIC" are permitted to be made available through a portion of the Platform designated "Public Side Information"; and (z) the Administrative
Agent and an Arranger Entity shall be entitled to treat any FLL Materials that are not marked "PUBLIC" as being suitable only for posting on a portion of the Platform not designated "Public Side Information."
THE PLATFORM IS PROVIDED "AS IS" AND "AS AVAILABLE." THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND
EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT
OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, "AGENT PARTIES") HAVE ANY LIABILITY TO ANY OBLIGOR, ANY LENDER OR ANY OTHER PERSON OR
ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY OBLIGOR'S OR THE ADMINISTRATIVE AGENT'S
TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
- 75 -
Section 5.10 Limitation on Transactions with Affiliates. No Borrower Party shall enter into, renew or extend any transaction after the date hereof (including the purchase,
sale, lease or exchange of property or assets, or the rendering of any service) with any Affiliate of such Borrower Party (other than any of its Subsidiaries), except (a) upon terms no less favorable to such Borrower Party than could be obtained,
at the time of such transaction or at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such an Affiliate and pursuant to enforceable agreements, or (b) with the
approval of a majority of the independent directors on the board of directors of FLL; provided that this Section 5.10 shall not apply to (i) any payment of reasonable and customary fees, reimbursements of
expenses (pursuant to indemnity arrangements or otherwise) and indemnities provided to or on behalf of any Borrower Party's officers, directors, employees or consultants, (ii) any servicing and/or management agreements or arrangements in effect on
the date hereof or any amendment, modification or supplement to such servicing and/or management agreements or arrangements or replacement thereof or any substantially similar servicing and/or management agreement or arrangement entered into after
the date hereof, or (iii) any Intercompany Loans entered into after the date hereof by any Borrower Party or Guarantor Party.
Section 5.11 Inspections. Not more frequently than one time per calendar year (unless an Event of Default shall have occurred and be
continuing), the Administrative Agent, or its agents or representatives, may, upon reasonable notice and during regular business hours, at the Borrower Party's expense, which notice shall in no event be less than five Business Days (except if an
Event of Default shall have occurred and be continuing), as requested by the Administrative Agent, (i) examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in the possession or under
the control of any Borrower Party and (ii) visit the offices and properties of any Borrower Party, for the purpose of examining such materials described in clause (i) above, and discussing matters relating to the Collateral or any Borrower Party's
performance under the Loan Documents or under the Leases with any appropriate officers or employees of any Borrower Party, having knowledge of such matters.
Section 5.12 Use of Proceeds; Margin Regulations. The proceeds of the Loans will be used solely to make FWAH Intercompany Loans, which shall in
turn be used solely to (l) to pay all Indebtedness (other than as permitted by Section 5.18) of each Borrower Party secured by the Collateral (including each of the Pool Aircraft, the other Aircraft Assets and the Equity Collateral), (m) to pay
interest, fees and expenses payable on such indebtedness or payable hereunder and (n) for general corporate purposes. No part of the proceeds of the Loans will be used, directly or indirectly, for any purpose that entails a violation of any of the
Regulations of the Federal Reserve Board, including Regulations T, U and X.
Section 5.13 Insurance. Each Borrower Party shall maintain or cause to be maintained insurance covering such risks, and in such amounts as
specified in Section 2.17 and Schedule V of the Mortgage.
Section 5.14 UNSC, EU and United States Sanctions and Export Restrictions. No Borrower Party shall, nor shall it permit or cause any of its
Subsidiaries to, directly or through a Subsidiary, lease, sell, purchase or own an aircraft, to any Person to which the export and/or use of such aircraft or engine is not permitted (including by reason of such Person's domicile), under (A) any
UNSC sanctions or export restrictions, (B) any EU sanctions or export restrictions, (C) any sanctions administered or enforced by OFAC, (D) the Export Administration Regulations administered by the Bureau of Industry and Security of the U.S.
Commerce Department, (E) the International Traffic in Arms Regulations administered by the Directorate of Defense Trade Controls of the U.S. Department of State, (F) the law applicable to the aircraft or (G) any subsequent sanctions, regulations or
orders amending the provisions of (A)-(F) the effect of which prohibits or restricts the export and/or use of aircraft to such country or such Person, after giving effect in each case to applicable licenses and other exemptions. Each Borrower
Party shall, and shall cause any of its Subsidiaries to, upon reasonable notice deliver to the Lenders any certification or other evidence reasonably requested from time to time by the Lenders, confirming its compliance with this Section 5.14.
- 76 -
Section 5.15 Sanctions. (a) No Borrower Party shall, directly or indirectly, use the proceeds of the Loans, or lend, contribute or otherwise make available any funds to any
subsidiary, joint venture partner or other Person (i) to fund any activities or business of or with any Person that is the subject of Sanctions or in any country or territory that, at the time of such funding or facilitation, is a Prohibited
Country; or (ii) in any other manner that will result in a violation of Sanctions by any Lender Party participating in the Loans, whether as lender, borrower, advisor or otherwise. In each case under this Section after taking into account any
applicable license or other exceptions.
(b) No Borrower Party shall permit any Pool Aircraft (i) to be registered in, or operated by any Lessee domiciled in, or organized under the laws of, a Prohibited Country or (ii) to be
operated by any Lessee under a Lease if the existence of such Lease would cause any Borrower Party to be in violation of Section 5.14 or this Section 5.15, otherwise in violation of any Sanctions, or in violation of any Requirement of Law relating
to money laundering, including the Bank Secrecy Act, as amended by the PATRIOT Act, or any implementing regulations thereunder.
Section 5.16 Loan-to-Value Ratio; Average Age; Minimum Liquidity. (a) The Borrower will not permit (i) the Loan-to-Value Ratio on any LTV
Determination Date to exceed 70.0%; or (ii) the Average Age immediately following any addition to, removal from, or substitution of any Pool Aircraft included in the Designated Pool to exceed the age that is equal to the sum of (x) the Average Age
on the Effective Date, plus (y) the amount of time elapsed since the Effective Date, plus (z) 12 months.
(b) The Loan-to-Value Ratio shall be tested on the Effective Date, each Release Date, each Proposed Release Date, each Payment Date beginning on the second Payment Date, upon the sale or
removal of any Pool Aircraft from the Designated Pool in accordance with Section 2.10, upon the substitution of a Non-Pool Aircraft for a Pool Aircraft or prepayment under Section 2.06, upon the release of any LTV Cash
Collateral from the LTV Securities Account to the Borrower pursuant to Section 2.12, upon an Event of Loss and upon a Specified Representation Deficiency in accordance with Section 2.10(g) (each such date, a "LTV Determination Date").
(c) In the event that the Loan-to-Value Ratio as of any LTV Determination Date is or will be (as applicable in accordance with Section 5.16(d)), after giving effect to any sale, removal or
substitution of any Pool Aircraft and any related release of Equity Collateral or other event or circumstance referred to in Section 5.16(b) above, greater than that permitted pursuant to Section 5.16(a) above, the Borrower shall be required, in
any combination, to (i) prepay all or a portion of the principal amount of the Loans by deposit into the Administrative Agent's Account, (ii) add Non-Pool Aircraft and any related Equity Collateral, and/or (iii) provide additional cash and/or
Investment Securities to the Collateral Agent by deposit into the LTV Securities Account (provided that the aggregate amount of LTV Cash Collateral in the LTV Securities Account, after giving effect to the
action taken pursuant to this Section 5.16(c)(iii), shall not exceed $50,000,000), in each case such that the Designated Pool shall be in compliance with Section 5.16(a) after giving pro forma effect to
such addition or other action (each of (i), (ii) and (iii), an "LTV Cure"), in an aggregate amount sufficient to cause the Loan-to-Value Ratio, after giving pro forma
effect to any LTV Cure, to satisfy the requirements of Section 5.16(a) as of such LTV Determination Date.
- 77 -
(d) The Borrower shall complete the applicable LTV Cure(s) (i) in connection with any LTV Determination Date relating to the sale, substitution or removal of any Pool Aircraft, or that is
the Effective Date, on or prior to the LTV Determination Date, and (ii) after any other LTV Determination Date, (A) with respect to any LTV Cure consisting of prepayment of the Loans and/or providing additional cash and/or Investment Securities to
the Collateral Agent by deposit into the LTV Securities Account, within three Business Days following the delivery of such LTV Certificate and (B) with respect to any other LTV Cure, within 45 days (or within 120 days in the case of an LTV Cure
resulting from an Event of Loss or Specified Representation Deficiency) following the delivery of such LTV Certificate.
(e) If the Borrower shall have provided LTV Cash Collateral pursuant to Section 5.16(c)(iii) (the "Temporary LTV Cash Collateral"), it shall within
180 days after providing such Temporary LTV Cash Collateral either (x) prepay all or a portion of the principal amount of the Loans by deposit of such Temporary LTV Cash Collateral into the Administrative Agent's Account or (y) add Non-Pool
Aircraft and any related Collateral, to cause the Loan-to-Value Ratio, calculated to exclude such Temporary Cash Collateral, not to be greater than 70.0%.
(f) For as long as the 2021 Notes remain outstanding, if the Unrestricted Cash of FLL as at any Test Date shall be less than $100,000,000, a Liquidity Event shall occur (the "Minimum Liquidity Test"). For the avoidance of doubt, the failure of FLL to meet the Minimum Liquidity Test shall not be a Default or an Event of Default.
Section 5.17 Mergers, Consolidations and Sales of Assets. (a) FLL shall not consolidate with or merge into any other Person or convey, transfer
or lease its properties and assets substantially as an entirety to any Person, and FLL shall not permit any Person to consolidate with or merge into FLL or convey, transfer or lease its properties and assets substantially as an entirety to FLL,
unless:
(i) in case FLL shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by
such consolidation or into which FLL is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of FLL substantially as an entirety shall be a corporation, company, partnership or trust, shall be
organized or incorporated and validly existing under the laws of the Cayman Islands, Bermuda, the Netherlands, Ireland, Singapore, the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an
amendment hereto, executed and delivered to the Administrative Agent, in form and substance satisfactory to the Administrative Agent, the due and punctual payment of the principal of (and premium, if any) and interest on all the Loans and the
performance of every covenant of this Credit Agreement and the other Loan Documents on the part of FLL to be performed or observed;
- 78 -
(ii) immediately after giving effect to such transaction no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing;
(iii) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, any properties or assets of FLL would become subject to a mortgage, pledge, lien, security
interest or other encumbrance which would not be permitted under Sections 5.02 and 5.03, FLL or such successor Person shall take such steps as shall be necessary effectively to (A) restore (if adversely affected) a first priority perfected security
interest in the Collateral for the benefit of the Collateral Agent (on behalf of the Secured Parties) in accordance with the requirements of the Loan Documents and (B) otherwise secure the Obligations equally and ratably with (or, at the option of
FLL, prior to) all indebtedness secured thereby; and
(iv) FLL has delivered to the Administrative Agent an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if
any amendment is required in connection with such transaction, such amendment comply with this Section 5.17 and that all conditions precedent herein provided for relating to such transaction have been complied with.
(b) Upon any consolidation by FLL with or merger by FLL into any other Person or any conveyance, transfer or lease of the properties and assets of FLL substantially as an entirety in
accordance with clause (a), the successor Person formed by such consolidation or into which FLL is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of,
FLL under the Loan Documents with the same effect as if such successor Person had been named as a Borrower Party herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under
the Loan Documents.
Section 5.18 Limitation on Indebtedness. No Pledged Equity Party may incur, create, issue, assume, guarantee or otherwise become liable for or
with respect to, or become responsible for, the payment of, contingently or otherwise, whether present or future, any Indebtedness other than (i) Indebtedness under the Loan Documents; (ii) in the case of the relevant Pledged Equity Parties,
Indebtedness secured by a Lien permitted under clause (r) of the definition of Permitted Liens; (iii) in the case of the Borrower and FWAH, Intercompany Loans; provided that no such Intercompany Loan shall
be permitted unless such Indebtedness has been subordinated to the Obligations and the Junior Lien Obligations pursuant to the terms of the Intercreditor Agreement; (iv) Leases and obligations to Lessees, trustees and others under the Leases, trust
agreements and other documents related thereto, including any Indebtedness owed to any Lessee under any such agreement or the Lease with respect to maintenance contributions, redelivery condition adjustment payments or any other obligation of any
Pledged Equity Party to a Lessee; (v) Indebtedness required in connection with repossession of an Aircraft or any Engine (as defined in the Mortgage); (vi) Indebtedness in favor of the issuer of a surety, letter of credit or similar instrument to
be obtained by any Pledged Equity Party in connection with the repossession or detention of an Aircraft or other enforcement action under a Lease; and (vii) in the case of the Borrower, Hedge Agreements.
- 79 -
Section 5.19 Limitation on Business Activity. Each Pledged Equity Party (but with respect to the Borrower, solely with respect to the following clause (ii)) shall maintain
its existence as a separate corporation, company, trust or other Person for the sole purpose of (i) owning, leasing and disposing of the Pool Aircraft and activities incidental thereto and (ii) holding and disposing of the assets contemplated to be
held hereunder and entering into the Loan Documents and the transactions contemplated thereby and activities incidental thereto. Each Pledged Equity Party shall maintain certain policies and procedures relating to its separateness, including, (x)
maintaining its own books and records (other than any Pledged Equity Party which is a trust) and maintaining its assets and liabilities in such a manner that it is not difficult to segregate, identify or ascertain such assets and liabilities from
those of any other Borrower Party and any other Person, and (y) holding itself out to creditors and the public as a legal entity (other than any trust) separate and distinct from other Borrower Parties and any other Person (except for consolidated
tax returns (or treatment under applicable tax laws as a disregarded entity), financial statements and similar reports). No Pledged Equity Party shall merge or consolidate into another Person.
Section 5.20 Requirements Following Additions to Designated Pool. (a) The Borrower shall exercise commercially reasonable efforts to deliver to
the Collateral Agent a Lessee Acknowledgement (as defined in the Mortgage) executed by the Lessee of each Pool Aircraft, as promptly as practicable but in any event within 120 days of becoming a Pool Aircraft; provided
that, if a Lessee Acknowledgement in respect of a Lessee cannot be procured after the relevant Borrower Parties have exercised commercially reasonable efforts, then such Lessee Acknowledgement from such Lessee shall not be required; provided, however, that in such instance, the relevant Borrower Parties shall be required to provide to the Administrative Agent
the insurance certificates and broker's letters of undertaking or other evidence reasonably satisfactory to the Administrative Agent that the Collateral Agent has been named as "loss payee" (or a "contract party" with respect to AVN67B)) in respect
of the relevant hull insurance, and the Collateral Agent and the Administrative Agent have been named as "additional insured" in respect of the relevant liability insurance, respectively, obtained by such Lessee in respect of the relevant Pool
Aircraft.
(b) Required Cape Town Registrations with respect to International Interests in Leases that are not registered on the International Registry as of the date an Aircraft is added to the
Designated Pool shall be made as promptly as practicable, but in any event no later than 120 days after such date.
Section 5.21 Credit Rating. FLL shall maintain a corporate family rating from Moody's and a corporate credit rating from S&P so long as the
applicable rating service remains in the business of providing corporate ratings for non-U.S.-Persons; provided that, in the event (i) either Moody's or S&P is no longer in the business of providing
ratings for Persons, the Administrative Agent and FLL shall negotiate in good faith to select an alternative rating service (if such rating service is available) to provide such a rating for FLL, or (ii) both Moody's and S&P are no longer in
the business of providing ratings for Persons, FLL shall appoint an alternative rating service (with the prior approval of the Required Lenders) to provide such a rating for FLL.
- 80 -
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any installment of the principal of the Loans when the same shall become due;
(b) the Borrower shall fail to pay when due any interest on the Loans and such failure shall continue unremedied for a period of three Business Days, or the Borrower shall fail to pay when
due any fee or other amount (except an amount referred to in clause (a) above) payable under any Loan Document, and such failure shall continue unremedied for a period of seven Business Days after demand upon or other notice to such Borrower;
(c) any representation, warranty or certification made or deemed made by or on behalf of any Borrower Party in or in connection with any Loan Document or any amendment or modification
thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect in any material respect when made or deemed made and the adverse effect thereof, if capable of being remedied, shall continue unremedied for a period of 30 days after the date on which the applicable Borrower Party shall have received
written notice thereof from any Lender Party;
(d) any Borrower Party shall fail to observe or perform any covenant or agreement contained in Sections 5.01, 5.04, 5.13, 5.16(a)(ii), 5.16(d) or 5.17;
(e) any Borrower Party shall fail to observe or perform any covenant or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) above), and such
failure shall continue unremedied for a period of 60 days (or, if FLL failed to give notice of such noncompliance or nonperformance pursuant to Section 5.09(a)(iv) within two Business Days after obtaining knowledge thereof, 60 days minus the number
of days elapsed between the date FLL obtained such knowledge and the date FLL gives the notice pursuant to Section 5.09(a)(iv), but in no event less than two Business Days) after notice thereof from any Lender Party to FLL (which notice will be
given by the Administrative Agent at the request of the Required Lenders);
(f) default under any mortgage, indenture or instrument under which there is issued, or which secures or evidences, any Material Indebtedness of the Borrower or any other Borrower Party
now existing or hereinafter created, which default shall constitute a failure to pay any amount in excess of $50,000,000 of principal of or interest on such Material Indebtedness when due and payable (other than as a result of acceleration), after
expiration of any applicable grace period with respect thereto, or shall have resulted in an aggregate principal amount in excess of $50,000,000 of any Material Indebtedness becoming or being declared due and payable prior to the date on which it
would otherwise have become due and payable, without such indebtedness having been discharged or such acceleration having been rescinded or annulled within a period of forty-five (45) days after there has been given a written notice to the Borrower
by the Administrative Agent or to the Borrower and the Administrative Agent by the Lenders of at least 25% in outstanding principal amount of the Loans, specifying such default with respect to the other indebtedness and requiring such Borrower
Party to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a notice of an Event of Default hereunder; provided, however, that there shall be excluded in each case Material Indebtedness in respect of which (i) the Person to whom that Material Indebtedness is owed has agreed to limit
its recourse to particular assets or (ii) the applicable Borrower Party is disputing such default in good faith, and in respect of which reasonable details of such dispute have been provided to the Administrative Agent but only if (x) reserves
required by IAS have been provided for the payment of such Material Indebtedness and (y) no enforcement action of any kind has been taken against any Borrower Party in respect of such default;
- 81 -
(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization, winding up or other relief in respect of any Borrower
Party or its debts, or of a substantial part of its assets, under any applicable Federal, state or other bankruptcy (faillite), insolvency, judicial liquidation (liquidation
judiciaire), composition with creditors (concordat préventif de faillite), reprieve from payment (sursis de paiement), controlled management (gestion contrôlée), fraudulent conveyance (action pauliana) receivership, examinership or similar law (including under the laws of Ireland, Bermuda and the Cayman
Islands) now or hereafter in effect or (ii) the appointment of a receiver, examiner, trustee, custodian, sequestrator, conservator, commissaire, commissaire surveillant,
juge-commissaire, liquidateur, curateur or similar official (including under the laws of Ireland, Bermuda and the Cayman
Islands) for any Borrower Party or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
(h) any Borrower Party shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization, examination, winding up or other relief under any Federal,
state or other bankruptcy, insolvency, receivership, examinership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause
(g) above, (iii) apply for or consent to the appointment of a receiver, examiner, trustee, custodian, sequestrator, conservator or similar official for any Borrower Party or for a substantial part of its respective assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) have its board of directors (or in respect of the Borrower, its Board of Directors or its
sole shareholder) vote to approve any action for the purpose of effecting any of the foregoing;
(i) any Borrower Party shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;
(j) one or more judgments for the payment of money in an aggregate amount exceeding $50,000,000 shall be rendered against the Borrower Parties taken as a whole and shall remain
undischarged for a period of 60 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any asset of any Borrower Party to enforce any such
judgment;
- 82 -
(k) any Lien purported to be created under any Security Document shall be asserted by any Borrower Party not to be, a valid and perfected Lien on any Collateral with the same priority as
and to the extent provided for under the applicable Security Documents except as a result of a sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents; provided, however, that if and to the extent that the failure of any such Lien to be a valid and perfected Lien also constitutes a Specified Representation Deficiency, such
Specified Representation Deficiency shall not constitute an Event of Default if and for so long as the relevant Borrower Party is taking all action that it is required to comply with following the occurrence of a Specified Representation Deficiency
in accordance with this Agreement;
(l) either (i) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, would reasonably be
expected to result in a Material Adverse Effect or (ii) any other event (other than an event occurring in the ordinary course) shall have occurred with respect to a Foreign Plan that, in the opinion of the Required Lenders, when taken together with
all other such events that have occurred, would reasonably be expected to result in a Material Adverse Effect; then, and in every such event (except an event with respect to any Borrower Party described in clause (g) or (h) above), and at any time
thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, (i) if such notice shall have been delivered prior to the making of the Loans, declare the
Commitments to be terminated or (ii) if such notice shall have been delivered after the making of the Loans, declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are waived by the Borrower; and in the case of any event with respect to any Borrower Party described in clause (g) or (h)
above, (1) if such event shall have occurred prior to the making of the Loans, the Commitments shall automatically be terminated and (2) if such event shall have occurred after the making of the Loans, the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of the Borrower Parties accrued hereunder, shall automatically become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of
which are waived by the Borrower Parties.
Section 7.01 Guaranty. Subject to Section 7.10, each of the Borrower Parties (other than the Borrower), hereby guarantees the punctual payment
upon the expiration of any applicable remedial period, whether at scheduled maturity or by acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. § 362(a) or any other applicable law (including under the laws of Ireland, the Cayman Islands and Bermuda)), of all of its Guaranteed Obligations (each Borrower Party (other than the Borrower), in its capacity as guarantor under
this Article VII, together with each other Person that becomes a Guarantor Party from time to time by executing a Guarantor Party Request and Assumption Agreement, a "Guarantor Party"). Subject to Section
7.10, without limiting the generality of the foregoing, the liability of each Guarantor Party shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any Borrower Party to any Secured Party under or in
respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization, examination, winding up or similar proceeding involving such Borrower Party.
- 83 -
Section 7.02 Contribution. Subject to Section 7.03, each Guarantor Party hereby unconditionally agrees that in the event any payment shall be required to be made to any
Secured Party under this Article VII, such Guarantor Party in its capacity as such will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor Party so as to maximize the aggregate amount paid to the Secured
Parties under or in respect of the Loan Documents.
Section 7.03 Guaranty Absolute. Subject to Section 7.10, each Guarantor Party guarantees that its Guaranteed Obligations will be paid in
accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Secured Party with respect thereto. The Obligations of each
Guarantor Party under or in respect of this Article VII are independent of the Guaranteed Obligations or any other Obligations of any other Borrower Party under or in respect of the Loan Documents, and a separate action or actions may be brought
and prosecuted against each Guarantor Party to enforce this Article VII, irrespective of whether any action is brought against any other Borrower Party or whether any other Borrower Party is joined in any such action or actions. Subject to Section
7.10, the liability of each Guarantor Party under this Article VII shall be irrevocable, absolute and unconditional, and each Guarantor Party hereby irrevocably waives any defenses (other than payment in full of the Guaranteed Obligations) it may
now have or hereafter acquire in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, all or any of its Guaranteed Obligations or any other Obligations of any other Borrower Party under or
in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in its Guaranteed Obligations resulting from the extension of additional credit to
any Borrower Party or any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of security interest in or Lien on any Collateral or any other collateral, or any taking, release or amendment or waiver of, or consent
to departure from, any other guaranty, for all or any of its Guaranteed Obligations;
(d) any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of its Guaranteed Obligations, or any manner of sale or other disposition of any
Collateral or any other collateral for all or any of its Guaranteed Obligations or any other Secured Obligations of any Borrower Party under the Loan Documents or any other assets of any Borrower Party or any of its Subsidiaries;
- 84 -
(e) any change, restructuring or termination of the corporate structure or existence of any Borrower Party or any of its Subsidiaries;
(f) any failure of any Secured Party to disclose to any Borrower Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or
prospects of any other Borrower Party now or hereafter known to such Secured Party (each Guarantor Party waiving any duty on the part of the Secured Parties to disclose such information);
(g) the failure of any other Person to execute or deliver any other guaranty or agreement or the release or reduction of liability of any other guarantor or surety with respect to its
Guaranteed Obligations; or
(h) any other circumstance or any existence of or reliance on any representation by any Secured Party that might otherwise constitute a defense available to, or a discharge of, any Borrower
Party or any guarantor or surety other than satisfaction in full of the Obligations.
In furtherance of the foregoing and without limiting the generality thereof, each Guarantor Party agrees as follows:
(a) the obligation pursuant to this Article VII is a guaranty of payment when due and not of collectability, and is a primary obligation of each Guarantor Party and not merely a contract of surety;
(b) the Administrative Agent may enforce the Guaranteed Obligations upon the occurrence of an Event of Default notwithstanding the existence of any dispute between any Borrower Party and any Secured Party
with respect to the existence of such Event of Default;
(c) the obligations of each Guarantor Party hereunder are independent of the obligations of the Borrower and the obligations of any other guarantor (including any other Guarantor Party) of the obligations of
the Borrower, and a separate action or actions may be brought and prosecuted against such Guarantor Party whether or not any action is brought against the Borrower or any of such other guarantors and whether or not the Borrower is joined in any
such action or actions;
(d) payment by any Guarantor Party of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any Guarantor Party's liability for any portion of the Guaranteed
Obligations which has not been paid. Without limiting the generality of the foregoing, if the Administrative Agent is awarded a judgment in any suit brought to enforce any Guarantor Party's covenant to pay a portion of the Guaranteed Obligations,
such judgment shall not be deemed to release such Guarantor Party from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit, and such judgment shall not, except to the extent satisfied by such Guarantor
Party, limit, affect, modify or abridge any other Guarantor Party's liability hereunder in respect of the Guaranteed Obligations;
- 85 -
(e) any Secured Party, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment,
discharge or termination of any Guarantor Party's liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed
Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same
to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person
(including any other Guarantor Party) with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of such Secured Party in respect hereof or the Guaranteed Obligations and direct the
order or manner of sale thereof, or exercise any other right or remedy that such Secured Party may have against any such security, in each case as such Secured Party in its discretion may determine consistent herewith or the applicable Hedge
Agreement and any Security Document including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to
impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor Party against any other creditor or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the
Loan Documents or any Hedge Agreements; and
(f) this Article VII and the obligations of Guarantor Parties hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any
reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not any Guarantor Party shall have had notice or knowledge of any of them: (i) any failure or omission to assert or
enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under
the Loan Documents or any Hedge Agreements, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed
Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, any of the other Loan Documents any of the Hedge
Agreements or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Loan Document, such Hedge Agreement or
any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments
received from any source (other than payments received pursuant to the other Loan Documents or any of the Hedge Agreements or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as
collateral for indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though any Secured Party might have elected to apply such payment to any part or all of the Guaranteed
Obligations; (v) any Secured Party's consent to the change, reorganization or termination of the corporate structure or existence of any Borrower Party and any of its Subsidiaries and to any corresponding restructuring of the Guaranteed
Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any defenses, set‑offs or counterclaims which any Borrower Party may allege or assert
against any Secured Party in respect of the Guaranteed Obligations, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or
omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Guarantor Party as an obligor in respect of the Guaranteed Obligations.
- 86 -
Section 7.04 Waiver and Acknowledgements. (a) Each Guarantor Party hereby waives promptness, diligence, notice of acceptance, presentment,
demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of its Guaranteed Obligations and this Article VII and any requirement that any Secured Party protect, secure,
perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Borrower Party or any other Person or any Collateral.
(i) Each Guarantor Party hereby unconditionally and irrevocably waives any right to revoke this Article VII and acknowledges that this Article VII is continuing in nature and applies to all of its Guaranteed
Obligations, whether existing now or in the future.
(ii) Each Guarantor Party hereby unconditionally and irrevocably waives any defense (i) arising by reason of any claim or defense based upon an election of remedies by any Secured Party
that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor Party or other rights of such Guarantor Party to proceed against any
of the other Borrower Parties, any other guarantor or any other Person or any Collateral; (ii) based on any right of set-off or counterclaim against or in respect of the Obligations of such Guarantor Party under this Article VII; (iii) arising by
reason of the incapacity, lack of authority or any disability or other defense of any Borrower Party including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or
instrument relating thereto or by reason of the cessation of the liability of any Borrower Party from any cause other than payment in full of the Guaranteed Obligations; (iv) based upon any statute or rule of law which provides that the obligation
of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (v) based upon any Secured Party's errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts
to bad faith; (vi) based on any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor's obligations hereunder; (vii) based on the
benefit of any statute of limitations affecting such Guarantor's liability hereunder or the enforcement hereof; (viii) based on promptness, diligence and any requirement that any Secured Party protect, secure, perfect or insure any security
interest or lien or any property subject thereto; and (ix) or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.
- 87 -
(iii) Each Guarantor Party hereby unconditionally and irrevocably waives any duty on the part of any Secured Party to disclose to such Guarantor Party any matter, fact or thing relating to the business,
condition (financial or otherwise), operations, performance, properties or prospects of any other Borrower Party or any of its Subsidiaries now or hereafter known by such Secured Party.
(iv) Each Guarantor Party acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this
Article VII are knowingly made in contemplation of such benefits.
Section 7.05 Subrogation. Each Guarantor Party hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or
hereafter acquire against any other Borrower Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor Party's Guaranteed Obligations under or in respect of any Loan Document,
including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Secured Party against any other Borrower Party or any other insider
guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any other Borrower Party or any other insider
guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of such Guarantor Party's Guaranteed Obligations and all other
amounts payable under this Article VII shall have been paid in full in cash, it being understood that payments in respect of inter-company advances exclusively among the Borrower Parties in the ordinary course of business are not prohibited under
this Section 7.05 unless an Event of Default has occurred and is continuing. If any amount shall be paid to any Guarantor Party in violation of the immediately preceding sentence at any time prior to the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Article VII, such amount shall be received and held in trust for the benefit of the Secured Parties, shall be segregated from other property and funds of such Guarantor Party and shall forthwith
be paid or delivered to the Lender in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to such Guarantor Party's Guaranteed Obligations and all other amounts payable by it under this Article
VII, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as Collateral for any of such Guarantor Party's Guaranteed Obligations or other amounts payable by it under this Article VII thereafter arising.
If all of the Guaranteed Obligations and all other amounts payable under this Article VII shall have been paid in full in cash, the Secured Parties will, at any Guarantor Party's request and expense, execute and deliver to such Guarantor Party
appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor Party of an interest in the Guaranteed Obligations resulting from such payment made by such
Guarantor Party pursuant to this Article VII.
Section 7.06 Payment Free and Clear of Taxes. Any and all payments by any Guarantor Party under this Article VII shall be made in accordance
with the provisions of this Agreement as though such payments were made by the Borrower, including the provisions of Section 2.08 (and such Guarantor Party shall make such payments of Taxes or Other Taxes to the extent described in Section 2.08 as
if references therein to the Borrower were references to such Guarantor Party).
- 88 -
Section 7.07 No Waiver; Remedies. No failure on the part of any Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by
law.
Section 7.08 Continuing Guaranty. This Article VII is a continuing guaranty and shall (a) remain in full force and effect until the payment in
full in cash of the Guaranteed Obligations and all other amounts payable under this Article VII, and (b) inure to the benefit of and be enforceable by the Secured Parties and their permitted successors, transferees and assigns. No Guarantor Party
shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Administrative Agent.
Section 7.09 Subordination of Certain Intercompany Indebtedness. Each Guarantor Party hereby agrees that any obligations owed to it by another
Borrower Party shall be subordinated to the Obligations of such Guarantor Party and that any indebtedness owed to it by another Borrower Party shall be subordinated to the Obligations of such other Borrower Party, it being understood that such
Guarantor Party or such other Borrower Party, as the case may be, may make payments on such intercompany indebtedness unless an Event of Default has occurred and is continuing.
Section 7.10 Limit of Liability. Each Guarantor Party shall be liable only for Guaranteed Obligations aggregating up to the largest amount that
would not render its Guaranteed Obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provision of any other applicable law (including under the laws of Ireland and Bermuda).
Section 8.01 Appointment of Agents. Royal Bank of Canada is hereby appointed Administrative Agent hereunder and under the other Loan Documents
and each Lender hereby authorizes Royal Bank of Canada to act as Administrative Agent in accordance with the terms hereof and the other Loan Documents. Bank of Utah is hereby appointed Collateral Agent hereunder, and each Lender hereby authorizes
Bank of Utah to act as Collateral Agent in accordance with the terms hereof and the other Loan Documents. Each Agent hereby agrees to act in its capacity as such upon the express conditions contained herein and the other Loan Documents, as
applicable. Except as expressly provided herein (including in the proviso in the first sentence of Section 8.07(a)), the provisions of this Article VIII are solely for the benefit of the Agents and the Lenders and no Borrower Party shall have any
rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties hereunder, each Agent shall act solely as an agent of the Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for any Borrower Party. Anything herein to the contrary notwithstanding, each Joint Lead Arranger listed on the cover page hereof shall have any powers, duties or responsibilities under
this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent or a Lender hereunder.
- 89 -
Section 8.02 Powers and Duties. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies
hereunder and under the other Loan Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only
those duties and responsibilities that are expressly specified herein and the other Loan Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. No Agent shall have, by
reason hereof or any of the other Loan Documents, a fiduciary relationship in respect of any Lender and no Agent shall be subject to any fiduciary or other implied duties; and nothing herein or any of the other Loan Documents, expressed or implied,
is intended to or shall be so construed as to impose upon any Agent any obligations in respect hereof or any of the other Loan Documents except as expressly set forth herein or therein.
(a) No Responsibility for Certain Matters. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectability or sufficiency hereof or any Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or made by any Agent to the Lenders or by any Lender to any Agent or by or on behalf of any Borrower Party to any Agent or any Lender in connection with the Loan Documents and
the transactions contemplated thereby or for the financial condition or business affairs of any Borrower Party or any other Person liable for the payment of any Obligations, nor shall any Agent be responsible for, or have any duty to ascertain or
inquire as to (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan
Documents, (iii) the use of the proceeds of the Loans or (iv) the existence or possible existence of any Event of Default or Default or to make any disclosures with respect to the foregoing. Anything contained herein to the contrary
notwithstanding, the Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof.
- 90 -
(b) Exculpatory Provisions. No Agent nor any of its officers, partners, directors, employees or agents shall be liable to the Lenders for any
action taken or omitted by any Agent under or in connection with any of the Loan Documents except to the extent caused by such Agent's gross negligence or willful misconduct, as determined by a final, non-appealable judgment of a court of competent
jurisdiction. Each Agent shall have no duty to take any discretionary action or exercise any discretionary powers, and shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection
herewith or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from the Required Lenders
(or such other Lenders as may be required to give such instructions under Section 9.05) and, upon receipt of such instructions from the Required Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so
instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected
in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and
judgments of attorneys (who may be attorneys for the Borrower Parties), accountants, experts and other professional advisors selected by it; (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting
or (where so instructed) refraining from acting hereunder or any of the other Loan Documents in accordance with the instructions of the Required Lenders (or such other Lenders as may be required to give such instructions under Section 9.05); (iii)
except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Borrower Party that is communicated to or obtained by the
institution serving as an Administrative Agent or any of its Affiliates in any capacity and (iv) the Administrative Agent will not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative
Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt, any action that may be in violation of the automatic stay under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect.
(c) Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers under this Agreement or
under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through
their respective Affiliates. The exculpatory, indemnification and other provisions of this Section 8.03 and of Section 8.06 shall apply to any Affiliates of the Administrative Agent and shall apply to their respective activities in connection with
the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. All of the rights, benefits and privileges (including the exculpatory and indemnification provisions) of this Section 8.03 and of Section
8.06 shall apply to any such sub-agent and to the Affiliates of any such sub-agent, and shall apply to their respective activities as sub-agent as if such sub-agent and Affiliates were named herein. Notwithstanding anything herein to the contrary,
with respect to each sub-agent appointed by the Administrative Agent, (i) such sub-agent shall be a third party beneficiary under this Agreement with respect to all such rights, benefits and privileges (including exculpatory rights and rights to
indemnification) and shall have all of the rights and benefits of a third party beneficiary, including an independent right of action to enforce such rights, benefits and privileges (including exculpatory rights and rights to indemnification)
directly, without the consent or joinder of any other Person, against any or all of Borrower Parties and the Lenders, (ii) such rights, benefits and privileges (including exculpatory rights and rights to indemnification) shall not be modified or
amended without the consent of such sub-agent, and (iii) such sub-agent shall only have obligations to the Administrative Agent and not to any Borrower Party, Lender or any other Person and no Borrower Party, Lender or any other Person shall have
any rights, directly or indirectly, as a third party beneficiary or otherwise, against such sub-agent.
- 91 -
Section 8.04 Agents Entitled to Act as Lender. 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, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the
same as if it were not performing the duties and functions delegated to it hereunder, and the term "Lender" shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Any Agent and its Affiliates may
accept deposits from, lend money to, own securities of, and generally engage in any kind of banking, trust, financial advisory or other business with any Borrower Party as if it were not performing the duties specified herein, and may accept fees
and other consideration from any Borrower Party for services in connection herewith and otherwise without having to account for the same to the Lenders.
Section 8.05 Lenders' Representations, Warranties and Acknowledgement. (a) Each Lender represents and warrants that it has independently and
without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and investigation of the financial condition and affairs of the Borrower
Parties in connection with the making of the Loans hereunder and made its own decision to enter into this Agreement and that it has made and shall, independently and without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall from time to time deem appropriate, continue to make its own appraisal of the creditworthiness of the Borrower Parties and make its own decisions in taking or not taking action under or based upon this
Agreement, any related agreement or any document furnished hereunder or thereunder. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of the
Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with
respect to the accuracy of or the completeness of any information provided to the Lenders.
(b) Each Lender, by delivering its signature page to this Agreement or an Assignment and Assumption, shall be deemed to have acknowledged receipt of, and consented to and approved, each
Loan Document and each other document required to be approved by any Agent, the Required Lenders or the Lenders, as applicable.
Section 8.06 Right to Indemnity. Each Lender, in proportion to its Applicable Percentage, severally agrees to indemnify each Agent, to the
extent that such Agent shall not have been reimbursed by any Borrower Party, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements and
compensation of agents and employees paid for services rendered on behalf of the Lenders) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and
remedies or performing its duties hereunder or under the other Loan Documents or otherwise in its capacity as such Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided,
no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct, as determined by
a final, non-appealable judgment of a court of competent jurisdiction. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity
and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished; provided, in no event shall this sentence require any Lender to indemnify any Agent against any
liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement in excess of such Lender's Applicable Percentage thereof; and provided, further,
this sentence shall not be deemed to require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement described in the proviso in the immediately preceding
sentence.
- 92 -
Section 8.07 Successor Administrative Agent and Collateral Agent. (a) The Administrative Agent shall have the right to resign at any time (which
such resignation shall then automatically include the resignation of each of its agents and sub-agents) by giving prior written notice thereof to the Lenders and the Borrower, and the Administrative Agent may be removed at any time with or without
cause (which such removal shall then automatically include the removal of each of its agents and sub-agents) by an instrument or concurrent instruments in writing delivered to the Borrower and the Administrative Agent and signed by the Required
Lenders. The Administrative Agent shall have the right to appoint a financial institution to act as the Administrative Agent and/or the Collateral Agent hereunder, subject to the reasonable satisfaction of the Borrower and the Required Lenders,
and the Administrative Agent's resignation shall become effective on the earliest of (i) 30 days after delivery of the notice of resignation, (ii) the acceptance of such successor Administrative Agent by the Borrower and the Required Lenders or
(iii) such other date, if any, agreed to by the Required Lenders. Upon any such notice of resignation or any such removal, if a successor Administrative Agent has not already been appointed by the retiring Administrative Agent, the Required
Lenders shall have the right, upon five Business Days' notice to the Borrower, to appoint a successor Administrative Agent. If neither the Required Lenders nor the Administrative Agent have appointed a successor Administrative Agent, the Required
Lenders shall be deemed to have succeeded to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent; provided that, until a successor Administrative Agent
is so appointed by the Required Lenders or the Administrative Agent, any collateral security held by the Administrative Agent in its role as a Secured Party on behalf of the Lenders under any of the Loan Documents shall continue to be held by the
retiring Administrative Agent as nominee until such time as a successor Administrative Agent is appointed. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall promptly (i) transfer to such successor
Administrative Agent all sums and items of Collateral held under the Security Documents, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Administrative Agent
under the Loan Documents, and (ii) execute and deliver to such successor Administrative Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such
successor Administrative Agent of the security interests created under the Security Documents, whereupon such retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring or removed
Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent hereunder. Any
successor Administrative Agent appointed pursuant to this Section shall, upon its acceptance of such appointment, become the successor Collateral Agent for all purposes hereunder.
- 93 -
(b) In addition to the foregoing, the Collateral Agent may resign at any time by giving prior written notice thereof to the Lenders and the Grantors, and the Collateral Agent may be removed
at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Grantors and the Collateral Agent signed by the Required Lenders. The Administrative Agent shall have the right to appoint a financial
institution as Collateral Agent hereunder, subject to the reasonable satisfaction of the Borrower and the Required Lenders and the Collateral Agent's resignation shall become effective on the earliest of (i) 30 days after delivery of the notice of
resignation, (ii) the acceptance of such successor Collateral Agent by the Borrower and the Required Lenders or (iii) such other date, if any, agreed to by the Required Lenders. Upon any such notice of resignation or any such removal, the Required
Lenders shall have the right, upon five Business Days' notice to the Administrative Agent, to appoint a successor Collateral Agent. Until a successor Collateral Agent is so appointed by the Required Lenders or the Administrative Agent, any
collateral security held by the Collateral Agent on behalf of the Lenders under any of the Loan Documents shall continue to be held by the retiring Collateral Agent as nominee until such time as a successor Collateral Agent is appointed. Upon the
acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed
Collateral Agent under this Agreement and the Security Documents, and the retiring or removed Collateral Agent under this Agreement shall promptly (i) transfer to such successor Collateral Agent all sums and items of Collateral held hereunder or
under the Security Documents, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Agreement and the Security Documents, and (ii)
execute and deliver to such successor Collateral Agent or otherwise authorize the filing of such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor
Collateral Agent of the security interests created under the Security Documents, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Agreement and the Security Documents. After any
retiring or removed Collateral Agent's resignation or removal hereunder as the Collateral Agent, the provisions of this Agreement and the Security Documents shall inure to its benefit as to any actions taken or omitted to be taken by it under this
Agreement or the Security Documents while it was the Collateral Agent hereunder.
(a) Agents under Security Documents and Guaranty. Each Secured Party hereby further authorizes the Administrative Agent or the Collateral Agent, as
applicable, on behalf of and for the benefit of the Secured Parties, to be the agent for and representative of the Secured Parties with respect to the guaranty set forth in Article VII, the Collateral and the Security Documents; provided that neither Administrative Agent nor Collateral Agent shall owe any fiduciary duty, duty of loyalty, duty of care, duty of disclosure or any other obligation whatsoever to any holder of Obligations with
respect to any Hedge Agreement. Subject to Section 9.05, without further written consent or authorization from any Secured Party, the Administrative Agent or the Collateral Agent, as applicable, may execute any documents or instruments necessary
to, in connection with a sale or disposition of assets permitted by this Agreement, release any Lien encumbering any item of Collateral that is the subject of such sale or other disposition of assets or to which the Required Lenders (or such other
Lenders as may be required to give such consent under Section 9.05) have otherwise consented.
- 94 -
(b) Right to Realize on Collateral and Enforce Guaranty. Anything contained in any of the Loan Documents to the contrary notwithstanding, the
Borrower, the Administrative Agent, the Collateral Agent and each Secured Party hereby agree that (i) no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce the guaranty set forth in Article VII, it
being understood and agreed that all powers, rights and remedies hereunder may be exercised solely by the Administrative Agent on behalf of the Secured Parties in accordance with the terms hereof and all powers, rights and remedies under the
Security Documents may be exercised solely by the Collateral Agent, and (ii) in the event of a foreclosure by the Collateral Agent on any of the Collateral pursuant to a public or private sale or other disposition, the Collateral Agent or any
Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and the Collateral Agent, as agent for and representative of Secured Parties (but not any Lender or Lenders in its or their respective
individual capacities unless the Required Lenders shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such
public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Agent at such sale or other disposition.
(c) Rights under Hedge Agreements. No Hedge Agreement will create (or be deemed to create) in favor of any
Hedge Counterparty that is a party thereto any rights to manage or direct the management or release of any Collateral or the obligations of any Guarantor under the Loan Documents except as expressly provided in Section 9.05(c)(iii) of this
Agreement. By accepting the benefits of the Collateral, such Hedge Counterparty shall be deemed to have appointed Collateral Agent as its agent and agreed to be bound by the Loan Documents as a Secured Party, subject to the limitations set forth
in this clause.
(d) Release of Collateral and Guarantees, Termination of Loan Documents. Notwithstanding anything to the contrary contained herein or any other Loan
Document, but without limiting any other provision therein providing for the partial release of any Collateral, when all Obligations (other than obligations in respect of any Hedge Agreement) have been paid in full and all Commitments have
terminated or expired, upon request of the Borrower, the Collateral Agent shall (without notice to, or vote or consent of, any Lender, or any affiliate of any Lender that is a party to any Hedge Agreement) take such actions as shall be required to
release its security interest in all Collateral, and to release all guarantee obligations provided for in any Loan Document, whether or not on the date of such release there may be outstanding Obligations in respect of Hedge Agreements. Any such
release of guarantee obligations shall be deemed subject to the provision that such guarantee obligations shall be reinstated if after such release any portion of any payment in respect of the Obligations guaranteed thereby shall be rescinded or
must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation, winding up or reorganization of the Borrower or any Guarantor Party, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower or any Guarantor Party or any substantial part of its property, or otherwise, all as though such payment had not been made.
- 95 -
Section 8.09 Withholding Taxes. To the extent required by any applicable law, the Administrative Agent, as the case may be, may withhold from
any payment to any Lender an amount equivalent to any applicable withholding Tax. If the Internal Revenue Service or any other Governmental Authority asserts a claim that the Administrative Agent, , did not properly withhold Tax from amounts paid
to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or
reduction of, withholding Tax ineffective or for any other reason, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or
interest and together with all expenses (including legal expenses, allocated internal costs and out-of-pocket expenses) incurred.
Section 8.10 Required Notice by Administrative Agent to Collateral Agent. Upon obtaining knowledge of the occurrence of a Default or Event of
Default, the Administrative Agent shall promptly notify the Collateral Agent of such Default or Event of Default. The Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until written notice
thereof is given to the Administrative Agent by a Borrower Party or a Lender.
Section 9.01 Notice Generally. (a) Any notice or other communication herein required or permitted to be given to a Borrower Party, the
Collateral Agent or the Administrative Agent shall be sent to such Person's address as set forth on Schedule 9.01, and in the case of any other Lender, the address as indicated in its Administrative Questionnaire or otherwise indicated to the
Administrative Agent in writing. Except as otherwise set forth in paragraph (b) below, each notice hereunder shall be in writing and may be personally served or sent by telefacsimile (except for any notices sent to the Administrative Agent) or
United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile, or three Business Days after depositing it in the
United States mail with postage prepaid and properly addressed; provided, no notice to any Agent shall be effective until received by such Agent; provided, further, any such notice or other communication shall at the request of Administrative Agent be provided to any sub-agent appointed pursuant to Section 8.03(c) hereto as designated by the Administrative Agent
from time to time.
- 96 -
(b) Electronic Communications.
(i) Notices and other communications to any Agent and the Lenders hereunder may be delivered or furnished by electronic communication (including e‑mail and Internet or intranet websites,
including the Platform) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Agent or any Lender pursuant to Article II if such Person
has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent
otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested" function, as
available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication
shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended
recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(ii) Each Borrower Party understands that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated
with such distribution and agrees and assumes the risks associated with such electronic distribution, except to the extent caused by the willful misconduct or gross negligence of the Administrative Agent, as determined by a final, non-appealable
judgment of a court of competent jurisdiction.
(iii) The Platform and any Approved Electronic Communications are provided "as is" and "as available." None of the Agents nor any of their respective officers, directors, employees, agents,
advisors or representatives (the "Agent Affiliates") warrant the accuracy, adequacy, or completeness of the Approved Electronic Communications or the Platform and each expressly disclaims liability for errors
or omissions in the Platform and the Approved Electronic Communications. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or
freedom from viruses or other code defects is made by the Agent Affiliates in connection with the Platform or the Approved Electronic Communications.
(iv) Each Borrower Party, each Lender and each Agent agrees that the Administrative Agent may, but shall not be obligated to, store any Approved Electronic Communications on the Platform in
accordance with the Administrative Agent's customary document retention procedures and policies.
(v) Any notice of Default or Event of Default may be provided by telephone if confirmed promptly thereafter by delivery of written notice thereof.
(c) Private Side Information Contracts. Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all
times have selected the "Private Side Information" or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender's compliance procedures and
applicable law, including United States federal and state securities laws, to make reference to information that is not made available through the "Public Side Information" portion of the Platform and that may contain non-public information with
respect to the Borrower Parties or their securities for purposes of United States federal or state securities laws. In the event that any Public Lender has determined for itself to not access any information disclosed through the Platform or
otherwise, such Public Lender acknowledges that (i) other Lenders may have availed themselves of such information and (ii) neither the Borrower nor the Administrative Agent has any responsibility for such Public Lender's decision to limit the scope
of the information it has obtained in connection with this Agreement and the other Loan Documents.
- 97 -
Section 9.02 Expenses. Whether or not the transactions contemplated hereby shall be consum-mated, the Borrower agrees to pay promptly (a) all the actual, reasonable and
documented costs and expenses incurred in connection with the negotiation, preparation and execution of the Loan Documents and any consents, amendments, waivers or other modifications thereto; (b) all the reasonable and documented costs of
furnishing all opinions by counsel for the Borrower and the other Borrower Parties; (c) the reasonable and documented fees, expenses and disbursements of counsel to the Agents (in each case including allocated costs of internal counsel) in
connection with the negotiation, preparation, execution and administration of the Loan Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by any Borrower Party, subject to a
maximum amount as separately agreed; (d) all the actual, reasonable and documented costs and expenses of creating, perfecting, recording, maintaining and preserving Liens in favor of the Collateral Agent for the benefit of Secured Parties,
including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums and reasonable fees, expenses and disbursements of counsel to each Agent and of counsel providing any opinions that any Agent
or the Required Lenders may request in respect of the Collateral or the Liens created pursuant to the Security Documents; (e) all the actual, reasonable and documented costs, fees, expenses and disbursements of any auditors, accountants,
consultants or appraisers; (f) all the actual, reasonable and documented costs and expenses (including the reasonable fees, expenses and disbursements of any appraisers, consultants, advisors and agents employed or retained by the Collateral Agent
and its counsel) in connection with the custody or preservation of any of the Collateral; (g) all other actual, reasonable and documented costs and expenses incurred by each Agent in connection with the syndication of the Loans and Commitments and
the transactions contemplated by the Loan Documents (including with respect to the release of UPA Loan Amounts and all reasonable printing, reproduction, document delivery, CUSIP, electronic platforms and communication costs including but not
limited to Intralinks or similar platform and ClearPar or similar platform) and any consents, amendments, waivers or other modifications thereto and (h) after the occurrence of a Default or an Event of Default, all documented costs and expenses,
including reasonable attorneys' fees (including allocated costs of internal counsel) and costs of settlement, incurred by any Agent and the Lenders in enforcing any Obligations of or in collecting any payments due from any Borrower Party hereunder
or under the other Loan Documents by reason of such Default or Event of Default (including in connection with the sale, lease or license of, collection from, or other realization upon any of the Collateral or the enforcement of the guaranty set
forth in Article VII) or in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a "work‑out" or pursuant to any insolvency or bankruptcy cases or proceedings.
- 98 -
Section 9.03 Indemnity. (a) In addition to the payment of expenses pursuant to Section 9.02, whether or not the transactions contemplated
hereby shall be consummated, each Borrower Party agrees to defend (subject to the Indemnitees' selection of counsel), indemnify, pay and hold harmless, each Agent and Lender and each of their respective officers, partners, members, directors,
trustees, advisors, employees, agents, sub-agents and affiliates (each, an "Indemnitee"), from and against any and all Indemnified Liabilities; provided, no Borrower
Party shall have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of such Indemnitee, in each case, as determined
by a final, non-appealable judgment of a court of competent jurisdiction. To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 9.03 may be unenforceable in whole or in part because they violate
any law or public policy, the applicable Borrower Party shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any
of them.
(b) To the extent permitted by applicable law, no Borrower Party shall assert, and each Borrower Party hereby waives, any claim against each Lender, each Agent and their respective
Affiliates, directors, employees, attorneys, agents or sub-agents, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on
contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, as a result of, or in any way related to, this Agreement or any Loan Document or any agreement or instrument contemplated hereby or thereby or
referred to herein or therein, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and each Borrower Party hereby waives, releases and
agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.
(c) Each Borrower Party also agrees that no Lender, Agent nor their respective Affiliates, directors, employees, attorneys, agents or sub-agents will have any liability to any Borrower
Party or any person asserting claims on behalf of or in right of any Borrower Party or any other person in connection with or as a result of this Agreement or any Loan Document or any agreement or instrument contemplated hereby or thereby or
referred to herein or therein, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, in each case, except in the case of any Borrower Party to
the extent that any losses, claims, damages, liabilities or expenses incurred by such Borrower Party or its affiliates, shareholders, partners or other equity holders have been found by a final, non-appealable judgment of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of such Lender, Agent or their respective Affiliates, directors, employees, attorneys, agents or sub-agents in performing its obligations under this Agreement or any Loan
Document or any agreement or instrument contemplated hereby or thereby or referred to herein or therein; provided, however, that
in no event will such Lender, Agent or their respective Affiliates, directors, employees, attorneys, agents or sub-agents have any liability for any indirect, consequential, special or punitive damages in connection with or as a result of such
Lender's, Agent's or their respective Affiliates', directors', employees', attorneys', agents' or sub-agents' activities related to this Agreement or any Loan Document or any agreement or instrument contemplated hereby or thereby or referred to
herein or therein.
- 99 -
Section 9.04 Set-Off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each
Lender is hereby authorized by each Borrower Party at any time or from time to time subject to the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), without notice to any Borrower Party or to any other
Person (other than the Administrative Agent), any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by such Lender to or for the credit or the account of any Borrower Party against and on account of the obligations and liabilities of any
Borrower Party to such Lender hereunder and under the other Loan Documents, including all claims of any nature or description arising out of or connected hereto or with any other Loan Document, irrespective of whether or not (a) such Lender shall
have made any demand hereunder or (b) the principal of or the interest on the Loans or any other amounts due hereunder shall have become due and payable pursuant to Article II and although such obligations and liabilities, or any of them, may be
contingent or unmatured.
(a) Requisite Lenders' Consent. Subject to the additional requirements of Sections 9.05(b) and 9.05(c), no amendment, modification, termination or
waiver of any provision of the Loan Documents, or consent to any departure by any Borrower Party therefrom, shall in any event be effective without the written concurrence of the Required Lenders; provided that
the Administrative Agent may, with the consent of the Borrower only, amend, modify or supplement this Agreement to cure any ambiguity, omission, defect or inconsistency, so long as such amendment, modification or supplement does not adversely
affect the rights of any Lender.
(b) Affected Lenders' Consent. Without the written consent of each Lender that would be directly affected thereby, no amendment, modification,
termination, or consent shall be effective if the effect thereof would:
(i) extend the scheduled final maturity of any Loan or Note;
(ii) waive, reduce or postpone any scheduled repayment (but not prepayment);
(iii) reduce the rate of interest on any Loan (other than any waiver of any increase in the interest rate applicable to any Loan pursuant to Section 2.04(b)) or any fee or any premium
payable hereunder;
(iv) extend the time for payment of any such interest or fees;
(v) reduce the principal amount of any Loan;
(vi) amend, modify, terminate or waive any provision of this Section 9.05(b), Section 9.05(c) or any other provision of this Agreement that expressly provides that the consent of all
Lenders is required;
(vii) amend the definition of "Required Lenders" or "Applicable Percentage"; provided, with the consent of Required Lenders, additional extensions of credit pursuant hereto may be included in the determination of "Required Lenders" or "Applicable Percentage" on substantially the same basis as the Commitments and the Loans are included on the Effective Date;
- 100 -
(viii) release all or substantially all of the Collateral or all or substantially all of the Guarantors from the guaranty set forth in Article VII except as expressly provided in the Loan
Documents; or
(ix) consent to the assignment or transfer by any Borrower Party of any of its rights and obligations under any Loan Document; provided that, for
the avoidance of doubt, all Lenders shall be deemed directly affected thereby with respect to any amendment described in clauses (vi), (vii), (viii) and (ix).
(c) Other Consents. No amendment, modification, termination or waiver of any provision of the Loan Documents, or consent to any departure by any
Borrower Party therefrom, shall:
(i) increase any Commitment of any Lender over the amount thereof then in effect without the consent of such Lender; provided, no amendment, modification or waiver of any condition
precedent, covenant, Default or Event of Default shall constitute an increase in any Commitment of any Lender;
(ii) amend, modify, terminate or waive any provision of Article VIII as the same applies to any Agent, or any other provision hereof as the same applies to the rights or obligations of
any Agent, in each case without the consent of such Agent; or
(iii) amend, modify or waive this Agreement or the Mortgage so as to alter the ratable treatment of Obligations arising under the Loan Documents and Obligations arising under Hedge
Agreements or the definition of "Hedge Counterparty," "Hedge Agreement," "Obligations," or "Secured Obligations" (as defined in any applicable Security Document) in each case in a manner adverse to any Hedge Counterparty with Obligations then
outstanding without the written consent of any such Hedge Counterparty.
(d) Execution of Amendments, etc. The Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Borrower Party in
any case shall entitle any Borrower Party to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 9.05 shall be binding upon
each Lender at the time outstanding, each future Lender and, if signed by a Borrower Party, on such Borrower Party.
Section 9.06 Successors and Assigns; Participations Consent Rights of Joint Lead Arrangers to Actions by Collateral Agent.
- 101 -
(a) Generally. This Agreement shall be binding upon the parties hereto and their respective successors
and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Lenders. No Borrower Party's rights or obligations hereunder nor any interest therein may be assigned or delegated by any Borrower Party without
the prior written consent of all Lenders. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent
expressly contemplated hereby, Affiliates of each of the Agents and Lenders and other Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Register. The Borrower, the Administrative Agent and the Lenders shall deem and treat the Persons listed as Lenders in the Register as the
holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any such Commitment or Loan shall be effective, in each case, unless and until recorded in the Register following
receipt of a fully executed Assignment and Assumption effecting the assignment or transfer thereof, together with the required forms and certificates regarding tax matters and any fees payable in connection with such assignment, in each case, as
provided in Section 9.06(d). Each assignment shall be recorded in the Register promptly following receipt by the Administrative Agent of the fully executed Assignment and Assumption and all other necessary documents and approvals (including a
completed Administrative Questionnaire and any additional information reasonably requested by the Administrative Agent necessary to satisfy "know your customer" or other similar checks under all applicable laws and regulations in relation to the
new Lender), prompt notice thereof shall be provided to the Borrower and a copy of such Assignment and Assumption shall be maintained, as applicable. The date of such recordation of a transfer shall be referred to herein as the "Assignment Effective Date." Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive
and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans.
(c) Right to Assign. Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under
this Agreement, including all or a portion of its Commitment or Loans owing to it or other Obligations (provided, however, that pro rata assignments shall not be required and each assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of any applicable Loan and any related
Commitments):
(i) to any Person meeting the criteria of clause (i) of the definition of the term of "Eligible Assignee" upon the giving of notice to the Borrower and the Administrative Agent, and
consented to by the Administrative Agent (such consent not to be (x) unreasonably withheld or delayed or (y) required in the case of a transfer or assignment to the Borrower, FLL or a Servicer or any of their Affiliates (a "Relevant Assignment Party") from any Lender or a transfer or assignment by a Relevant Assignment Party to another Relevant Assignment Party); and
- 102 -
(ii) to any Person meeting the criteria of clause (ii) of the definition of the term of "Eligible Assignee" upon giving of notice to the Borrower and the Administrative Agent, consented to
by the Administrative Agent (such consent not to be (x) unreasonably withheld or delayed or (y) required in the case of a transfer or assignment to a Relevant Assignment Party from any Lender or a transfer or assignment by a Relevant Assignment
Party to another Relevant Assignment Party) and, in the case of assignment of Loans or Commitments to any such Person (except in the case of primary assignments made by RBC Capital Markets, LLC or any of its affiliates), consented to by the
Borrower (such consent not to be (x) unreasonably withheld or delayed or (y) in the case of the Borrower, required at any time an Event of Default shall have occurred and be continuing); provided, further that (A) the Borrower shall be deemed to have consented to any such assignment of Loans or Commitments unless it shall object thereto by written notice to the Administrative Agent within fifteen (15) days
after having received notice thereof; provided that in connection with any such assignment to any of the entities listed in Annex 2, (as the same may be amended by agreement of the Borrower and
Administrative Agent from time to time, each, a "Borrower Competitor") there shall be no deemed consent, and the Borrower's actual consent shall be required, and (B) each such assignment pursuant to this
Section 9.06(c)(ii) shall be in an aggregate amount of not less than $1,000,000 (or such lesser amount as may be agreed to by the Borrower (unless an Event of Default has occurred and is continuing) and the Administrative Agent or as shall
constitute the aggregate amount of the Commitments and Loans of the assigning Lender) with respect to the assignment of the Commitments and Loans.
(d) Mechanics. Assignments and assumptions of Loans and Commitments by Lenders shall be
effected by manual execution and delivery to the Administrative Agent of an Assignment and Assumption. Assignments made pursuant to the foregoing provision shall be effective as of the Assignment Effective Date. In connection with all assignments
there shall be delivered to the Administrative Agent such forms, certificates or other evidence, if any, with respect to United States federal or other applicable income Tax withholding matters as the assignee under such Assignment and Assumption
may be required to deliver pursuant to Section 2.08(e), together with payment to the Administrative Agent of a registration and processing fee of $3,500.00 (except that no such registration and processing fee shall be payable in the case of primary
assignments made by Royal Bank of Canada).
(e) Representations and Warranties of Assignee. Each Lender, upon execution and delivery hereof or upon succeeding to an interest in the Commitments
and Loans, as the case may be, represents and warrants as of the Assignment Effective Date that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments or loans such as the applicable
Commit-ments or Loans, as the case may be; and (iii) it will make or invest in, as the case may be, its Commitments or Loans for its own account in the ordinary course and without a view to distribution of such Commitments or Loans within the
meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 9.06, the disposition of such Commitments or Loans or any interests therein shall at all times
remain within its exclusive control).
(f) Effect of Assignment. Subject to the terms and conditions of this Section 9.06, as of the "Assignment Effective Date" (i) the assignee
thereunder shall have the rights and obligations of a "Lender" hereunder to the extent of its interest in the Loans and Commitments as reflected in the Register and shall thereafter be a party hereto and a "Lender" for all purposes hereof; (ii) the
assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned to the assignee, relinquish its rights (other than any rights which survive the termination hereof under Section 9.08) and be released from
its obligations hereunder (and, in the case of an assignment covering all or the remaining portion of an assigning Lender's rights and obligations hereunder, such Lender shall cease to be a party hereto on the Assignment Effective Date; provided,
anything contained in any of the Loan Documents to the contrary notwithstanding, such assigning Lender shall continue to be entitled to the benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior
involvement of such assigning Lender as a Lender hereunder); (iii) the Commitments shall be modified to reflect the Commitment of such assignee; and (iv) if any such assignment occurs after the issuance of any Note hereunder, the assigning Lender
shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes to the Administrative Agent for cancellation, and thereupon the Borrower shall issue and deliver new Notes, if so requested by
the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriate insertions, to reflect the outstanding Loans of the assignee and/or the assigning Lender.
- 103 -
(g) Participations.
(i) Each Lender shall have the right at any time to sell one or more participations to any Person (other than any Borrower Party or any of their Affiliates) in all or any part of its
Commitments, Loans or in any other Obligation.
(ii) The holder of any such participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any
action hereunder except with respect to any amendment, modification or waiver that would (A) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of
interest or fees thereon (except in connection with a waiver of applicability of any post‑default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan
shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (B) consent to the assignment or transfer by any Borrower Party of any of its rights and obligations under this
Agreement or (C) release all or substantially all of the Collateral under the Security Documents or all or substantially all of the Guarantors from the guaranty set forth in Article VII (in each case, except as expressly provided in the Loan
Documents) supporting the Loans hereunder in which such participant is participating.
(iii) The Borrower agrees that each participant shall be entitled to the benefits of Section 2.08 to the same extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (c) of this Section; provided, (x) a participant shall not be entitled to receive any greater payment under Section 2.08 than the applicable Lender would have been entitled to receive with respect to the participation sold to
such participant, unless the sale of the participation to such participant is made with the Borrower's prior written consent and (y) such participant shall not be entitled to the benefits of Sections 2.08(a) through 2.08(f), inclusive, unless
Borrower is notified of the participation sold to such participant and such participant agrees, for the benefit of the Borrower, to comply with Sections 2.08(a) through 2.08(f), inclusive, as though it were a Lender; provided, further, that, except as specifically set forth in clauses (x) and (y) of this sentence, nothing herein shall require any notice to the
Borrower or any other Person in connection with the sale of any participation. To the extent permitted by law, each participant also shall be entitled to the benefits of Section 9.04 as though it were a Lender, provided such Participant agrees to
be subject to Section 2.09(g) as though it were a Lender.
- 104 -
(h) Certain Other Assignments and Participations. In addition to any other assignment or participation permitted pursuant to this Section 9.06 any
Lender may assign, pledge and/or grant a security interest in all or any portion of its Loans, the other Obligations owed by or to such Lender and its Notes, if any, to secure obligations of such Lender including any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Federal Reserve Board and any operating circular issued by such Federal Reserve Bank; provided that no Lender, as
between the Borrower and such Lender, shall be relieved of any of its obligations hereunder as a result of any such assignment and pledge, and provided, further, that in no event shall the applicable Federal Reserve Bank, pledgee or trustee, be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder.
(i) Consent Rights of Joint Lead Arrangers to Actions By Collateral Agent. Prior to the final completion of all primary assignments by each of RBC
Capital Markets, LLC and MUFG Bank Ltd., any actions to be taken by the Collateral Agent in connection with the Loan Documents and/or the Collateral (including granting any consents or waivers) shall be subject to the consent of the Joint Lead
Arrangers, and thereafter the Collateral Agent, to the extent not required to act on instructions of the Required Lenders or all of the Lenders, in the exercise of any discretionary right or power to approve the form or substance of any document or
otherwise shall exercise such right or power after consultation with the Administrative Agent.
Section 9.07 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition
is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action
is taken or condition exists.
Section 9.08 Survival of Representations, Warranties and Agreements. All representations, warranties and agreements made herein shall survive
the execution and delivery hereof and the making of any Loan. Notwithstanding anything herein or implied by law to the contrary, the agreements of each Borrower Party set forth in Sections 2.08, 2.09, 9.02, 9.03 and 9.04 and the agreements of the
Lenders set forth in Sections 2.08, 2.09(g), 8.03(b) and 8.06 shall survive the payment of the Loans and the termination hereof.
Section 9.09 No Waiver; Remedies Cumulative. No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or
privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other power, right or privilege. The rights, powers and remedies given to each Agent and each Lender hereby are cumulative and shall be in addition to and independent of all rights, powers and
remedies existing by virtue of any statute or rule of law or in any of the other Loan Documents or any of the Hedge Agreements. Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not
impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy.
- 105 -
Section 9.10 Marshalling; Payments Set Aside. Neither any Agent nor any Lender shall be under any obligation to marshal any assets in favor of
any Borrower Party or any other Person or against or in payment of any or all of the Obligations. To the extent that any Borrower Party makes a payment or payments to the Administrative Agent or the Lenders (or to the Administrative Agent on
behalf of the Lenders), or any Agent or Lender enforces any security interests or exercises any right of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
Section 9.11 Severability. In case any provision in or obligation hereunder or under any other Loan Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
Section 9.12 Obligations Several; Independent Nature of Lenders' Rights. The obligations of the Lenders hereunder are several and no Lender
shall be responsible for the obligations or Commitment of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by the Lenders pursuant hereto or thereto, shall be deemed to constitute the Lenders
as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights
arising out hereof and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.
Section 9.13 Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for
any other purpose or be given any substantive effect.
Section 9.14 Applicable Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
- 106 -
Section 9.15 Consent to Jurisdiction. (a) SUBJECT TO CLAUSE (E) OF THE FOLLOWING SENTENCE, ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY
ARISING OUT OF OR RELATING HERETO OR ANY OTHER LOAN DOCUMENT, OR ANY OF THE OBLIGATIONS, SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS
AGREEMENT, EACH BORROWER PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (A) ACCEPTS GENERALLY AND UNCONDITIONALLY THE EXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS (OTHER THAN WITH RESPECT TO ACTIONS BY ANY AGENT IN RESPECT
OF RIGHTS UNDER ANY SECURITY DOCUMENT GOVERNED BY LAW OTHER THAN THE LAW OF THE STATE OF NEW YORK OR WITH RESPECT TO ANY COLLATERAL SUBJECT THERETO); (B) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (C) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE BORROWER PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 9.01; (D) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (C) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE BORROWER PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (E) AGREES THAT THE AGENTS AND LENDERS RETAIN THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY BORROWER PARTY IN THE COURTS OF ANY OTHER JURISDICTION IN CONNECTION WITH THE EXERCISE OF ANY RIGHTS UNDER ANY SECURITY DOCUMENT OR THE ENFORCEMENT OF
ANY JUDGMENT.
(b) Each Borrower Party that is organized or incorporated under the laws of a jurisdiction outside the United States hereby appoints BBAM US LP, with an office at 50 California Street, 14th
Floor, San Francisco, CA 94111, as its agent for service of process in any matter related to this Agreement or the other Loan Documents and shall provide written evidence of acceptance of such appointment by such agent on or before the Effective
Date.
Section 9.16 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL‑ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON
THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WAR-RANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 9.16 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
- 107 -
Section 9.17 Confidentiality. Each Agent and each Lender shall hold all non‑public information regarding the Borrower and its Subsidiaries and their businesses identified as such by
the Borrower and obtained by such Agent or such Lender pursuant to the requirements hereof ("Information") in accordance with such Agent's and such Lender's customary procedures for handling confidential
information of such nature, it being understood and agreed by the Borrower that, in any event, the Administrative Agent may disclose such information to the Lenders and each Agent and each Lender may make (i) disclosures of such information to
Affiliates of such Lender or Agent and to their respective agents and advisors (and to other Persons authorized by a Lender or Agent to organize, present or disseminate such information in connection with disclosures otherwise made in accordance
with this Section 9.17), (ii) disclosures of such information reasonably required by any bona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer
or participation of any Loans or any participations therein or by any direct or indirect contractual counterparties (or the professional advisors thereto) to any swap or derivative transaction relating to the Borrower and its obligations (provided,
such assignees, transferees, participants, counterparties and advisors are advised of and agree to be bound by either the provisions of this Section 9.17 or other provisions at least as restrictive as this Section 9.17), (iii) disclosure to any
rating agency when required by it; provided that, prior to any disclosure, such rating agency shall undertake in writing to preserve the confidentiality of any confidential information relating to Borrower
Parties received by it from any Agent or any Lender, (iv) disclosures in connection with the exercise of any remedies hereunder or under any other Loan Document and (v) disclosures required or requested by any governmental agency or representative
thereof or by the National Association of Insurance Commissioners or any successor thereto or pursuant to legal or judicial process; provided, unless specifically prohibited by applicable law or court order, each Lender and each Agent shall make
reasonable efforts to notify the Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Lender by
such governmental agency) for disclosure of any such non‑public information prior to disclosure of such information. In addition, each Agent and each Lender may disclose the existence of this Agreement and the information about this Agreement to
market data collectors, similar services providers to the lending industry, and service providers to the Agents and the Lenders in connection with the administration and management of this Agreement and the other Loan Documents.
Section 9.18 Usury Savings Clause. Notwithstanding any other provision herein, the aggregate interest
rate charged with respect to any of the Obligations, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate. If the rate of interest (determined without
regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate, the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder
equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due
hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the
extent permitted by law, the Borrower shall pay to the Administrative Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been
in effect. Notwithstanding the foregoing, it is the intention of the Lenders and the Borrower to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes
interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to the
Borrower.
- 108 -
Section 9.19 Counterparts; Electronic Execution. This Agreement and each other Loan Document may be executed in one or more counterparts (and
by different parties hereto in different counterparts), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by fax or other electronic transmission of an executed counterpart
of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document and the words "execution," "execute", "signed," "signature," and
words of like import in or related to any document to be signed in connection with this Agreement or any other Loan Document shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on
electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper based
recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any
other similar state laws based on the Uniform Electronic Transactions Act. The Administrative Agent may, in its discretion, require that any such documents and signatures executed electronically or delivered by fax or other electronic transmission
be confirmed by a manually-signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature executed electronically or delivered by fax or other electronic
transmission.
Section 9.20 Effectiveness Entire Agreement; Third Party Beneficiary. This Agreement shall become effective upon the execution of a counterpart
hereof by each of the parties hereto and receipt by the Borrower and the Administrative Agent of written notification of such execution and authorization of delivery thereof.
Section 9.21 PATRIOT Act. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Borrower
Party that pursuant to the requirements of the PATRIOT Act, it is required to obtain, verify and record information that identifies each Borrower Party, which information includes the name and address of each Borrower Party and other information
that will allow such Lender or the Administrative Agent, as applicable, to identify such Borrower Party in accordance with the PATRIOT Act. The Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all
documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable "know your customer" and anti-money laundering rules and regulations, including the PATRIOT
Act.
- 109 -
Section 9.22 Electronic Execution of Documents. The words "execution," "signed," "signature," and words of like import in any Assignment and
Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any
other similar state laws based on the Uniform Electronic Transactions Act.
Section 9.23 No Fiduciary Duty. Each Agent, each Lender and their Affiliates (collectively, solely for purposes of this paragraph, the "Lenders"), may have economic interests that conflict with those of the Borrower Parties, their stockholders and/or their affiliates. Each Borrower Party agrees that nothing in the Loan Documents or otherwise
will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Lender, on the one hand, and such Borrower Party, its stockholders or its affiliates, on the other. The Borrower Parties
acknowledge and agree that (i) the transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder and thereunder) are arm's-length commercial transactions between the Lenders, on the one hand, and the
Borrower Parties, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Lender has assumed an advisory or fiduciary responsibility in favor of any Borrower Party, its stockholders or its affiliates with respect
to the transactions contemplated hereby (or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lender has advised, is currently advising or will advise any Borrower Party, its
stockholders or its Affiliates on other matters) or any other obligation to any Borrower Party except the obligations expressly set forth in the Loan Documents and (y) each Lender is acting solely as principal and not as the agent or fiduciary of
any Borrower Party, its management, stockholders, creditors or any other Person. Each Borrower Party acknowledges and agrees that it has consulted its own legal, tax and financial advisors to the extent it deemed appropriate and that it is
responsible for making its own independent judgment with respect to such transactions and the process leading thereto. Each Borrower Party agrees that it will not claim that any Lender has rendered advisory services of any nature or respect, or
owes a fiduciary or similar duty to such Borrower Party, in connection with such transaction or the process leading thereto.
[Signature pages follow.]
- 110 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
THE BORROWER
|
|||
FLY WILLOW FUNDING LIMITED
|
|||
By:
|
/s/ Vincent Cannon
|
||
Name:
|
Vincent Cannon | ||
Title:
|
Director |
THE GUARANTOR PARTIES
|
|||
FLY LEASING LIMITED
|
|||
By:
|
/s/ Colm Barrington
|
||
Name:
|
Colm Barrington | ||
Title:
|
Chief Executive Officer |
FLY WILLOW AIRCRAFT HOLDINGS DAC
|
|||
By:
|
/s/ Declan Cotter
|
||
Name:
|
Declan Cotter | ||
Title:
|
Director |
BANK OF UTAH, not in its individual capacity,
but solely as Collateral Agent and Securities
Intermediary
|
|||
By
|
/s/ Jon Croasmun
|
||
Name:
|
Jon Croasmun | ||
Title:
|
Senior Vice President |
ROYAL BANK OF CANADA, as Administrative Agent
|
|||
By
|
/s/ Yvonne Brazier
|
||
Name:
|
Yvonne Brazier | ||
Title:
|
Manager, Agency Services |
ROYAL BANK OF CANADA
|
|||
By
|
/s/ Scott Umbs
|
||
Name:
|
Scott Umbs | ||
Title:
|
Authorized Signatory |
Exhibit 4.3
EXECUTION VERSION
SERVICING AGREEMENT
THIS SERVICING AGREEMENT dated as of October 15, 2020 (this “Agreement”), is among BBAM US LP, a Delaware limited partnership (“BBAM”), BBAM AVIATION SERVICES LIMITED, a company
incorporated under the laws of Ireland (“BBAM Ireland” and together with BBAM, the “Servicers,” each a “Servicer”) and FLY LEASING LIMITED, a company incorporated under the laws of Bermuda (together with its affiliates and
subsidiaries collectively referred to herein as, the “Company”).
WHEREAS, the Company is the owner (directly or indirectly) of certain aircraft (the “Aircraft”) identified in Schedule 3.17(a) (as such schedule may be amended, restated or supplemented from
time to time) of that certain Term Loan Credit Agreement (the "Credit Agreement") dated on or about the date hereof among Fly Willow Funding Limited, as borrower, the Company and Fly Willow Aircraft Holdings DAC, each as a guarantor party,
Royal Bank of Canada, as administrative agent, Bank of Utah as collateral agent and such other parties as may be identified therein and has leased the Aircraft pursuant to certain aircraft lease agreements described in further detail in Schedule
3.17(b) of the Credit Agreement (collectively, the "Leases", which term shall include any subsequent leases for the Aircraft during the term of this Agreement); and
WHEREAS, the Company wishes to engage BBAM and BBAM Ireland, collectively, as Servicers to provide certain administrative and management services with respect to the Aircraft during the term of the
Lease and each of BBAM and BBAM Ireland hereby accepts such appointment and agrees to provide such services, all in accordance with the terms hereof.
NOW, THEREFORE, it is agreed as follows:
For purposes of this Agreement capitalized terms not defined herein shall have the meanings provided in the Lease.
1. Administration and Servicing Obligations; Term.
The Company hereby appoints BBAM and BBAM Ireland, collectively, to act as the exclusive servicer in respect of its interest in the Aircraft and the Lease and for the acquisition and disposition of the Aircraft. The
term of this Agreement will commence on the date hereof and, unless terminated earlier in accordance with Section 10, shall end on the earlier of the Maturity Date (as defined in the Credit Agreement) or the date on which the Company ceases to own
the Aircraft; provided that in either such case, the affairs of the Company in relation to the Aircraft have been wound up and the Company shall have performed its payment and other obligations under this Agreement (the “Term”). Pursuant to
this appointment, BBAM and BBAM Ireland will perform the services listed in Schedule 1 to this Agreement. All services listed on Schedule 1 hereto, together with all activities undertaken by the Servicers in connection with this Agreement, the
Lease or the Aircraft, are referred to collectively as the “Services”.
2. Compensation for Services.
In consideration of the Servicers performing the Services, the Company shall pay the Servicers the following fees (collectively, the “Fees”):
(a) a servicing fee equal to 3.5% of the monthly rents (excluding maintenance reserves or other supplemental rent) actually collected (including the application of a deposit for monthly rent owed) which fee
shall be deemed fully earned upon receipt of any monthly rent and is payable monthly in arrears on the first day of each calendar month;
(b) as administrative fee equal to (i) $10,000 per month plus (ii) $1,000 multiplied by the number of Aircraft per month,
which shall be deemed fully earned upon the first day of each calendar month, shall be prorated for any partial month and is payable monthly in arrears on the first day of each calendar month; and
(c) a disposition fee equal to 1.5% of the gross consideration collected with respect to the sale of the Aircraft, which such fee shall be deemed fully earned upon receipt of such sales proceeds and is payable
upon such receipt; provided however, no such Fee shall be payable on the sale of the Aircraft related to a refinancing or a transfer of the Aircraft among the Company’s subsidiaries.
3. Servicer’s Expenses.
Except as provided in Section 4 hereof, all reasonable out-of-pocket expenses (including without limitation, reasonable attorneys’ fees) incurred by each Servicer (and any Servicer delegate) in connection with the
performing the Services will be reimbursable by the Company to each Servicer upon receipt of invoice. The Servicers shall be under no obligation to incur material costs and may condition the performance of any Services that would require the same
upon the receipt of an appropriate cost advance from the Company. The Company will provide customary directors’ and officers’ liability insurance for any employees of the Servicer who act as directors or officers of the Company.
4. Other Parties.
It is acknowledged and agreed that the Servicers may, in order to discharge the Services, engage other parties to provide services or render advice where the Servicers believe this is appropriate; provided that any
such other party is reputable in the industry and selected in accordance with the Standard of Care. Except as provided in Section 3, such engagement shall be at the Servicers’ expense and shall not in any way affect the Servicers’ responsibility
to the Company to provide the Services.
5. Standard of Care; Conflicts Standard; Limitations on Liability; Indemnity.
The Servicers shall use reasonable care and diligence at all times in the performance of the Services consistent with the customary commercial practice of major international aircraft lessors in
the management, servicing and marketing of commercial jet aircraft and related assets and with no less care and diligence than the Servicers would use in providing the Services with respect to aircraft that are owned or managed by the Servicers
(the “Standard of Care”); provided, however, that the Company acknowledges and agrees that the Servicers’ ability to use such care and diligence may be limited or restricted by the provisions of this Agreement or by any other agreement that
is binding on the Company (including the Lease) or by actions or omissions of the Company.
-2-
The Company acknowledges and agrees that: (a) in addition to providing the Services to the Company under this Agreement, the Servicers shall be entitled to manage, service and market from time to
time the separate assets and businesses of the Servicers, theirs affiliates, and other third parties (the assets of the parties described in this sentence are collectively referred to as the “Other Assets”); and (b) in the course of
conducting such activities, the Servicers may from time to time have conflicts of interest in performing the Services. If any such conflicts of interest arise, the Servicers agree to perform the Services in good faith and, without prejudice to the
generality of the foregoing, to the extent that the Aircraft and such Other Assets are similar in terms of objectively identifiable characteristics relevant for purposes of the particular Services to be performed, the Servicers shall not
discriminate against the Aircraft on an unreasonable basis.
The relationship between the Servicers and the Company is an agency relationship. The Servicers shall not be under any fiduciary duty or other implied obligation or duty to the Company arising out
of this Agreement, it being agreed that the rights and obligations of the parties hereto shall only be those expressly provided for in this Agreement.
Neither of the Servicers nor any affiliate of the Servicers to whom duties of the Servicers are delegated pursuant to this Agreement, nor any agent, contractor, vendor, member, partner, manager,
director, officer, employee of the Servicers or any such affiliate or any other person who serves at the request of any of the foregoing in connection with this Agreement (each severally, a "BBAM Covered Person") shall be liable, responsible
or accountable in damages or otherwise to the Company for any losses, damages, liabilities, demands or expenses suffered by the Company or which directly or indirectly arise out of, in connection with or related to, the Lease, the Aircraft or the
performance by the Servicers or any BBAM Covered Person of the Services, or any mistakes of judgment or for action or inaction, except to the extent attributable to the gross negligence or willful misconduct of the Servicers or such BBAM Covered
Person. In no case shall the liability of the Servicers exceed the revenues actually received by the Servicers from the Company pursuant to this Agreement.
The Company agrees on demand to indemnify, defend and hold harmless the Servicers and any BBAM Covered Person from and against all claims, demands, costs, expenses and liabilities incurred by the Servicers or any BBAM
Covered Person which directly or indirectly arise out of, in connection with or are related to, the Lease, the Aircraft or the performance by the Servicers or any BBAM Covered Person of the Services, unless caused by the gross negligence or willful
misconduct of the Servicers or any BBAM Covered Person. The obligations of the Company under this Section 5 shall survive the termination of this Agreement pursuant to Section 10 hereof or otherwise.
-3-
6. Transaction Approval Requirements.
The Servicers shall not do any of the following without the prior approval of the Company:
(a) |
other than as required under the terms of the Lease sell (or enter into any agreement to sell) or otherwise dispose of the Aircraft (excluding any sale or exchange of any Engine, parts or components thereof or aircraft or engine spare
parts or ancillary equipment or devices furnished therewith) forming part of the Aircraft;
|
(b) |
enter into any new lease of the Aircraft (or any renewal or extension of a Lease);
|
(c) |
terminate a Lease with respect to the Aircraft except in the case of a lessee default, bankruptcy or insolvency or circumstances in which the Servicers consider such a default, bankruptcy or insolvency as likely to occur;
|
(d) |
enter into on behalf of the Company any order or commitment to acquire aircraft, engines or any part thereof, other than as contemplated by the Lease; and
|
(e) |
make or consent to any material modification (to the extent that either Servicer has any right to make, consent to, or prevent any modification) to any required insurance, or cause the Aircraft to be employed in any place or in any
manner or for any purpose inconsistent with the terms of or outside the coverage provided by any required insurance.
|
7. Notices.
Any notice or communication under or in connection with this Agreement shall be in writing and shall be delivered personally or by post, telex, facsimile (confirmed as received by the recipient) or cable to the
respective addresses or telex or fax numbers given below or such other address or telex or fax number as the recipient may have notified to the sender in writing. Proof of posting or dispatch shall be deemed proof of receipt:
(a) |
in the case of a letter, on the fifth business day after posting;
|
(b) |
in the case of a telex or cable, on the business day immediately following the date of dispatch; and
|
(c) |
in the case of a facsimile, on the date on which the recipient confirms receipt:
|
-4-
to BBAM at:
|
50 California Street, 14th Floor
|
|
San Francisco, CA 94111
|
||
Facsimile: 415-618-3337
|
||
Attention: General Counsel
|
||
to BBAM Ireland at:
|
West Pier Business Campus, Dun Laoghaire
|
|
County Dublin A96 N6T7, Ireland
|
||
Facsimile: +353-1-231-1901
|
||
Attention: General Counsel
|
||
to the Company at:
|
c/o Fly Leasing Limited
|
|
West Pier Business Campus, Dun Laoghaire
|
||
County Dublin A96 N6T7, Ireland
|
||
Facsimile: +353-1-231-1901
|
||
Attention: General Counsel
|
Any party by notice given in accordance with this Section 7 to the other party may designate another address or person for receipt of notices hereunder.
8. Governing Law.
This Agreement, and all matters arising out of or relating to this Agreement (whether in contract or tort), shall governed by, and shall be construed in accordance with, the laws of the State of New York, without
regard to conflict of law principles.
9. Non‑Exclusive Jurisdiction in New York.
The parties hereby consent to the non‑exclusive jurisdiction of any state or Federal court located in the County of New York, New York. Nothing herein will prevent any party from bringing suit in any other appropriate
jurisdiction. The parties hereby agree that service of process may be made upon each of them by mailing copies of the summons and complaint to the person to be served by air mail, certified or registered mail to the address set forth in Section 7,
postage prepaid, return receipt requested, or in accordance with the Hague Convention, if applicable.
10. Termination, Resignation.
The parties hereto agree that BBAM’s and BBAM Ireland’s appointment as Servicers may be terminated prior to the expiry of the Term at the election of the Company, by written notice to the Servicers, if a “Termination
Event” occurs and is not cured within the applicable cure periods described below. For purposes of this Section 10, each of the events described in the following paragraphs shall constitute a Termination Event:
(a) |
the insolvency of the Servicers or the commencement of any voluntary or involuntary bankruptcy, insolvency, liquidation, winding-up or similar proceedings in relation to the Servicers, which in the case of an involuntary bankruptcy or
similar proceeding is not dismissed with 90 days;
|
-5-
(b) |
the Servicers shall make a general assignment for the benefit of their creditors;
|
(c) |
the Servicers commit a material breach of any one or more of the obligations contained in this Agreement and fail to cure such breach within 30 days after written notice thereof by the Company;
|
(d) |
the Aircraft, other than by a substitution of such Aircraft as permitted under the Credit Agreement, shall cease to be owned by the Company; or
|
(d) |
the Servicers cease to be actively involved in the aircraft leasing business.
|
Each of Servicers shall be entitled to resign their appointment prior to the expiry of the Term if the Company shall fail to pay in full any Fee, reimbursable expense or such other amount payable to the Servicers
hereunder within 5 days after receipt of written notice from the Servicers of such failure.
Upon the occurrence of a Termination Event or any resignation of the Servicers pursuant to this Section 10, the Servicers shall as soon as reasonably practicable wind up their performance of the Services and, if
applicable, reasonably assist the Company in transitioning to a replacement servicer. So long as the Servicers are continuing to perform any of the Services, all provisions of this Agreement shall remain applicable, including provisions relating
to the payment of Fees and reimbursement of expenses. The Servicers shall continue in their role until a replacement servicer has assumed servicing responsibilities or the affairs of the Company in relation to the Aircraft have been wound up, as
applicable; provided, however, in no event shall the Servicers be obligated to perform any of the Services during any period in which they are not be paid, nor shall the Servicers be obligated to assist in transitioning to a replacement servicer or
winding up the Company for a period in excess of 120 days. Within thirty (30) days following the date that the Servicers’ appointment terminates, all Fees that have been earned by the Servicers, but not yet paid, and all expenses and other amounts
that have become payable hereunder to the Servicers, but not yet paid, shall be paid by the Company.
11. Confidentiality.
This Agreement is confidential and neither party shall disclose any or all of its content to any third party, other than to its affiliates, the Administrative Agent, the Collateral Agent and the Lenders (as such terms
are defined in the Credit Agreement), including any potential assignee, transferee or participant of such Lender ( provided, such assignees, transferees or participants agree to be bound by the confidentiality provisions of the Credit Agreement)
and, in the case of the Servicers, any party to which it makes a delegation pursuant to Section 4 hereof, without the prior consent of the other party.
12. Counterparts.
This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same
instrument.
-6-
13. Amendment.
This Agreement shall not be amended or varied otherwise then by an instrument in writing executed by the parties hereto.
14. Illegality.
If any provision of this Agreement becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or
impaired.
15. No Services requiring authorisation.
Notwithstanding any other provision of this Agreement, the Parties acknowledge and agree that the Servicers shall not and shall not be required to undertake any activity or perform any service that would require any Servicer to obtain an
authorisation or registration from a regulatory or govermental authority, including the Central Bank of Ireland, pursuant to, inter alia, the European Union (Markets in Financial Instruments) Regulations
2017, the European Union (Insurance Distribution) Regulations 2018, the European Union (Payment Services) Regulations 2018, the European Union (Alternative Investment Fund Managers) Regulations 2013, the Central Bank Act 1971, the Central Bank Act
1997, the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 or any other applicable law (each as may be amended from time to time). In particular, the Servicers are not required to provide any service with respect to financial
isntruments within the meaning of the European Union (Markets in Financial Instruments) Regulations 2017, including for the avoidance of doubt, shares in Aircraft-owning companies, bonds and derivatives.
-7-
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.
FLY LEASING LIMITED
|
|||
By:
|
/s/ Colm Barrington | ||
Name:
|
Colm Barrinton | ||
Title:
|
Chief Executive Officer |
[Signature Page to Servicing Agreement]
BBAM AVIATION SERVICES LIMITED
|
|||
By:
|
/s/ Maurice Prendergast | ||
Name:
|
Maurice Prendergast | ||
Title:
|
Director |
[Signature Page to Servicing Agreement]
BBAM US LP
|
|||
By:
|
/s/ Robert S. Tomczak | ||
Name:
|
Robert S. Tomczak | ||
Title:
|
Sr. Vice President |
[Signature Page to Servicing Agreement]
SCHEDULE 1
STANDARD SERVICING OBLIGATIONS
Lessee Communications &
Reporting
|
- Receive, review, and respond to all communications with the Lessee and advise/invoice the Company as necessary
- Monitor the Lessee’s periodic reporting obligations (utilization and maintenance status, financial statements, etc)
|
Lease Options
|
- Advise Company with respect to necessary action in connection with purchase, Lease extension and other Lease options
- In the event of an insolvency of the Lessee or other Lease Event of Default, engage the Lessee in connection with negotiations, restructuring or other workout and advise Company
with respect to any recommended action
|
Invoicing & Routine
Administration of Receivables
|
- Invoice the Lessee for amounts due, including Basic Rent, Security, Overhaul Payments or other payments, under the Lease
- Monitor and maintain appropriate payment records
|
Maintenance Reserve
Administration
|
- Monitor the performance of maintenance obligations by the Lessee under the Lease
- Monitor periodic payments and verify relevant calculations
- Review and recommend payment with respect to approval of maintenance reserve reimbursement claims
- Upon redelivery of aircraft, arrange for inspection of aircraft, review and maintain records,determine whether Lessee has complied with the terms of the Lease, including all
redelivery requirements, airworthiness directives and maintenance obligations
|
Sch. 1-1
Insurance
|
- Monitor performance of the Lessee’s insurance obligations under the Lease
- Review agreed values and advise the Company if increases or additional coverages should be effected,and, to the extent commercially available, procure such increases or
additional coverages as directed by the Company.
- Notify the Company promptly in writing of incidents known to the Servicers resulting in damage with cost potentially exceeding Damage Notification Threshold
- Furnish the Company’s insurance broker with such information as it may require to procure insurance for aircraft off-lease (at Company’s expense) in accordance with standard BBAM
practices
|
Enforcement
|
- Take necessary steps to enforce the obligations of the Lessee under the Lease and, following a default, all steps necessary or appropriate to preserve and enforce the rights of
the Company under the Lease
|
Technical Services
|
- Monitor performance of the Lessee’s maintenance payment obligations under the Lease by reference to the monthly reports provided by the Lessee under the Lease
- Arrange, when requested by the Company, and at the Company’s cost, physical inspections by the Servicers or any other person nominated by the Company and provide written reports
(including assistance relating to any valuation or appraisal services)
- Monitor the Lessee’s compliance with respect to service bulletins and airworthiness directives required by the Lease, which may be subject to cost sharing arrangements as between
the Company and the Lessee pursuant to the Lease, including a review of the calculation of such cost sharing
- Review and make recommendations in respect of Lessee proposals for modifications to the Aircraft
- Review proposed changes to the maintenance program for the Aircraft of which the Servicers have knowledge
- Redelivery management (compliance with redelivery requirements (including, without limitation, service bulletins and airworthiness directives compliance required by the Lease),
documentation and acceptance)
|
Operational Reports/Notices
|
- Provide notice to the Company of any material Lessee payment defaults - Provide to the Company technical status updates (utilisation and timing of major maintenance
payments) as requested by Company
- Information and reports provided by the Lessee under the Lease and received by the Servicers
- Provide to the Company notice of Events of Default of which the Servicers have knowledge
- Provide to the Company notice of any claim made by the Lessee against the Company of which the Servicers have knowledge
|
Sch. 1-2
Other
|
- Prepare, draft and negotiate each lease agreement for each new lease the Company enters into with respect to the Aircraft -
- Receive and review any estimate of cost, invoice or other request for reimbursement or expenditure pursuant to the Lease
- Evaluate and advise the Company regarding any proposal or request to approve pooling arrangements in respect of the Aircraft made by the Lessee in accordance with the Lease
- Consult with the Company to discuss any matters relating to the Lease, the Aircraft or the Lessee (i) whenever the Company shall reasonably request and/or (ii) whenever the
Servicers shall deem it advisable, provided always that that such advice does not involve any recommendation relating to financial instruments, within the meaning of the European Union (Markets in Financial Instruments) Regulations 2017,
such as interests in an Aircraft-owning vehicle.
- Set up and manage corporate bank accounts in the name of and on behalf of the Company in connection with the performance of the Services provided always that that the management
and administration of such corporate bank accounts does not involve the Servicers investing funds on deposit in the accounts in financial instruments, within the meaning of the European Union (Markets in Financial Instruments) Regulations
2017.
- Procure legal, tax and accounting services on behalf of the Company as is necessary or desirable in connection with the performance of the Services
- Forward promptly a copy of any material communication received from any person in relation to the Lease, Aircraft or engine
- Hold all original Lease and Lease related documents (or copies thereof) of the Company in safe custody, by application of measures comparable to those each Servicer uses in the
retention of its own original documents of a similar nature
- If the Lease terminates or expires for any reason, the Servicers shall use commercially reasonable efforts to lease, sell or otherwise remarket the Aircraft taking into account
the then current market conditions.
|
Sch. 1-3
Exhibit 4.4
SERVICING AGREEMENT
(msn(s) [ ])
THIS SERVICING AGREEMENT dated as of [____________] (this “Agreement”), is among BBAM US LP, a Delaware limited partnership (“BBAM”), BBAM AVIATION SERVICES LIMITED, a company
incorporated under the laws of Ireland (“BBAM Ireland” and together with BBAM, the “Servicers,” each a “Servicer”) and [ENTITY NAME], a [______] company (the “Company”).
[WHEREAS, the Company holds 100% of the beneficial interest in an owner trust created pursuant to that certain Trust Agreement dated [________] between [________], not in its individual capacity but
solely as owner trustee (the “Owner Trustee”) and the Company (as the same may be amended, supplemented, assigned and assumed from time to time, the “Trust”);]
WHEREAS, the [Owner Trustee / Company] is the owner of that certain [______] aircraft bearing manufacturer’s serial number [____] (the “Aircraft”) and has leased the Aircraft pursuant to that
certain Aircraft Lease Agreement dated [_____] (as the same may be amended, novated, supplemented or modified from time to time, the “Lease,” which term shall include any subsequent leases for the Aircraft during the term of this Agreement)
between the [Owner Trustee / Company] and [______] (the “Lessee”); and
WHEREAS, the Company wishes to engage BBAM and BBAM Ireland, collectively, as Servicers to provide certain administrative and management services with respect to the Aircraft during the term of the
Lease and each of BBAM and BBAM Ireland hereby accepts such appointment and agrees to provide such services, all in accordance with the terms hereof.
NOW, THEREFORE, it is agreed as follows:
For purposes of this Agreement capitalized terms not defined herein shall have the meanings provided in the Lease.
1. Administration and Servicing Obligations; Term.
The Company hereby appoints BBAM and BBAM Ireland, collectively, to act as the exclusive servicer in respect of its interest in the Aircraft and the Lease and for the acquisition and disposition of the Aircraft. The
term of this Agreement will commence on the date hereof and, unless terminated earlier in accordance with Section 10, shall end on the earlier of [insert date] or the date on which the Company ceases to own the Aircraft; provided that in either such
case, the affairs of the Company in relation to the Aircraft have been wound up and the Company shall have performed its payment and other obligations under this Agreement (the “Term”). Pursuant to this appointment, BBAM and BBAM Ireland will
perform the services listed in Schedule 1 to this Agreement. All services listed on Schedule 1 hereto, together with all activities undertaken by the Servicers in connection with this Agreement, the Lease or the Aircraft, are referred to
collectively as the “Services”.
2. Compensation for Services.
In consideration of the Servicers performing the Services, the Company shall pay the Servicers the following fees (collectively, the “Fees”):
(a) a servicing fee equal to 3.5% of the monthly rents (excluding maintenance reserves or other supplemental rent) actually collected (including the application of a deposit for monthly rent owed) which fee
shall be deemed fully earned upon receipt of any monthly rent and is payable monthly in arrears on the first day of each calendar month;
(b) as administrative fee equal to $1,000 per month, which shall be deemed fully earned upon the first day of each calendar month, shall be prorated for any partial month and is payable monthly in arrears on the
first day of each calendar month; and
(c) a disposition fee equal to 1.5% of the gross consideration collected with respect to the sale of the Aircraft, which such fee shall be deemed fully earned upon receipt of such sales proceeds and is payable
upon such receipt; provided however, no such Fee shall be payable on the sale of the Aircraft related to a refinancing or a transfer of the Aircraft among the Company’s subsidiaries.
3. Servicer’s Expenses.
Except as provided in Section 4 hereof, all reasonable out-of-pocket expenses (including without limitation, reasonable attorneys’ fees) incurred by each Servicer (and any Servicer delegate) in connection with the
performing the Services will be reimbursable by the Company to each Servicer upon receipt of invoice. The Servicers shall be under no obligation to incur material costs and may condition the performance of any Services that would require the same
upon the receipt of an appropriate cost advance from the Company. The Company will provide customary directors’ and officers’ liability insurance for any employees of the Servicer who act as directors or officers of the Company.
4. Other Parties.
It is acknowledged and agreed that the Servicers may, in order to discharge the Services, engage other parties to provide services or render advice where the Servicers believe this is appropriate; provided that any such
other party is reputable in the industry and selected in accordance with the Standard of Care. Except as provided in Section 3, such engagement shall be at the Servicers’ expense and shall not in any way affect the Servicers’ responsibility to the
Company to provide the Services.
5. Standard of Care; Conflicts Standard; Limitations on Liability; Indemnity.
The Servicers shall use reasonable care and diligence at all times in the performance of the Services consistent with the customary commercial practice of major international aircraft lessors in the
management, servicing and marketing of commercial jet aircraft and related assets and with no less care and diligence than the Servicers would use in providing the Services with respect to aircraft that are owned or managed by the Servicers (the “Standard
of Care”); provided, however, that the Company acknowledges and agrees that the Servicers’ ability to use such care and diligence may be limited or restricted by the provisions of this Agreement or by any other agreement that is binding on the
Company (including the Lease) or by actions or omissions of the Company.
- 2 -
The Company acknowledges and agrees that: (a) in addition to providing the Services to the Company under this Agreement, the Servicers shall be entitled to manage, service and market from time to
time the separate assets and businesses of the Servicers, theirs affiliates, and other third parties (the assets of the parties described in this sentence are collectively referred to as the “Other Assets”); and (b) in the course of conducting
such activities, the Servicers may from time to time have conflicts of interest in performing the Services. If any such conflicts of interest arise, the Servicers agree to perform the Services in good faith and, without prejudice to the generality
of the foregoing, to the extent that the Aircraft and such Other Assets are similar in terms of objectively identifiable characteristics relevant for purposes of the particular Services to be performed, the Servicers shall not discriminate against
the Aircraft on an unreasonable basis.
The relationship between the Servicers and the Company is an agency relationship. The Servicers shall not be under any fiduciary duty or other implied obligation or duty to the Company arising out
of this Agreement, it being agreed that the rights and obligations of the parties hereto shall only be those expressly provided for in this Agreement.
Neither of the Servicers nor any affiliate of the Servicers to whom duties of the Servicers are delegated pursuant to this Agreement, nor any agent, contractor, vendor, member, partner, manager,
director, officer, employee of the Servicers or any such affiliate or any other person who serves at the request of any of the foregoing in connection with this Agreement (each severally, a "BBAM Covered Person") shall be liable, responsible
or accountable in damages or otherwise to the Company for any losses, damages, liabilities, demands or expenses suffered by the Company or which directly or indirectly arise out of, in connection with or related to, the Lease, the Aircraft or the
performance by the Servicers or any BBAM Covered Person of the Services, or any mistakes of judgment or for action or inaction, except to the extent attributable to the gross negligence or willful misconduct of the Servicers or such BBAM Covered
Person. In no case shall the liability of the Servicers exceed the revenues actually received by the Servicers from the Company pursuant to this Agreement.
The Company agrees on demand to indemnify, defend and hold harmless the Servicers and any BBAM Covered Person from and against all claims, demands, costs, expenses and liabilities incurred by the Servicers or any BBAM
Covered Person which directly or indirectly arise out of, in connection with or are related to, the Lease, the Aircraft or the performance by the Servicers or any BBAM Covered Person of the Services, unless caused by the gross negligence or willful
misconduct of the Servicers or any BBAM Covered Person. The obligations of the Company under this Section 5 shall survive the termination of this Agreement pursuant to Section 10 hereof or otherwise.
- 3 -
6. Transaction Approval Requirements.
The Servicers shall not do any of the following without the prior approval of the Company:
(a) |
other than as required under the terms of the Lease sell (or enter into any agreement to sell) or otherwise dispose of the Aircraft (excluding any sale or exchange of any Engine, parts or components thereof or aircraft or engine spare
parts or ancillary equipment or devices furnished therewith) forming part of the Aircraft;
|
(b) |
enter into any new lease of the Aircraft (or any renewal or extension of a Lease);
|
(c) |
terminate a Lease with respect to the Aircraft except in the case of a lessee default, bankruptcy or insolvency or circumstances in which the Servicers consider such a default, bankruptcy or insolvency as likely to occur;
|
(d) |
enter into on behalf of the Company any order or commitment to acquire aircraft, engines or any part thereof, other than as contemplated by the Lease; and
|
(e) |
to the extent that they have a right to make, consent to, or prevent any such action, make or consent to any material modification to the Aircraft or to any required insurance with respect to the Aircraft, or cause the Aircraft to be
employed in any place or in any manner or for any purpose inconsistent with the terms of or outside the coverage provided by any required insurance.
|
7. Notices.
Any notice or communication under or in connection with this Agreement shall be in writing and shall be delivered personally or by post, telex, facsimile (confirmed as received by the recipient) or cable to the
respective addresses or telex or fax numbers given below or such other address or telex or fax number as the recipient may have notified to the sender in writing. Proof of posting or dispatch shall be deemed proof of receipt:
(a) |
in the case of a letter, on the fifth business day after posting;
|
(b) |
in the case of a telex or cable, on the business day immediately following the date of dispatch; and
|
(c) |
in the case of a facsimile, on the date on which the recipient confirms receipt:
|
to BBAM at:
|
50 California Street, 14th Floor
|
||
San Francisco, CA 94111
|
Facsimile:
|
415-618-3337
|
||
Attention :
|
General Counsel
|
to BBAM Ireland at:
|
West Pier Business Campus, Dun Laoghaire
|
- 4 -
County Dublin A96 N6T7, Ireland
|
|||
Facsimile:
|
+353-1-231-1901
|
||
Attention:
|
General Counsel
|
to the Company at:
|
[_____________]
|
||
[_____________]
|
|||
[_____________]
|
|||
[_____________]
|
Any party by notice given in accordance with this Section 7 to the other party may designate another address or person for receipt of notices hereunder.
8. Governing Law.
This Agreement, and all matters arising out of or relating to this Agreement (whether in contract or tort), shall governed by, and shall be construed in accordance with, the laws of the State of New York, without regard
to conflict of law principles.
9. Non‑Exclusive Jurisdiction in New York.
The parties hereby consent to the non‑exclusive jurisdiction of any state or Federal court located in the County of New York, New York. Nothing herein will prevent any party from bringing suit in any other appropriate
jurisdiction. The parties hereby agree that service of process may be made upon each of them by mailing copies of the summons and complaint to the person to be served by air mail, certified or registered mail to the address set forth in Section 7,
postage prepaid, return receipt requested, or in accordance with the Hague Convention, if applicable.
10. Termination, Resignation.
The parties hereto agree that BBAM’s and BBAM Ireland’s appointment as Servicers may be terminated prior to the expiry of the Term at the election of the Company, by written notice to the Servicers, if a “Termination
Event” occurs and is not cured within the applicable cure periods described below. For purposes of this Section 10, each of the events described in the following paragraphs shall constitute a Termination Event:
(a) |
the insolvency of the Servicers or the commencement of any voluntary or involuntary bankruptcy, insolvency, liquidation, winding-up or similar proceedings in relation to the Servicers, which in the case of an involuntary bankruptcy or
similar proceeding is not dismissed with 90 days;
|
(b) |
the Servicers shall make a general assignment for the benefit of their creditors;
|
- 5 -
(c) |
the Servicers commit a material breach of any one or more of the obligations contained in this Agreement and fail to cure such breach within 30 days after written notice thereof by the Company; or
|
(d) |
the Servicers cease to be actively involved in the aircraft leasing business.
|
Each of Servicers shall be entitled to resign their appointment prior to the expiry of the Term if the Company shall fail to pay in full any Fee, reimbursable expense or such other amount payable to the Servicers
hereunder within 5 days after receipt of written notice from the Servicers of such failure.
Upon the occurrence of a Termination Event or any resignation of the Servicers pursuant to this Section 10, the Servicers shall as soon as reasonably practicable wind up their performance of the Services and, if
applicable, reasonably assist the Company in transitioning to a replacement servicer. So long as the Servicers are continuing to perform any of the Services, all provisions of this Agreement shall remain applicable, including provisions relating to
the payment of Fees and reimbursement of expenses. The Servicers shall continue in their role until a replacement servicer has assumed servicing responsibilities or the affairs of the Company in relation to the Aircraft have been wound up, as
applicable; provided, however, in no event shall the Servicers be obligated to perform any of the Services during any period in which they are not be paid, nor shall the Servicers be obligated to assist in transitioning to a replacement servicer or
winding up the Company for a period in excess of 120 days. Within thirty (30) days following the date that the Servicers’ appointment terminates, all Fees that have been earned by the Servicers, but not yet paid, and all expenses and other amounts
that have become payable hereunder to the Servicers, but not yet paid, shall be paid by the Company.
11. Confidentiality.
This Agreement is confidential and neither party shall disclose any or all of its content to any third party, other than to its affiliates and, in the case of the Servicers, any party to which it makes a delegation
pursuant to Section 4 hereof, without the prior consent of the other party.
12. Counterparts.
This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same
instrument.
13. Amendment.
This Agreement shall not be amended or varied otherwise then by an instrument in writing executed by the parties hereto.
- 6 -
14. Illegality.
If any provision of this Agreement becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or
impaired.
15. No Services requiring authorisation.
Notwithstanding any other provision of this Agreement, the Parties acknowledge and agree that the Servicers shall not and shall not be required to undertake any activity or perform any service that would require any
Servicer to obtain an authorisation or registration from a regulatory or governmental authority, including the Central Bank of Ireland, pursuant to, inter alia, the European Union (Markets in Financial
Instruments) Regulations 2017, the European Union (Insurance Distribution) Regulations 2018, the European Union (Payment Services) Regulations 2018, the European Union (Alternative Investment Fund Managers) Regulations 2013, the Central Bank Act
1971, the Central Bank Act 1997, the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 or any other applicable law (each as may be amended from time to time). In particular, the Servicers are not required to provide any service
with respect to financial instruments within the meaning of the European Union (Markets in Financial Instruments) Regulations 2017, including for the avoidance of doubt, shares in Aircraft-owning companies, bonds and derivatives.
- 7 -
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.
[_____________]
|
||
By:
|
Name:
|
||
Title:
|
||
BBAM US LP
|
||
By:
|
Name:
|
||
Title:
|
||
BBAM AVIATION SERVICES LIMITED
|
||
By:
|
Name:
|
||
Title:
|
-Signature Page-
Servicing Agreement
(MSN(s) [___]
Schedule 1
Standard Servicing Obligations
Lessee Communications & Reporting
|
- Receive, review, and respond to all communications with the Lessee and advise/invoice the Company as necessary
- Monitor the Lessee’s periodic reporting obligations (utilization and maintenance status, financial statements, etc)
|
Lease Options
|
- Advise Company with respect to necessary action in connection with purchase, Lease extension and other Lease options
- In the event of an insolvency of the Lessee or other Lease Event of Default, engage the Lessee in connection with negotiations, restructuring or other workout and advise Company
with respect to any recommended action
|
Invoicing & Routine Administration of Receivables
|
- Invoice the Lessee for amounts due, including Basic Rent, Security, Overhaul Payments or other payments, under the Lease
- Monitor and maintain appropriate payment records
|
Maintenance Reserve Administration
|
- Monitor the performance of maintenance obligations by the Lessee under the Lease
- Monitor periodic payments and verify relevant calculations
- Review and recommend payment with respect to approval of maintenance reserve reimbursement claims
- Upon redelivery of aircraft, arrange for inspection of aircraft, review and maintain records, determine whether Lessee has complied with the terms of the Lease, including all
redelivery requirements, airworthiness directives and maintenance obligations
|
Insurance
|
- Monitor performance of the Lessee’s insurance obligations under the Lease
- Review agreed values and advise the Company if increases or additional coverages should be effected, and, to the extent commercially available, procure such increases or additional
coverages as directed by the Company
- Notify the Company promptly in writing of incidents known to the Servicers resulting in damage with cost potentially exceeding Damage Notification Threshold
- Procure insurance for aircraft off-lease (at Company’s expense) in accordance with standard BBAM practices
|
- 9 -
Enforcement
|
- Take necessary steps to enforce the obligations of the Lessee under the Lease and, following a default, all steps necessary or appropriate to preserve and enforce the rights of the
Company under the Lease
|
Technical Services
|
- Monitor performance of the Lessee’s maintenance payment obligations under the Lease by reference to the monthly reports provided by the Lessee under the Lease
- Arrange, when requested by the Company, and at the Company’s cost, physical inspections by the Servicers or any other person nominated by the Company and provide written reports
(including assistance relating to any valuation or appraisal services)
- Monitor the Lessee’s compliance with respect to service bulletins and airworthiness directives required by the Lease, which may be subject to cost sharing arrangements as between
the Company and the Lessee pursuant to the Lease, including a review of the calculation of such cost sharing
- Review and make recommendations in respect of Lessee proposals for modifications to the Aircraft
- Review proposed changes to the maintenance program for the Aircraft of which the Servicers have knowledge
- Redelivery management (compliance with redelivery requirements (including, without limitation, service bulletins and airworthiness directives compliance required by the Lease),
documentation and acceptance)
|
Operational Reports/Notices
|
- Provide notice to the Company of any material Lessee payment defaults
- Provide to the Company technical status updates (utilisation and timing of major maintenance payments) as requested by Company
- Information and reports provided by the Lessee under the Lease and received by the Servicers
- Provide to the Company notice of Events of Default of which the Servicers have knowledge
- Provide to the Company notice of any claim made by the Lessee against the Company of which the Servicers have knowledge
|
- 10 -
Other
|
- Prepare, draft and negotiate each lease agreement for each new lease the Company enters into with respect to the Aircraft
- Receive and review any estimate of cost, invoice or other request for reimbursement or expenditure pursuant to the Lease
- Evaluate and advise the Company regarding any proposal or request to approve pooling arrangements in respect of the Aircraft made by the Lessee in accordance with the Lease
- Consult with the Company to discuss any matters relating to the Lease, the Aircraft or the Lessee (i) whenever the Company shall reasonably request and/or (ii) whenever the
Servicers shall deem it advisable, provided always that that such advice does not involve any recommendation relating to financial instruments, within the meaning of the European Union (Markets in Financial Instruments) Regulations 2017, such
as interests in an Aircraft-owning vehicle.
- Set up and manage corporate bank accounts in the name of and on behalf of the Company in connection with the performance of the Services provided always that the management and
administration of such corporate bank accounts does not involve the Servicers investing funds on deposit in the accounts in financial instruments, within the meaning of the European Union (Markets in Financial Instruments) Regulations 2017.
- Procure legal, tax and accounting services on behalf of the Company as is necessary or desirable in connection with the performance of the Services
- Forward promptly a copy of any material communication received from any person in relation to the Lease, Aircraft or engine
- Hold all original Lease and Lease related documents (or copies thereof) of the Company in safe custody, by application of measures comparable to those each Servicer uses in the
retention of its own original documents of a similar nature
- If the Lease terminates or expires for any reason, the Servicers shall use commercially reasonable efforts to lease, sell or otherwise remarket the Aircraft taking into account the
then current market conditions
|
- 11 -
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Atlas Salt Inc. Announces Annual Filings and Company Update
- Commencement Bancorp, Inc. (CBWA) Announces Cash Dividend
- MiMedia Enters Into Market-Making Agreement with Independent Trading Group
Create E-mail Alert Related Categories
SEC FilingsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!