-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VO0pKPwqI0o0lC4aTj8D1UsqjCPjn7+l5zcMZ1VjL7Qbgyqg2gJ4XWr7HAp9ggp3 gwicJuq4lfHQHiomc9EcZg== 0000898430-96-000980.txt : 19981231 0000898430-96-000980.hdr.sgml : 19981231 ACCESSION NUMBER: 0000898430-96-000980 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 DATE AS OF CHANGE: 19981230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL LEASE FINANCE CORP CENTRAL INDEX KEY: 0000714311 STANDARD INDUSTRIAL CLASSIFICATION: 7359 IRS NUMBER: 223059110 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-11350 FILM NUMBER: 96538764 BUSINESS ADDRESS: STREET 1: 1999 AVE OF THE STARS 39TH FL CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3107881999 MAIL ADDRESS: STREET 1: 1999 AVE OF THE STARS CITY: CENTURY CITY STATE: CA ZIP: 90067 10-K405 1 FORM 10-K405 - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 10-K ANNUAL REPORT ------------------------------ (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] December 31, 1995 For the fiscal year ended ..................................................... OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ...................... to ...................... 0-11350 Commission file number......................................................... INTERNATIONAL LEASE FINANCE CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 22-3059110 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1999 AVENUE OF THE STARS, LOS ANGELES, 90067 CALIFORNIA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 788-1999 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE (TITLE OF CLASS) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K ((S) 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X] AS OF FEBRUARY 28, 1996, THERE WERE 35,818,122 SHARES OF COMMON STOCK, NO PAR VALUE, OUTSTANDING. REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(A) AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- INTERNATIONAL LEASE FINANCE CORPORATION 1995 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I
Page ---- Item 1. Business........................................................ 1 Item 2. Properties...................................................... 6 Item 3. Legal Proceedings............................................... 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................ 8 Item 6. Selected Financial Data......................................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 10 Item 8. Financial Statements and Supplementary Data..................... 12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................................... 12 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................ 13
PART I ITEM 1. BUSINESS GENERAL International Lease Finance Corporation (the "Company") is primarily engaged in the acquisition of new and used commercial jet aircraft and the leasing and sale of such aircraft to domestic and foreign airlines. The Company, in terms of the number and value of transactions concluded, is a major owner-lessor of commercial jet aircraft. In addition, the Company is engaged in the remarketing of commercial jets for its own account, for airlines and for financial institutions. As of December 31, 1995, the Company owned 278 aircraft including aircraft owned in joint ventures. See "Item 2. Properties--Flight Equipment." At December 31, 1995, the Company had committed to purchase, or had secured positions for (which were subsequently committed), 292 aircraft deliverable through 2004 at an estimated aggregate purchase price of $15.9 billion. It also had options to purchase an additional 34 aircraft deliverable through 2005 at an estimated aggregate purchase price of $2.5 billion. See "Item 2. Properties--Commitments." The Company maintains the mix of flight equipment to meet its customers' needs by purchasing those models of new and used aircraft which it believes will have the greatest airline demand and operational longevity and minimize the time that its aircraft are not leased to customers. The Company purchases, and finances the purchase of, aircraft on terms intended to permit the Company to lease or resell such aircraft at a profit. The Company typically finances the purchase of aircraft with borrowed funds and internally generated cash flow. The Company accesses the capital markets for such funds at times and on terms and conditions it considers appropriate. The Company may, but does not necessarily, engage in financing transactions for specific aircraft. The Company relies significantly on short- and medium- term financing, and thereby attempts to manage interest rate exposure. To date, the Company has been able to purchase aircraft on terms which have permitted it to lease the aircraft at a profit and has not experienced any difficulty in obtaining financing. The Company's aircraft are usually leased on terms under which the Company does not fully recover the acquisition cost of such aircraft. Thus, at the termination of a lease, the Company bears the risk of selling or releasing the aircraft on terms which will cover its remaining cost. The airlines are in a cyclical, economically sensitive and highly competitive business. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company's revenue and income may be affected by political instability abroad, changes in national policy, competitive pressures on certain air carriers, fuel shortages, labor stoppages, recessions, and other political or economic events adversely affecting world or regional trading markets or impacting a particular customer. The Company's continued success is partly dependent on management's ability in the future to develop customer relationships for leasing, sales and remarketing with those airlines best able to maintain their economic viability and survive in a deregulated environment. The Company is incorporated in the State of California and its principal executive offices are located at 1999 Avenue of the Stars, Los Angeles, California 90067. The Company's telephone, telecopier and telex numbers are (310) 788-1999, (310) 788-1990 and 69-1400, respectively. The Company is an indirect wholly owned subsidiary of American International Group, Inc. ("AIG"). AIG is a holding company which through its subsidiaries is primarily engaged in a broad range of insurance and insurance-related activities in the United States and abroad. The Common Stock of AIG is listed on, among others, the New York Stock Exchange. 1 AIRCRAFT LEASING The initial term of the Company's current leases range in length from one year to 15 years. See "Item 2. Properties--Flight Equipment" for information regarding scheduled lease terminations. Most of the Company's leases are operating leases under which the Company does not fully recover its aircraft cost and retains the benefit and assumes the risk of the residual value of the aircraft. The Company on occasion also enters into finance-type and sales-type leases where the full cost of the aircraft is substantially recovered over the term of the lease. At December 31, 1995, three of the Company's leases were accounted for as finance leases. The aircraft under operating leases are included as assets on the Company's balance sheet and depreciation is charged to income over the estimated useful lives of the aircraft. In accordance with generally accepted accounting principles, rentals are reported as revenue over the lease term as they become due and are earned. The Company attempts to maintain a mix of short- and medium-term leases to balance the benefits and risks associated with different lease terms such as larger lease payments on shorter-term leases, changes in prevailing market conditions at the time aircraft become eligible for re-lease or sale and uncertainty associated with estimating residual value of the aircraft at the termination of the lease. All leases are on a "net" basis with the lessee responsible for all operating expenses, which customarily include fuel, crews, airport and navigation charges, taxes, licenses, registration and insurance. Normal maintenance and repairs; airframe and engine overhauls; and compliance with return conditions of flight equipment on lease are provided by and paid for by the lessee. Under the provisions of most leases, for certain airframe and engine overhauls, the lessee is reimbursed by the Company for costs incurred up to but not exceeding contingent rentals paid to the Company by the lessee. The Company provides a charge to operations for such reimbursements based primarily upon the hours utilized during the period and the expected reimbursement during the life of the lease. The leases contain specific provisions regarding the condition of the aircraft upon redelivery to the Company. The lessee is responsible for compliance with all applicable laws and regulations with respect to the aircraft. The Company requires its lessees to comply with the most restrictive standards of either the Federal Aviation Administration (the "FAA") or its foreign equivalent. The Company makes periodic inspections of the condition of its leased aircraft. Generally, the Company requires a deposit which is security for the condition of aircraft upon return to the Company, the rental payment by the lessee and the performance of other obligations by the lessee under the lease. In addition, the leases contain extensive provisions regarding the remedies and rights of the Company in the event of a default thereunder by the lessee. The lessee is required to continue lease payments under all circumstances, including periods during which the aircraft is not in operation for maintenance, grounding or any other reason whatsoever. The Company obtains and reviews financial statements from all prospective lessees and purchasers before entering into a lease or extending credit. Under certain circumstances, the Company may require the lessee to obtain guarantees or other financial support from an acceptable financial institution or other third party. FLIGHT EQUIPMENT MARKETING The Company also regularly engages in transactions to buy and sell aircraft. Generally, the Company makes a contractual commitment to purchase specific aircraft for its own account for resale only after or concurrently with obtaining a firm order from a customer. In some cases, the Company assists its customers through consulting services and procurement of financing from third parties. From time to time, the Company also disposes of its leased aircraft at or before the expiration of their leases. Any gain or loss on disposition of leased aircraft is reflected as revenues from flight equipment marketing. 2 In addition to its leasing and sales operations, the Company is engaged, from time to time, as an agent for airlines in the disposition of their surplus aircraft. The Company generally acts as an agent under an exclusive remarketing contract whereby it agrees to sell aircraft on a "best efforts" basis within a period of one year. Compensation to the Company is based upon a percentage of the sales price or lease proceeds and is customarily 2% to 5%. In addition, certain air travel expenses of the Company in connection with its remarketing activities may be provided by the contracting or selling airline. These activities generally augment the Company's primary activities and also serve to promote relationships with prospective sellers and buyers of aircraft. The Company plans to continue its remarketing services on a selected basis involving specific situations where these activities will not conflict or compete with, but rather will be complementary to, its leasing and selling activities. The Company also has guaranteed the loans of certain buyers of aircraft, which guarantees aggregate approximately $85,981,000. See Note K of Notes to Consolidated Financial Statements. FINANCING/SOURCE OF FUNDS The Company purchases new aircraft directly from manufacturers and used aircraft from airlines for lease or sale to other airlines. The Company finances the purchase price of flight equipment from internally generated funds, secured and unsecured commercial bank financings, issuance of commercial paper, public and private debt and preferred stock. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." CUSTOMERS At December 31, 1995, lessees of the Company included: (domestic) Alaska Airlines, American Trans Air, Carnival Air Lines, Continental Airlines, Millon Air, North American Airlines, Southwest Airlines, Tower Air, Trans World Airlines (TWA) and World Airways; (foreign) Aer Lingus, Aero Lloyd Flugreisen, Aeromexico, Air 2000, Air Afrique, Air Canada, Air Espana, Air Europe SpA, Air Inter, Air Liberte, Air Macau, Air Madagascar, Air Mauritius, Air New Zealand, Air Pacific, Air Seychelles, Air Transat, Air UK, Asiana, Baikal Airlines, Braathens S.A.F.E., Britannia Airways, British Airways, British Midland Airways, BWIA International, Canada 3000, Cathay Pacific, China Airlines, China Hainan Airlines, China Southern Airlines, China Southwest Airlines, Emirates, Estonian Air, EVA Airways, Garuda Indonesia, GB Airways, Guyana Airways, Hapag-Lloyd Flug, Hong Kong Dragon Airlines (Dragonair), Kenya Airways, KLM Royal Dutch Airlines, Korean Airlines, L'Aeropostale, LACSA, Lineas Aereas Privadas Argentinas, S.A. (LAPA), Lloyd Aero Boliviano (LAB), Ladeco S.A., LAN Chile, Linjeflyg AB (a wholly-owned subsidiary of SAS), LTU Luftransport-Unternehmen, Lufthansa Cargo, Malev Hungarian Airlines, Martinair Holland, Middle East Airlines Airliban, Monarch Airways, National Jet Systems, Nordic East, ONUR Air, Pegasus, Polynesian Airways, QANTAS Airways, SAETA, Sahara India Airlines, Sichuan Airlines, Sunquest Vacations Limited, Swissair, TACA International Airlines, TAP Air Portugal, TAT European Airlines, TEA Basel, THY, Transaero Airlines, Transavia, Transbrasil, Translift Airways, Varig, Virgin Atlantic Airways, VIVA Airways and Wuhan Airlines. No single customer accounted for more than 10% of total revenues in any of the last three years. Revenues include rentals of flight equipment to foreign airlines of $1,002,251,000 (1995), $798,619,000 (1994) and $655,773,000 (1993) comprising 80.0%, 80.4% and 82.4%, respectively, of total rentals of flight equipment. See Note J of Notes to Consolidated Financial Statements. 3 The following table sets forth the dollar amount and percentage of total rental revenues attributable to the indicated geographic areas for the years indicated:
1995 1994 1993 ---------------- -------------- -------------- AMOUNT % AMOUNT % AMOUNT % ---------- ----- -------- ----- -------- ----- (DOLLARS IN THOUSANDS) Europe....................... $ 462,252 36.9% $353,009 35.5% $261,523 32.9% Asia/Pacific................. 255,163 20.4 180,215 18.2 169,036 21.2 Central, South America and Mexico...................... 166,443 13.2 199,041 20.0 171,577 21.6 United States and Canada..... 304,784 24.3 230,856 23.2 171,720 21.6 Africa and the Middle East... 65,378 5.2 30,475 3.1 21,581 2.7 ---------- ----- -------- ----- -------- ----- $1,254,020 100.0% $993,596 100.0% $795,437 100.0% ========== ===== ======== ===== ======== =====
Many foreign countries have currency and exchange laws regulating the international transfer of currencies. The Company attempts to minimize its currency and exchange risks by negotiating substantially all of its aircraft leasing and sales transactions in U.S. dollars and all guarantees obtained to support various lease agreements are denominated for payment in U.S. dollars. The Company requires, as a condition to any foreign transaction, that the lessee or purchaser in a foreign country first obtain, if required, written approval of the appropriate government agency, finance ministry or central bank for the remittance of all funds contractually owed to the Company in U.S. dollars. As a result, foreign currency risk is immaterial to the Company. The Company has restructured leases with both foreign and domestic lessees. Such restructurings have involved the voluntary termination of leases prior to lease expiration, the replacement of leased aircraft with smaller, less expensive leased aircraft, the arrangement of subleases from the primary lessee to another airline and the rescheduling of lease payments. In seven instances from January 1990 through December 1994, the Company has been required to repossess aircraft. In one instance, the aircraft were leased to a domestic airline which had filed for protection under Chapter 11 of the U. S. Bankruptcy Code. In the other six instances, the aircraft were on lease to foreign airlines. In 1995, the Company repossessed one A320 from a lessee and terminated early the lease of one A320. Both aircraft were promptly released to other customers. In some situations where the Company repossesses an aircraft, it may decide to export the aircraft from the lessee's jurisdiction. To date, the Company has been able to export all repossessed aircraft which it desired to export. In addition, in connection with the repossession of an aircraft, the Company may be required to pay outstanding mechanic's, airport and other operating liens on the repossessed aircraft, which could include charges relating to other aircraft operated by the lessee. The Company's revenues and income may be affected by political instability abroad, changes in national policy, competitive pressures on certain air carriers, fuel shortages, labor stoppages, recessions and other political or economic events adversely affecting world or regional trading markets or impacting a particular customer. COMPETITION The leasing and sale of jet aircraft is highly competitive. Aircraft manufacturers and the airlines sell new and used jet aircraft. Furthermore, the Company faces competition in leasing aircraft from aircraft manufacturers, banks, other financial institutions and leasing companies. There is also competition with respect to its remarketing activities from many sources, including, but not limited to, aircraft brokers. GOVERNMENT REGULATION The FAA, the Department of Transportation and the Department of State exercise regulatory authority over the air transportation industry. The FAA has regulatory jurisdiction over registration and flight operations of aircraft operating in the United States, including equipment use, ground facilities, maintenance, communications and other matters. 4 The FAA can suspend or revoke the authority of air carriers or their licensed personnel for failure to comply with its regulations and ground aircraft if their airworthiness is in question. The Company believes it holds all airworthiness and FAA registration certificates which are required for the aircraft owned by the Company, although the certificates may be suspended or revoked for cause. The Department of State and the Department of Transportation, in general, have jurisdiction over economic regulation of air transportation, but since the Company does not itself operate its aircraft for public transportation of passengers and property, it is not directly subject to their regulatory jurisdiction. To export aircraft from the U.S. to a foreign destination, the Company is required to obtain an export license from the United States Department of Commerce. To date, the Company has not experienced any difficulty in obtaining required certificates either from the FAA, Department of Commerce or any other regulatory agency or their foreign counterparts. EMPLOYEES The Company is in a capital intensive rather than a labor intensive business. As of December 31, 1995, the Company had 74 full-time employees which it considered adequate for its business operations. The Company will expand its management and administrative personnel, as necessary, to meet future growth. None of the Company's employees is covered by a collective bargaining agreement and the Company believes that it has maintained excellent employee relations. The Company provides certain employee benefits, including retirement plans and health, life, disability and accident insurance. INSURANCE The Company requires its lessees to carry those types of insurance which are customary in the air transportation industry, including comprehensive liability insurance and aircraft hull insurance. In general, the Company is an additional insured on liability policies carried by the lessees. All policies contain a breach of warranty endorsement so that the interests of the Company are not prejudiced by any act or omission of the operator-lessee. Insurance premiums are prepaid by the lessee, with payment acknowledged by the insurance carrier. The territorial coverage is, in each case, suitable for its lessee's area of operations and the policies contain, among other provisions, a "no co-insurance" clause and a provision prohibiting cancellation or material change without at least 30 days advance written notice to the Company. Furthermore, the insurance is primary and not contributory and all insurance carriers are required to waive rights of subrogation against the Company. The stipulated loss value schedule under aircraft hull insurance policies is on an agreed value basis acceptable to the Company, which usually exceeds the book value of the aircraft. In cases where the Company believes that the agreed value under the lease is not sufficient, the Company purchases additional Total Loss Only coverage for the deficiency. Additionally, all aircraft in the Company's fleet are covered by Contingent Liability insurance. Aircraft hull policies contain standard clauses covering aircraft engines with deductibles required to be paid by the lessee. Furthermore, the aircraft hull policies contain full war risk endorsements, including, but not limited to, confiscation, seizure, hijacking and similar forms of retention or terrorist acts. All losses under such policies are payable in U.S. currency. The comprehensive liability insurance policies include provisions for bodily injury, property damage, passenger liability, cargo liability and such other provisions reasonably necessary in commercial passenger and cargo airline operations with minimal deductibles. Such policies generally have combined comprehensive single liability limits of not less than $250 million and all losses are payable in U.S. dollars, U.K. pounds or German marks. 5 The Company also maintains other insurance covering the specific needs of its business operations. Insurance policies are generally placed or reinsured through AIG subsidiaries, with costs allocated back to the Company. The Company believes that its insurance is adequate both as to coverage and amount. ITEM 2. PROPERTIES FLIGHT EQUIPMENT The Company's management frequently reviews opportunities to acquire suitable commercial jet aircraft based not only on market demand and customer airline requirements, but also on the Company's fleet portfolio mix criteria and planning strategies for leasing. Before committing to purchase specific aircraft, the Company takes into consideration factors such as estimates of future values, potential for remarketing, trends in supply and demand for the particular type, make and model of aircraft and engines and anticipated obsolescence. As a result, certain types and vintages of aircraft do not necessarily fit the profile for inclusion in the Company's portfolio of aircraft owned and used in its leasing operations. At December 31, 1995, all of the aircraft were Stage III, which are aircraft that hold or are capable of holding a noise certificate issued under Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago Convention or have been shown to comply with the Stage III noise levels set out in Section 36.5 of Appendix C of Part 36 of the Federal Aviation Regulations of the United States. At December 31, 1995, the average age of the Company's flight equipment was 4.13 years. The following table shows the scheduled lease terminations (for the minimum noncancelable period) by aircraft type for the Company's lease portfolio at December 31, 1995:
AIRCRAFT TYPE 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 TOTAL - - ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- 737-300................. 3 13 7 5 5 6 6 1 4 2 52 737-400................. 3 8 8 7 10 3 3 7 7 56 737-500................. 3 2 2 1 1 9 757-200................. 3 5 6 4 5 2 3 4 2 4 38 767-200................. 1 1 1 3 6 767-300................. 3 2 2 4 4 2 1 18 747-200................. 1 1 2 747-300................. 3 3 747-400................. 1 3 1 1 1 7 MD-82................... 1 1 MD-83................... 1 3 3 1 3 11 MD-87................... 1 1 2 MD-11................... 1 2 1 2 6 F-70.................... 1 1 F-100 (a)............... 7 7 A300-600R............... 1 1 1 3 1 1 8 A310-200 (a)............ 1 4 5 A310-300................ 1 1 3 1 1 6 A320.................... 11 7 1 4 1 2 1 27 A321.................... 2 1 3 A330.................... 6 1 7 A340.................... 1 2 3 L-1011.................. 1 2 1 4 --- --- --- --- --- --- --- --- --- --- --- Total................... 25 64 39 37 39 19 18 20 13 8 282
- - ------------ (a) As of March 1, 1996, all F-100 aircraft are committed for sale in 1996. In addition, all A310-200 aircraft are committed for sale in 1996 and 1997. This schedule does not include 3 A310-200 aircraft committed for sale in 1996 yet unleased at December 31, 1995. This schedule includes seven aircraft leased by the Company and subleased to others. 6 COMMITMENTS At December 31, 1995 the Company had committed to purchase, or had secured positions for (which were subsequently committed), the following aircraft at an estimated aggregate purchase price (including adjustment for anticipated inflation) of approximately $15.9 billion for delivery as shown:
AIRCRAFT TYPE 1996 1997 1998 1999 2000 2001 2002 2003 2004 TOTAL - - ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- 737-300/400/500 (a).......... 17 10 4 31 737-600/700/800 (a).......... 2 8 9 9 9 9 7 2 55 757-200...................... 7 10 7 1 25 767-300...................... 8 8 6 22 777-200/300 (a).............. 2 3 3 4 3 3 3 3 24 747-400...................... 1 1 1 1 4 A300-600R.................... 1 1 A310-200 (b)................. 6 6 A319......................... 2 3 3 4 3 1 16 A320-200..................... 9 9 9 5 4 2 38 A321-100..................... 6 7 6 8 6 2 1 1 37 A330-200/300 (a)............. 3 1 3 2 1 1 2 2 15 A340......................... 2 3 2 2 2 2 2 1 16 F-70......................... 2 2 --- --- --- --- --- --- --- --- --- --- Total....................... 64 56 52 35 29 19 18 14 5 292
- - -------- (a) The Company has the right to designate the size of the aircraft within the specific model type at specified dates prior to contractual delivery. (b) All A310-200 aircraft are commited for sale in 1996 and 1997. At December 31, 1995, the Company had options to purchase the following aircraft at an estimated aggregate purchase price (including adjustment for anticipated inflation) of approximately $2.5 billion for delivery as shown:
AIRCRAFT TYPE 1998 1999 2000 2001 2002 2003 2004 2005 TOTAL - - ------------- ---- ---- ---- ---- ---- ---- ---- ---- ----- 757-200........................... 1 5 6 767-300........................... 4 4 777-200/300....................... 2 2 A319.............................. 3 1 1 5 A320-200.......................... 3 1 1 2 7 A321-100.......................... 1 1 1 3 A330-200/300...................... 1 3 4 A340.............................. 1 2 3 --- --- --- --- --- --- --- --- --- Total............................ 1 10 0 6 2 4 9 2 34
If all 326 aircraft were to be acquired, the estimated aggregate purchase price (including adjustment for anticipated inflation) would be approximately $18.4 billion. Management anticipates that a significant portion of such aggregate purchase price will be funded by incurring additional debt. The exact amount of the indebtedness to be incurred will depend upon the actual purchase price of the aircraft, which can vary due to a number of factors, including inflation, and the percentage of the purchase price of the aircraft which must be financed. 7 Most of the purchase commitments and options set forth above are based upon master arrangements with each of The Boeing Company ("Boeing") and AVSA, S.A.R.L., the sales subsidiary of Airbus Industrie ("Airbus"). The aircraft listed above are either being purchased, or the options to purchase have been granted, pursuant to purchase agreements executed by the Company and Boeing or Airbus. These agreements establish the pricing formulas (which include certain price adjustments based upon inflation and other factors) and various other terms with respect to the purchase of aircraft. Under certain circumstances, the Company has the right to alter the mix of aircraft type ultimately acquired. As of December 31, 1995, the Company had made non-refundable deposits (exclusive of capitalized interest) with respect to the aircraft which the Company has committed to purchase of approximately $389,788,000 and $322,537,000 with Boeing and Airbus, respectively. As of March 15, 1996, the Company had entered into contracts for all of the 64 aircraft to be delivered in 1996, 33 of the 56 aircraft to be delivered in 1997, 4 of the 52 aircraft to be delivered in 1998, 2 of the 35 aircraft to be delivered in 1999 and 5 of the 85 aircraft to be delivered subsequent to 1999. The Company will need to find customers for aircraft presently on order and any new aircraft ordered and arrange financing for portions of the purchase price of such equipment. Although the Company has been successful to date in placing its new aircraft on lease or sales contracts, and has obtained adequate financing in the past, there can be no assurance as to the future continued availability of lessees or purchasers, or of sufficient amounts of financing on terms acceptable to the Company. FACILITIES The Company's principal offices are located at 1999 Avenue of the Stars, Los Angeles, California. The Company occupies space under leases which expire in 2000. The leases cover approximately 30,000 square feet of office space, provide for annual rentals of approximately $1,627,000, and the rental payments thereunder are subject to certain indexed escalation provisions. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material legal proceedings. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company is indirectly wholly owned by AIG and the Company's Common Stock is not listed on any national exchange or traded in any established market. During the years ended December 31, 1993, 1994 and 1995, the Company paid cash dividends to its parent company of $11,359,000, $13,462,000, and $21,150,000, respectively. It is the intent of the Company to pay its parent company an annual dividend of at least 7% of net income subject to the dividend preference of any preferred stock outstanding. Under the most restrictive provisions of the Company's borrowing arrangements, consolidated retained earnings at December 31, 1995 in the amount of $221,744,000 were unrestricted as to the payment of dividends. 8 ITEM 6. SELECTED FINANCIAL DATA The following table summarizes selected consolidated financial data and operating information of the Company. The selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Form 10-K.
YEARS ENDED DECEMBER 31, ------------------------------------------------------- 1991 1992 1993 1994 1995 ---------- ---------- ---------- ---------- ----------- (DOLLAR AMOUNTS IN THOUSANDS) OPERATING DATA: Rentals of flight equipment....... $ 433,505 $ 628,600 $ 795,437 $ 993,596 $ 1,254,020 Flight equipment marketing........ 38,238 46,845 53,680 76,193 119,078 Interest and other income......... 54,968 55,072 62,515 40,267 49,390 Total revenues.................... 526,711 730,517 911,632 1,110,056 1,422,488 Expenses.......................... 387,011 484,277 633,992 798,049 1,084,142 Income before income taxes........ 139,700 246,240 277,640 312,007 338,346 Net income........................ 89,530 157,749 168,565 201,943 196,437 RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(1): 1.44x 1.75x 1.68x 1.59x 1.43x BALANCE SHEET DATA: Flight equipment under operating leases (net of accumulated depreciation).................... $3,453,149 $4,759,899 $6,515,837 $8,851,079 $10,762,870 Net investment in finance and sales-type leases................ 247,936 242,445 290,269 92,233 86,237 Total assets...................... 4,563,622 6,079,765 8,139,821 10,353,132 12,298,379 Total debt........................ 3,242,010 4,242,288 5,819,481 7,583,006 8,892,634 Shareholders' equity.............. 815,208 1,156,195 1,409,181 1,640,772 2,000,107 OTHER DATA: Aircraft owned at period end(2)... 132 176 230 270 278 Aircraft sold or remarketed during the period....................... 8 7 9 24 41
- - ------------ (1)See Exhibit 12. (2)See "Item 2. Properties--Flight Equipment". 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL INDUSTRY CONDITION In recent years, several of the Company's customers have experienced economic difficulties resulting in the Company's participation in customer restructurings. Such restructurings have involved the voluntary early termination of leases and the rescheduling of payments. In addition, in certain circumstances, the Company has been required to repossess aircraft. In 1995 the Company only repossessed one aircraft and terminated one aircraft lease early. Both aircraft were promptly released to other customers. See "Item 1. Business--Customers." FINANCIAL CONDITION The Company borrows funds to purchase flight equipment, including to make progress payments during the construction phase, principally on an unsecured basis from various sources. At December 31, 1995, 1994 and 1993, the Company's debt financing and capital lease obligations were comprised of the following:
1995 1994 1993 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Public term debt with single maturities........................... $3,550,000 $2,950,000 $2,550,000 Public medium-term notes with varying maturities........................... 2,403,770 2,011,770 1,765,920 Capital lease obligations............. 1,088,424 305,400 -- Bank and other term debt.............. 22,502 43,503 68,778 ---------- ---------- ---------- Total term debt.................... 7,064,696 5,310,673 4,384,698 Commercial paper...................... 1,843,630 1,972,361 1,444,977 Bank lines of credit and revolvers.... -- 319,000 -- Less: Deferred debt discount.......... (15,692) (19,028) (10,194) ---------- ---------- ---------- Debt financing and capital lease obligations......................... $8,892,634 $7,583,006 $5,819,481 ========== ========== ========== Composite interest rate............... 6.47% 6.41% 5.89% Percentage of total debt at fixed rate................................. 75.59% 66.98% 74.77% Composite interest rate on fixed debt. 6.66% 6.65% 6.70% Bank prime rate....................... 8.50% 8.50% 6.00%
The interest on substantially all the public debt (exclusive of the commercial paper) is fixed for the term of the note. As of December 31, 1995, the Company had committed revolving loans and lines of credit with 40 banks aggregating $1.95 billion and uncommitted lines of credit with two banks aggregating $125 million. Bank debt principally provides for interest rates that vary according to the pricing option then in effect and range from prime, .25% to .30% over LIBOR or .395% over CD rates, at the Company's option. Bank financings are subject to facility fees of up to .10% of amounts available. On January 19, 1996, the Company replaced $1.8 billion of the committed revolving loans and lines of credit with a new, expanded facility for $2.25 billion. The facility consists of a $1.0 billion, 364 day tranche with a 7 basis point annual facility fee and a $1.25 billion, 5 year tranche with a 10 basis point annual facility fee. 10 The Company has an effective shelf registration with respect to $2.111 billion of debt securities, under which $250 million of notes were sold through 1995. Additionally, a $750 million Medium-Term Note program has been implemented under the shelf registration, under which $59 million was sold during 1995. The Export Credit Lease facilities provide ten year, amortizing loans in the form of capital lease obligations. The interest rate on 62.5% of the original financing available is 6.55%, the interest rate on 22.5% of the original financing available varies between 6.18% and 6.89%. The remaining 15% of the original financing available provides for LIBOR based pricing. As of March 1996, the Company had the option to enter into an additional facility of $615 million for aircraft to be delivered in 1996. The terms are basically the same as for the existing facilities. In 1995, the Company entered into a sale-leaseback transaction in the amount of $413 million relating to seven aircraft. The transaction results in the sale and leaseback of these aircraft for one year operating leases, each with six one year extension options for a total of seven years for each aircraft. The Company has the option to either buy back the aircraft or redeliver the aircraft for a fee to the lessor at the end of any lease period. The lease rates equate to fixed principal amortization and floating interest payments of LIBOR plus .42%. In each of 1992, 1993 and February and November 1995, the Company sold $100 million of Market Auction Preferred Stock. The Company believes that the combination of internally generated funds and debt financing currently available to the Company will allow the Company to meet its capital requirements for at least the next 12 months. In the normal course of business, the Company employs a variety of off- balance sheet financial instruments and other derivative products to manage its exposure to interest rates and the resulting impact of changes in interest rates on earnings, with the objective to lower its overall borrowing cost and to maintain its optimal mix of variable and fixed rate interest obligations. The Company only enters into derivative transactions to hedge interest rate risk and not to speculate on interest rates. These derivative products include interest rate swap agreements, interest rate spreadlocks, interest rate swap options ("swaptions") and interest rate floors. The counterparties to the Company's derivative instruments are all recognized U.S. derivative dealers. The counterparties to the majority of the notional amounts of the Company's derivative instruments are AAA rated and all have at least an A credit rating. The Company currently does not, although it can in certain circumstances, require its counterparties to provide security for its positions with the Company. Any failure of the instruments or counterparties to perform under the derivative contracts would have an immaterial impact on the Company's earnings. RESULTS OF OPERATIONS The increase in revenues from rentals of flight equipment from $795.4 million in 1993 to $993.6 million in 1994 to $1,254.0 million in 1995 is due to the increase in both the size and relative cost of the fleet of leased flight equipment subject to operating lease from 223 in 1993 to 262 in 1994 to 275 in 1995. In addition to its leasing operations, the Company engages in the marketing of flight equipment on a principal and commission basis as well as the disposition of flight equipment at the end of the lease term. Revenue from such flight equipment marketing increased from $53.7 million in 1993 to 11 $76.2 million in 1994 to $119.1 million in 1995 as a result of the following number of aircraft transactions in each period:
1995 1994 1993 ---- ---- ---- Sales of flight equipment.................................. 0 3 2 Commissions................................................ 6 10 8 Disposition of leased aircraft............................. 41 21 7
In addition, the Company sold 19 engines (1995), eight engines (1994) and five engines (1993). Interest and other income decreased from $62.5 million in 1993 to $40.3 million in 1994 and increased to $49.4 million in 1995. The decrease in 1994 was due primarily to the decline in dividend income resulting from the disposition of the Alaska Air Group Stock in 1993. The increase in 1995 was due, in part, to the increase in notes receivable in 1995. Expenses as a percentage of total revenues were 70.0% for 1993 compared to 71.9% for 1994 and 76.2% for 1995. Interest expense increased from $301.2 million in 1993 to $376.6 million in 1994 to $541.4 million in 1995, primarily as a result of an increase in debt outstanding, excluding the effect of debt discount, from $5.829 billion in 1993 to $7.602 billion in 1994 to $8.908 billion in 1995 to finance aircraft acquisitions, as affected by changes in interest rates during the periods. These interest rate changes caused the Company's composite borrowing rate to fluctuate as follows: December 31, 1992........................... 6.55% March 31, 1993.............................. 6.29 June 30, 1993............................... 6.11 September 30, 1993.......................... 6.05 December 31, 1993........................... 5.89 March 31, 1994.............................. 5.79 June 30, 1994............................... 5.87 September 30, 1994.......................... 6.09 December 31, 1994........................... 6.41 March 31, 1995.............................. 6.69 June 30, 1995............................... 6.59 September 30, 1995.......................... 6.50 December 31, 1995........................... 6.47
Depreciation of flight equipment increased from $268.2 million in 1993 to $334.6 million in 1994 to $431.9 million in 1995 due to the addition of aircraft. Provisions for overhauls also increased from $39.9 million in 1993 to $57.6 million in 1994 to $71.1 million in 1995 due to an increase in the number of aircraft on which the Company collects overhaul reserves and therefore an increase in the number of hours flown for which an overhaul reserve is provided. The provision for income taxes as a percentage of Income Before Income Taxes decreased from 39.3% in 1993 to 35.3% in 1994 and increased to 41.9% in 1995. The decrease from 1993 to 1994 was due principally to the impact in 1993 of the change in the federal statutory rate. The increase in 1995 was due principally to the impact of losses of subsidiaries for which the Company does not receive current or future tax benefit. During the fourth quarter of 1995, two of these corporations were restructed. The Company does not anticipate that losses of consolidated controlled foreign corporations will materially impact the provision for income taxes in the future. ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this Item is submitted as a separate section of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE During the two fiscal periods prior to the date of the Company's most recent financial statements, the Company has not reported a change in accountants nor have there been any disagreements reported on any matter of accounting principles or practices or financial statement disclosure. 12 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) and (2): Financial Statements and Financial Schedule: The response to this portion of Item 14 is submitted as a separate section of this report beginning on page 17. (a)(3) and (c): Exhibits: The response to this portion of Item 14 is submitted as a separate section of this report beginning on page 14. (b) Reports on Form 8-K: Current Reports on Form 8-K, event dates October 5, 1995, October 13, 1995 (relating to the Company's Medium-Term Notes, Series H), October 13, 1995 (relating to the Company's 6 1/8% Notes due November 1, 1999) and December 5, 1995. All Current Reports reported under Item 7. INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES FORM 10-K ITEMS 8, 14(A), AND 14(C) INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE The following consolidated financial statements of the Company and its subsidiaries required to be included in Item 8 are listed below:
PAGE ---- Report of Independent Auditors............................................ 17 Consolidated Financial Statements: Balance Sheets at December 31, 1994 and 1995............................. 18 Statements of Income for the years ended December 31, 1993, 1994 and 1995.................................................................... 19 Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995........................................................... 20 Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995.................................................................... 21 Notes to Consolidated Financial Statements............................... 23
The following financial statement schedule of the Company and its subsidiaries is included in Item 14(a)(2):
SCHEDULE NUMBER DESCRIPTION PAGE - - --------------- ----------- ---- II Valuation and Qualifying Accounts....................... 35
All other financial statements and schedules not listed have been omitted since the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required. 13 The following exhibits of the Company and its subsidiaries are included in Item 14(c):
EXHIBIT NUMBER DESCRIPTION - - -------------- ----------- 3.1 Restated Articles of Incorporation of the Company, as amended through December 9, 1992, filed November 3, 1993 (filed as an ex- hibit to Registration Statement No. 33-50913 and incorporated herein by reference). 3.2 Certificate of Determination of Preferences of Series C Market Auc- tion Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 3.3 Certificate of Determination of Preferences of Series D Market Auc- tion Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 3.4 Certificate of Determination of Preferences of Series E Market Auc- tion Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 3.5 Certificate of Determination of Preferences of Series F Market Auc- tion Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 3.6 Certificate of Determination of Preferences of Series G Market Auc- tion Preferred Stock. 3.7 Certificate of Determination of Preferences of Series H Market Auc- tion Preferred Stock. 3.8 By-Laws of the Company, including amendment thereto dated August 31, 1990 (filed as an exhibit to Registration Statement No. 33- 37600 and incorporated herein by reference). 4.1 Indenture dated as of November 1, 1991, between the Company and First Trust of Illinois, National Association (successor to Continental Bank, National Association), as Trustee (filed as an exhibit to Registration Statement No. 33-43698 and incorporated herein by reference). 4.2 The Company agrees to furnish to the Commission upon request a copy of each instrument with respect to issues of long-term debt of the Company and its subsidiaries, the authorized principal amount of which does not exceed 10% of the consolidated assets of the Company and its subsidiaries 10.1* Employment Agreement with Leslie L. Gonda (filed as an exhibit to Form 10-Q for the fiscal quarter ended May 31, 1990 and incorpo- rated herein by reference). 10.2* Employment Agreement with Steven F. Udvar-Hazy (filed as an exhibit to Form 10-Q for the fiscal quarter ended May 31, 1990 and incorpo- rated herein by reference). 10.3 General Terms Agreement, dated November 10, 1988 between AVSA, S.A.R.L. and the Company, including Letter Agreements Nos. 1 through 4 relating thereto (filed as exhibits to Form 8-K, dated January 25, 1989 and incorporated herein by reference). 10.4 Purchase Agreement A321 dated February 14, 1990, between AVSA, S.A.R.L. and the Company, including Letter Agreements relating thereto (filed as an exhibit to Form 10-K, for the thirteen months ended December 31, 1990 and incorporated herein by reference).
- - -------- *Denotes management contract. 14 10.5 Amendments Nos. 1 and 2 dated as of June 18, 1991 and as of December 10, 1992, respectively, to Purchase Agreement No. A321 dated as of February 14, 1990 between AVSA, S.A.R.L. and the Com- pany (filed as an exhibit to Form 10-K for the year ended December 31, 1992 and incorporated herein by reference). 10.6 Amendments Nos. 3 and 4 dated January 3, 1994 and February 28, 1994, respectively, to the Airbus A321 Purchase Agreement dated as of February 14, 1990 between AVSA, A.S.R.L. and the Company (filed as an exhibit to Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). 10.7 Option Waiver Notice pursuant to Amendment No. 1, dated June 18, 1991, to Purchase Agreement No. A321 dated as of February 14, 1990 between AVSA, S.A.R.L. and the Company (filed as an exhibit to Form 10-Q for the fiscal quarter ended June 30, 1994 and incorporated herein by reference). 10.8 Amendment No. 5 dated as of September 23, 1994 to the A321 Purchase Agreement dated as of February 14, 1990 between AVSA, S.A.R.L. and the Company (filed as an a exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 10.9 Amendment No. 6 dated as of December 27, 1994 to the A321 Purchase Agreement dated as of February 14, 1990 between AVSA, S.A.R.L. and the Company (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 10.10 Letter Agreements Nos. 1, 2, 3, 4, 5, 6 and 7, each dated as of De- cember 27, 1994 between AVSA, S.A.R.L. and the Company (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and in- corporated herein by reference). 10.11 Amendment No. 7 dated as of July 5, 1995, to the Airbus A321 Purchase Agreement dated as of February 14, 1990, between AVSA, S.A.R.L. and the Company (filed as an exhibit to Form 10-Q for the fiscal quarter ended September 30, 1995 and incorporated herein by reference). 10.12 Amendment No. 8 dated as of October 4, 1995, to the Airbus A321 Purchase Agreement dated as of Feburary 14, 1990, between AVSA, S.A.R.L. and the Company (filed as an exhibit to Form 10-Q for the fiscal quarter ended September 30, 1995 and incorporated herein by reference). 10.13 Revolving Credit Agreement, dated as of January 19, 1996, among the Company, Union Bank of Switzerland, Los Angeles Branch, and the other banks listed therein providing up to $1,000,000,000. 10.14 Revolving Credit Agreement, dated as of January 19, 1996, among the Company, Union Bank of Switzerland, Los Angeles Branch, and the other banks listed therein providing up to $1,250,000,000. 10.15 Amendment No. 9 dated as of February 23, 1996, to the Airbus A321 Purchase Agreement dated as of February 14, 1990, between AVSA, S.A.R.L. and the Company (Confidential treatment requested). 10.16 Amendment No. 10 dated as of February 23, 1996, to the Airbus A321 Purchase Agreement dated as of February 14, 1990, between AVSA, S.A.R.L. and the Company (Confidential treatment requested).
15 10.17 Letter Agreement No. 1 dated as of February 23, 1996, with respect to Amendment No. 10 to the Airbus A321 Purchase Agreement, between AVSA, S.A.R.L. and the Company (Confidential treatment requested). 12. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. 23. Consent of Ernst & Young LLP. 27. Financial Data Schedule.
16 REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Directors International Lease Finance Corporation Los Angeles, California We have audited the accompanying consolidated balance sheets of International Lease Finance Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Lease Finance Corporation and subsidiaries at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Century City, Los Angeles, California February 20, 1996 17 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS
DECEMBER 31, ------------------------ 1995 1994 ----------- ----------- Cash, including interest bearing accounts of $59,624 (1995) and $45,831 (1994) .......................... $ 87,097 $ 52,891 Notes receivable--Notes B and D...................... 423,799 355,151 Net investment in finance and sales-type leases--Note C................................................... 86,237 92,233 Flight equipment under operating leases--Note G...... 12,015,308 9,928,416 Less accumulated depreciation....................... 1,252,438 1,077,337 ----------- ----------- 10,762,870 8,851,079 Deposits on flight equipment purchases--Note K....... 805,570 890,711 Accrued interest, other receivables and other assets. 87,991 71,238 Investments--Note D.................................. 17,311 18,983 Deferred debt issue costs--less accumulated amortiza- tion of $30,778 (1995) and $22,346 (1994) .................. 27,504 20,846 ----------- ----------- $12,298,379 $10,353,132 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Accrued interest and other payables.................. $ 196,676 $ 124,025 Debt financing, net of deferred debt discount of $15,692 (1995) and $19,028 (1994)--Note E........... 7,804,210 7,277,606 Capital lease obligations--Note E.................... 1,088,424 305,400 Security and other deposits on flight equipment...... 498,016 478,486 Rentals received in advance.......................... 80,811 72,557 Deferred income taxes--Note I........................ 660,938 487,410 Current income taxes................................. (30,803) (33,124) Commitments and contingencies--Note K SHAREHOLDERS' EQUITY--Notes E and F Preferred stock--no par value; 20,000,000 authorized shares; Market Auction Preferred Stock, $100,000 per share liquidation value; Series A, B, C, D, E, F, G and H (1995) and Series A, B, C and D (1994), each having 500 shares issued and outstanding............................. 400,000 200,000 Common stock--no par value; 100,000,000 authorized shares, 35,818,122 (1995 and 1994) issued and out- standing........................................... 3,582 3,582 Paid-in capital..................................... 580,085 582,941 Retained earnings................................... 1,016,440 854,249 ----------- ----------- 2,000,107 1,640,772 ----------- ----------- $12,298,379 $10,353,132 =========== ===========
See accompanying notes. 18 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------ 1995 1994 1993 ---------- ---------- -------- Revenues: Rental of flight equipment--Note G.............. $1,254,020 $ 993,596 $795,437 Flight equipment marketing...................... 119,078 76,193 53,680 Interest and other.............................. 49,390 40,267 62,515 ---------- ---------- -------- 1,422,488 1,110,056 911,632 Expenses: Interest........................................ 541,428 376,560 301,205 Depreciation.................................... 431,947 334,587 268,170 Provision for overhaul.......................... 71,113 57,619 39,893 Selling, general and administrative--Note H..... 39,654 29,283 24,724 ---------- ---------- -------- 1,084,142 798,049 633,992 ---------- ---------- -------- INCOME BEFORE INCOME TAXES..................... 338,346 312,007 277,640 Provision for income taxes--Note I............... 141,909 110,064 109,075 ---------- ---------- -------- NET INCOME..................................... $ 196,437 $ 201,943 $168,565 ========== ========== ========
See accompanying notes. 19 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
MARKET AUCTION PREFERRED STOCK COMMON STOCK ------------------ ----------------- NUMBER OF NUMBER OF PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL --------- -------- ---------- ------ -------- ---------- ---------- (DOLLARS IN THOUSANDS) Balance At December 31, 1992................... 1,000 $100,000 35,818,122 $3,582 $534,469 $ 518,144 $1,156,195 Sale of MAPS preferred. 1,000 100,000 (1,528) 98,472 Dividend to AIG........ (11,359) (11,359) Preferred stock dividends............. (2,692) (2,692) Net income............. 168,565 168,565 ----- -------- ---------- ------ -------- ---------- ---------- Balance at December 31, 1993................... 2,000 $200,000 35,818,122 $3,582 $532,941 $ 672,658 $1,409,181 Capital contribution... 50,000 50,000 Dividend to AIG........ (13,462) (13,462) Preferred stock dividends............. (6,890) (6,890) Net income............. 201,943 201,943 ----- -------- ---------- ------ -------- ---------- ---------- Balance at December 31, 1994................... 2,000 $200,000 35,818,122 $3,582 $582,941 $ 854,249 $1,640,772 Sale of MAPs preferred. 2,000 200,000 (2,856) 197,144 Dividend to AIG........ (21,150) (21,150) Preferred stock dividends............. (13,096) (13,096) Net income............. 196,437 196,437 ----- -------- ---------- ------ -------- ---------- ---------- Balance at December 31, 1995................... 4,000 $400,000 35,818,122 $3,582 $580,085 $1,016,440 $2,000,107 ===== ======== ========== ====== ======== ========== ==========
See accompanying notes. 20 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------------- 1995 1994 1993 ----------- ----------- ----------- OPERATING ACTIVITIES: Net income............................. $ 196,437 $ 201,943 $ 168,565 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of flight equipment....... 431,947 334,587 268,170 Deferred income taxes.................. 173,528 147,657 113,793 Amortization of deferred debt issue costs................................. 11,554 5,956 5,055 Gain on sale of flight equipment included in amount financed........... (46,260) (53,627) (24,806) Increase in notes receivable........... (9,053) (36,608) (8,694) Equity in net (income) loss of affiliates............................ 517 (2,022) (3,036) Changes in operating assets and liabilities: (Increase) decrease in accrued interest, other receivables and other assets........................ (16,753) 10,006 (21,110) Increase in accrued interest and other payables...................... 72,651 31,796 13,029 Increase (decrease) in current income taxes payable....................... 2,321 (33,346) (20,262) Increase in rentals received in advance............................. 8,254 30,606 3,326 ----------- ----------- ----------- Net cash provided by operating activities............................. 825,143 636,948 494,030 ----------- ----------- ----------- INVESTING ACTIVITIES: Acquisition of flight equipment: For operating leases................. (3,364,496) (2,621,669) (2,372,789) For finance leases................... (4,790) (Increase) decrease in deposits and progress payments..................... 85,141 (70,663) (111,955) Proceeds from disposal of flight equipment--net of gain................ 862,935 119,799 126,005 Advances on notes receivable........... (5,606) (16,227) (14,856) Collections on notes receivable........ 150,093 114,141 70,242 Collections on finance and sales-type leases................................ 5,996 9,891 13,576 Purchase of investments................ (845) (850) (2,333) Sale of investments--net of gain....... 2,000 1,727 32,822 ----------- ----------- ----------- Net cash used in investing activities... (2,264,782) (2,468,641) (2,259,288) ----------- ----------- ----------- FINANCING ACTIVITIES: Proceeds from debt financing and capital lease obligations............. 6,309,304 4,746,500 4,265,761 Payments in reduction of debt financing and capital lease obligations......... (5,003,012) (2,974,141) (2,685,416) Proceeds from sale of MAPS preferred stock (net of issue costs)............ 197,144 98,472 Cash contributions to capital by AIG... 50,000 Debt issue costs....................... (18,211) (11,637) (9,961) Change in unamortized debt discount.... 3,336 (8,834) (3,154) Payment of common and preferred dividends............................. (34,246) (20,352) (14,051) Increase in customer deposits.......... 19,530 41,482 119,992 ----------- ----------- ----------- Net cash provided by financing activities............................. 1,473,845 1,823,018 1,771,643 ----------- ----------- ----------- Net increase (decrease) in cash......... 34,206 (8,675) 6,385 Cash at beginning of year............... 52,891 61,566 55,181 ----------- ----------- ----------- Cash at end of year.................... $ 87,097 $ 52,891 $ 61,566 =========== =========== ===========
(Table continued on next page) 21 (Table continued from previous page)
YEARS ENDED DECEMBER 31 ---------------------------- 1995 1994 1993 -------- -------- -------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (received) during the year for: Interest (net of amount capitalized $51,091 (1995), $44,610 (1994) and $39,363 (1993))...... $503,023 $352,805 $264,571 Income taxes..................................... (33,940) (4,247) 15,395
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: 1995 Notes in the amount of $268,660 were received as partial payments in exchange for flight equipment sold with a book value of $222,400. Flight equipment was received in exchange for notes receivable in the amount of $64,576. 1994 Flight equipment with a net book value of $222,873 was transferred from finance and sales-type leases to operating leases. Flight equipment was received in exchange for notes receivable in the amount of $69,317. Notes and finance and sales-type leases in the amount of $177,857 were received as partial payments in exchange for flight equipment sold with a book value of $124,230. 1993 Flight equipment with a net book value of $60,478 was transferred from operating leases to finance and sales-type leases. Flight equipment was received in exchange for notes receivable in the amount of $41,987. Notes in the amount of $228,645 were received as partial payments in exchange for flight equipment sold with a book value of $204,185. Notes in the amount of $26,600 were received in exchange for investments in preferred stock with a book value of $26,153. See accompanying notes. 22 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Parent Company: International Lease Finance Corporation (the "Company") is an indirect wholly owned subsidiary of American International Group, Inc. ("AIG"). AIG is a holding company which through its subsidiaries is primarily engaged in a broad range of insurance and insurance-related activities in the United States and abroad. Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Investments of less than 20% in other entities are carried at cost. Investments of between 20% and 50% in other entities are carried under the equity method. All significant intercompany balances and transactions have been eliminated in consolidation. Intercompany Allocations: The Company is party to cost sharing agreements with AIG. Generally, these agreements provide for the allocation of costs upon either the specific identification basis or a proportional cost allocation basis which management believes to be reasonable. The charges amounted to $6,439 (1995), $2,506 (1994) and $2,312 (1993). Rentals: The Company, as lessor, leases flight equipment principally under operating leases. Accordingly, income is reported over the life of the lease as rentals become receivable under the provisions of the lease or, in the case of leases with varying payments, under the straight-line method over the noncancelable term of the lease. In certain cases, leases provide for additional amounts based on usage. Flight Equipment Marketing: The Company is a marketer of flight equipment. Marketing revenues include all revenues from such operations consisting of net gains on sales of flight equipment, commissions and net gains on disposition of leased flight equipment. Flight Equipment: Flight equipment is stated at cost. Major additions and modifications are capitalized. Normal maintenance and repairs; airframe and engine overhauls; and compliance with return conditions of flight equipment on lease are provided by and paid for by the lessee. Under the provisions of most leases, for certain airframe and engine overhauls, the lessee is reimbursed for costs incurred up to but not exceeding contingent rentals paid the Company by the lessee. The Company provides a charge to operations for such reimbursements based primarily upon the hours utilized during the period and the expected reimbursement during the life of the lease. Generally, all aircraft, including aircraft acquired under capital leases, are depreciated using the straight-line method over a 25 year life from the date of manufacture to a 15% residual value. At the time assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the related accounts and the difference, net of proceeds, is recorded as a gain or loss. Capitalized Interest: The Company borrows certain funds to finance progress payments for the construction of flight equipment ordered. The interest incurred on such borrowings is capitalized and included in the cost of the equipment. The amounts were $51,091 (1995), $44,610 (1994) and $39,363 (1993). Deferred Debt Issue Costs: Deferred debt issue costs incurred in connection with debt financing are being amortized over the life of the debt using the interest rate method and are charged to interest expense. 23 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial Instruments: As a result of the Company having specific aircraft purchase agreements, it has been able to obtain financing options for fixed rate debt. The financing is available upon the purchase of specific aircraft. However, the Company is not required to use the financing options to purchase the specific aircraft and may choose to use other financing methods. Acquired financing options that are expected to be designated as hedges of anticipated financing arrangements are carried at cost based on their allocated fair values. Such costs are amortized over the lives of the acquired financing options. The Company has granted certain parties the right but not the obligation to effectively convert certain of the Company's fixed note obligations to floating rate obligations based on an established notional amount. The proceeds of such option agreements are initially recorded as a liability. Subsequently, the value of such options agreements, as well as the cost allocated to undesignated aircraft financing options, are adjusted to fair value with changes in value recorded in income. When swap agreements resulting from this activity are effective in modifying the terms of actual debt agreements from a fixed rate basis to a floating rate basis, such swaps are accounted for by the accrual method. Periodic payments as well as the amortization (by a level yield method) of the initial value are treated as adjustments to interest expense from the related debt. Income Taxes: The Company and its U.S. subsidiaries are included in the consolidated federal income tax return of AIG. The Company and its subsidiaries are included in the combined California unitary tax return of AIG. The provision for income taxes is calculated on a separate return basis. Income tax payments are made pursuant to a tax payment allocation agreement whereby AIG credits or charges the Company for the corresponding increase or decrease (not to exceed the separate return basis calculation) in AIG's current taxes resulting from the inclusion of the Company in AIG's consolidated tax return. Intercompany payments are made when such taxes are due or tax benefits are realized by AIG. The deferred tax liability is determined based on the difference between the financial statement and tax basis of assets and liabilities and is measured at the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is determined by the change in the liability for deferred taxes ("Liability Method"). Organization: The Company is primarily engaged in the acquisition of new and used commercial jet aircraft and the leasing and sale of such aircraft to charter and scheduled airlines throughout the world. In addition, the Company is engaged in the remarketing of commercial jets for its own account, for airlines and for financial institutions. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications: Certain amounts have been reclassified in the 1994 and 1993 financial statements to conform to the Company's 1995 presentation. 24 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE B--NOTES RECEIVABLE Notes receivable are primarily from the sale of flight equipment and are summarized as follows:
1995 1994 -------- -------- Fixed rate notes receivable due in varying installments to 2005: Less than 8%........................................... $296,590 $132,341 8% to 9.99%............................................ 81,486 104,585 10% to 14%............................................. 4,862 2,007 Libor plus 1.1% to Libor plus 1.5% notes receivable in varying installments to 2002........................... 40,861 116,218 -------- -------- $423,799 $355,151 ======== ========
Included above, the Company had notes receivable of $2,300 (1995) and $18,010 (1994) representing restructured lease payments. At December 31, 1995, the minimum future notes receivable payments to be received are as follows: 1996................................................................ $ 45,005 1997................................................................ 142,211 1998................................................................ 52,175 1999................................................................ 38,140 2000................................................................ 26,426 Thereafter.......................................................... 119,842 -------- $423,799 ========
NOTE C--NET INVESTMENT IN FINANCE AND SALES-TYPE LEASES The following lists the components of the net investment in finance and sales-type leases:
1995 1994 -------- -------- Total minimum lease payments to be received.............. $ 91,124 $101,888 Estimated residual values of leased flight equipment..... 26,544 29,127 Less: Unearned income.................................... (31,431) (38,782) -------- -------- Net investment in finance and sales-type leases.......... $ 86,237 $ 92,233 ======== ========
Minimum future lease payments to be received for flight equipment on finance and sales-type leases at December 31, 1995 are as follows: 1996...................................... $13,515 1997...................................... 12,714 1998...................................... 13,080 1999...................................... 11,478 2000...................................... 7,935 Thereafter................................ 32,402 ------- Total minimum lease payments to be received................................. $91,124 =======
25 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE D--INVESTMENTS Investments consist of the following:
1995 1994 --------------- --------------- PERCENT PERCENT OWNED AMOUNT OWNED AMOUNT ------- ------- ------- ------- Cost method: Air Liberte.................................... 10.8% $ 4,792 10.8% $ 4,154 International Aircraft Investors............... 6.2% 300 6.2% 300 Others......................................... 1,058 2,850 Equity method: Pacific Ocean Leasing Ltd...................... 50.0% 5,858 50.0% 7,223 Pacific Asia Leasing Ltd....................... 25.0% 5,303 25.0% 4,456 ------- ------- $17,311 $18,983 ======= =======
In addition, the Company has notes receivable of $11,111 (1995) and $10,538 (1994) from entities in which it has investments. At December 31, 1995, the Company had nine aircraft on lease to Air Liberte. These leases are similar in terms to those of unaffiliated customers. The Company has sold used aircraft and engines to International Aircraft Investors ("IAI") on terms similar to those of unaffiliated customers (see Note K). In exchange for these sales the Company has received notes which are included in Notes Receivable in the accompanying consolidated balance sheets (see Note B). The Company has a 50% interest in Pacific Ocean Leasing Ltd. ("POL"), a Bermuda corporation. POL presently owns one Boeing 767-200 aircraft, one spare engine and various spare parts on lease to an airline. Additionally, the Company has guaranteed the bank loan to POL (see Note K). The Company has a 25% interest in Pacific Asia Leasing Ltd. ("PAL"), a Bermuda corporation. PAL presently owns one Boeing 767-300ER aircraft on lease to an airline. The Company guaranteed part of the loan in connection with such purchase (see Note K). 26 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE E--DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS Debt financing and capital lease obligations are comprised of the following:
1995 1994 ---------- ---------- Commercial Paper (weighted average interest rate at December 31, 5.82% (1995) and 5.73% (1994))....... $1,843,630 $1,972,361 Term Notes......................................... 3,550,000 2,950,000 Medium-Term Notes.................................. 2,403,770 2,011,770 Capital Lease Obligations.......................... 1,088,424 305,400 Bank and other term debt........................... 22,502 43,503 Bank lines of credit and revolvers................. -- 319,000 Less: Deferred debt discount....................... (15,692) (19,028) ---------- ---------- $8,892,634 $7,583,006 ========== ==========
Bank Financing: As of December 31, 1995, the Company had committed credit agreements with 40 commercial banks aggregating $1,950,000 and uncommitted lines of credit with two commercial banks in the amount of $125,000. Bank debt principally provides for interest rates that vary according to the pricing option then in effect and range from prime, .25% to .30% over LIBOR or .395% over CD rates, at the option of the Company. The interest rates on the uncommitted bank lines are fixed for a period of up to one year at rates determined by the banks. Bank debt is subject to facility fees of up to .10% of amounts available. Bank financing is used primarily as backup for the Company's Commercial Paper program. Term Notes: The Company has issued the following Notes which provide for a single principal payment at maturity and cannot be redeemed prior to maturity:
INITIAL TERM 1995 1994 ------- ------- -------- 6% Notes due January 15, 1995...................... 3 years $ $150,000 8.20% Notes due April 15, 1995..................... 4 years 150,000 4 7/8% Notes due September 15, 1995................ 3 years 100,000 6 7/8% Notes due December 15, 1995................. 4 years 100,000 5 3/4% Notes due January 15, 1996.................. 3 years 150,000 150,000 6 5/8% Notes due June 1, 1996...................... 4 years 100,000 100,000 4 3/4% Notes due July 15, 1996..................... 3 years 100,000 100,000 7.90% Notes due October 1, 1996.................... 5 years 100,000 100,000 6 3/8% Notes due November 1, 1996.................. 4 years 150,000 150,000 4 3/4% Notes due January 15, 1997.................. 3 years 100,000 100,000 5 7/8% Notes due February 1, 1997.................. 4 years 100,000 100,000 5 1/2% Notes due April 1, 1997..................... 4 years 100,000 100,000 6 1/2% Notes due July 15, 1997..................... 5 years 150,000 150,000 6 3/4% Notes due August 1, 1997.................... 3 years 100,000 100,000
27 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) NOTE E--DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS (CONTINUED) Term Notes (continued):
INITIAL TERM 1995 1994 ----------- ---------- ---------- Floating Rate Notes due October 15, 1997. 4 1/2 years $ 100,000 $ 100,000 8 1/8% Notes due January 15, 1998........ 3 years 150,000 5 5/8% Notes due March 1, 1998........... 4 years 100,000 100,000 5 3/4% Notes due March 15, 1998.......... 5 years 100,000 100,000 7% Notes due June 1, 1998................ 4 years 100,000 100,000 6 1/4% Notes due June 15, 1998........... 3 years 100,000 5 3/4% Notes due July 1, 1998............ 5 years 100,000 100,000 8.35% Notes due October 1, 1998.......... 7 years 100,000 100,000 5 3/4% Notes due January 15, 1999........ 5 years 150,000 150,000 7 1/2% Notes due March 1, 1999........... 4 years 100,000 6 5/8% Notes due April 1, 1999........... 5 years 100,000 100,000 Floating Rate Notes due June 2, 1999..... 4 years 100,000 Floating Rate Notes due July 15, 1999.... 4 years 100,000 6 1/2% Notes due August 15, 1999......... 7 years 100,000 100,000 6 1/8% Notes due November 1, 1999........ 4 years 100,000 5 3/4% Notes due December 15, 1999....... 4 years 150,000 8 1/4% Notes due January 15, 2000........ 5 years 100,000 6.20% Notes due May 1, 2000.............. 7 years 100,000 100,000 7% Notes due May 15, 2000................ 5 years 100,000 6 1/4% Notes due October 15, 2000........ 5 years 100,000 8 7/8% Notes due April 15, 2001.......... 10 years 150,000 150,000 8 3/8% Notes due December 15, 2004....... 10 years 100,000 100,000 ---------- ---------- $3,550,000 $2,950,000 ========== ==========
Medium-Term Notes: The Company's Medium-Term Notes bear interest at rates varying between 4.5% and 9.88%, inclusive, with maturities from 1996 through 2005. The Medium-Term Notes provide for a single principal payment at the maturity of the respective note. They cannot be redeemed by the Company prior to maturity. Capital Lease Obligations: The Company's Capital Lease Obligations provide 10 year, fully amortizing debt in three interest rate tranches. The first 62.5% of the original debt is at a fixed rate of 6.55%. The second 22.5% of the original debt is at fixed rates varying between 6.18% and 6.89%. The final 15% of the original debt is at a floating LIBOR based rate. The debt matures through 2005. The flight equipment associated with the obligations had a net book value of $1,215,912 (1995) and $359,266 (1994). As of December 31, 1995, the Company had the option to enter into an additional facility of $747,000 for aircraft to be delivered in 1996. The terms are basically the same as for the existing facilities. 28 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE E--DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS (CONTINUED) Maturities of debt financing and capital lease obligations (excluding commercial paper) at December 31, 1995 are as follows: 1996........................................................... $1,171,104 1997........................................................... 1,289,487 1998........................................................... 1,410,087 1999........................................................... 1,477,802 2000........................................................... 648,552 Thereafter..................................................... 1,067,664 ---------- $7,064,696 ==========
Under the most restrictive provisions of the related borrowings, consolidated retained earnings at December 31, 1995, in the amount of $221,744 are unrestricted as to payment of dividends. NOTE F--SHAREHOLDERS' EQUITY Preferred Stock: In February and November 1995 and November 1993, 500 shares each of Series E and F, G and H and C and D, respectively, of Market Auction Preferred Stock ("MAPS") were issued in connection with public offerings at $100 per share. Proceeds, net of issuance costs, to the Company were $197,144 (1995) and $98,472 (1993). The MAPS have a liquidation value of $100 per share and are not convertible. The dividend rate, other than the initial rate, for each dividend period for each series will be reset approximately every 7 weeks (49 days) on the basis of orders placed in an auction. At December 31, 1995, the dividend rates for Series A through H ranged from 4.35% to 4.69%. Stock Appreciation Rights: Stock Appreciation Rights ("SARs") were granted to certain employees of the Company during 1990. The SARs granted generally vest over a nine year period from the effective date and are exercisable immediately upon vesting. SARs initially have no value but can gain a cash value based upon the difference between a Benchmark Price and a Formula Price (based on adjusted pre-tax cash flow of the Company), but not in excess of an aggregate of $150,000, to be accrued and paid over the period of the plan. The SAR plan became effective on January 1, 1991. No value has been earned or accrued under the SAR plan as of December 31, 1995. NOTE G--RENTAL INCOME Minimum future rentals on noncancelable operating leases and subleases of flight equipment which have been delivered at December 31, 1995 are as follows:
YEAR ENDED ---------- 1996................................... $1,112,237 1997................................... 889,205 1998................................... 700,100 1999................................... 551,181 2000................................... 404,996 Thereafter............................. 743,435 ---------- $4,401,154 ==========
29 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE G--RENTAL INCOME (CONTINUED) Additional rentals earned by the Company based on the lessees' usage aggregated $168,121 (1995), $122,321 (1994) and $101,761 (1993). Flight equipment is leased, under operating leases, with remaining terms ranging from one to 10 years. NOTE H--RENTAL EXPENSE At December 31, 1995, the Company had entered into a sale-leaseback transaction in the amount of $412,626 relating to seven aircraft. The transaction results in the sale and leaseback of these aircraft for one year operating leases, each with six one year extension options, maturing on December 22, 1996. The lease rates equate to fixed principal amortization and floating interest payments of LIBOR plus .42%. Minimum future rental expense for 1996 is $15,226 at December 31, 1995. NOTE I--INCOME TAXES The provision (benefit) for income taxes is comprised of the following:
1995 1994 1993 -------- -------- -------- Current: Federal....................................... $(32,962) $(34,027) $ (8,522) State......................................... 1,427 (3,508) 3,826 -------- -------- -------- (31,535) (37,535) (4,696) Deferred: Federal....................................... 162,129 149,364 103,220 State......................................... 11,315 (1,765) 10,551 -------- -------- -------- 173,444 147,599 113,771 -------- -------- -------- $141,909 $110,064 $109,075 ======== ======== ========
The provision for deferred income taxes is comprised of the following temporary differences:
1995 1994 1993 -------- -------- -------- Accelerated depreciation on flight equipment..... $182,125 $180,137 $108,548 Excess of state income taxes not currently de- ductible for Federal income tax purposes........ (3,960) 626 (3,698) Tax versus book lease differences................ 779 (806) (1,092) Provision for overhauls.......................... (4,370) (9,951) (3,613) Rentals received in advance...................... (308) (14,511) (1,077) Straight line rents.............................. (606) (2,315) 7,269 Changes in tax rates............................. -- -- 6,056 Other............................................ (216) (5,581) 2,659 Investment and other tax credits................. -- -- (1,281) -------- -------- -------- $173,444 $147,599 $113,771 ======== ======== ========
30 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE I--INCOME TAXES (CONTINUED) The deferred tax liability at December 31, 1995 consists of the following: Accelerated depreciation on flight equipment...................... $669,742 Excess of state income taxes not currently deductible for Federal income tax purposes.............................................. (14,049) Tax versus book lease differences................................. 49,496 Provision for overhauls........................................... (31,047) Rentals received in advance....................................... (30,622) Straight line rents............................................... 17,428 Other............................................................. (10) -------- $660,938 ========
A reconciliation of computed expected total provision for income taxes to the amount recorded is as follows:
1995 1994 1993 -------- -------- -------- Computed expected provision based upon a federal rate of 35% .................................... $118,421 $109,202 $97,174 State income taxes, net of Federal income taxes.. 8,282 5,772 9,345 Foreign sales corporation benefit................ (7,305) (3,178) (3,324) Subsidiary losses without tax benefit............ 17,169 -- -- Other............................................ 5,342 (1,732) (176) Adjustments of deferred tax liability for changes in tax rates.................................... -- -- 6,056 -------- -------- -------- $141,909 $110,064 $109,075 ======== ======== ========
NOTE J--OTHER INFORMATION Concentration of Credit Risk The Company leases and sells aircraft to airlines. All of the lease receivables and the majority of notes receivable are from airlines located throughout the world. The Company generally obtains deposits on leases and obtains collateral in flight equipment on notes receivable. The Company has no single customer which accounts for 10% or more of revenues. Segment Information The Company operates within one industry, the marketing of flight equipment through leasing and sales. Revenues include rentals of flight equipment to foreign airlines of $1,002,251 (1995), $798,619 (1994) and $655,773 (1993). 31 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE J--OTHER INFORMATION (CONTINUED) The following table sets forth the dollar amount and percentage of total rental revenues attributable to the indicated geographic areas for the years indicated:
1995 1994 1993 ---------------- -------------- -------------- AMOUNT % AMOUNT % AMOUNT % ---------- ----- -------- ----- -------- ----- (DOLLARS IN THOUSANDS) Europe....................... $ 462,252 36.9% $353,009 35.5% $261,523 32.9% Asia/Pacific................. 255,163 20.4 180,215 18.2 169,036 21.2 Central, South America and Mexico...................... 166,443 13.2 199,041 20.0 171,577 21.6 United States and Canada..... 304,784 24.3 230,856 23.2 171,720 21.6 Africa and the Middle East... 65,378 5.2 30,475 3.1 21,581 2.7 ---------- ----- -------- ----- -------- ----- $1,254,020 100.0% $993,596 100.0% $795,437 100.0% ========== ===== ======== ===== ======== =====
Employee Benefit Plans The Company's employees participate in various benefit plans sponsored by AIG, including a noncontributory qualified defined benefit retirement plan, various stock option and purchase plans and a voluntary savings plan (401(k) plan). AIG's U.S. plans do not separately identify projected benefit obligations and plan assets attributable to employees of participating affiliates. AIG's projected benefit obligations exceeded the plan assets at December 31, 1995 by $41,416. NOTE K--COMMITMENTS AND CONTINGENCIES Aircraft orders and options At December 31, 1995, the Company had committed to purchase, or had secured positions for (which were subsequently committed), 292 aircraft deliverable from 1996 through 2004 at an estimated aggregate purchase price (including adjustment for anticipated inflation) of approximately $15,935,000. At December 31, 1995, the Company had options to purchase 34 aircraft deliverable from 1998 through 2005 at an estimated aggregate purchase price (including adjustment for anticipated inflation) of approximately $2,547,000. Most of these purchase commitments and options are based upon master arrangements with each of The Boeing Company ("Boeing"), AVSA, S.A.R.L., the sales subsidiary of Airbus Industrie ("Airbus"). The Boeing aircraft (models 737, 747, 757, 767 and 777), and the Airbus aircraft (models A300, A319, A320, A321, A330 and A340) are either being purchased, or the options to purchase have been granted, pursuant to purchase agreements executed by the Company and Boeing or Airbus. These agreements establish the pricing formulas (which include certain price adjustments based upon inflation and other factors) and various other terms with respect to the purchase of aircraft. Under certain circumstances, the Company has the right to alter the mix of aircraft type ultimately acquired. As of December 31, 1995, the Company had made non-refundable deposits (exclusive of capitalized interest) with respect to the aircraft which the Company has committed to purchase of approximately $389,788, $322,537 with Boeing and Airbus, respectively. 32 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE K--COMMITMENTS AND CONTINGENCIES (CONTINUED) If all 326 aircraft were to be acquired, the estimated aggregate purchase price (including adjustment for anticipated inflation) would be approximately $18,482,000. Management anticipates that a significant portion of such aggregate purchase price will be funded by incurring additional debt. The exact amount of the indebtedness to be incurred will depend upon the actual purchase price of the aircraft, which can vary due to a number of factors, including inflation, and the percentage of the purchase price of the aircraft which must be financed. Asset Value Guarantees The Company guaranteed a portion of the residual value of four aircraft for fees paid in 1991 and seven aircraft for fees paid in 1994. The aggregate guarantees at December 31, 1995, are $131,259 and, if called upon, are payable in the amounts of $8,159 (1997), $3,100 (1999), $21,000 (2000), $63,000 (2003) and $36,000 (2006). Other Guarantees In connection with the acquisition of seven aircraft by entities in which the Company has an investment, the Company guaranteed the loans, which at December 31, 1995 aggregated $75,348. The Company guaranteed the loans of two customers which, at December 31, 1995, aggregrated $10,633. NOTE L--FINANCIAL INSTRUMENTS In the normal course of business, the Company employs a variety of off- balance sheet financial instruments and other derivative products to manage its exposure to interest rates and the resulting impact of changes in interest rates on earnings, with the objective to lower its overall borrowing cost and to maintain its optimal mix of variable and fixed rate interest obligations. These derivative products include interest rate swap agreements, interest rate spreadlocks, and interest rate swap options ("swaptions") and interest rate floors. The counterparties to the Company's derivative instruments are all recognized U.S. derivative dealers. The counterparties to the majority of the notional amounts of the Company's derivative instruments are AAA rated and all have at least an A credit rating. One of the counterparties is a related party of the Company. All derivative contracts between the Company and the related party are at arms length. The Company currently does not, although it can in certain circumstances, require its counterparties to provide security for its positions with the Company. Any failure of the instruments or counterparties to perform under the derivative contracts would have an immaterial impact on the Company's earnings. At December 31, 1995 and 1994, the Company had interest rate swap agreements with aggregate notional amounts of $624,568 and $294,761, respectively, which effectively converted certain fixed rate obligations with a weighted average interest rate of 6.53% (1995) and 6.46% (1994) to variable rate obligations equal to the six month LIBOR rate. In addition, at December 31, 1995 and 1994, the Company had an interest rate swap agreement with a notional amount of $100,000 which effectively converted a floating rate obligation equal to the one month commercial paper rate to a fixed rate obligation with a weighted average interest rate of 5.82%. Also, at December 31, 1995 and 1994 the 33 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE L--FINANCIAL INSTRUMENTS (CONTINUED) Company had an interest rate swap agreement with a notional amount of $50,000 which converted a floating rate obligation equal to two year U.S. Treasuries minus 0.25% to a floating rate obligation equal to three month LIBOR plus 0.25%. In addition, at December 31, 1995, the Company had interest rate swap agreements with aggregate notional amounts of $200,000 which converted floating rate obligations equal to three month LIBOR plus .20% to fixed rate obligations with a weighted average interest rate of 6.44%. Finally, at December 31, 1995, the Company had an interest rate swap agreement with a notional amount of $412,626 which converted floating rate obligations equal to one month LIBOR plus .42% to one month LIBOR subject to a floor of 5.315%. The notional amounts of many of the Company's swap agreements amortize on a semi- annual basis. The interest rate swap agreements amortize and expire in 1996 ($80,724 notional value), 1997 ($158,287 notional value), 1998 ($161,194 notional value), 1999 ($314,249 notional value), 2000 ($67,549 notional value), 2001 ($70,982 notional value), 2002 ($381,227 notional value), 2003 ($63,496 notional value), 2004 ($64,339 notional value) and 2005 ($25,147 notional value). At December 31, 1995, the Company had committed swaption contracts with an aggregate notional amount of $565,670 substantially expiring through 1996. The swaptions grant to the option holder the right but not the obligation to effectively convert certain of the Company's fixed rate financing options with a weighted average interest rate of 6.70% to floating rates equal to the six month LIBOR rate. The swaptions were entered into with the objective to lower the Company's borrowing costs and to obtain its optimal mix of variable and fixed rate obligations. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying value reported in the balance sheet for cash and cash equivalents approximates its fair value. Notes receivable: The fair values for notes receivable are estimated using discounted cash flow analyses, using interest rates currently being offered for similar loans to borrowers with similar credit ratings. Investments: It was not practicable to estimate the fair value of most of the Company's investments in the common and preferred stocks of other companies because of the lack of a quoted market price and the inability to estimate fair value without incurring excessive costs. The carrying amount of these investments at December 31, 1995 represents the original cost or original cost plus the Company's share of earnings of the investment, which management believes is not impaired. For investments held by the Company that had a quoted market price at December 31, 1995, the Company used such quoted market price in estimating the fair value of such investments. Debt financing: The carrying value of the Company's commercial paper and term debt maturing within one year approximates its fair value. The fair value of the Company's long-term debt is estimated using discounted cash flow analyses, based on the Company's spread to Treasuries for similar debt at year-end. Off-balance-sheet instruments: Fair values for the Company's off-balance- sheet instruments are based on pricing models or formulas using current assumptions (swaps, swaptions, interest rate floors and the acquired financing options) and the amount of the guarantee which would not be covered by the fair value of the underlying collateral (loan guarantees and asset value guarantees). 34 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE L--FINANCIAL INSTRUMENTS (CONTINUED) The carrying amounts and fair values of the Company's financial instruments at December 31, 1995 are as follows:
CARRYING AMOUNT OF FAIR VALUE OF ASSET (LIABILITY) ASSET (LIABILITY) ----------------- ----------------- Cash and cash equivalents... $ 87,097 $ 87,097 Notes receivable............ 423,799 408,648 Investments................. 17,311 18,301 Debt financing.............. (7,804,210) (8,034,202) Off-balance-sheet financial instruments: Hedging Activities: Swaps................... (2,377) 10,426 Acquired financing options................ -- -- Other Risk Management Activities: Swaptions............... (2,981) (2,981) Interest rate floors.... (2,662) (2,662) Acquired financing options................ 1,574 1,574 Loan guarantees......... -- -- Asset value guarantees.. -- --
35 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
COL. A COL. B COL. C COL. D COL. E ------ ------------ --------------------------- ------------ ------------- ADDITIONS BALANCE AT CHARGED TO CHARGED TO BEGINNING OF COSTS AND OTHER ACCOUNTS-- DEDUCTIONS-- BALANCE AT DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE(1) END OF PERIOD ----------- ------------ ---------- ---------------- ------------ ------------- (DOLLARS IN THOUSANDS) Reserve for overhaul: Year ended December 31, 1995................... $71,554 $71,113 $4,201(2) $63,001 $83,857 Year ended December 31, 1994................... $44,843 $57,619 $1,802(2) $32,710 $71,554 Year ended December 31, 1993................... $34,965 $39,893 $ 0 $30,015 $44,843
- - -------- (1) Reimbursements to lessees for overhauls performed and amounts transferred to buyers for aircraft sold. (2)Payments received from lessees in lieu of compliance with return conditions. 36 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 26, 1996 INTERNATIONAL LEASE FINANCE CORPORATION By LESLIE L. GONDA ---------------------------------------- Leslie L. Gonda Chairman of the Board Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- LESLIE L. GONDA March 26, 1996 - - ------------------------------------ Leslie L. Gonda Director STEVEN F. UDVAR-HAZY March 26, 1996 - - ------------------------------------ Steven F. Udvar-Hazy Director LOUIS L. GONDA March 26, 1996 - - ------------------------------------ Louis L. Gonda Director M. R. GREENBERG March 26, 1996 - - ------------------------------------ M. R. Greenberg Director EDWARD E. MATTHEWS March 26, 1996 - - ------------------------------------ Edward E. Matthews Director PETROS K. SABATACAKIS March 26, 1996 - - ------------------------------------ Petros K. Sabatacakis Director HOWARD I. SMITH March 26, 1996 - - ------------------------------------ Howard I. Smith Director ALAN H. LUND March 26, 1996 - - ------------------------------------ Alan H. Lund Chief Financial Officer and Chief Accounting Officer
37 SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT. Since the Registrant is an indirect wholly owned subsidiary of AIG, no annual report to security holders for the year ended December 31, 1995 or proxy statement, form of proxy or other proxy soliciting materials have been sent to securities holders since January 1, 1990. 38 EX-3.6 2 CERTIFICATE OF DETERMINATION OF SERIES G EXHIBIT 3.6 CERTIFICATE OF DETERMINATION OF PREFERENCES OF PREFERRED STOCK OF INTERNATIONAL LEASE FINANCE CORPORATION, A CALIFORNIA CORPORATION The undersigned, Steven F. Udvar-Hazy and Julie I. Sackman hereby certify that: 1. They are the duly elected and acting President and Secretary, respectively, of International Lease Finance Corporation (the "Company"). 2. Pursuant to authority given by the Company's Restated Articles of Incorporation, a duly appointed committee (the "Special Committee") of the Board of Directors of the Company (such committee having been previously authorized to exercise the powers of the Board of Directors as to the subject matter), has duly adopted the following recitals and resolutions: WHEREAS, the Restated Articles of Incorporation of the Company provide for a class of shares known as Preferred Stock, issuable from time to time in one or more series; and WHEREAS, the Board of Directors of the Company is authorized to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, to fix the number of shares constituting any such series, and to determine the designation thereof, or any of them; and WHEREAS, the Company desires, pursuant to its authority as aforesaid, to determine and fix the rights, preferences, privileges, and restrictions relating to a series of said Preferred Stock and the number of shares constituting and the designation of said series; NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes and determines the designation of, the number of shares constituting, and the rights, preferences, privileges, and restrictions relating to, said series of Preferred Stock as follows: ARTICLE ONE DESIGNATION Section 1. Designation. A series of Preferred Stock shall be designated "Market Auction Preferred Stock, Series G" (the "Series G MAPS"). Section 2. Amount. The number of shares constituting Series G MAPS shall be 500. ARTICLE TWO SERIES G MAPS--GENERAL PROVISIONS. Section 1. Definitions. As used herein, the following terms have the following meanings: (a) "Additional Directors" has the meaning specified in Section 6(a) of this ARTICLE TWO. (b) "Agent Member" means the member of the Securities Depositary that will act on behalf of an Existing Holder or a Potential Holder and that is identified as such in such Existing Holder's or Potential Holder's Master Purchaser's Letter. (c) "Applicable 'AA' Composite Commercial Paper Rate," on any date, shall mean in the case of any Standard Dividend Period or Short Dividend Period of (1) 49 days or more but less than 70 days, the interest equivalent of the 60-day rate, (2) 70 days or more but less than 85 days, the arithmetic average of the interest equivalent of the 60-day and 90-day rates, (3) 85 days or more but less than 120 days, the interest equivalent of the 90-day rate, (4) 120 days or more but less than 148 days, the arithmetic average of the interest equivalent of the 90-day and 180-day rates, and (5) 148 days or more but less than 184 days, the interest equivalent of the 180-day rate, in each case, on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's, or the equivalent of such rating by another rating agency, as made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date. In the event that the Federal Reserve Bank of New York does not make available any of the foregoing rates, then such rates shall be the 60-day rate or arithmetic average of such rates, as the case may be, as quoted on a discount basis or otherwise, by Commercial Paper Dealers to the Auction Agent as of the close of business on the Business Day next preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the Applicable "AA" Composite Commercial Paper Rate, the Applicable "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer (if any) and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Company to provide such rate or rates or, if the Company does not select any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer (if any). "Substitute Commercial Paper Dealer" means Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated or Salomon Brothers Inc or their respective affiliates or successors or, if no such dealer furnishes such quotations, a leading dealer in the commercial paper market selected by the Company in good faith. For purposes of this definition, the "interest equivalent" means the equivalent yield on a 360-day basis of a discount-basis security to an interest-bearing security. (d) "Applicable Rate" means the rate per annum, resulting from the next preceding Auction, at which dividends are payable on the shares of Series G MAPS for any Dividend Period. (e) "Applicable Treasury Bill Rate" for any Short Dividend Period in excess of 183 days and "Applicable Treasury Note Rate" for any Long Dividend Period, on any date, shall mean the interest equivalent of the rate for direct obligations of the United States Treasury having an original maturity which is equal to, or next lower than, the length of such Short Dividend Period or Long Dividend Period, as the case may be, as published weekly by the Board of Governors of the Federal Reserve System (the "Board") in "Federal Reserve Statistical Release H.15(519)-Selected Interest Rates," or any successor publication by the Board, within five Business Days preceding such date. In the event that the Board does not publish such rate, or if such release is not available, the Applicable Treasury Bill Rate or Applicable Treasury Note Rate will be the arithmetic mean of the secondary market bid rate as of approximately 3:30 P.M., New York City time, on the Business Day next preceding such date of the U.S. Government Securities Dealers furnished to 2 the Auction Agent for the issue of direct obligations of the United States Treasury, in an aggregate principal amount of at least $1,000,000 with a remaining maturity equal to, or next lower than, the length of such Short Dividend Period or Long Dividend Period, as the case may be. If any U.S. Government Securities Dealer does not quote a rate required to determine the Applicable Treasury Bill Rate or Applicable Treasury Note Rate, the Applicable Treasury Bill Rate or Applicable Treasury Note Rate shall be determined on the basis of the quotation or quotations furnished by any Substitute U.S. Government Securities Dealer or Dealers selected by the Company to provide such rate or rates or, if the Company does not select any such Substitute U.S. Government Securities Dealer or Dealers, by the remaining U.S. Government Securities Dealer (if any). "Substitute U.S. Government Securities Dealers" means Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated or Salomon Brothers Inc or their respective affiliates or successors or, if no such dealer provides such quotes, a leading dealer in the government securities market selected by the Company in good faith. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis shall be equal to the quotient of (A) the discount rate divided by (B) the difference between 1.00 and the discount rate. (f) "Auction Agent" means Chemical Bank, or its successors, or any other bank or trust company appointed by a resolution of the Board of Directors of the Company, or its Special Committee, which enters into an agreement with the Company to follow the Auction Procedures set forth in ARTICLE THREE hereof. (g) "Auction Date" means the first Business Day preceding the first day of a Dividend Period other than the Initial Dividend Period. (h) "Broker-Dealer" means any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in ARTICLE THREE, that has been selected by the Company and has entered into a Broker-Dealer Agreement with the Auction Agent that remains effective. (i) "Broker-Dealer Agreement" means an agreement between the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in ARTICLE THREE. (j) "Business Day" means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which banks in New York City are authorized or obligated by law to close. (k) "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock, whether outstanding on the Date of Original Issue or thereafter. (l) "Code" means the Internal Revenue Code of 1986, as amended. (m) "Commercial Paper Dealers" means Morgan Stanley & Co. Incorporated and Lehman Brothers Inc. or, in lieu of either thereof, their respective affiliates or successors. (n) "Common Stock" means all shares now or hereafter authorized of the class of Common Stock of the Company presently authorized and any other shares into which such shares may hereafter be changed from time to time. (o) "Date of Original Issue" means the date on which the Company initially issues shares of Series G MAPS. (p) "Default Period" has the meaning specified in Section 6(a) of this ARTICLE TWO. 3 (q) "Default Rate" means the Applicable Determining Rate multiplied by the percentage shown opposite the lowest Credit Ratings category in the definition of Maximum Applicable Rate, determined as of the Business Day preceding a Failure to Deposit. (r) "Dividend Payment Date" has the meaning specified in Section 2(b) of this ARTICLE TWO. (s) "Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (t) "Dividend Quarter" has the meaning specified in Section 2(b) of this ARTICLE TWO. (u) "Dividends-Received Deduction" has the meaning specified in Section 2(b) of this ARTICLE TWO. (v) "Existing Holder," means a Person who has signed a Master Purchaser's Letter and is listed as the beneficial owner of shares of Series G MAPS in the records of the Auction Agent. (w) "Failure to Deposit" has the meaning specified in Section 2(e) of this ARTICLE TWO. (x) "Initial Dividend Payment Date" means January 30, 1996. (y) "Initial Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (z) "Initial Dividend Rate" has the meaning specified in Section 2(a) of this ARTICLE TWO. (aa) "Junior Capital Stock" means, with respect to the Company, any and all Capital Stock of the Company ranking junior to the Series G MAPS with respect to the payment of dividends or the distribution of assets upon liquidation. (ab) "Long Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (ac) "MAPS" means all shares of each series of the Company's Market Auction Preferred Stock now or hereafter authorized. (ad) "Maximum Applicable Rate," on any Auction Date, shall mean the rate per annum obtained by multiplying the Applicable Determining Rate on such Auction Date by a percentage determined as set forth below based on the lower of the credit ratings assigned to the Series G MAPS by Moody's and S&P (or if Moody's or S&P or both shall not make such rating available, the equivalent of either or both of such ratings by a Substitute Rating Agency or two Substitute Rating Agencies, as the case may be, or in the event that only one such rating shall be available, the percentage shall be based on such rating).
Credit Ratings ------------------ Applicable Percentage of Applicable Moody's S&P Determining Rate ------------ ------------- ---------------------- "aa3" or Above AA-- or Above 150% "a3" to "a1" A-- to A+ 200% "baa3" to "baa1" BBB-- to BBB+ 225% Below "baa3" Below BBB-- 275%
4 (ae) "Master Purchaser's Letter" means a letter addressed to the Company, the Auction Agent and a Broker-Dealer in which a Person agrees, among other things, to offer to purchase, purchase, offer to sell or sell shares of Series G MAPS as set forth in ARTICLE THREE. (af) "Minimum Holding Period" has the meaning specified in Section 2(b) of this ARTICLE TWO. (ag) "Moody's" means Moody's Investors Service, Inc. (ah) "Normal Dividend Payment Date" has the meaning specified in Section 2(b) of this ARTICLE TWO. (ai) "Notice" has the meaning specified in Section 2(c) of this ARTICLE TWO. (aj) "Notice of Long Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (ak) "Notice of Revocation" has the meaning specified in Section 2(c) of this ARTICLE TWO. (al) "Notice of Short Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (am) "Outstanding" means, as of any date, shares of MAPS theretofore issued by the Company except, without duplication, (i) any shares of MAPS theretofore cancelled, delivered to the Company for cancellation or redeemed and (ii) as of any Auction Date, any shares of MAPS subject to redemption on the next following Business Day. (an) "Parity Capital Stock" means any and all shares of Capital Stock of the Company ranking on a parity with or equal to the Series G MAPS as to the payment of dividends and distribution of assets. (ao) "Parity Securities" has the meaning specified in Section 6(a) of this ARTICLE TWO. (ap) "Person" means and includes an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. (aq) "Potential Holder" means any Person, including any Existing Holder, (i) who has executed a Master Purchaser's Letter and (ii) who may be interested in acquiring shares of Series G MAPS (or, in the case of an Existing Holder, additional shares of Series G MAPS). (ar) "Preferred Stock" means all shares now or hereafter authorized of the class of Preferred Stock, without par value, of the Company, including the shares of MAPS of any series. (as) "S&P" means Standard & Poor's Corporation. (at) "Securities Depositary" means The Depository Trust Company and its successors and assigns or any other securities depository selected by the Company which agrees to follow the procedures required to be followed by such Securities Depositary in connection with shares of Series G MAPS. (au) "Short Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (av) "Standard Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (aw) "Subsequent Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. 5 (ax) "Subsequent Dividend Period Days" has the meaning specified in Section 2(b) of this ARTICLE TWO. (ay) "Substitute Rating Agency" shall mean a nationally recognized statistical rating organization (as that term is used in the rules and regulations of the Securities Exchange Act of 1934, as amended) selected by the Company, subject to the approval by Morgan Stanley & Co. Incorporated and Lehman Brothers Inc., such approval not to be unreasonably withheld. (az) "Sufficient Clearing Bids" has the meaning specified in Section 4(a) of ARTICLE THREE. (ba) "U.S. Government Securities Dealers" shall mean Morgan Stanley & Co. Incorporated and Lehman Brothers Inc. or, in lieu of either thereof, their respective affiliates or successors. Section 2. Dividends. (a) Holders of Series G MAPS shall be entitled to receive, when, as and if declared by the Board of Directors of the Company, out of funds available therefor under applicable law and the Restated Articles of Incorporation of the Company, cumulative cash dividends at the Applicable Rate, determined as set forth below, payable on the respective dates set forth below that may be applicable with respect to such Series G MAPS. For the Initial Dividend Period, dividends will accumulate at a rate per annum of 4.40% (the "Initial Dividend Rate"). For each subsequent Dividend Period, the dividend rate for the Series G MAPS will be the Applicable Rate, determined as set forth herein, and will be payable on the respective dates set forth below. (b) Dividends on the Series G MAPS will accumulate (whether or not declared) from the Date of Original Issue. Except for the Initial Dividend Payment Date, dividends on the Series G MAPS with a Standard Dividend Period will be payable, except as provided below, on each seventh Tuesday following the preceding Dividend Payment Date. Dividends on the Series G MAPS with a Short Dividend Period will be payable, except as provided below, on the day following the last day of such Short Dividend Period and will also be payable on such other dates as are established at the time such Short Dividend Period is determined. Dividends on the Series G MAPS with a Long Dividend Period will be payable, except as provided below, on the day following the last day of such Long Dividend Period and on the first day of the fourth calendar month after the commencement of such Long Dividend Period and quarterly thereafter on the first day of each applicable month. Each day on which dividends on Series G MAPS would be payable as determined as set forth in this paragraph but for the adjustments set forth below is referred to herein as a "Normal Dividend Payment Date." (i) In the case of dividends payable on Series G MAPS with a Standard Dividend Period or a Short Dividend Period, if: (A)(1) the Securities Depositary shall continue to make available to Agent Members the amounts due as dividends on the Series G MAPS in next-day funds on the dates on which such dividends are payable and (2) a Normal Dividend Payment Date is not a Business Day, or the day next succeeding such Normal Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day preceding such Normal Dividend Payment Date that is next succeeded by a Business Day; or (B)(1) the Securities Depositary shall make available to Agent Members the amounts due as dividends on Series G MAPS in immediately available funds on the dates on which such dividends are payable (and the Securities Depositary shall have so advised the Auction Agent) and (2) a Normal 6 Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day following such Normal Dividend Payment Date. (ii) In the case of dividends payable on Series G MAPS with a Long Dividend Period, if: (A)(1) the Securities Depositary shall continue to make available to Agent Members the amounts due as dividends on the Series G MAPS in next-day funds on the dates on which such dividends are payable and (2) a Normal Dividend Payment Date is not a Business Day, or the day next succeeding such Normal Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day following such Normal Dividend Payment Date that is next succeeded by a Business Day; or (B)(1) the Securities Depositary shall make available to Agent Members the amounts due as dividends on the Series G MAPS in immediately available funds on the dates on which such dividends are payable (and the Securities Depositary shall have so advised the Auction Agent) and (2) a Normal Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day following such Normal Dividend Payment Date. Notwithstanding the foregoing, in case of payment in next-day funds, if the date on which dividends on Series G MAPS would be payable as determined as set forth in the preceding paragraphs is a day that would result in the number of days between successive Auction Dates (determined by excluding the first Auction Date and including the second Auction Date) not being at least equal to the then-current minimum holding period (currently set forth in Section 246(c) of the Code) (the "Minimum Holding Period") required for corporate taxpayers to be entitled to the dividends-received deduction on preferred stock held by nonaffiliated corporations (currently set forth in Section 243(a) of the Code) (the "Dividends-Received Deduction"), then dividends on the Series G MAPS shall be payable on the first Business Day following such date on which dividends would be so payable that is next succeeded by a Business Day that results in the number of days between such successive Auction Dates (determined as set forth above) being at least equal to the then-current Minimum Holding Period. Each date on which dividends on Series G MAPS shall be payable as determined as set forth above is referred to herein as a "Dividend Payment Date". If applicable, the period from the preceding Dividend Payment Date to the next Dividend Payment Date for Series G MAPS with a Long Dividend Period is hereby referred to as a "Dividend Quarter." Although any particular Dividend Payment Date may not occur on the originally scheduled Normal Dividend Payment Date because of the adjustments set forth above, each succeeding Dividend Payment Date will be, subject to such adjustments, the date determined as set forth above as if each preceding Dividend Payment Date had occurred on the respective originally scheduled Normal Dividend Payment Date. In addition, notwithstanding the foregoing, in the event of a change in law altering the Minimum Holding Period, the period of time between Dividend Payment Dates shall automatically be adjusted so that there shall be a uniform number of days in subsequent Dividend Periods (such number of days without giving effect to the adjustment referred to above being referred to herein as the "Subsequent Dividend Period Days") commencing after the date of such change in law equal to or to the extent necessary, in excess of the then-current Minimum Holding Period, provided that the number of Subsequent Dividend Period Days shall not exceed by more than nine days the length of such then-current Minimum Holding Period and shall be evenly divisible by seven, and the maximum number of Subsequent Dividend Period Days, as adjusted pursuant to this provision, in no event shall exceed 119 days. (c) After the Initial Dividend Period for the Series G MAPS, each subsequent Dividend Period will (except for the adjustments for non-Business Days described above) be 49 days (each such 49-day period, subject to any adjustment as a result of a change in law altering the Minimum Holding Period as described 7 above, being herein referred to as a "Standard Dividend Period"), unless the Company specifies that any such subsequent Dividend Period will be a Dividend Period of 50 to 364 days and consisting of a whole number of weeks (a "Short Dividend Period") or a Dividend Period of one year or longer (a "Long Dividend Period"). Each such Standard Dividend Period, Short Dividend Period and Long Dividend Period (together with the period commencing on the Date of Original Issue and ending on the Initial Dividend Payment Date for the Series G MAPS (the "Initial Dividend Period")) being referred to herein as a "Dividend Period." After the Initial Dividend Period for the Series G MAPS, each successive Dividend Period will commence on the Dividend Payment Date for the preceding Dividend Period and will end (i) in the case of a Standard Dividend Period, on the day preceding the next Dividend Payment Date and (ii) in the case of a Short Dividend Period or a Long Dividend Period, on the last day of the Short Dividend Period or the Long Dividend Period specified by the Company in the related Notice. The Company may give telephonic and written notice, not less than ten and not more than 30 days prior to an Auction Date, to the Auction Agent and the Securities Depositary that the next succeeding Dividend Period will be a Short Dividend Period (a "Notice of Short Dividend Period") or a Long Dividend Period (a "Notice of Long Dividend Period" and, together with a Notice of Short Dividend Period, a "Notice"). Each such Notice will specify (i) the next succeeding Dividend Period as a Short Dividend Period or a Long Dividend Period, (ii) the term thereof, (iii) in the case of any Long Dividend Period, additional redemption provisions or restrictions on redemption, if any, and (iv) the Dividend Payment Dates; provided that, for any Auction occurring after the initial Auction, the Company may not give a Notice of a Short Dividend Period or a Notice of a Long Dividend Period (and any such Notice shall be null and void) unless Sufficient Clearing Bids were made in the last occurring Auction of any series of MAPS (or all shares of such series were subject to Submitted Hold Orders) and full cumulative dividends, if any, for all series of MAPS payable prior to such date have been paid in full. The Board of Directors of the Company may establish a Short Dividend Period or a Long Dividend Period for the Series G MAPS. Notice may be revoked by the Company on or prior to the Business Day prior to the related Auction Date by telephonic and written notice (a "Notice of Revocation") to the Auction Agent and the Securities Depositary. If the Company does not give a Notice with respect to the next succeeding Dividend Period or gives a Notice of Revocation with respect thereto, such next succeeding Dividend Period will be a Standard Dividend Period. In addition, if the Company has given Notice with respect to the next succeeding Dividend Period and has not given Notice of Revocation with respect thereto, but Sufficient Clearing Bids are not made in the Auction for the Series G MAPS (other than because all shares of Series G MAPS were subject to Submitted Hold Orders) or such Auction is not held for any reason, such next succeeding Dividend Period will, notwithstanding such Notice, be a Standard Dividend Period and the Company may not again give a Notice (and such Notice shall be null and void) until Sufficient Clearing Bids have been made in an Auction of a series of MAPS or an Auction has been held in which all shares of a series of MAPS were subject to Submitted Hold Orders. (d) Prior to each Dividend Payment Date for the Series G MAPS, the Company shall deposit with the Auction Agent sufficient funds for the payment of declared dividends. Each dividend will be payable to the holder or holders of record of Series G MAPS as they appear on the stock books of the Company on the Business Day next preceding the applicable Dividend Payment Date. Dividends in arrears for any past Dividend Period (and for any past Dividend Quarter during a Long Dividend Period) may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the holder or holders of record of the Series G MAPS. Any dividend payment made shall first be credited against the dividends accumulated with respect to the earliest Dividend Period (or, if applicable, the earliest Dividend Quarter) for which dividends have not been paid. So long as the Series G MAPS are held of record by the nominee of the Securities Depositary, dividends will be paid to the nominee of the Securities Depositary on each Dividend Payment Date. The Securities Depositary will credit the accounts of the Agent Members of Existing Holders in accordance with the Securities Depositary's normal procedures, which now 8 provide for payments in next-day funds settled through the New York Clearing House. The Agent Member of an Existing Holder will be responsible for holding or disbursing such payments to Existing Holders in accordance with the instructions of such Existing Holders. Holders of shares of the Series G MAPS shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends. No dividends will be declared or paid or set apart for payment on the Series G MAPS for any period unless full cumulative dividends have been or contemporaneously are declared and paid on all series of MAPS through the most recent applicable Dividend Payment Date for such series of MAPS. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series G MAPS which may be in arrears. So long as any MAPS are Outstanding, the Company shall not declare, pay or set aside for payment any dividend or other distribution in respect of Junior Capital Stock or call for redemption, redeem, purchase or otherwise acquire for consideration any shares of Junior Capital Stock unless (i) full cumulative dividends for all past Dividend Periods (and, if applicable, for all past Dividend Quarters) and all Dividend Payment Dates occurring on or prior to the date of the transaction shall have been declared and paid (or declared and a sum sufficient for payment of the dividends set apart for payment) on all such MAPS Outstanding and (ii) the Company has redeemed (or set apart for payment a sum sufficient for redemption) the full number of MAPS required to be redeemed after giving any notice of an optional redemption. The amount of dividends per share on Series G MAPS payable for each Dividend Period (or for each Dividend Quarter) shall be computed by multiplying the Applicable Rate for each Dividend Period (or Dividend Quarter) by a fraction, the numerator of which shall be the number of days in the Dividend Period (or Dividend Quarter) (calculated by counting both the last day and the first day thereof) such share was Outstanding, and the denominator of which shall be 360 and multiplying the amount so obtained by $100,000. (e) The dividend rate for each Dividend Period subsequent to the Initial Dividend Period for the Series G MAPS will be, except as provided below, the Applicable Rate. Notwithstanding the results of any Auction or any other provision herein, the dividend rate on the Series G MAPS shall not exceed the Maximum Applicable Rate for any Dividend Period. The provisions of the previous sentence of this paragraph notwithstanding, at any time that the application of the provisions of the next paragraph would result in a dividend rate on the Series G MAPS being in excess of the Maximum Applicable Rate, the maximum dividend rate applicable to such Series G MAPS shall be such higher dividend rate as provided below. In the event of the failure by the Company to pay to the Auction Agent by 12:00 noon, New York City time, (i) on the Business Day next preceding any Dividend Payment Date, the full amount of any dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on the Series G MAPS or (ii) on the Business Day next preceding any redemption date, the full redemption price (including accumulated and unpaid dividends) to be paid on such redemption date for any share of the Series G MAPS (in each case referred to as a "Failure to Deposit"), then, until the full amount due shall have been paid to the Auction Agent, Auctions will be suspended and the Applicable Rate shall be the Default 9 Rate as determined as of the Business Day preceding the Failure to Deposit. If such Failure to Deposit is cured within three Business Days as provided below, the Applicable Rate for the Dividend Period commencing on the second Business Day following such cure will be based upon the results of an Auction to be held on the Business Day next succeeding such cure. Unless such a cure is effected, the Default Rate shall continue in effect until there shall occur a Dividend Payment Date at least two Business Days prior to which the full amount of any dividends (whether or not earned or declared) payable on each Dividend Payment Date prior to and including such Dividend Payment Date, and the full amount of any redemption price (including accumulated and unpaid dividends) then due, shall have been paid to the Auction Agent, and thereupon Auctions shall resume on the terms stated herein for Dividend Periods commencing with such Dividend Payment Date. If an Auction is not held on an Auction Date for any reason (other than the suspension of Auctions due to a Failure to Deposit), the dividend rate for the applicable Dividend Period shall be the Maximum Applicable Rate determined as of such Auction Date. Any Failure to Deposit with respect to the Series G MAPS shall be deemed to be cured if, within three Business Days of such Failure to Deposit, with respect to a Failure to Deposit relating to (a) the payment of dividends, the Company deposits with the Auction Agent by 12:00 noon, New York City time, all accumulated and unpaid dividends on the Series G MAPS, including the full amount of any dividends to be paid with respect to the Dividend Period with respect to which the Failure to Deposit occurred, plus an amount computed by multiplying the Default Rate by a fraction, the numerator of which shall be the number of days during the period from the Dividend Payment Date in respect of which such Failure to Deposit occurred through the day preceding the Business Day next succeeding the Auction held following such cure and the denominator of which shall be 360, and applying the rate obtained against the aggregate liquidation preference of the Series G MAPS and (b) the redemption of shares of Series G MAPS, the deposit by the Company with the Auction Agent, by 12:00 noon, New York City time, of funds sufficient for the redemption of such shares (including accumulated and unpaid dividends), plus an amount computed by multiplying the Default Rate by a fraction, the numerator of which shall be the number of days for which such Failure to Deposit is not cured in accordance with this paragraph (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 360, and applying the rate obtained against the aggregate liquidation preference of the shares of Series G MAPS to be redeemed, and the giving of irrevocable instructions by the Company to apply such funds and, if applicable, the income and proceeds therefrom, to the payment of the redemption price (including accumulated and unpaid dividends) for such shares of the Series G MAPS. If the Company shall have cured such Failure to Deposit by making timely payment to the Auction Agent, the Auction Agent shall give telephonic and written notice of such cure to each Existing Holder of MAPS at the telephone number and address specified in such Existing Holder's Master Purchaser's Letter and to each Broker-Dealer as promptly as practicable after such cure is effected and schedule an Auction for the Series G MAPS for the next Business Day. Section 3. Redemption. The Series G MAPS shall be redeemable by the Company as provided below: (a) At the option of the Company, the Series G MAPS may be redeemed, in whole or from time to time in part, out of funds legally available therefor, on any Dividend Payment Date for the Series G MAPS, 10 upon at least fifteen but not more than 45 days' notice, at a redemption price per share equal to the sum of $100,000 plus an amount equal to accumulated and unpaid dividends thereon (whether or not earned or declared) to the date that the Company pays the full amount payable upon redemption of the shares of Series G MAPS. The Company may only redeem Series G MAPS in whole shares. Pursuant to such right of optional redemption, the Company may elect to redeem some or all of the shares of Series G MAPS without redeeming shares of any other series of MAPS or redeem some or all of the shares of any other series of MAPS without redeeming shares of Series G MAPS. In the event of a partial redemption, the shares to be redeemed shall be selected by the Company or, at the Company's request, the Auction Agent by lot or by such other method as such Person shall deem fair and equitable. Upon any date fixed for redemption (unless a Failure to Deposit occurs), all rights of the holders of shares of Series G MAPS called for redemption will cease and terminate, except the right of such holders to receive the amounts payable in respect of such redemption therefor, but without interest, and such shares of the Series G MAPS will be deemed no longer Outstanding. So long as all of the Series G MAPS to be redeemed are held of record by a nominee of the Securities Depositary, the redemption price (including accumulated and unpaid dividends) for such shares of the Series G MAPS will be paid by the Company to the Securities Depositary on the redemption date for distribution to Agent Members in accordance with its normal procedures. (b) Any shares of Series G MAPS which shall at any time have been redeemed or purchased by the Company shall, after such redemption or purchase, be restored to the status of authorized unissued shares, undesignated as to series, in the manner provided by the laws of the State of California. Section 4. Conversion or Exchange. The holders of shares of Series G MAPS shall not have any rights to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of the Capital Stock of the Company or into any other securities of the Company. Section 5. Liquidation Rights. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, holders of the Series G MAPS will be entitled to receive, out of the assets of the Company available for distribution to shareholders after satisfying claims of creditors but before any payment or distribution of assets is made to holders of Junior Capital Stock, a preferential liquidation distribution in the amount of $100,000 per share plus an amount equal to accumulated and unpaid dividends on each such share (whether or not declared) to and including the date of such distribution. If upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the assets of the Company are insufficient to pay the holders of the Series G MAPS the full amount of the preferential liquidation distributions to which they are entitled, holders of the Series G MAPS will share ratably in any such distribution of such assets with holders of Parity Capital Stock. Unless and until payment in full has been made to holders of the Series G MAPS of the liquidation distributions to which they are entitled as described in this paragraph, no dividends or distributions will be made to holders of the Company's Junior Capital Stock, and no purchase, redemption or other acquisition for any consideration by the Company will be made in respect of the Company's Junior Capital Stock. After the payment to the holders of the Series G MAPS of the full amount of the preferential liquidation distributions to which they are entitled pursuant to this paragraph, such holders (in their capacity as such holders) will have no right or claim to any of the remaining assets of the Company. Neither the consolidation nor the merger of the Company with or into any other corporation or corporations, nor the sale or transfer by the Company of all or any part of its assets, shall be deemed to be a liquidation, dissolution or winding up of the Company for purposes of this Section 5. 11 Section 6. Voting Rights. (a) Holders of the Series G MAPS will have no voting rights except as hereinafter described, or as expressly required by law. During any period when dividends on the Series G MAPS or any other Parity Capital Stock of the Company which has voting rights comparable to the Series G MAPS which are then exercisable (the Series G MAPS and all such other securities being referred to as the "Parity Securities") shall be in arrears for at least 180 consecutive days and shall not have been paid in full (a "Default Period"), the holders of record of the Parity Securities voting as described below will be entitled to elect two directors to the Board of Directors (the "Additional Directors") whether or not the Board of Directors of the Company has taken appropriate action to increase the established number of directors of the Company by two, and the holders of the Common Stock as a class, shall be entitled to elect the remaining number of directors. If the Board of Directors has not taken appropriate action to authorize an increase in the number of directors by two and there are not two vacancies then existing on the Board of Directors, then, upon the election of the two Additional Directors as provided below, the term of all previously sitting directors shall cease (a "Termination of Directors"). As soon as practicable after the beginning of a Default Period (or a reinstatement of the voting rights of holders of Parity Securities as provided herein), the Board of Directors of the Company will call or cause to be called a special meeting of the holders of Parity Securities and, in the case of a Termination of Directors, all holders of Capital Stock of the Company entitled to vote for the election of directors generally ("Other Voting Securities"), by mailing or causing to be mailed to such holders a notice of such special meeting to be held not less than ten and not more than 45 days after the date such notice is given. If the Board of Directors of the Company does not call or cause to be called such a special meeting, it may be called by any of such holders on like notice. The record date for determining the holders of the Parity Securities and, if applicable, Other Voting Securities entitled to notice of and to vote at such special meeting will be the close of business on the Business Day preceding the day on which such notice is mailed. At any such special meeting, the holders of Parity Securities, by plurality vote, voting together as a single class without regard to series (to the exclusion of the holders of Junior Capital Stock) will be entitled to elect the two Additional Directors on the basis of one vote per $100,000 liquidation preference (excluding amounts in respect of accumulated and unpaid dividends) and, in the case of a Termination of Directors, the holders of Other Voting Securities shall be entitled to elect the remaining members of the Board of Directors in the same manner as if such election had occurred at an annual meeting of the Company. The holder or holders of one-third of the Parity Securities then outstanding, present in person or by proxy, will constitute a quorum for the election of the Additional Directors except as otherwise provided by law. Notice of all meetings at which holders of the Series G MAPS shall be entitled to vote will be given to such holders at their addresses as they appear on the register of the Company. If a Default Period shall terminate after the notice of a special meeting has been given but before such special meeting has been held, the Company shall, as soon as practicable after such termination, mail or cause to be mailed notice of such termination to holders of the Parity Securities and, if applicable, Other Voting Securities that would have been entitled to vote at such special meeting. So long as a Default Period continues, (i) any vacancy in the office of an Additional Director may be filled (except as provided in the following clause (ii)) by the person appointed in an instrument in writing signed by the remaining Additional Director and filed with the Secretary of the Company or, in the event there is no remaining Additional Director, by vote of the holders of the outstanding Parity Securities, voting together as a single class without regard to series, in a meeting of shareholders or at a meeting of holders of Parity Securities called for such purpose, and (ii) in the case of the removal of any Additional Director, the vacancy may be filled by appointment by the person elected by the vote of the holders of the outstanding Parity Securities, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted upon or any subsequent meeting. Each director who shall be elected or appointed by the remaining Additional Director as aforesaid shall be an Additional Director. At such time as a Default Period shall terminate, (i) the term of office of the Additional Directors shall terminate and (ii) the voting rights of the holders of the Parity Securities to elect directors shall cease (subject to the occurrence of a subsequent Default Period). 12 (b) Except as provided below, so long as any Series G MAPS remain Outstanding, the Company shall not, without the consent of the holders of at least two-thirds of all of the MAPS then outstanding (taken together as a single class), given in person or by proxy, either in writing or at a meeting (voting separately as a single class), (i) authorize, create or issue, or increase the authorized amount of, any Capital Stock of the Company of any class ranking, as to dividends or upon the liquidation, dissolution or winding up of the Company, prior to the Series G MAPS, or reclassify any authorized Capital Stock of the Company into any such Capital Stock, or authorize, create or issue any obligation or security convertible into or evidencing the right to purchase any such Capital Stock, or (ii) amend, alter or repeal the provisions of the Company's Articles of Incorporation, whether by merger, consolidation, share exchange, division or otherwise, so as to adversely affect any preference, limitation or special right of the Series G MAPS. Except as provided by law, the consent of the holders of the Series G MAPS is not required and such holders are not entitled to vote upon (i) the authorization, creation, issuance or increase in the authorized amount of the Common Stock, additional series of MAPS or any Capital Stock of the Company of any class ranking, as to dividends and upon the liquidation, dissolution or winding up of the Company, on a parity with or junior to the Series G MAPS or (ii) any merger, consolidation, share exchange or division of the Company (or any successor corporation) with or into another corporation the result of which is that the Series G MAPS that may be Outstanding from time to time may be junior to any preferred shares of such corporation as to dividends and upon the liquidation, dissolution or winding up of the surviving corporation if on or prior to the date of effectiveness of such merger or consolidation, the Company shall have given Moody's and S&P written notice of such merger or consolidation and Moody's and S&P shall have confirmed in writing that the transaction will not adversely affect the then existing rating for the MAPS. If either Moody's or S&P shall change its rating categories for preferred stock, then the determination of whether the transaction will not adversely affect the then existing rating for the MAPS shall be made based upon the substantially equivalent new rating categories for preferred stock of such rating agency. If either Moody's or S&P, or both, shall not make a rating available for the Series G MAPS necessary to make such a determination or will not confirm whether the transaction will adversely affect its then existing rating for the Series G MAPS, such confirmation will be sought from two Substitute Rating Agencies if they have made ratings available for the Series G MAPS necessary to make the determination and are willing to make such confirmation or, in the event that only one such rating agency shall make such ratings available and is willing to make such confirmation, based upon such rating agency's confirmation. Section 7. Sinking Fund. Shares of Series G MAPS are not subject or entitled to the benefit of a sinking fund. 13 ARTICLE THREE AUCTION PROCEDURES Section 1. Definitions. Capitalized terms not defined in this Section 1 shall have the respective meanings specified in Section 1 of ARTICLE TWO. As used in this ARTICLE THREE, the following terms have the following meanings: (a) "Affiliate" means any Person controlled by, in control of or under common control with the Company. (b) "Applicable Determining Rate" means, (i) for any Standard Dividend Period or Short Dividend Period of 183 days or less, the Applicable "AA" Composite Commercial Paper Rate, (ii) for any Short Dividend Period of 184 to 364 days, the Applicable Treasury Bill Rate and (iii) for any Long Dividend Period, the Applicable Treasury Note Rate. (c) "Available Shares of Series G MAPS" has the meaning specified in Section 4(a) of this ARTICLE THREE. (d) "Bid" has the meaning specified in Section 2(a) of this ARTICLE THREE. (e) "Bidder" has the meaning specified in Section 2(a) of this ARTICLE THREE. (f) "Hold Order" has the meaning specified in Section 2(a) of this ARTICLE THREE. (g) "Order" has the meaning specified in Section 2(a) of this ARTICLE THREE. (h) "Sell Order" has the meaning specified in Section 2(a) of this ARTICLE THREE. (i) "Submission Deadline" means 1:00 P.M., New York City time, on any Auction Date or such other time on any Auction Date as may be specified from time to time by the Auction Agent as the time prior to which each Broker-Dealer must submit to the Auction Agent in writing all Orders obtained by it for the Auction to be conducted on such Auction Date. (j) "Submitted Bid" has the meaning specified in Section 3(a) of this ARTICLE THREE. (k) "Submitted Hold Order" has the meaning specified in Section 3(a) of this ARTICLE THREE. (l) "Submitted Order" has the meaning specified in Section 3(a) of this ARTICLE THREE. (m) "Submitted Sell Order" has the meaning specified in Section 3(a) of this ARTICLE THREE. (n) "Winning Bid Rate" has the meaning specified in Section 4(a) of this ARTICLE THREE. 14 Section 2. Orders by Existing Holders and Potential Holders. (a) Prior to the Submission Deadline on each Auction Date for Series G MAPS: (i) each Existing Holder may submit to a Broker-Dealer information as to: (A) the number of Outstanding shares of Series G MAPS, if any, held by such Existing Holder that such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period; (B) the number of Outstanding shares of Series G MAPS, if any, held by such Existing Holder that such Existing Holder desires to sell, provided that the Applicable Rate for the next succeeding Dividend Period is less than the rate per annum specified by such Existing Holder; and/or (C) the number of Outstanding shares of Series G MAPS, if any, held by such Existing Holder that such Existing Holder desires to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and (ii) each Broker-Dealer, using a list of Potential Holders that shall be maintained in accordance with the provisions set forth in the Broker- Dealer Agreement for the purpose of conducting a competitive Auction, shall contact both Existing Holders and Potential Holders, including Existing Holders with respect to an offer by any such Existing Holder to purchase additional shares of Series G MAPS, on such list to notify such Existing Holders and Potential Holders as to the length of the next Dividend Period and (A) with respect to any Short Dividend Period or Long Dividend Period, the Dividend Payment Date(s) and (B) with respect to any Long Dividend Period, any dates before which shares of Series G MAPS may not be redeemed and any redemption premium applicable in an optional redemption and to determine the number of Outstanding shares of Series G MAPS, if any, with respect to which each such Existing Holder desires to submit an Order and each such Potential Holder desires to submit a Bid. For the purposes hereof, the communication to a Broker-Dealer of information referred to in clause (i) or (ii) of this Subsection (a) is hereinafter referred to as an "Order" and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a "Bidder," an Order containing the information referred to in clause (i)(A) of this Subsection (a) is hereinafter referred to as a "Hold Order," an Order containing the information referred to in clause (i)(B) or (ii) of this Subsection (a) is hereinafter referred to as a "Bid;" and an Order containing the information referred to in clause (i)(C) of this Subsection (a) is hereinafter referred to as a "Sell Order." (b) (i) A Bid by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of Series G MAPS specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate per annum specified in such Bid; or (B) such number or a lesser number of Outstanding shares of Series G MAPS to be determined as set forth in Subsections (a)(iv) and (c) of Section 5 of this ARTICLE THREE if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum specified therein; or (C) a lesser number of Outstanding shares of Series G MAPS to be determined as set forth in Subsections (b)(iii) and (c) of Section 5 of this ARTICLE THREE if such specified rate per annum shall be higher than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist. 15 (ii) A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of Series G MAPS specified in such Sell Order; or (B) such number or a lesser number of Outstanding shares of Series G MAPS to be determined as set forth in Subsections (b)(iii) and (c) of Section 5 of this ARTICLE THREE if Sufficient Clearing Bids do not exist. (iii) A Bid by a Potential Holder shall constitute an irrevocable offer to purchase: (A) the number of Outstanding shares of Series G MAPS specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate per annum specified in such Bid; or (B) such number or a lesser number of Outstanding shares of Series G MAPS to be determined as set forth in Subsections (a)(v) and (d) of Section 5 of this ARTICLE THREE if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum specified therein. (c) Orders may be submitted for whole shares of MAPS only. Orders submitted for fractional shares of MAPS shall not be valid. Section 3. Submission of Orders by Broker-Dealers to Auction Agent. (a) Each Broker-Dealer shall submit in writing to the Auction Agent prior to the Submission Deadline on each Auction Date for the Series G MAPS all Orders obtained by such Broker-Dealer, specifying with respect to each Order: (i) the name of the Bidder placing such Order; (ii) the aggregate number of Outstanding shares of Series G MAPS that are the subject of such Order; (iii) to the extent that such Bidder is an Existing Holder; (A) the number of Outstanding shares of Series G MAPS, if any, subject to any Hold Order placed by such Existing Holder; (B) the number of Outstanding shares of Series G MAPS, if any, subject to any Bid placed by such Existing Holder and the rate per annum specified in such Bid; and (C) the number of Outstanding shares of Series G MAPS, if any, subject to any Sell Order placed by such Existing Holder; and (iv) to the extent such Bidder is a Potential Holder, the rate per annum specified in such Potential Holder's Bid. (Each "Hold Order," "Bid" or "Sell Order" as submitted or deemed submitted by a Broker-Dealer is hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a "Submitted Order.") 16 (b) If any rate per annum specified in any Submitted Bid contains more than three figures to the right of the decimal point, the Auction Agent shall round such rate up to the next highest one-thousandth (.001) of 1%. (c) If one or more Orders covering in the aggregate all of the Outstanding shares of Series G MAPS held by an Existing Holder are not submitted to the Auction Agent prior to the Submission Deadline for any reason (including the failure of a Broker-Dealer to contact such Existing Holder or to submit such Existing Holder's Order or Orders), such Existing Holder shall be deemed to have submitted a Hold Order covering the number of Outstanding shares of Series G MAPS held by such Existing Holder that are not subject to Orders submitted to the Auction Agent. (d) A Submitted Order or Submitted Orders of an Existing Holder that cover in the aggregate more than the number of Outstanding shares of Series G MAPS held by such Existing Holder will be considered valid in the following order of priority: (i) any Submitted Hold Order of such Existing Holder will be considered valid up to and including the number of Outstanding shares of Series G MAPS held by such Existing Holder, provided that, if there is more than one such Submitted Hold Order and the aggregate number of shares of Series G MAPS subject to such Submitted Hold Orders exceeds the number of Outstanding shares of Series G MAPS held by such Existing Holder, the number of shares of Series G MAPS subject to each such Submitted Hold Order will be reduced pro rata so that such Submitted Hold Orders in the aggregate will cover exactly the number of Outstanding shares of Series G MAPS held by such Existing Holder; (ii) any Submitted Bids of such Existing Holder will be considered valid (in the ascending order of their respective rates per annum if there is more than one Submitted Bid of such Existing Holder) for the number of Outstanding shares of Series G MAPS held by such Existing Holder equal to the difference between (A) the number of Outstanding shares of Series G MAPS held by such Existing Holder and (B) the number of Outstanding shares of Series G MAPS subject to any Submitted Hold Order of such Existing Holder referred to in clause (d)(i) above (and, if more than one Submitted Bid of such Existing Holder specifies the same rate per annum and together they cover more than the remaining number of shares of Series G MAPS that can be the subject of valid Submitted Bids of such Existing Holder after application of clause (d)(i) above and of the foregoing portion of this clause (d)(ii) to any Submitted Bid or Submitted Bids of such Existing Holder specifying a lower rate or rates per annum, the number of shares of Series G MAPS subject to each of such Submitted Bids specifying the same rate per annum will be reduced pro rata so that such Submitted Bids, in the aggregate, cover exactly such remaining number of Outstanding shares of Series G MAPS of such Existing Holder); (iii) any Submitted Sell Order of such Existing Holder will be considered valid up to and including the excess of the number of Outstanding shares of Series G MAPS held by such Existing Holder over the sum of (A) the number of shares of Series G MAPS subject to Submitted Hold Orders by such Existing Holder referred to in clause (d)(i) above and (B) the number of shares of Series G MAPS subject to valid Submitted Bids by such Existing Holder referred to in clause (d)(ii) above; provided that, if there is more than one Submitted Sell Order of such Existing Holder and the number of shares of Series G MAPS subject to such Submitted Sell Orders is greater than such excess, the number of shares of Series G MAPS subject to each of such Submitted Sell Orders will be reduced pro rata so that such Submitted Sell Orders, in the aggregate, will cover exactly the number of shares of Series G MAPS equal to such excess. The number of Outstanding shares of Series G MAPS, if any, subject to Submitted Bids of such Existing Holder not valid under clause (d)(ii) above shall be treated as the subject of a Submitted Bid by a Potential Holder at the rate per annum specified in such Submitted Bids. 17 (e) If there is more than one Submitted Bid by any Potential Holder in any Auction, each such Submitted Bid shall be considered a separate Submitted Bid with respect to the rate per annum and number of shares of Series G MAPS specified therein. Section 4. Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. (a) Not earlier than the Submission Deadline on each Auction Date for the Series G MAPS, the Auction Agent shall assemble all Orders submitted or deemed submitted to it by the Broker-Dealers and shall determine: (i) the excess of the total number of Outstanding shares of Series G MAPS over the number of shares of Series G MAPS that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available Shares of Series G MAPS"); (ii) from the Submitted Orders, whether the number of Outstanding shares of Series G MAPS that are the subject of Submitted Bids by Potential Holders specifying one or more rates per annum equal to or lower than the Maximum Applicable Rate exceeds or is equal to the sum of: (A) the number of Outstanding shares of Series G MAPS that are the subject of Submitted Bids by Existing Holders specifying one or more rates per annum higher than the Maximum Applicable Rate, and (B) the number of Outstanding shares of Series G MAPS that are subject to Submitted Sell Orders. (if such excess or such equality exists (other than because the number of Outstanding shares of Series G MAPS in clauses (A) and (B) above are each zero because all of the Outstanding shares of Series G MAPS are the subject of Submitted Hold Orders), there shall exist "Sufficient Clearing Bids" and such Submitted Bids by Potential Holders shall be hereinafter referred to collectively as "Sufficient Clearing Bids"); and (iii) if Sufficient Clearing Bids exist, the winning bid rate (the "Winning Bid Rate"), which shall be the lowest rate per annum specified in the Submitted Bids that if: (A) each Submitted Bid from Existing Holders specifying the Winning Bid Rate and all other Submitted Bids from Existing Holders specifying lower rates per annum were accepted, thus entitling such Existing Holders to continue to hold the shares of Series G MAPS that are the subject of such Submitted Bids, and (B) each Submitted Bid from Potential Holders specifying the Winning Bid Rate and all other Submitted Bids from Potential Holders specifying lower rates per annum were accepted, thus entitling such Potential Holders to purchase the shares of Series G MAPS that are the subject of such Submitted Bids, would result in such Existing Holders described in subclause (iii)(A) continuing to hold an aggregate number of Outstanding shares of Series G MAPS that, when added to the number of Outstanding shares of Series G MAPS to be purchased by such Potential Holders described in subclause (iii)(B), would equal or exceed the number of Available Shares of Series G MAPS. (b) In connection with any Auction and promptly after the Auction Agent has made the determinations pursuant to Subsection (a), the Auction Agent shall advise the Company of the Maximum 18 Applicable Rate and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows: (i) if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate; (ii) if Sufficient Clearing Bids do not exist (other than because all of the Outstanding shares of Series G MAPS are the subject of Submitted Hold Orders), that the next succeeding Dividend Period will be a Standard Dividend Period and the Applicable Rate for the next succeeding Dividend Period shall be equal to the Maximum Applicable Rate for a Standard Dividend Period determined as of the Business Day immediately preceding such Auction; or (iii) if all of the Outstanding shares of Series G MAPS are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall be equal to 59% of the Applicable "AA" Composite Commercial Paper Rate, in the case of Series G MAPS with a Standard Dividend Period or a Short Dividend Period of 183 days or less, 59% of the Applicable Treasury Bill Rate in the case of Series G MAPS with a Short Dividend Period of 184 to 364 days, or 59% of the Applicable Treasury Note Rate in the case of Series G MAPS with a Long Dividend Period, in effect on the Auction Date. Section 5. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares of Series G MAPS. Based on the determinations made pursuant to Subsection (a) of Section 4, the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Auction Agent shall take such other action as set forth below: (a) If Sufficient Clearing Bids have been made, subject to the provisions of Subsections (c) and (d), Submitted Bids and Submitted Sell Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected: (i) the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate per annum that is higher than the Winning Bid Rate shall be rejected, thus requiring each such Existing Holder to sell the Outstanding shares of Series G MAPS that are the subject of such Submitted Sell Order or Submitted Bid; (ii) the Submitted Bid of each of the Existing Holders specifying any rate per annum that is lower than the Winning Bid Rate shall be accepted, thus entitling each such Existing Holder to continue to hold the Outstanding shares of Series G MAPS that are the subject of such Submitted Bid; (iii) the Submitted Bid of each of the Potential Holders specifying any rate per annum that is lower than the Winning Bid Rate shall be accepted; (iv) the Submitted Bid of each of the Existing Holders specifying a rate per annum that is equal to the Winning Bid Rate shall be accepted, thus entitling each such Existing Holder to continue to hold the Outstanding shares of Series G MAPS that are the subject of such Submitted Bid, unless the number of Outstanding shares of Series G MAPS subject to all such Submitted Bids shall be greater than the number of Outstanding shares of Series G MAPS ("Remaining Shares of Series G MAPS") equal to the excess of the Available Shares of Series G MAPS over the number of Outstanding shares of Series G MAPS subject to Submitted Bids described in Subsections (a)(ii) and (a)(iii), in which event the Submitted Bids of each such Existing Holder shall be rejected, and each such Existing Holder 19 shall be required to sell Outstanding shares of Series G MAPS, but only in an amount equal to the difference between (A) the number of Outstanding shares of Series G MAPS then held by such Existing Holder subject to such Submitted Bid and (B) the number of shares of Series G MAPS obtained by multiplying (x) the number of Remaining Shares of Series G MAPS by (y) a fraction, the numerator of which shall be the number of Outstanding shares of Series G MAPS held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of Series G MAPS subject to such Submitted Bids made by all such Existing Holders that specified a rate per annum equal to the Winning Bid Rate; and (v) the Submitted Bid of each of the Potential Holders specifying a rate per annum that is equal to the Winning Bid Rate shall be accepted, but only in an amount equal to the number of Outstanding shares of Series G MAPS obtained by multiplying (x) the difference between the Available Shares of Series G MAPS and the number of Outstanding shares of Series G MAPS subject to Submitted Bids described in Subsections (a)(ii), (a)(iii) and (a)(iv) by (y) a fraction, the numerator of which shall be the number of Outstanding shares of Series G MAPS subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of Series G MAPS subject to such Submitted Bids made by all such Potential Holders that specified rates per annum equal to the Winning Bid Rate. (b) If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of Series G MAPS are subject to Submitted Hold Orders), subject to the provisions of Subsection (c), Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids of Potential Holders shall be rejected: (i) the Submitted Bid of each Existing Holder specifying any rate per annum that is equal to or lower than the Maximum Applicable Rate shall be accepted, thus entitling such Existing Holder to continue to hold the Outstanding shares of Series G MAPS that are the subject of such Submitted Bid; (ii) the Submitted Bid of each Potential Holder specifying any rate per annum that is equal to or lower than the Maximum Applicable Rate shall be accepted, thus requiring such Potential Holder to purchase the Outstanding shares of Series G MAPS that are the subject of such Submitted Bid; and (iii) the Submitted Bids of each Existing Holder specifying any rate per annum that is higher than the Maximum Applicable Rate shall be rejected, thus requiring each such Existing Holder to sell the Outstanding shares of Series G MAPS that are the subject of such Submitted Bid, and the Submitted Sell Orders of each Existing Holder shall be accepted, in both cases only in an amount equal to the difference between (A) the number of Outstanding shares of Series G MAPS then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (B) the number of shares of Series G MAPS obtained by multiplying (x) the difference between the Available Shares of Series G MAPS and the aggregate number of Outstanding shares of Series G MAPS subject to Submitted Bids described in Subsections (b)(i) and (b)(ii) by (y) a fraction, the numerator of which shall be the number of Outstanding shares of Series G MAPS held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the aggregate number of Outstanding shares of Series G MAPS subject to all such Submitted Bids and Submitted Sell Orders. (c) If, as a result of the procedures described in Subsections (a) or (b), any Existing Holder would be entitled or required to sell or any Potential Holder would be entitled or required to purchase, a fraction of a share of Series G MAPS on any Auction Date, the Auction Agent shall, in such manner as in its sole discretion it shall determine, round up or down the number of shares of Series G MAPS to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that only whole shares of Series G MAPS will be entitled or required to be sold or purchased. 20 (d) If, as a result of the procedures described in Subsection (a), any Potential Holder would be entitled or required to purchase less than a whole share of Series G MAPS on any Auction Date, the Auction Agent shall, in such manner as in its sole discretion it shall determine, allocate shares of Series G MAPS for purchase among Potential Holders so that only whole shares of Series G MAPS are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing any shares of Series G MAPS on such Auction Date. (e) Based on the results of each Auction, the Auction Agent shall determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders on behalf of Existing Holders or Potential Holders, the aggregate number of Outstanding shares of Series G MAPS to be purchased and the aggregate number of Outstanding shares of Series G MAPS to be sold by such Potential Holders and Existing Holders and, to the extent that such aggregate number of Outstanding shares of Series G MAPS to be purchased and such aggregate number of Outstanding shares of Series G MAPS to be sold differ, the Auction Agent shall determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Outstanding shares of Series G MAPS. Section 6. Participation in Auctions. The Company and its Affiliates shall not submit any Order in any Auction except as set forth in the next sentence. Any Broker-Dealer that is an Affiliate of the Company may submit Orders in Auctions but only if such Orders are not for its own account, except that if such affiliated Broker-Dealer holds shares of Series G MAPS for its own account, it must submit a Sell Order in the next Auction with respect to such shares of Series G MAPS. Section 7. Miscellaneous. An Existing Holder (a) may sell, transfer or otherwise dispose of shares of Series G MAPS only pursuant to a Bid or Sell Order in accordance with the procedures described in these Auction Procedures or to or through a Broker- Dealer or to a Person that has delivered a signed copy of a Master Purchaser's Letter to a Broker-Dealer, provided that in the case of all transfers other than pursuant to Auctions such Existing Holder, its Broker-Dealer or its Agent Member advises the Auction Agent of such transfer and (b) unless otherwise required by law, shall have the beneficial ownership of the shares of Series G MAPS held by it maintained in book-entry form by the Securities Depositary in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. All of the Outstanding shares of Series G MAPS shall be represented by a single certificate registered in the name of the nominee of the Securities Depositary unless otherwise required by law or unless there is no Securities Depositary. If there is no Securities Depositary, shares of Series G MAPS shall be registered in the register of the Company in the name of the Existing Holder thereof and such Existing Holder thereupon will be entitled to receive a certificate therefor and be required to deliver a certificate therefor upon transfer or exchange thereof. 21 RESOLVED FURTHER, that the Chairman of the Board, the President or any Vice President, and the Secretary, the Chief Financial Officer, the Treasurer, or any Assistant Secretary or Assistant Treasurer of this Company are each authorized to execute, verify, and file a certificate of determination of preferences in accordance with California law. 3. The authorized number of shares of Preferred Stock of the Company is 20,000,000, and the number of shares constituting Series G MAPS, none of which has been issued, is 500. IN WITNESS WHEREOF, the undersigned have executed this certificate on Nov. 30, 1995. /s/ Steven F. Udvar-Hazy _____________________________________________ STEVEN F. UDVAR-HAZY, President /s/ Julie I. Sackman _____________________________________________ JULIE I. SACKMAN, Secretary The undersigned, STEVEN F. UDVAR-HAZY and JULIE I. SACKMAN, the President and Secretary, respectively, of INTERNATIONAL LEASE FINANCE CORPORATION, each declares under penalty of perjury that the matters set forth in the foregoing Certificate are true of his or her own knowledge. Executed at Los Angeles, California on Nov. 30, 1995. /s/ Steven F. Udvar-Hazy _____________________________________________ STEVEN F. UDVAR-HAZY /s/ Julie I. Sackman _____________________________________________ JULIE I. SACKMAN 22 EX-3.7 3 CERTIFICATE OF DETERMINATION OF SERIES H EXHIBIT 3.7 CERTIFICATE OF DETERMINATION OF PREFERENCES OF PREFERRED STOCK OF INTERNATIONAL LEASE FINANCE CORPORATION, A CALIFORNIA CORPORATION The undersigned, Steven F. Udvar-Hazy and Julie I. Sackman hereby certify that: 1. They are the duly elected and acting President and Secretary, respectively, of International Lease Finance Corporation (the "Company"). 2. Pursuant to authority given by the Company's Restated Articles of Incorporation, a duly appointed committee (the "Special Committee") of the Board of Directors of the Company (such committee having been previously authorized to exercise the powers of the Board of Directors as to the subject matter), has duly adopted the following recitals and resolutions: WHEREAS, the Restated Articles of Incorporation of the Company provide for a class of shares known as Preferred Stock, issuable from time to time in one or more series; and WHEREAS, the Board of Directors of the Company is authorized to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, to fix the number of shares constituting any such series, and to determine the designation thereof, or any of them; and WHEREAS, the Company desires, pursuant to its authority as aforesaid, to determine and fix the rights, preferences, privileges, and restrictions relating to a series of said Preferred Stock and the number of shares constituting and the designation of said series; NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes and determines the designation of, the number of shares constituting, and the rights, preferences, privileges, and restrictions relating to, said series of Preferred Stock as follows: ARTICLE ONE DESIGNATION Section 1. Designation. A series of Preferred Stock shall be designated "Market Auction Preferred Stock, Series H" (the "Series H MAPS"). Section 2. Amount. The number of shares constituting Series H MAPS shall be 500. ARTICLE TWO SERIES H MAPS--GENERAL PROVISIONS. Section 1. Definitions. As used herein, the following terms have the following meanings: (a) "Additional Directors" has the meaning specified in Section 6(a) of this ARTICLE TWO. (b) "Agent Member" means the member of the Securities Depositary that will act on behalf of an Existing Holder or a Potential Holder and that is identified as such in such Existing Holder's or Potential Holder's Master Purchaser's Letter. (c) "Applicable 'AA' Composite Commercial Paper Rate," on any date, shall mean in the case of any Standard Dividend Period or Short Dividend Period of (1) 49 days or more but less than 70 days, the interest equivalent of the 60-day rate, (2) 70 days or more but less than 85 days, the arithmetic average of the interest equivalent of the 60-day and 90-day rates, (3) 85 days or more but less than 120 days, the interest equivalent of the 90-day rate, (4) 120 days or more but less than 148 days, the arithmetic average of the interest equivalent of the 90-day and 180-day rates, and (5) 148 days or more but less than 184 days, the interest equivalent of the 180-day rate, in each case, on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's, or the equivalent of such rating by another rating agency, as made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date. In the event that the Federal Reserve Bank of New York does not make available any of the foregoing rates, then such rates shall be the 60-day rate or arithmetic average of such rates, as the case may be, as quoted on a discount basis or otherwise, by Commercial Paper Dealers to the Auction Agent as of the close of business on the Business Day next preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the Applicable "AA" Composite Commercial Paper Rate, the Applicable "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer (if any) and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Company to provide such rate or rates or, if the Company does not select any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer (if any). "Substitute Commercial Paper Dealer" means Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated or Salomon Brothers Inc or their respective affiliates or successors or, if no such dealer furnishes such quotations, a leading dealer in the commercial paper market selected by the Company in good faith. For purposes of this definition, the "interest equivalent" means the equivalent yield on a 360-day basis of a discount-basis security to an interest-bearing security. (d) "Applicable Rate" means the rate per annum, resulting from the next preceding Auction, at which dividends are payable on the shares of Series H MAPS for any Dividend Period. (e) "Applicable Treasury Bill Rate" for any Short Dividend Period in excess of 183 days and "Applicable Treasury Note Rate" for any Long Dividend Period, on any date, shall mean the interest equivalent of the rate for direct obligations of the United States Treasury having an original maturity which is equal to, or next lower than, the length of such Short Dividend Period or Long Dividend Period, as the case may be, as published weekly by the Board of Governors of the Federal Reserve System (the "Board") in "Federal Reserve Statistical Release H.15(519)-Selected Interest Rates," or any successor publication by the Board, within five Business Days preceding such date. In the event that the Board does not publish such rate, or if such release is not available, the Applicable Treasury Bill Rate or Applicable Treasury Note Rate will be the arithmetic mean of the secondary market bid rate as of approximately 3:30 P.M., New York City time, on the Business Day next preceding such date of the U.S. Government Securities Dealers furnished to 2 the Auction Agent for the issue of direct obligations of the United States Treasury, in an aggregate principal amount of at least $1,000,000 with a remaining maturity equal to, or next lower than, the length of such Short Dividend Period or Long Dividend Period, as the case may be. If any U.S. Government Securities Dealer does not quote a rate required to determine the Applicable Treasury Bill Rate or Applicable Treasury Note Rate, the Applicable Treasury Bill Rate or Applicable Treasury Note Rate shall be determined on the basis of the quotation or quotations furnished by any Substitute U.S. Government Securities Dealer or Dealers selected by the Company to provide such rate or rates or, if the Company does not select any such Substitute U.S. Government Securities Dealer or Dealers, by the remaining U.S. Government Securities Dealer (if any). "Substitute U.S. Government Securities Dealers" means Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated or Salomon Brothers Inc or their respective affiliates or successors or, if no such dealer provides such quotes, a leading dealer in the government securities market selected by the Company in good faith. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis shall be equal to the quotient of (A) the discount rate divided by (B) the difference between 1.00 and the discount rate. (f) "Auction Agent" means Chemical Bank, or its successors, or any other bank or trust company appointed by a resolution of the Board of Directors of the Company, or its Special Committee, which enters into an agreement with the Company to follow the Auction Procedures set forth in ARTICLE THREE hereof. (g) "Auction Date" means the first Business Day preceding the first day of a Dividend Period other than the Initial Dividend Period. (h) "Broker-Dealer" means any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in ARTICLE THREE, that has been selected by the Company and has entered into a Broker-Dealer Agreement with the Auction Agent that remains effective. (i) "Broker-Dealer Agreement" means an agreement between the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in ARTICLE THREE. (j) "Business Day" means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which banks in New York City are authorized or obligated by law to close. (k) "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock, whether outstanding on the Date of Original Issue or thereafter. (l) "Code" means the Internal Revenue Code of 1986, as amended. (m) "Commercial Paper Dealers" means Morgan Stanley & Co. Incorporated and Lehman Brothers Inc. or, in lieu of either thereof, their respective affiliates or successors. (n) "Common Stock" means all shares now or hereafter authorized of the class of Common Stock of the Company presently authorized and any other shares into which such shares may hereafter be changed from time to time. (o) "Date of Original Issue" means the date on which the Company initially issues shares of Series H MAPS. (p) "Default Period" has the meaning specified in Section 6(a) of this ARTICLE TWO. 3 (q) "Default Rate" means the Applicable Determining Rate multiplied by the percentage, shown opposite the lowest Credit Ratings category in the definition of Maximum Applicable Rate, determined as of the Business Day preceding a Failure to Deposit. (r) "Dividend Payment Date" has the meaning specified in Section 2(b) of this ARTICLE TWO. (s) "Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (t) "Dividend Quarter" has the meaning specified in Section 2(b) of this ARTICLE TWO. (u) "Dividends-Received Deduction" has the meaning specified in Section 2(b) of this ARTICLE TWO. (v) "Existing Holder," means a Person who has signed a Master Purchaser's Letter and is listed as the beneficial owner of shares of Series H MAPS in the records of the Auction Agent. (w) "Failure to Deposit" has the meaning specified in Section 2(e) of this ARTICLE TWO. (x) "Initial Dividend Payment Date" means February 21, 1996. (y) "Initial Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (z) "Initial Dividend Rate" has the meaning specified in Section 2(a) of this ARTICLE TWO. (aa) "Junior Capital Stock" means, with respect to the Company, any and all Capital Stock of the Company ranking junior to the Series H MAPS with respect to the payment of dividends or the distribution of assets upon liquidation. (ab) "Long Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (ac) "MAPS" means all shares of each series of the Company's Market Auction Preferred Stock now or hereafter authorized. (ad) "Maximum Applicable Rate," on any Auction Date, shall mean the rate per annum obtained by multiplying the Applicable Determining Rate on such Auction Date by a percentage determined as set forth below based on the lower of the credit ratings assigned to the Series H MAPS by Moody's and S&P (or if Moody's or S&P or both shall not make such rating available, the equivalent of either or both of such ratings by a Substitute Rating Agency or two Substitute Rating Agencies, as the case may be, or in the event that only one such rating shall be available, the percentage shall be based on such rating).
Credit Ratings -------------- Applicable Percentage of Applicable Moody's S&P Determining Rate --------------------- -------------- --------------------- "aa3" or Above AA-- or Above 150% "a3" to "a1" A-- to A+ 200% "baa3" to "baa1" BBB-- to BBB+ 225% Below "baa3" Below BBB-- 275%
4 (ae) "Master Purchaser's Letter" means a letter addressed to the Company, the Auction Agent and a Broker-Dealer in which a Person agrees, among other things, to offer to purchase, purchase, offer to sell or sell shares of Series H MAPS as set forth in ARTICLE THREE. (af) "Minimum Holding Period" has the meaning specified in Section 2(b) of this ARTICLE TWO. (ag) "Moody's" means Moody's Investors Service, Inc. (ah) "Normal Dividend Payment Date" has the meaning specified in Section 2(b) of this ARTICLE TWO. (ai) "Notice" has the meaning specified in Section 2(c) of this ARTICLE TWO. (aj) "Notice of Long Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (ak) "Notice of Revocation" has the meaning specified in Section 2(c) of this ARTICLE TWO. (al) "Notice of Short Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (am) "Outstanding" means, as of any date, shares of MAPS theretofore issued by the Company except, without duplication, (i) any shares of MAPS theretofore cancelled, delivered to the Company for cancellation or redeemed and (ii) as of any Auction Date, any shares of MAPS subject to redemption on the next following Business Day. (an) "Parity Capital Stock" means any and all shares of Capital Stock of the Company ranking on a parity with or equal to the Series H MAPS as to the payment of dividends and distribution of assets. (ao) "Parity Securities" has the meaning specified in Section 6(a) of this ARTICLE TWO. (ap) "Person" means and includes an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. (aq) "Potential Holder" means any Person, including any Existing Holder, (i) who has executed a Master Purchaser's Letter and (ii) who may be interested in acquiring shares of Series H MAPS (or, in the case of an Existing Holder, additional shares of Series H MAPS). (ar) "Preferred Stock" means all shares now or hereafter authorized of the class of Preferred Stock, without par value, of the Company, including the shares of MAPS of any series. (as) "S&P" means Standard & Poor's Corporation. (at) "Securities Depositary" means The Depository Trust Company and its successors and assigns or any other securities depository selected by the Company which agrees to follow the procedures required to be followed by such Securities Depositary in connection with shares of Series H MAPS. (au) "Short Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (av) "Standard Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. (aw) "Subsequent Dividend Period" has the meaning specified in Section 2(c) of this ARTICLE TWO. 5 (ax) "Subsequent Dividend Period Days" has the meaning specified in Section 2(b) of this ARTICLE TWO. (ay) "Substitute Rating Agency" shall mean a nationally recognized statistical rating organization (as that term is used in the rules and regulations of the Securities Exchange Act of 1934, as amended) selected by the Company, subject to the approval by Morgan Stanley & Co. Incorporated and Lehman Brothers Inc., such approval not to be unreasonably withheld. (az) "Sufficient Clearing Bids" has the meaning specified in Section 4(a) of ARTICLE THREE. (ba) "U.S. Government Securities Dealers" shall mean Morgan Stanley & Co. Incorporated and Lehman Brothers Inc. or, in lieu of either thereof, their respective affiliates or successors. Section 2. Dividends. (a) Holders of Series H MAPS shall be entitled to receive, when, as and if declared by the Board of Directors of the Company, out of funds available therefor under applicable law and the Restated Articles of Incorporation of the Company, cumulative cash dividends at the Applicable Rate, determined as set forth below, payable on the respective dates set forth below that may be applicable with respect to such Series H MAPS. For the Initial Dividend Period, dividends will accumulate at a rate per annum of 4.35% (the "Initial Dividend Rate"). For each subsequent Dividend Period, the dividend rate for the Series H MAPS will be the Applicable Rate, determined as set forth herein, and will be payable on the respective dates set forth below. (b) Dividends on the Series H MAPS will accumulate (whether or not declared) from the Date of Original Issue. Except for the Initial Dividend Payment Date, dividends on the Series H MAPS with a Standard Dividend Period will be payable, except as provided below, on each seventh Wednesday following the preceding Dividend Payment Date. Dividends on the Series H MAPS with a Short Dividend Period will be payable, except as provided below, on the day following the last day of such Short Dividend Period and will also be payable on such other dates as are established at the time such Short Dividend Period is determined. Dividends on the Series H MAPS with a Long Dividend Period will be payable, except as provided below, on the day following the last day of such Long Dividend Period and on the first day of the fourth calendar month after the commencement of such Long Dividend Period and quarterly thereafter on the first day of each applicable month. Each day on which dividends on Series H MAPS would be payable as determined as set forth in this paragraph but for the adjustments set forth below is referred to herein as a "Normal Dividend Payment Date." (i) In the case of dividends payable on Series H MAPS with a Standard Dividend Period or a Short Dividend Period, if: (A)(1) the Securities Depositary shall continue to make available to Agent Members the amounts due as dividends on the Series H MAPS in next- day funds on the dates on which such dividends are payable and (2) a Normal Dividend Payment Date is not a Business Day, or the day next succeeding such Normal Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day preceding such Normal Dividend Payment Date that is next succeeded by a Business Day; or (B)(1) the Securities Depositary shall make available to Agent Members the amounts due as dividends on Series H MAPS in immediately available funds on the dates on which such dividends are payable (and the Securities Depositary shall have so advised the Auction Agent) and (2) a Normal 6 Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day following such Normal Dividend Payment Date. (ii) In the case of dividends payable on Series H MAPS with a Long Dividend Period, if: (A)(1) the Securities Depositary shall continue to make available to Agent Members the amounts due as dividends on the Series H MAPS in next- day funds on the dates on which such dividends are payable and (2) a Normal Dividend Payment Date is not a Business Day, or the day next succeeding such Normal Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day following such Normal Dividend Payment Date that is next succeeded by a Business Day; or (B)(1) the Securities Depositary shall make available to Agent Members the amounts due as dividends on the Series H MAPS in immediately available funds on the dates on which such dividends are payable (and the Securities Depositary shall have so advised the Auction Agent) and (2) a Normal Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day following such Normal Dividend Payment Date. Notwithstanding the foregoing, in case of payment in next-day funds, if the date on which dividends on Series H MAPS would be payable as determined as set forth in the preceding paragraphs is a day that would result in the number of days between successive Auction Dates (determined by excluding the first Auction Date and including the second Auction Date) not being at least equal to the then-current minimum holding period (currently set forth in Section 246(c) of the Code) (the "Minimum Holding Period") required for corporate taxpayers to be entitled to the dividends-received deduction on preferred stock held by nonaffiliated corporations (currently set forth in Section 243(a) of the Code) (the "Dividends-Received Deduction"), then dividends on the Series H MAPS shall be payable on the first Business Day following such date on which dividends would be so payable that is next succeeded by a Business Day that results in the number of days between such successive Auction Dates (determined as set forth above) being at least equal to the then-current Minimum Holding Period. Each date on which dividends on Series H MAPS shall be payable as determined as set forth above is referred to herein as a "Dividend Payment Date". If applicable, the period from the preceding Dividend Payment Date to the next Dividend Payment Date for Series H MAPS with a Long Dividend Period is hereby referred to as a "Dividend Quarter." Although any particular Dividend Payment Date may not occur on the originally scheduled Normal Dividend Payment Date because of the adjustments set forth above, each succeeding Dividend Payment Date will be, subject to such adjustments, the date determined as set forth above as if each preceding Dividend Payment Date had occurred on the respective originally scheduled Normal Dividend Payment Date. In addition, notwithstanding the foregoing, in the event of a change in law altering the Minimum Holding Period, the period of time between Dividend Payment Dates shall automatically be adjusted so that there shall be a uniform number of days in subsequent Dividend Periods (such number of days without giving effect to the adjustment referred to above being referred to herein as the "Subsequent Dividend Period Days") commencing after the date of such change in law equal to or to the extent necessary, in excess of the then-current Minimum Holding Period, provided that the number of Subsequent Dividend Period Days shall not exceed by more than nine days the length of such then-current Minimum Holding Period and shall be evenly divisible by seven, and the maximum number of Subsequent Dividend Period Days, as adjusted pursuant to this provision, in no event shall exceed 119 days. (c) After the Initial Dividend Period for the Series H MAPS, each subsequent Dividend Period will (except for the adjustments for non-Business Days described above) be 49 days (each such 49-day period, subject to any adjustment as a result of a change in law altering the Minimum Holding Period as described 7 above, being herein referred to as a "Standard Dividend Period"), unless the Company specifies that any such subsequent Dividend Period will be a Dividend Period of 50 to 364 days and consisting of a whole number of weeks (a "Short Dividend Period") or a Dividend Period of one year or longer (a "Long Dividend Period"). Each such Standard Dividend Period, Short Dividend Period and Long Dividend Period (together with the period commencing on the Date of Original Issue and ending on the Initial Dividend Payment Date for the Series H MAPS (the "Initial Dividend Period")) being referred to herein as a "Dividend Period." After the Initial Dividend Period for the Series H MAPS, each successive Dividend Period will commence on the Dividend Payment Date for the preceding Dividend Period and will end (i) in the case of a Standard Dividend Period, on the day preceding the next Dividend Payment Date and (ii) in the case of a Short Dividend Period or a Long Dividend Period, on the last day of the Short Dividend Period or the Long Dividend Period specified by the Company in the related Notice. The Company may give telephonic and written notice, not less than ten and not more than 30 days prior to an Auction Date, to the Auction Agent and the Securities Depositary that the next succeeding Dividend Period will be a Short Dividend Period (a "Notice of Short Dividend Period") or a Long Dividend Period (a "Notice of Long Dividend Period" and, together with a Notice of Short Dividend Period, a "Notice"). Each such Notice will specify (i) the next succeeding Dividend Period as a Short Dividend Period or a Long Dividend Period, (ii) the term thereof, (iii) in the case of any Long Dividend Period, additional redemption provisions or restrictions on redemption, if any, and (iv) the Dividend Payment Dates; provided that, for any Auction occurring after the initial Auction, the Company may not give a Notice of a Short Dividend Period or a Notice of a Long Dividend Period (and any such Notice shall be null and void) unless Sufficient Clearing Bids were made in the last occurring Auction of any series of MAPS (or all shares of such series were subject to Submitted Hold Orders) and full cumulative dividends, if any, for all series of MAPS payable prior to such date have been paid in full. The Board of Directors of the Company may establish a Short Dividend Period or a Long Dividend Period for the Series H MAPS. Notice may be revoked by the Company on or prior to the Business Day prior to the related Auction Date by telephonic and written notice (a "Notice of Revocation") to the Auction Agent and the Securities Depositary. If the Company does not give a Notice with respect to the next succeeding Dividend Period or gives a Notice of Revocation with respect thereto, such next succeeding Dividend Period will be a Standard Dividend Period. In addition, if the Company has given Notice with respect to the next succeeding Dividend Period and has not given Notice of Revocation with respect thereto, but Sufficient Clearing Bids are not made in the Auction for the Series H MAPS (other than because all shares of Series H MAPS were subject to Submitted Hold Orders) or such Auction is not held for any reason, such next succeeding Dividend Period will, notwithstanding such Notice, be a Standard Dividend Period and the Company may not again give a Notice (and such Notice shall be null and void) until Sufficient Clearing Bids have been made in an Auction of a series of MAPS or an Auction has been held in which all shares of a series of MAPS were subject to Submitted Hold Orders. (d) Prior to each Dividend Payment Date for the Series H MAPS, the Company shall deposit with the Auction Agent sufficient funds for the payment of declared dividends. Each dividend will be payable to the holder or holders of record of Series H MAPS as they appear on the stock books of the Company on the Business Day next preceding the applicable Dividend Payment Date. Dividends in arrears for any past Dividend Period (and for any past Dividend Quarter during a Long Dividend Period) may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the holder or holders of record of the Series H MAPS. Any dividend payment made shall first be credited against the dividends accumulated with respect to the earliest Dividend Period (or, if applicable, the earliest Dividend Quarter) for which dividends have not been paid. So long as the Series H MAPS are held of record by the nominee of the Securities Depositary, dividends will be paid to the nominee of the Securities Depositary on each Dividend Payment Date. The Securities Depositary will credit the accounts of the Agent Members of Existing Holders in accordance with the Securities Depositary's normal procedures, which now 8 provide for payments in next-day funds settled through the New York Clearing House. The Agent Member of an Existing Holder will be responsible for holding or disbursing such payments to Existing Holders in accordance with the instructions of such Existing Holders. Holders of shares of the Series H MAPS shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends. No dividends will be declared or paid or set apart for payment on the Series H MAPS for any period unless full cumulative dividends have been or contemporaneously are declared and paid on all series of MAPS through the most recent applicable Dividend Payment Date for such series of MAPS. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series H MAPS which may be in arrears. So long as any MAPS are Outstanding, the Company shall not declare, pay or set aside for payment any dividend or other distribution in respect of Junior Capital Stock or call for redemption, redeem, purchase or otherwise acquire for consideration any shares of Junior Capital Stock unless (i) full cumulative dividends for all past Dividend Periods (and, if applicable, for all past Dividend Quarters) and all Dividend Payment Dates occurring on or prior to the date of the transaction shall have been declared and paid (or declared and a sum sufficient for payment of the dividends set apart for payment) on all such MAPS Outstanding and (ii) the Company has redeemed (or set apart for payment a sum sufficient for redemption) the full number of MAPS required to be redeemed after giving any notice of an optional redemption. The amount of dividends per share on Series H MAPS payable for each Dividend Period (or for each Dividend Quarter) shall be computed by multiplying the Applicable Rate for each Dividend Period (or Dividend Quarter) by a fraction, the numerator of which shall be the number of days in the Dividend Period (or Dividend Quarter) (calculated by counting both the last day and the first day thereof) such share was Outstanding, and the denominator of which shall be 360 and multiplying the amount so obtained by $100,000. (e) The dividend rate for each Dividend Period subsequent to the Initial Dividend Period for the Series H MAPS will be, except as provided below, the Applicable Rate. Notwithstanding the results of any Auction or any other provision herein, the dividend rate on the Series H MAPS shall not exceed the Maximum Applicable Rate for any Dividend Period. The provisions of the previous sentence of this paragraph notwithstanding, at any time that the application of the provisions of the next paragraph would result in a dividend rate on the Series H MAPS being in excess of the Maximum Applicable Rate, the maximum dividend rate applicable to such Series H MAPS shall be such higher dividend rate as provided below. In the event of the failure by the Company to pay to the Auction Agent by 12:00 noon, New York City time, (i) on the Business Day next preceding any Dividend Payment Date, the full amount of any dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on the Series H MAPS or (ii) on the Business Day next preceding any redemption date, the full redemption price (including accumulated and unpaid dividends) to be paid on such redemption date for any share of the Series H MAPS (in each case referred to as a "Failure to Deposit"), then, until the full amount due shall have been paid to the Auction Agent, Auctions will be suspended and the Applicable Rate shall be the Default 9 Rate as determined as of the Business Day preceding the Failure to Deposit. If such Failure to Deposit is cured within three Business Days as provided below, the Applicable Rate for the Dividend Period commencing on the second Business Day following such cure will be based upon the results of an Auction to be held on the Business Day next succeeding such cure. Unless such a cure is effected, the Default Rate shall continue in effect until there shall occur a Dividend Payment Date at least two Business Days prior to which the full amount of any dividends (whether or not earned or declared) payable on each Dividend Payment Date prior to and including such Dividend Payment Date, and the full amount of any redemption price (including accumulated and unpaid dividends) then due, shall have been paid to the Auction Agent, and thereupon Auctions shall resume on the terms stated herein for Dividend Periods commencing with such Dividend Payment Date. If an Auction is not held on an Auction Date for any reason (other than the suspension of Auctions due to a Failure to Deposit), the dividend rate for the applicable Dividend Period shall be the Maximum Applicable Rate determined as of such Auction Date. Any Failure to Deposit with respect to the Series H MAPS shall be deemed to be cured if, within three Business Days of such Failure to Deposit, with respect to a Failure to Deposit relating to (a) the payment of dividends, the Company deposits with the Auction Agent by 12:00 noon, New York City time, all accumulated and unpaid dividends on the Series H MAPS, including the full amount of any dividends to be paid with respect to the Dividend Period with respect to which the Failure to Deposit occurred, plus an amount computed by multiplying the Default Rate by a fraction, the numerator of which shall be the number of days during the period from the Dividend Payment Date in respect of which such Failure to Deposit occurred through the day preceding the Business Day next succeeding the Auction held following such cure and the denominator of which shall be 360, and applying the rate obtained against the aggregate liquidation preference of the Series H MAPS and (b) the redemption of shares of Series H MAPS, the deposit by the Company with the Auction Agent, by 12:00 noon, New York City time, of funds sufficient for the redemption of such shares (including accumulated and unpaid dividends), plus an amount computed by multiplying the Default Rate by a fraction, the numerator of which shall be the number of days for which such Failure to Deposit is not cured in accordance with this paragraph (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 360, and applying the rate obtained against the aggregate liquidation preference of the shares of Series H MAPS to be redeemed, and the giving of irrevocable instructions by the Company to apply such funds and, if applicable, the income and proceeds therefrom, to the payment of the redemption price (including accumulated and unpaid dividends) for such shares of the Series H MAPS. If the Company shall have cured such Failure to Deposit by making timely payment to the Auction Agent, the Auction Agent shall give telephonic and written notice of such cure to each Existing Holder of MAPS at the telephone number and address specified in such Existing Holder's Master Purchaser's Letter and to each Broker-Dealer as promptly as practicable after such cure is effected and schedule an Auction for the Series H MAPS for the next Business Day. Section 3. Redemption. The Series H MAPS shall be redeemable by the Company as provided below: (a) At the option of the Company, the Series H MAPS may be redeemed, in whole or from time to time in part, out of funds legally available therefor, on any Dividend Payment Date for the Series H MAPS, 10 upon at least fifteen but not more than 45 days' notice, at a redemption price per share equal to the sum of $100,000 plus an amount equal to accumulated and unpaid dividends thereon (whether or not earned or declared) to the date that the Company pays the full amount payable upon redemption of the shares of Series H MAPS. The Company may only redeem Series H MAPS in whole shares. Pursuant to such right of optional redemption, the Company may elect to redeem some or all of the shares of Series H MAPS without redeeming shares of any other series of MAPS or redeem some or all of the shares of any other series of MAPS without redeeming shares of Series H MAPS. In the event of a partial redemption, the shares to be redeemed shall be selected by the Company or, at the Company's request, the Auction Agent by lot or by such other method as such Person shall deem fair and equitable. Upon any date fixed for redemption (unless a Failure to Deposit occurs), all rights of the holders of shares of Series H MAPS called for redemption will cease and terminate, except the right of such holders to receive the amounts payable in respect of such redemption therefor, but without interest, and such shares of the Series H MAPS will be deemed no longer Outstanding. So long as all of the Series H MAPS to be redeemed are held of record by a nominee of the Securities Depositary, the redemption price (including accumulated and unpaid dividends) for such shares of the Series H MAPS will be paid by the Company to the Securities Depositary on the redemption date for distribution to Agent Members in accordance with its normal procedures. (b) Any shares of Series H MAPS which shall at any time have been redeemed or purchased by the Company shall, after such redemption or purchase, be restored to the status of authorized unissued shares, undesignated as to series, in the manner provided by the laws of the State of California. Section 4. Conversion or Exchange. The holders of shares of Series H MAPS shall not have any rights to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of the Capital Stock of the Company or into any other securities of the Company. Section 5. Liquidation Rights. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, holders of the Series H MAPS will be entitled to receive, out of the assets of the Company available for distribution to shareholders after satisfying claims of creditors but before any payment or distribution of assets is made to holders of Junior Capital Stock, a preferential liquidation distribution in the amount of $100,000 per share plus an amount equal to accumulated and unpaid dividends on each such share (whether or not declared) to and including the date of such distribution. If upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the assets of the Company are insufficient to pay the holders of the Series H MAPS the full amount of the preferential liquidation distributions to which they are entitled, holders of the Series H MAPS will share ratably in any such distribution of such assets with holders of Parity Capital Stock. Unless and until payment in full has been made to holders of the Series H MAPS of the liquidation distributions to which they are entitled as described in this paragraph, no dividends or distributions will be made to holders of the Company's Junior Capital Stock, and no purchase, redemption or other acquisition for any consideration by the Company will be made in respect of the Company's Junior Capital Stock. After the payment to the holders of the Series H MAPS of the full amount of the preferential liquidation distributions to which they are entitled pursuant to this paragraph, such holders (in their capacity as such holders) will have no right or claim to any of the remaining assets of the Company. Neither the consolidation nor the merger of the Company with or into any other corporation or corporations, nor the sale or transfer by the Company of all or any part of its assets, shall be deemed to be a liquidation, dissolution or winding up of the Company for purposes of this Section 5. 11 Section 6. Voting Rights. (a) Holders of the Series H MAPS will have no voting rights except as hereinafter described, or as expressly required by law. During any period when dividends on the Series H MAPS or any other Parity Capital Stock of the Company which has voting rights comparable to the Series H MAPS which are then exercisable (the Series H MAPS and all such other securities being referred to as the "Parity Securities") shall be in arrears for at least 180 consecutive days and shall not have been paid in full (a "Default Period"), the holders of record of the Parity Securities voting as described below will be entitled to elect two directors to the Board of Directors (the "Additional Directors") whether or not the Board of Directors of the Company has taken appropriate action to increase the established number of directors of the Company by two, and the holders of the Common Stock as a class, shall be entitled to elect the remaining number of directors. If the Board of Directors has not taken appropriate action to authorize an increase in the number of directors by two and there are not two vacancies then existing on the Board of Directors, then, upon the election of the two Additional Directors as provided below, the term of all previously sitting directors shall cease (a "Termination of Directors"). As soon as practicable after the beginning of a Default Period (or a reinstatement of the voting rights of holders of Parity Securities as provided herein), the Board of Directors of the Company will call or cause to be called a special meeting of the holders of Parity Securities and, in the case of a Termination of Directors, all holders of Capital Stock of the Company entitled to vote for the election of directors generally ("Other Voting Securities"), by mailing or causing to be mailed to such holders a notice of such special meeting to be held not less than ten and not more than 45 days after the date such notice is given. If the Board of Directors of the Company does not call or cause to be called such a special meeting, it may be called by any of such holders on like notice. The record date for determining the holders of the Parity Securities and, if applicable, Other Voting Securities entitled to notice of and to vote at such special meeting will be the close of business on the Business Day preceding the day on which such notice is mailed. At any such special meeting, the holders of Parity Securities, by plurality vote, voting together as a single class without regard to series (to the exclusion of the holders of Junior Capital Stock) will be entitled to elect the two Additional Directors on the basis of one vote per $100,000 liquidation preference (excluding amounts in respect of accumulated and unpaid dividends) and, in the case of a Termination of Directors, the holders of Other Voting Securities shall be entitled to elect the remaining members of the Board of Directors in the same manner as if such election had occured at an annual meeting of the Company. The holder or holders of one-third of the Parity Securities then outstanding, present in person or by proxy, will constitute a quorum for the election of the Additional Directors except as otherwise provided by law. Notice of all meetings at which holders of the Series H MAPS shall be entitled to vote will be given to such holders at their addresses as they appear on the register of the Company. If a Default Period shall terminate after the notice of a special meeting has been given but before such special meeting has been held, the Company shall, as soon as practicable after such termination, mail or cause to be mailed notice of such termination to holders of the Parity Securities and, if applicable, Other Voting Securities that would have been entitled to vote at such special meeting. So long as a Default Period continues, (i) any vacancy in the office of an Additional Director may be filled (except as provided in the following clause (ii)) by the person appointed in an instrument in writing signed by the remaining Additional Director and filed with the Secretary of the Company or, in the event there is no remaining Additional Director, by vote of the holders of the outstanding Parity Securities, voting together as a single class without regard to series, in a meeting of shareholders or at a meeting of holders of Parity Securities called for such purpose, and (ii) in the case of the removal of any Additional Director, the vacancy may be filled by appointment by the person elected by the vote of the holders of the outstanding Parity Securities, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted upon or any subsequent meeting. Each director who shall be elected or appointed by the remaining Additional Director as aforesaid shall be an Additional Director. At such time as a Default Period shall terminate, (i) the term of office of the Additional Directors shall terminate and (ii) the voting rights of the holders of the Parity Securities to elect directors shall cease (subject to the occurrence of a subsequent Default Period). 12 (b) Except as provided below, so long as any Series H MAPS remain Outstanding, the Company shall not, without the consent of the holders of at least two-thirds of all of the MAPS then outstanding (taken together as a single class), given in person or by proxy, either in writing or at a meeting (voting separately as a single class), (i) authorize, create or issue, or increase the authorized amount of, any Capital Stock of the Company of any class ranking, as to dividends or upon the liquidation, dissolution or winding up of the Company, prior to the Series H MAPS, or reclassify any authorized Capital Stock of the Company into any such Capital Stock, or authorize, create or issue any obligation or security convertible into or evidencing the right to purchase any such Capital Stock, or (ii) amend, alter or repeal the provisions of the Company's Articles of Incorporation, whether by merger, consolidation, share exchange, division or otherwise, so as to adversely affect any preference, limitation or special right of the Series H MAPS. Except as provided by law, the consent of the holders of the Series H MAPS is not required and such holders are not entitled to vote upon (i) the authorization, creation, issuance or increase in the authorized amount of the Common Stock, additional series of MAPS or any Capital Stock of the Company of any class ranking, as to dividends and upon the liquidation, dissolution or winding up of the Company, on a parity with or junior to the Series H MAPS or (ii) any merger, consolidation, share exchange or division of the Company (or any successor corporation) with or into another corporation the result of which is that the Series H MAPS that may be Outstanding from time to time may be junior to any preferred shares of such corporation as to dividends and upon the liquidation, dissolution or winding up of the surviving corporation if on or prior to the date of effectiveness of such merger or consolidation, the Company shall have given Moody's and S&P written notice of such merger or consolidation and Moody's and S&P shall have confirmed in writing that the transaction will not adversely affect the then existing rating for the MAPS. If either Moody's or S&P shall change its rating categories for preferred stock, then the determination of whether the transaction will not adversely affect the then existing rating for the MAPS shall be made based upon the substantially equivalent new rating categories for preferred stock of such rating agency. If either Moody's or S&P, or both, shall not make a rating available for the Series H MAPS necessary to make such a determination or will not confirm whether the transaction will adversely affect its then existing rating for the Series H MAPS, such confirmation will be sought from two Substitute Rating Agencies if they have made ratings available for the Series H MAPS necessary to make the determination and are willing to make such confirmation or, in the event that only one such rating agency shall make such ratings available and is willing to make such confirmation, based upon such rating agency's confirmation. Section 7. Sinking Fund. Shares of Series H MAPS are not subject or entitled to the benefit of a sinking fund. 13 ARTICLE THREE AUCTION PROCEDURES Section 1. Definitions. Capitalized terms not defined in this Section 1 shall have the respective meanings specified in Section 1 of ARTICLE TWO. As used in this ARTICLE THREE, the following terms have the following meanings: (a) "Affiliate" means any Person controlled by, in control of or under common control with the Company. (b) "Applicable Determining Rate" means, (i) for any Standard Dividend Period or Short Dividend Period of 183 days or less, the Applicable "AA" Composite Commercial Paper Rate, (ii) for any Short Dividend Period of 184 to 364 days, the Applicable Treasury Bill Rate and (iii) for any Long Dividend Period, the Applicable Treasury Note Rate. (c) "Available Shares of Series H MAPS" has the meaning specified in Section 4(a) of this ARTICLE THREE. (d) "Bid" has the meaning specified in Section 2(a) of this ARTICLE THREE. (e) "Bidder" has the meaning specified in Section 2(a) of this ARTICLE THREE. (f) "Hold Order" has the meaning specified in Section 2(a) of this ARTICLE THREE. (g) "Order" has the meaning specified in Section 2(a) of this ARTICLE THREE. (h) "Sell Order" has the meaning specified in Section 2(a) of this ARTICLE THREE. (i) "Submission Deadline" means 1:00 P.M., New York City time, on any Auction Date or such other time on any Auction Date as may be specified from time to time by the Auction Agent as the time prior to which each Broker-Dealer must submit to the Auction Agent in writing all Orders obtained by it for the Auction to be conducted on such Auction Date. (j) "Submitted Bid" has the meaning specified in Section 3(a) of this ARTICLE THREE. (k) "Submitted Hold Order" has the meaning specified in Section 3(a) of this ARTICLE THREE. (l) "Submitted Order" has the meaning specified in Section 3(a) of this ARTICLE THREE. (m) "Submitted Sell Order" has the meaning specified in Section 3(a) of this ARTICLE THREE. (n) "Winning Bid Rate" has the meaning specified in Section 4(a) of this ARTICLE THREE. 14 Section 2. Orders by Existing Holders and Potential Holders. (a) Prior to the Submission Deadline on each Auction Date for Series H MAPS: (i) each Existing Holder may submit to a Broker-Dealer information a s to: (A) the number of Outstanding shares of Series H MAPS, if any, held by such Existing Holder that such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period; (B) the number of Outstanding shares of Series H MAPS, if any, held by such Existing Holder that such Existing Holder desires to sell, provided that the Applicable Rate for the next succeeding Dividend Period is less than the rate per annum specified by such Existing Holder; and/or (C) the number of Outstanding shares of Series H MAPS, if any, held by such Existing Holder that such Existing Holder desires to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and (ii) each Broker-Dealer, using a list of Potential Holders that shall be maintained in accordance with the provisions set forth in the Broker- Dealer Agreement for the purpose of conducting a competitive Auction, shall contact both Existing Holders and Potential Holders, including Existing Holders with respect to an offer by any such Existing Holder to purchase additional shares of Series H MAPS, on such list to notify such Existing Holders and Potential Holders as to the length of the next Dividend Period and (A) with respect to any Short Dividend Period or Long Dividend Period, the Dividend Payment Date(s) and (B) with respect to any Long Dividend Period, any dates before which shares of Series H MAPS may not be redeemed and any redemption premium applicable in an optional redemption and to determine the number of Outstanding shares of Series H MAPS, if any, with respect to which each such Existing Holder desires to submit an Order and each such Potential Holder desires to submit a Bid. For the purposes hereof, the communication to a Broker-Dealer of information referred to in clause (i) or (ii) of this Subsection (a) is hereinafter referred to as an "Order" and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a "Bidder," an Order containing the information referred to in clause (i)(A) of this Subsection (a) is hereinafter referred to as a "Hold Order," an Order containing the information referred to in clause (i)(B) or (ii) of this Subsection (a) is hereinafter referred to as a "Bid;" and an Order containing the information referred to in clause (i)(C) of this Subsection (a) is hereinafter referred to as a "Sell Order." (b) (i) A Bid by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of Series H MAPS specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate per annum specified in such Bid; or (B) such number or a lesser number of Outstanding shares of Series H MAPS to be determined as set forth in Subsections (a)(iv) and (c) of Section 5 of this ARTICLE THREE if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum specified therein; or (C) a lesser number of Outstanding shares of Series H MAPS to be determined as set forth in Subsections (b)(iii) and (c) of Section 5 of this ARTICLE THREE if such specified rate per annum shall be higher than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist. 15 (ii) A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of Series H MAPS specified in such Sell Order; or (B) such number or a lesser number of Outstanding shares of Series H MAPS to be determined as set forth in Subsections (b)(iii) and (c) of Section 5 of this ARTICLE THREE if Sufficient Clearing Bids do not exist. (iii) A Bid by a Potential Holder shall constitute an irrevocable offer to purchase: (A) the number of Outstanding shares of Series H MAPS specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate per annum specified in such Bid; or (B) such number or a lesser number of Outstanding shares of Series H MAPS to be determined as set forth in Subsections (a)(v) and (d) of Section 5 of this ARTICLE THREE if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum specified therein. (c) Orders may be submitted for whole shares of MAPS only. Orders submitted for fractional shares of MAPS shall not be valid. Section 3. Submission of Orders by Broker-Dealers to Auction Agent. (a) Each Broker-Dealer shall submit in writing to the Auction Agent prior to the Submission Deadline on each Auction Date for the Series H MAPS all Orders obtained by such Broker-Dealer, specifying with respect to each Order: (i) the name of the Bidder placing such Order; (ii) the aggregate number of Outstanding shares of Series H MAPS that are the subject of such Order; (iii) to the extent that such Bidder is an Existing Holder; (A) the number of Outstanding shares of Series H MAPS, if any, subject to any Hold Order placed by such Existing Holder; (B) the number of Outstanding shares of Series H MAPS, if any, subject to any Bid placed by such Existing Holder and the rate per annum specified in such Bid; and (C) the number of Outstanding shares of Series H MAPS, if any, subject to any Sell Order placed by such Existing Holder; and (iv) to the extent such Bidder is a Potential Holder, the rate per annum specified in such Potential Holder's Bid. (Each "Hold Order," "Bid" or "Sell Order" as submitted or deemed submitted by a Broker-Dealer is hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a "Submitted Order.") 16 (b) If any rate per annum specified in any Submitted Bid contains more than three figures to the right of the decimal point, the Auction Agent shall round such rate up to the next highest one-thousandth (.001) of 1%. (c) If one or more Orders covering in the aggregate all of the Outstanding shares of Series H MAPS held by an Existing Holder are not submitted to the Auction Agent prior to the Submission Deadline for any reason (including the failure of a Broker-Dealer to contact such Existing Holder or to submit such Existing Holder's Order or Orders), such Existing Holder shall be deemed to have submitted a Hold Order covering the number of Outstanding shares of Series H MAPS held by such Existing Holder that are not subject to Orders submitted to the Auction Agent. (d) A Submitted Order or Submitted Orders of an Existing Holder that cover in the aggregate more than the number of Outstanding shares of Series H MAPS held by such Existing Holder will be considered valid in the following order of priority: (i) any Submitted Hold Order of such Existing Holder will be considered valid up to and including the number of Outstanding shares of Series H MAPS held by such Existing Holder, provided that, if there is more than one such Submitted Hold Order and the aggregate number of shares of Series H MAPS subject to such Submitted Hold Orders exceeds the number of Outstanding shares of Series H MAPS held by such Existing Holder, the number of shares of Series H MAPS subject to each such Submitted Hold Order will be reduced pro rata so that such Submitted Hold Orders in the aggregate will cover exactly the number of Outstanding shares of Series H MAPS held by such Existing Holder; (ii) any Submitted Bids of such Existing Holder will be considered valid (in the ascending order of their respective rates per annum if there is more than one Submitted Bid of such Existing Holder) for the number of Outstanding shares of Series H MAPS held by such Existing Holder equal to the difference between (A) the number of Outstanding shares of Series H MAPS held by such Existing Holder and (B) the number of Outstanding shares of Series H MAPS subject to any Submitted Hold Order of such Existing Holder referred to in clause (d)(i) above (and, if more than one Submitted Bid of such Existing Holder specifies the same rate per annum and together they cover more than the remaining number of shares of Series H MAPS that can be the subject of valid Submitted Bids of such Existing Holder after application of clause (d)(i) above and of the foregoing portion of this clause (d)(ii) to any Submitted Bid or Submitted Bids of such Existing Holder specifying a lower rate or rates per annum, the number of shares of Series H MAPS subject to each of such Submitted Bids specifying the same rate per annum will be reduced pro rata so that such Submitted Bids, in the aggregate, cover exactly such remaining number of Outstanding shares of Series H MAPS of such Existing Holder); (iii) any Submitted Sell Order of such Existing Holder will be considered valid up to and including the excess of the number of Outstanding shares of Series H MAPS held by such Existing Holder over the sum of (A) the number of shares of Series H MAPS subject to Submitted Hold Orders by such Existing Holder referred to in clause (d)(i) above and (B) the number of shares of Series H MAPS subject to valid Submitted Bids by such Existing Holder referred to in clause (d)(ii) above; provided that, if there is more than one Submitted Sell Order of such Existing Holder and the number of shares of Series H MAPS subject to such Submitted Sell Orders is greater than such excess, the number of shares of Series H MAPS subject to each of such Submitted Sell Orders will be reduced pro rata so that such Submitted Sell Orders, in the aggregate, will cover exactly the number of shares of Series H MAPS equal to such excess. The number of Outstanding shares of Series H MAPS, if any, subject to Submitted Bids of such Existing Holder not valid under clause (d)(ii) above shall be treated as the subject of a Submitted Bid by a Potential Holder at the rate per annum specified in such Submitted Bids. 17 (e) If there is more than one Submitted Bid by any Potential Holder in any Auction, each such Submitted Bid shall be considered a separate Submitted Bid with respect to the rate per annum and number of shares of Series H MAPS specified therein. Section 4. Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. (a) Not earlier than the Submission Deadline on each Auction Date for the Series H MAPS, the Auction Agent shall assemble all Orders submitted or deemed submitted to it by the Broker-Dealers and shall determine: (i) the excess of the total number of Outstanding shares of Series H MAPS over the number of shares of Series H MAPS that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available Shares of Series H MAPS"); (ii) from the Submitted Orders, whether the number of Outstanding shares of Series H MAPS that are the subject of Submitted Bids by Potential Holders specifying one or more rates per annum equal to or lower than the Maximum Applicable Rate exceeds or is equal to the sum of: (A) the number of Outstanding shares of Series H MAPS that are the subject of Submitted Bids by Existing Holders specifying one or more rates per annum higher than the Maximum Applicable Rate, and (B) the number of Outstanding shares of Series H MAPS that are subject to Submitted Sell Orders. (if such excess or such equality exists (other than because the number of Outstanding shares of Series H MAPS in clauses (A) and (B) above are each zero because all of the Outstanding shares of Series H MAPS are the subject of Submitted Hold Orders), there shall exist "Sufficient Clearing Bids" and such Submitted Bids by Potential Holders shall be hereinafter referred to collectively as "Sufficient Clearing Bids"); and (iii) if Sufficient Clearing Bids exist, the winning bid rate (the "Winning Bid Rate"), which shall be the lowest rate per annum specified in the Submitted Bids that if: (A) each Submitted Bid from Existing Holders specifying the Winning Bid Rate and all other Submitted Bids from Existing Holders specifying lower rates per annum were accepted, thus entitling such Existing Holders to continue to hold the shares of Series H MAPS that are the subject of such Submitted Bids, and (B) each Submitted Bid from Potential Holders specifying the Winning Bid Rate and all other Submitted Bids from Potential Holders specifying lower rates per annum were accepted, thus entitling such Potential Holders to purchase the shares of Series H MAPS that are the subject of such Submitted Bids, would result in such Existing Holders described in subclause (iii)(A) continuing to hold an aggregate number of Outstanding shares of Series H MAPS that, when added to the number of Outstanding shares of Series H MAPS to be purchased by such Potential Holders described in subclause (iii)(B), would equal or exceed the number of Available Shares of Series H MAPS. (b) In connection with any Auction and promptly after the Auction Agent has made the determinations pursuant to Subsection (a), the Auction Agent shall advise the Company of the Maximum 18 Applicable Rate and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows: (i) if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate; (ii) if Sufficient Clearing Bids do not exist (other than because all of the Outstanding shares of Series H MAPS are the subject of Submitted Hold Orders), that the next succeeding Dividend Period will be a Standard Dividend Period and the Applicable Rate for the next succeeding Dividend Period shall be equal to the Maximum Applicable Rate for a Standard Dividend Period determined as of the Business Day immediately preceding such Auction; or (iii) if all of the Outstanding shares of Series H MAPS are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall be equal to 59% of the Applicable "AA" Composite Commercial Paper Rate, in the case of Series H MAPS with a Standard Dividend Period or a Short Dividend Period of 183 days or less, 59% of the Applicable Treasury Bill Rate in the case of Series H MAPS with a Short Dividend Period of 184 to 364 days, or 59% of the Applicable Treasury Note Rate in the case of Series H MAPS with a Long Dividend Period, in effect on the Auction Date. Section 5. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares of Series H MAPS. Based on the determinations made pursuant to Subsection (a) of Section 4, the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Auction Agent shall take such other action as set forth below: (a) If Sufficient Clearing Bids have been made, subject to the provisions of Subsections (c) and (d), Submitted Bids and Submitted Sell Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected: (i) the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate per annum that is higher than the Winning Bid Rate shall be rejected, thus requiring each such Existing Holder to sell the Outstanding shares of Series H MAPS that are the subject of such Submitted Sell Order or Submitted Bid; (ii) the Submitted Bid of each of the Existing Holders specifying any rate per annum that is lower than the Winning Bid Rate shall be accepted, thus entitling each such Existing Holder to continue to hold the Outstanding shares of Series H MAPS that are the subject of such Submitted Bid; (iii) the Submitted Bid of each of the Potential Holders specifying any rate per annum that is lower than the Winning Bid Rate shall be accepted; (iv) the Submitted Bid of each of the Existing Holders specifying a rate per annum that is equal to the Winning Bid Rate shall be accepted, thus entitling each such Existing Holder to continue to hold the Outstanding shares of Series H MAPS that are the subject of such Submitted Bid, unless the number of Outstanding shares of Series H MAPS subject to all such Submitted Bids shall be greater than the number of Outstanding shares of Series H MAPS ("Remaining Shares of Series H MAPS") equal to the excess of the Available Shares of Series H MAPS over the number of Outstanding shares of Series H MAPS subject to Submitted Bids described in Subsections (a)(ii) and (a)(iii), in which event the Submitted Bids of each such Existing Holder shall be rejected, and each such Existing Holder shall 19 be required to sell Outstanding shares of Series H MAPS, but only in an amount equal to the difference between (A) the number of Outstanding shares of Series H MAPS then held by such Existing Holder subject to such Submitted Bid and (B) the number of shares of Series H MAPS obtained by multiplying (x) the number of Remaining Shares of Series H MAPS by (y) a fraction, the numerator of which shall be the number of Outstanding shares of Series H MAPS held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of Series H MAPS subject to such Submitted Bids made by all such Existing Holders that specified a rate per annum equal to the Winning Bid Rate; and (v) the Submitted Bid of each of the Potential Holders specifying a rate per annum that is equal to the Winning Bid Rate shall be accepted, but only in an amount equal to the number of Outstanding shares of Series H MAPS obtained by multiplying (x) the difference between the Available Shares of Series H MAPS and the number of Outstanding shares of Series H MAPS subject to Submitted Bids described in Subsections (a)(ii), (a)(iii) and (a)(iv) by (y) a fraction, the numerator of which shall be the number of Outstanding shares of Series H MAPS subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of Series H MAPS subject to such Submitted Bids made by all such Potential Holders that specified rates per annum equal to the Winning Bid Rate. (b) If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of Series H MAPS are subject to Submitted Hold Orders), subject to the provisions of Subsection (c), Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids of Potential Holders shall be rejected: (i) the Submitted Bid of each Existing Holder specifying any rate per annum that is equal to or lower than the Maximum Applicable Rate shall be accepted, thus entitling such Existing Holder to continue to hold the Outstanding shares of Series H MAPS that are the subject of such Submitted Bid; (ii) the Submitted Bid of each Potential Holder specifying any rate per annum that is equal to or lower than the Maximum Applicable Rate shall be accepted, thus requiring such Potential Holder to purchase the Outstanding shares of Series H MAPS that are the subject of such Submitted Bid; and (iii) the Submitted Bids of each Existing Holder specifying any rate per annum that is higher than the Maximum Applicable Rate shall be rejected, thus requiring each such Existing Holder to sell the Outstanding shares of Series H MAPS that are the subject of such Submitted Bid, and the Submitted Sell Orders of each Existing Holder shall be accepted, in both cases only in an amount equal to the difference between (A) the number of Outstanding shares of Series H MAPS then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (B) the number of shares of Series H MAPS obtained by multiplying (x) the difference between the Available Shares of Series H MAPS and the aggregate number of Outstanding shares of Series H MAPS subject to Submitted Bids described in Subsections (b)(i) and (b)(ii) by (y) a fraction, the numerator of which shall be the number of Outstanding shares of Series H MAPS held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the aggregate number of Outstanding shares of Series H MAPS subject to all such Submitted Bids and Submitted Sell Orders. (c) If, as a result of the procedures described in Subsections (a) or (b), any Existing Holder would be entitled or required to sell or any Potential Holder would be entitled or required to purchase, a fraction of a share of Series H MAPS on any Auction Date, the Auction Agent shall, in such manner as in its sole discretion it shall determine, round up or down the number of shares of Series H MAPS to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that only whole shares of Series H MAPS will be entitled or required to be sold or purchased. 20 (d) If, as a result of the procedures described in Subsection (a), any Potential Holder would be entitled or required to purchase less than a whole share of Series H MAPS on any Auction Date, the Auction Agent shall, in such manner as in its sole discretion it shall determine, allocate shares of Series H MAPS for purchase among Potential Holders so that only whole shares of Series H MAPS are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing any shares of Series H MAPS on such Auction Date. (e) Based on the results of each Auction, the Auction Agent shall determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders on behalf of Existing Holders or Potential Holders, the aggregate number of Outstanding shares of Series H MAPS to be purchased and the aggregate number of Outstanding shares of Series H MAPS to be sold by such Potential Holders and Existing Holders and, to the extent that such aggregate number of Outstanding shares of Series H MAPS to be purchased and such aggregate number of Outstanding shares of Series H MAPS to be sold differ, the Auction Agent shall determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker- Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Outstanding shares of Series H MAPS. Section 6. Participation in Auctions. The Company and its Affiliates shall not submit any Order in any Auction except as set forth in the next sentence. Any Broker-Dealer that is an Affiliate of the Company may submit Orders in Auctions but only if such Orders are not for its own account, except that if such affiliated Broker-Dealer holds shares of Series H MAPS for its own account, it must submit a Sell Order in the next Auction with respect to such shares of Series H MAPS. Section 7. Miscellaneous. An Existing Holder (a) may sell, transfer or otherwise dispose of shares of Series H MAPS only pursuant to a Bid or Sell Order in accordance with the procedures described in these Auction Procedures or to or through a Broker- Dealer or to a Person that has delivered a signed copy of a Master Purchaser's Letter to a Broker-Dealer, provided that in the case of all transfers other than pursuant to Auctions such Existing Holder, its Broker-Dealer or its Agent Member advises the Auction Agent of such transfer and (b) unless otherwise required by law, shall have the beneficial ownership of the shares of Series H MAPS held by it maintained in book-entry form by the Securities Depositary in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. All of the Outstanding shares of Series H MAPS shall be represented by a single certificate registered in the name of the nominee of the Securities Depositary unless otherwise required by law or unless there is no Securities Depositary. If there is no Securities Depositary, shares of Series H MAPS shall be registered in the register of the Company in the name of the Existing Holder thereof and such Existing Holder thereupon will be entitled to receive a certificate therefor and be required to deliver a certificate therefor upon transfer or exchange thereof. 21 RESOLVED FURTHER, that the Chairman of the Board, the President or any Vice President, and the Secretary, the Chief Financial Officer, the Treasurer, or any Assistant Secretary or Assistant Treasurer of this Company are each authorized to execute, verify, and file a certificate of determination of preferences in accordance with California law. 3. The authorized number of shares of Preferred Stock of the Company is 20,000,000, and the number of shares constituting Series H MAPS, none of which has been issued, is 500. IN WITNESS WHEREOF, the undersigned have executed this certificate on Nov. 30, 1995. /s/ Steven F. Udvar-Hazy _____________________________________________ STEVEN F. UDVAR-HAZY, President /s/ Julie I. Sackman _____________________________________________ JULIE I. SACKMAN, Secretary The undersigned, STEVEN F. UDVAR-HAZY and JULIE I. SACKMAN, the President and Secretary, respectively, of INTERNATIONAL LEASE FINANCE CORPORATION, each declares under penalty of perjury that the matters set forth in the foregoing Certificate are true of his or her own knowledge. Executed at Los Angeles, California on Nov. 30, 1995. /s/ Steven F. Udvar-Hazy _____________________________________________ STEVEN F. UDVAR-HAZY /s/ Julie I. Sackman _____________________________________________ JULIE I. SACKMAN 22 EX-10.13 4 REVOLVING CREDIT AGREEMENT ($1,000,000,000) CONFORMED COPY -------------- 10.13 $1,000,000,000 REVOLVING CREDIT AGREEMENT DATED AS OF JANUARY 19, 1996 AMONG INTERNATIONAL LEASE FINANCE CORPORATION UNION BANK OF SWITZERLAND LOS ANGELES BRANCH AND THE OTHER BANKS (AS DEFINED HEREIN) TABLE OF CONTENTS
Page ---- SECTION 1. CERTAIN DEFINITIONS ............................................ 1 Section 1.1. Terms Generally......................................... 1 Section 1.2. Specific Terms.......................................... 1 SECTION 2. BID LOANS AND BID NOTES......................................... 15 Section 2.1. Making of Bid Loans..................................... 15 Section 2.2. Procedure for Bid Loans................................. 15 Section 2.3. Funding of Bid Loans.................................... 18 Section 2.4. Bid Notes............................................... 18 SECTION 3. COMMITTED LOANS AND NOTES....................................... 19 Section 3.1. Agreement to Make Committed Loans....................... 19 Section 3.2. Procedure for Committed Loans........................... 19 Section 3.3. Maturity of Committed Loans............................. 21 Section 3.4. Committed Notes......................................... 21 SECTION 4. INTEREST AND FEES............................................... 21 Section 4.1. Interest Rates.......................................... 21 Section 4.2. Interest Payment Dates.................................. 22 Section 4.3. Setting and Notice of Committed Loan Rates.............................................. 22 Section 4.4. Facility Fee............................................ 23 Section 4.5. Agent's Fees............................................ 24 Section 4.6. Computation of Interest and Fees........................ 24 SECTION 5. REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS........ 24 Section 5.1. Voluntary Termination or Reduction of the Commitments...................................... 24 Section 5.2. Voluntary Prepayments................................... 24 SECTION 6. MAKING AND PRORATION OF PAYMENTS; SET-OFF; TAXES................ 25 Section 6.1. Making of Payments...................................... 25 Section 6.2. Pro Rata Treatment; Sharing............................. 25 Section 6.3. Set-off................................................. 26 Section 6.4. Taxes, etc.............................................. 27 SECTION 7. INCREASED COSTS AND SPECIAL PROVISIONS FOR ABSOLUTE RATE LOANS, LIBOR RATE LOANS AND CD RATE LOANS.............................. 28 Section 7.1. Increased Costs......................................... 28 Section 7.2. Basis for Determining Interest Rate Inadequate or Unfair.................................... 30 Section 7.3. Changes in Law Rendering Certain Loans Unlawful.......................................... 31 Section 7.4. Funding Losses.......................................... 31 Section 7.5. Discretion of Banks as to Manner of Funding................................................. 32 Section 7.6. Conclusiveness of Statements; Survival of Provisions.................................. 32
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Page ---- SECTION 8. REPRESENTATIONS AND WARRANTIES................................. 32 Section 8.1. Organization, etc...................................... 32 Section 8.2. Authorization; Consents; No Conflict............................................... 33 Section 8.3. Validity and Binding Nature............................ 33 Section 8.4. Financial Statements................................... 34 Section 8.5. Litigation and Contingent Liabilities............................................ 34 Section 8.6. Employee Benefit Plans................................. 34 Section 8.7. Investment Company Act................................. 35 Section 8.8. Public Utility Holding Company Act..................... 35 Section 8.9. Regulation U........................................... 35 Section 8.10. Information............................................ 35 Section 8.11. Compliance with Applicable Laws, etc.................................................... 36 Section 8.12. Insurance.............................................. 36 Section 8.13. Taxes.................................................. 36 Section 8.14. Use of Proceeds........................................ 36 Section 8.15. Pari Passu............................................. 36 Section 8.16. Ownership and Liens.................................... 36 SECTION 9. COVENANTS...................................................... 37 Section 9.1. Reports, Certificates and Other Information............................................ 37 Section 9.2. Existence.............................................. 39 Section 9.3. Nature of Business..................................... 39 Section 9.4. Books, Records and Access.............................. 39 Section 9.5. Insurance.............................................. 40 Section 9.6. Repair................................................. 40 Section 9.7. Taxes.................................................. 40 Section 9.8. Compliance............................................. 40 Section 9.9. Merger, Purchase and Sale.............................. 41 Section 9.10. Consolidated Indebtedness to Consolidated Tangible Net Worth Ratio.................. 41 Section 9.11. Fixed Charge Coverage Ratio............................ 42 Section 9.12. Consolidated Tangible Net Worth........................ 42 Section 9.13. Restricted Payments.................................... 42 Section 9.14. Liens.................................................. 42 Section 9.15. Leases................................................. 45 Section 9.16. Use of Proceeds........................................ 45 Section 9.17. Transactions with Related Parties...................... 46 Section 9.18. Securitization......................................... 46 SECTION 10. CONDITIONS TO LENDING......................................... 46 Section 10.1. Conditions Precedent to All Loans...................... 46 Section 10.2. Conditions to the Availability of the Commitments........................................ 47 SECTION 11. EVENTS OF DEFAULT AND THEIR EFFECT............................ 49 Section 11.1. Events of Default...................................... 49
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Page ---- Section 11.2. Effect of Event of Default............................. 51 SECTION 12. THE AGENT..................................................... 52 Section 12.1. Authorization.......................................... 52 Section 12.2. Indemnification........................................ 52 Section 12.3. Action on Instructions of the Required Banks......................................... 53 Section 12.4. Payments............................................... 53 Section 12.5. Exculpation............................................ 54 Section 12.6. Credit Investigation................................... 55 Section 12.7. UBS and Affiliates..................................... 55 Section 12.8. Resignation............................................ 55 SECTION 13. GENERAL....................................................... 56 Section 13.1. Waiver; Amendments..................................... 56 Section 13.2. Notices................................................ 57 Section 13.3. Computations........................................... 57 Section 13.4. Assignments; Participations............................ 58 Section 13.5. Costs, Expenses and Taxes.............................. 61 Section 13.6. Indemnification........................................ 62 Section 13.7. Regulation U........................................... 62 Section 13.8. Extension of Termination Dates; Removal of Banks; Substitution of Banks............................................... 62 Section 13.9. Captions............................................... 65 Section 13.10. Governing Law; Severability............................ 65 Section 13.11. Counterparts; Effectiveness............................ 65 Section 13.12. Further Assurances..................................... 66 Section 13.13. Successors and Assigns................................. 66 Section 13.14. Waiver of Jury Trial................................... 66
-iii- SCHEDULES AND EXHIBITS Schedule I Schedule of Banks (Sections 1.2 and 13.8) Schedule II Fees and Margins (Sections 1.2, 4.4 and 4.6) Exhibit A Form of Notice of Competitive Bid Borrowing (Sections 1.2 and 2.2) Exhibit B Form of Bid (Sections 1.2 and 2.2) Exhibit C Form of Committed Loan Request (Section 3.2) Exhibit D Form of Bid Note (Section 1.2) Exhibit E Form of Committed Note (Section 1.2) Exhibit F Fixed Charge Coverage Ratio (Sections 1.2 and 9.11) Exhibit G Form of Opinion of O'Melveny & Myers, Counsel for the Company (Section 10.2.5) Exhibit H Form of Opinion of the General Counsel of the Company (Section 10.2.5) Exhibit I Form of Assignment and Assumption Agreement (Section 13.4.1) Exhibit J Form of Request For Extension of Termination Date (Section 13.8) -iv- REVOLVING CREDIT AGREEMENT -------------------------- REVOLVING CREDIT AGREEMENT (this "Agreement"), dated as of January 19, 1996, among INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation (herein called the "Company"), the financial institutions listed on the signature pages hereof (herein, together with their respective successors and assigns, collectively called the "Banks" and individually each called a "Bank") and UNION BANK OF SWITZERLAND, acting through its Los Angeles Branch (herein, in its individual capacity, together with its successors and assigns, called "UBS"), as agent for the Banks (herein, in such capacity, together with its successors and assigns in such capacity, called the "Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company has requested the Banks to lend up to $1,000,000,000 to the Company on a revolving basis to enable the Company to support its commercial paper program and for other general corporate purposes; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows: SECTION 1. CERTAIN DEFINITIONS. Section 1.1. Terms Generally. The definitions ascribed to terms in --------------- this Section 1 and elsewhere in this Agreement shall apply equally to both the --------- singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The words "hereby", "herein", "hereof", "hereunder" and words of similar import refer to this Agreement as a whole (including any exhibits and schedules hereto) and not merely to the specific section, paragraph or clause in which such word appears. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of and Exhibits and Schedules to this Agreement unless the context shall otherwise require. Section 1.2. Specific Terms. When used herein, the following terms -------------- shall have the following meanings: Absolute Rate means a rate of interest per annum, expressed as a ------------- percentage to four decimal places and set forth in a Bid for a particular Bid Loan amount and a particular Loan Period. Absolute Rate Loan means any Loan which bears interest at an Absolute ------------------ Rate. Affiliate means, with respect to any Person, any other Person directly --------- or indirectly controlling, controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through ownership of stock, by contract or otherwise. Agent - see Preamble. ----- -------- Aggregate Commitment means $1,000,000,000, as reduced by any reduction -------------------- in the Commitments made from time to time pursuant to Section 5.1 or 13.8. ----------- ---- Agreement - see Preamble. --------- -------- AIG means American International Group, Inc. --- Assessment Rate means, at any time, the then current rate as --------------- determined by the Agent after consultation with the Reference Banks, for the lowest annual assessment payable by banks to the FDIC (or any successor) for the FDIC's or such successor's insuring dollar deposits in the United States and, when used with respect to a Loan Period for a CD Rate Loan, shall mean such rate as in effect from time to time during such Loan Period. Assignee - see Section 13.4.1. -------- -------------- Authorized Officer of the Company means any of the Chairman of the ------------------ Board, the President, the Executive Vice President and Chief Financial Officer, the Treasurer, the Controller and the Assistant Controller of the Company. Available Commitment - see Section 2.2(a). -------------------- -------------- Bank - see Preamble. ---- -------- Bank Parties - see Section 13.6. ------------ ------------ Base LIBOR means, with respect to any Loan Period for a LIBOR Rate ---------- Loan, the rate per annum determined by the Agent to be the arithmetic mean (rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next higher 1/16 of 1%) of the respective rates of interest communicated by the Reference Banks to the Agent as the rate at which Dollar deposits are offered to the Reference Banks by leading banks in the London interbank deposit market at approximately 11:00 a.m., London time, on the second full Business Day preceding the first day of such Loan Period in an amount substantially equal to the amount of such LIBOR Rate Loan for such Reference Banks and for a period equal to such Loan Period. Base Rate means a fluctuating interest rate per annum, as shall be in --------- effect from time to time, which rate per annum shall be equal to the higher of (i) the Prime Rate and (ii) one half of one percent per annum above the Federal Funds Rate. -2- Base Rate Loan means any Loan which bears interest at the Base Rate. -------------- Bid means one or more offers by a Bank to make one or more Bid Loans, --- submitted to the Agent by telephone no later than the Submission Deadline and promptly confirmed in writing on the same day on a duly completed and executed form substantially similar to Exhibit B, personally delivered or transmitted by --------- facsimile to the Agent. Bid Borrowing - see Section 2.2(a). ------------- -------------- Bid Loan means a Loan in Dollars that is an Absolute Rate Loan or a -------- LIBOR Rate Loan made pursuant to Section 2. --------- Bid Note means a promissory note of the Company, substantially in the -------- form of Exhibit D, duly completed, evidencing Bid Loans made to the Company, as --------- such note may be amended, modified or supplemented or supplanted pursuant to Section 13.4.1 from time to time. - - -------------- Business Day means any day of the year on which banks are open for ------------ commercial banking business in the city of New York and in Los Angeles and, if the applicable Business Day relates to the determination of LIBOR for any LIBOR Rate Loan any such Business Day on which dealings in deposits in Dollars are transacted in the London interbank market. Capitalized Lease means any lease under which any obligations of the ----------------- lessee are, or are required to be, capitalized on a balance sheet of the lessee in accordance with generally accepted accounting principles in the United States. Capitalized Rentals means, as of the date of any determination, the ------------------- amount at which the obligations of the lessee, due and to become due under all Capitalized Leases under which the Company or any Subsidiary is a lessee, are reflected as a liability on a consolidated balance sheet of the Company and its Subsidiaries. CD Base Rate means with respect to any Loan Period for a CD Rate Loan ------------ the average of the bid rates (rounded to the nearest 1/100 of 1% or, if there is no nearest 1/100 of 1%, to the next higher 1/100 of 1%) quoted at 10:00 a.m., New York City time (or as soon thereafter as is practi cable), on the first Business Day of such Loan Period by two or more New York certificate of deposit dealers of recognized standing, selected by the Agent, for the purchase at face value of 30-day, 60-day, 90-day or 180-day, as the case may be, certificates of deposit sold by the Reference Banks in the secondary market in an amount substantially equal to the amount of such CD Rate Loan. CD Rate means, with respect to any Loan Period, the rate per annum ------- determined pursuant to the following formula, which rate shall change during such Loan Period as and when the Reserve Percentage or the Assessment Rate shall change: -3- CDBR CD Rate = -------- + AR + ARM 1 - RP where: ----- CDBR = CD Base Rate for such Loan Period for a CD Rate Loan AR = Assessment Rate ARM = The applicable rate margin with respect to CD Rate Loans set forth in Schedule II hereto ----------- RP = Reserve Percentage CD Rate Loan means any Loan that bears interest at the CD Rate. ------------ Code means the Internal Revenue Code of 1986, as amended. ---- Commitments means the Banks' commitments to make Committed Loans ----------- hereunder; and Commitment as to any Bank means the amount set forth opposite ---------- such Bank's name on Schedule I (as reduced in accordance with Section 5.1, or as ---------- ----------- periodically revised in accordance with Section 13.4 or Section 13.8). ------------ ------------ Committed Loan means a Loan in Dollars that is a Base Rate Loan, CD -------------- Rate Loan or LIBOR Rate Loan made pursuant to Section 3. --------- Committed Loan Request - see Section 3.2(a). ---------------------- -------------- Committed Note means a promissory note of the Company, substantially -------------- in the form of Exhibit E, duly completed, evidencing Committed Loans to the --------- Company, as such note may be amended, modified or supplemented or supplanted pursuant to Section 13.4.1 from time to time. -------------- Company - see Preamble. ------- -------- Consolidated Indebtedness means, as of the date of any determination, ------------------------- the total amount of Indebtedness, less the amount of current and deferred income taxes and rentals received in advance of the Company and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles in the United States. Consolidated Tangible Net Worth means, as of the date of any ------------------------------- determination, the total of shareholders' equity (including capital stock, additional paid-in capital and retained earnings after deducting treasury stock), less the sum of the total amount of goodwill, organization expenses, unamortized debt issue costs (determined on an after tax basis), deferred assets other than prepaid insurance and prepaid taxes, the excess of cost of shares acquired over book value of related assets, surplus -4- resulting from any revaluation write-up of assets subsequent to September 30, 1994 and such other assets as are properly classified as intangible assets, all determined in accordance with generally accepted accounting principles in the United States consolidating the Company and its Subsidiaries. Dollar, and $, refer to the lawful money of the United States. ------ ERISA means the Employee Retirement Income Security Act of 1974, as ----- amended. ERISA Affiliate means any corporation, trade or business that is, --------------- along with the Company or any Subsidiary, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in sections 414(b) and 414(c), respectively, of the Code or section 4001 of ERISA. Eurodollar Reserve Percentage means for any day in any Loan Period for ----------------------------- any LIBOR Rate Loan that percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor thereto) or other U.S. government agency for determining the reserve requirement (including, without limitations, any marginal, basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion dollars in respect of eurocurrency funding liabilities. LIBOR shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. Event of Default means any of the events described in Section 11.1. ---------------- ------------ Existing Litigation - see Section 10.1.3. ------------------- --------------- FASB 13 means the Statement of Financial Accounting Standards No. 13 ------- (Accounting for Leases) as in effect on the date hereof. FDIC means the Federal Deposit Insurance Corporation. ---- Federal Funds Rate means, for any day, the rate set forth in the ------------------ weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System (including any such successor publication, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the -5- rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m., New York City time, on such day by each of three leading brokers of Federal funds trans actions in New York City, selected by the Agent. The rate for any day which is not a Business Day shall be the rate for the immediately preceding Business Day. Fixed Charge Coverage Ratio on the last day of any quarter of any --------------------------- fiscal year of the Company means the ratio for the period of four fiscal quarters ending on such day of earnings to combined fixed charges and preferred stock dividends referred to in Paragraph (d)(1)(i) of Item 503 of Regulation S-K of the Securities and Exchange Commission, as amended from time to time, and determined pursuant to Paragraphs (d)(2) through (d)(10) of such Item 503 with the Company as "registrant" (such ratio for the four fiscal quarters ended September 30, 1995 is attached hereto as Exhibit F); provided, however that if --------- -------- ------- the Required Banks in their sole discretion determine that amendments to Regulation S-K subsequent to the date hereof substantially modify the provisions of such Item 503, "Fixed Charge Coverage Ratio" shall have the meaning ---- --- determined by this definition without regard to any such amendments. Funding Date means the date on which any Loan is scheduled to be ------------ disbursed. Funding Office means, with respect to any Bank, any office or offices -------------- of such Bank or Affiliate or Affiliates of such Bank through which such Bank shall fund or shall have funded any Loan. A Funding Office may be, at such Bank's option, either a domestic or foreign office of such Bank or a domestic or foreign office of an Affiliate of such Bank. Governmental Authority means any nation or government, any state or ---------------------- other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. Guaranties by any Person means all obligations (other than ---------- endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation or (ii) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, (c) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness or obligation or (d) otherwise to assure the -6- owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof; provided, however, that the obligation described in clause (c) -------- ------- ---------- shall not include (i) obligations of a buyer under an agreement with a seller to purchase goods or services entered into in the ordinary course of such buyer's and seller's businesses unless such agreement requires that such buyer make payment whether or not delivery is ever made of such goods or services and (ii) remarketing agreements where the remaining debt on an aircraft does not exceed the aircraft's net book value, determined in accordance with industry standards, except that clause (c) shall apply to the amount of remaining debt under a ---------- remarketing agreement that exceeds the net book value of the aircraft. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. Indebtedness of any Person means and includes all obligations of such ------------ Person which in accordance with generally accepted accounting principles in the United States shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all: (a) obligations of such Person for borrowed money or which have been incurred in connection with the acquisition of property or assets (other than security and other deposits on flight equipment), (b) obligations secured by any Lien or other charge upon property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations, (c) obligations created or arising under any conditional sale, or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property, (d) Capitalized Rentals of such Person under any Capitalized Lease, (e) obligations evidenced by bonds, debentures, notes or other similar instruments, and (f) Guaranties by such Person to the extent required pursuant to the definition thereof. Indemnified Liabilities - see Section 13.6. ----------------------- ------------ -7- Investment means any investment, made in cash or by delivery of any ---------- kind of property or asset, in any Person, whether (i) by acquisition of (x) shares of stock or similar interest, (y) Indebtedness, or (z) other obligation or security or (ii) by loan, advance or capital contribution, or otherwise. For purposes of this Agreement, Investment shall exclude any notes receivable and any finance or sales-type leases entered into by the Company or any of its Subsidiaries in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto and minus the amount of any portion of such Investment repaid to such Person in cash as a return of capital, but without any other adjustment for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. LIBOR means with respect to any Loan Period the rate per annum ----- (rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next higher 1/16 of 1%), determined pursuant to the following formula: Base LIBOR ----------------------------------- LIBOR = (1 - Eurodollar Reserve Percentage) LIBOR Rate means (i) with respect to Committed Loans that are LIBOR ---------- Rate Loans, LIBOR plus the applicable rate margin set forth in Schedule II and ----------- (ii) with respect to Bid Loans that are LIBOR Rate Loans, LIBOR plus or minus the rate margin set forth in a Bid for a particular Bid Loan amount and a particular Loan Period. LIBOR Rate Loan means any Loan which bears interest at a LIBOR Rate. --------------- Lien means any mortgage, pledge, lien, security interest or other ---- charge, encumbrance or preferential arrangement, including the retained security title of a conditional vendor or lessor. Litigation Actions means all litigation, claims and arbitration ------------------ proceedings, proceedings before any Governmental Authority or investigations which are pending or, to the knowledge of the Company, threatened against, or affecting, the Company or any Subsidiary. Loan Period means (i) with respect to any Absolute Rate Loan, the ----------- period commencing on such Loan's Funding Date and ending not less than 14 days thereafter nor more than 183 days thereafter as specified in the Bid Loan Request related to such Bid Loan, (ii) with respect to any LIBOR Rate Loan, the period commencing on such Loan's Funding Date and ending 1, 2, 3 or 6 months thereafter as selected by the Company pursuant to Section 3.2(a) or specified in -------------- the Bid Loan Request, as the case may be and (iii) with respect to any CD Rate Loan, the period commencing on such Loan's Funding Date and ending 30, 60, 90 or 180 days thereafter as selected by the Company pursuant to Section 3.2(a); -------------- provided, however, that - - -------- ------- -8- (a) if a Loan Period would otherwise end on a day which is not a Business Day, such Loan Period shall end on the next succeeding Business Day (unless, in the case of a LIBOR Rate Loan, such next succeeding Business Day would fall in the next succeeding calendar month, in which case such Loan Period shall end on the next preceding Business Day); (b) in the case of a Loan Period for any LIBOR Rate Loan, if there exists no day numerically corresponding to the day such Loan was made in the month in which the last day of such Loan Period would otherwise fall, such Loan Period shall end on the last Business Day of such month; and (c) on the date of the making of any Loan by a Bank, the Loan Period for such Loan shall not extend beyond the then-scheduled Termination Date for such Bank. Loans means, collectively, the Bid Loans and the Committed Loans and, ----- individually, any Bid Loan or Committed Loan. Material Adverse Effect shall mean (i) any material adverse effect on ----------------------- the business, properties, condition (financial or otherwise) or operations, present or prospective, of the Company and its Subsidiaries, taken as a whole since any stated reference date or from and after the date of determination, as the case may be, (ii) any material adverse effect on the ability of the Company to perform its obligations hereunder and under the Notes or (iii) any adverse effect on the legality, validity, binding effect or enforceability of any material provision of this Agreement or any Note. Multiemployer Plan has the meaning assigned to such term in section ------------------ 3(37) of ERISA. New Litigation - see Section 10.1.3. -------------- -------------- Notes means, collectively, the Bid Notes and the Committed Notes; and ----- Note means any individual Bid Note or Committed Note. - - ---- Notice of Competitive Bid Borrowing - see Section 2.2(a). ----------------------------------- -------------- Notice Office means the New York Branch of UBS which, as of the date ------------- hereof, is 299 Park Avenue, New York, New York 10071-0026, Attn: James Broadus, Telecopy Number (212) 821-3259; Telephone (212) 821-3227. Operating Lease means any lease other than a Capitalized Lease; --------------- provided, however, that leases with an original term of less than one year shall - - -------- ------- not be Operating Leases. Operating Lease Rental of an Operating Lease means, as of the date of ---------------------- any determination thereof, the net present value of the aggregate unpaid amount due at such date and to become due from the Company or any -9- Subsidiary, on a consolidated basis, as lessee under such Operating Lease discounted at such lessee's incremental borrowing rate or if the interest rate implicit in such Operating Lease can be practically determined and is smaller, at such interest rate, such present value and interest rate being determined in accordance with standard financial practice and such borrowing rate being determined in accordance with FASB 13, excluding from such aggregate amount all amounts which are in excess of the minimum aggregate unpaid amount due at such date and to become due from such lessee under such Operating Lease assuming that such lessee would take or fail to take all actions with respect to all termination, renewal, purchase and other options as would produce the least amount becoming due under such Operating Lease, and "Operating Lease Rentals" means, as of the date of any determination, the aggregate Operating Lease Rental of all Operating Leases as of such date. Participant - see Section 13.4.2. ----------- -------------- Payment Office means the New York Branch of UBS which, as of the date -------------- hereof, is at 299 Park Avenue, New York, New York 10071-0026, Attn: James Broadus. PBGC means the Pension Benefit Guaranty Corporation and any entity ---- succeeding to any or all of its functions under ERISA. Percentage means as to any Bank the ratio, expressed as a percentage, ---------- that such Bank's Commitment as set forth opposite such Bank's name on Schedule -------- I, as periodically revised in accordance with Section 13.4 or 13.8, bears to the - - - ------------ ---- Aggregate Commitment or, if the Commitments have been terminated, the ratio, expressed as a percentage, that the aggregate principal amount of such Bank's outstanding Loans bears to the aggregate principal amount of all outstanding Loans. Permitted Acquisitions means purchases or other acquisitions, or ---------------------- Investments by acquisition of shares of stock, for which cumulatively and in the aggregate since the date hereof the Company has not given consideration in value exceeding $100,000,000. Person means an individual or a corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. Plan means, at any date, any employee pension benefit plan (as defined ---- in section 3(2) of ERISA) which is subject to Title IV of ERISA (other than a Multiemployer Plan) and to which the Company or any ERISA Affiliate may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. -10- Prime Rate means the rate of interest publicly announced from time to ---------- time by the New York Branch of UBS as its prime commercial lending rate. Reference Banks means UBS, The Bank of Nova Scotia, Commerzbank AG and --------------- The Bank of New York. Related Party means, for purposes of Section 9.17 only, any Person ------------- ------------ (other than a Subsidiary): (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (ii) which beneficially owns or holds five percent or more of the equity interest of the Company, or (iii) twenty percent or more of the equity interest of which is beneficially owned or held by the Company or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Reportable Event has the meaning assigned to such term in section 4043 ---------------- of ERISA. Required Banks means Banks having an aggregate Percentage of 66 2/3% -------------- or more. Reserve Percentage means for any day, that percentage, expressed as a ------------------ decimal, which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including any marginal, supplemental or emergency reserve requirements) for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the relevant Loan Period and in an amount of $100,000 or more. The CD Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage. Significant Subsidiary means any Subsidiary which is so defined ---------------------- pursuant to Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission. Submission Deadline- see Section 2.2(b). ------------------- -------------- Subsidiary means any Person of which or in which the Company and its ---------- other Subsidiaries own directly or indirectly 50% or more of: -11- (a) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such Person, if it is a corporation, (b) the capital interest or profits interest of such Person, if it is a partnership, joint venture or similar entity, or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated organization; provided, however, that so long as (i) the Company continues to own not more - - -------- ------- than 50% of Pacific Ocean Leasing, Ltd., and (ii) Pacific Ocean Leasing, Ltd. does not materially alter the manner in which it conducts the business in which it is currently engaged, Pacific Ocean Leasing, Ltd. shall not be considered a Subsidiary within the foregoing definition for purposes of this Agreement. Successor Bank - see Section 13.8(c). -------------- --------------- Taxes with respect to any Person means income, excise and other taxes, ----- and all assessments, imposts, duties and other governmental charges or levies, imposed upon such Person, its income or any of its properties, franchises or assets by any Governmental Authority. Terminating Bank - see Section 13.8(c). ---------------- --------------- Termination Date means, with respect to any Bank, the earliest to ---------------- occur of (i) the date that is 364 days after the date of this Agreement or such later date as may be agreed to by such Bank pursuant to Section 13.8(a), (ii) --------------- the date on which the Commitments shall terminate pursuant to Section 11.2 or ------------ the Commitments shall be reduced to zero pursuant to Section 5.1 and (iii) the ----------- date specified as such Bank's Termination Date pursuant to Section 13.8(b), or, --------------- if in any case (other than clause (ii) above) such day is not a Business Day, ----------- the next succeeding Business Day; in all cases, subject to the provisions of Section 13.8(d). - - --------------- UBS - see Preamble. --- -------- Unmatured Event of Default means any event which if it continues -------------------------- uncured will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default. Wholly-owned Subsidiary means any Person of which or in which the ----------------------- Company and its other Wholly-owned Subsidiaries own directly or indirectly 100% of: (a) the issued and outstanding shares of stock (except shares required as directors' qualifying shares), (b) the capital interest or profits interest of such Person, if it is a partnership, joint venture or similar entity, or -12- (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated organization. SECTION 2. BID LOANS AND BID NOTES. Section 2.1. Making of Bid Loans. On the terms and subject to the ------------------- conditions of this Agreement, each Bank, severally and for itself alone, may (but is not obligated to) make Bid Loans to the Company from time to time on or after the date hereof and prior to the date which is the fourteenth day preceding such Bank's Termination Date in amounts equal to such Bank's Bids that have been accepted as provided in Section 2.2(c); provided that the aggregate -------------- -------- principal amount of all outstanding Loans shall not at any time exceed the then Aggregate Commitment. Section 2.2. Procedure for Bid Loans. ----------------------- (a) Bid Loan Request. Whenever the Company desires to incur a ---------------- competitive bid borrowing (a "Bid Borrowing"), it shall give the Agent written notice (or telephonic notice promptly confirmed in writing), such notice to be delivered to the Agent at its Notice Office no later than 12:00 Noon (New York City time), at least three Business Days prior to any proposed LIBOR Rate Loan and at least one Business Day prior to any proposed Absolute Rate Loan. Each such notice shall be substantially in the form of Exhibit A hereto (each a --------- "Notice of Competitive Bid Borrowing"), and shall specify in each case (i) the date of such proposed Bid Borrowing (which shall be a Business Day), (ii) the aggregate amount of the proposed Bid Borrowing, (iii) whether the proposed Bid Borrowing is to be an Absolute Rate Loan or a LIBOR Rate Loan and the Loan Period, (iv) the maturity date for repayment of each Bid Loan to be made as part of such borrowing (which maturity date shall not be earlier than one month after the date of any proposed LIBOR Rate Loan or 14 days after the date of any proposed Absolute Rate Loan or later than the earliest to occur of (x) six months after the date of such proposed Bid Loan, (y) the Termination Date and (z) if the proposed Bid Loan has an interest rate that is the LIBOR Rate, the last day of the proposed Loan Period), (v) the interest payment date or dates relating thereto, (vi) the account of the Company to which the proceeds of such Bid Borrowing are to be credited and (vii) any other terms to be applicable to such Bid Borrowing. The Agent shall promptly give each Bank written notice (or telephonic notice promptly confirmed in writing) of each such request for a Bid Borrowing received by it from the Company. Each Notice of Competitive Bid Borrowing shall contemplate Bid Loans in a minimum aggregate principal amount of $10,000,000 or a higher integral multiple of $1,000,000, not to exceed, however, the excess of the then Aggregate Commitment over the aggregate principal amount of all outstanding Loans, calculated as of the relevant Funding Date, assuming that the Company will pay, when due, all Loans maturing on or prior to such Funding Date (the "Available Commitment"). (b) Bidding Procedure. Each Bank shall, if in its sole discretion it ----------------- elects to do so, irrevocably offer to make one or more Bid -13- Loans to the Company as part of such proposed Bid Borrowing at a rate or rates of interest specified by such Bank in its sole discretion and determined by such Bank independently of each other Bank, by notifying by telephone confirmed in writing to the Agent at its Notice Office (which shall give prompt notice thereof to the Company), before 10:00 a.m. (New York City time) on the date (the "Submission Deadline") that is (x) in the case of a proposed Absolute Rate Loan, the same day as the date of such proposed Bid Loan and (y) in the case of a proposed LIBOR Rate Loan, two Business Days before, the date of such proposed Bid Loan, of the minimum amount and maximum amount of each Bid Loan that such Bank would be willing to make as part of such proposed Bid Borrowing (which amounts may, subject to the proviso in Section 2.1, exceed such Bank's ----------- Commitment), the rate or rates of interest therefor and such Bank's lending office with respect to such Bid Loan; provided that if the Agent in its capacity -------- as a Bank shall, in its sole discretion, elect to make any such offer, it shall notify the Company of such offer before 8:30 a.m. (New York City time) on the Submission Deadline. (c) Acceptance of Bids. The Company shall, in turn, before 10:30 ------------------ a.m. (New York City time) on the Submission Deadline, either: (i) cancel such proposed Bid Borrowing by giving the Agent notice to that effect, or (ii) accept (such acceptance to be irrevocable) one or more of the offers made by any Bank or Banks pursuant to clause (b) above by giving ---------- notice (in writing or by telephone confirmed in writing) to the Agent of the amount of each Bid Loan (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Company by the Agent on behalf of such Bank for such Bid Borrowing pursuant to clause (b) above) to be made by such Bank as part of such Bid ---------- Borrowing, and reject any remaining offers made by any Bank pursuant to clause (b) above by giving the Agent notice to that effect; provided that ---------- -------- for any maturity date acceptance of offers may only be made on the basis of ascending Absolute Rates (in the case of an Absolute Rate Loan) or floating rates (in the case of a LIBOR Rate Loan), in each case commencing with the lowest rate so offered and only as to offers made in conformity with the terms hereof; provided further, however, if offers are made by two or more -------- ------- ------- Banks at the same rate or rates and acceptance of all such equal offers would result in a greater principal amount of Bid Loans being accepted than the aggregate principal amount requested by the Company, the Company shall have the right to accept one or more of such equal offers in their entirety and reject the other equal offer or offers or to allocate acceptance among all such equal offers (but giving effect to the minimum and maximum amounts specified for each such offer pursuant to clause (b) above), as the Company ---------- may elect in its sole discretion. For the avoidance of doubt, the Company may accept offers whose aggregate principal amount is greater than or less than the requested aggregate amount as specified in the related Notice of Competitive Bid Borrowing, subject to the proviso in Section 2.1. ----------- -14- (d) Cancellation of Bid Borrowing. If the Company notifies the Agent ----------------------------- that such proposed Bid Borrowing is cancelled pursuant to clause (c)(i) above, ------------- the Agent shall give prompt notice thereof to the Banks and such Bid Borrowing shall not be made. (e) Notification of Acceptance. If the Company accepts one or more -------------------------- of the offers made by any Bank or Banks pursuant to clause (c)(ii) above, the -------------- Agent shall in turn promptly notify (x) each Bank that has made an offer as described in clause (b) above, of the date and aggregate amount of such Bid ---------- Borrowing and whether or not any offer or offers made by such Bank pursuant to clause (b) above have been accepted by the Company and (y) each Bank that is to - - ---------- make a Bid Loan as part of such Bid Borrowing, of the amount of each Bid Loan to be made by such Bank as part of such Bid Borrowing. (f) Reliance. The Agent may rely and act upon notice given by -------- telephone by individuals reasonably believed by the Agent to be those designated to the Agent by the Company or by any Bank in writing from time to time, without waiting for receipt of written confirmation thereof, and the Company hereby agrees to indemnify and hold harmless the Agent from and against any and all losses, costs, expenses, damages, claims, actions or other proceedings relating to such reliance. Section 2.3. Funding of Bid Loans. No later than 1:00 p.m. (New York -------------------- City time) on the date specified in each Notice of Competitive Bid Borrowing, each Bank will make available the Bid Loan, if any, to be made by such Bank as part of the Bid Borrowing requested to be made on such date in the manner provided below. All amounts shall be made available to the Agent in Dollars and immediately available funds at the Payment Office of the Agent and the Agent promptly will make available to the Company at its account specified in the relevant Notice of Competitive Bid Borrowing the aggregate of the amounts so made available in the type of funds received. Unless the Agent shall have been notified by any Bank which has submitted a bid pursuant to Section 2.2(b) prior -------------- to the date of the proposed Bid Borrowing that such Bank does not intend to make available to the Agent its portion, if any, of the Bid Borrowing to be made on such date, the Agent may assume that such Bank has made such amount available to the Agent on such date of Bid Borrowing, and the Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Company a corresponding amount. Section 2.4. Bid Notes. The Bid Loans of each Bank shall be --------- evidenced by a Bid Note payable to the order of such Bank in the original principal amount of the Aggregate Commitment. Each Bank shall record in its records, or at its option on the schedule attached to its Bid Note, the date and amount of each Bid Loan made by such Bank, each repayment thereof, and the dates on which the Loan Period for such Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Note. The failure to so record or any error in so recording any such amount or any payment thereof shall not, however, limit or otherwise affect the -15- obligations of the Company hereunder or under such Bid Note to repay the principal amount of each Bid Loan together with all interest accruing thereon. SECTION 3. COMMITTED LOANS AND NOTES. Section 3.1. Agreement to Make Committed Loans. On the terms and --------------------------------- subject to the conditions of this Agreement, each Bank, severally and for itself alone, agrees to make Loans (herein collectively called "Committed Loans" and individually each called a "Committed Loan") on a revolving basis from time to time before such Bank's Termination Date in such Bank's Percentage of such aggregate amounts as the Company may from time to time request as provided in Section 3.2; provided that (a) the aggregate principal amount of all outstanding - - ----------- -------- Committed Loans of any Bank shall not at any time exceed the amount set forth opposite such Bank's name on Schedule I (as reduced in accordance with Section ---------- ------- 5.1, 13.4 or 13.8) and (b) the aggregate principal amount of all outstanding - - --- ---- ---- Committed Loans of all Banks plus the aggregate principal amount of all outstanding Bid Loans of all Banks shall not at any time exceed the then Aggregate Commitment. Section 3.2. Procedure for Committed Loans. ----------------------------- (a) Committed Loan Requests. The Company shall give the Agent ----------------------- irrevocable telephonic notice at the Notice Office (promptly confirmed in writing on the same day), not later than 10:30 a.m., New York City time, (i) at least three Business Days prior to the Funding Date in the case of LIBOR Rate Loans, (ii) at least two Business Days prior to the Funding Date in the case of CD Rate Loans or (iii) on the Funding Date in the case of Base Rate Loans, of each requested Committed Loan, and the Agent shall promptly advise each Bank thereof and, in the case of a LIBOR Rate Loan or a CD Rate Loan, request each Reference Bank to notify the Agent of its applicable rate (as contemplated in the definitions of Base LIBOR and CD Base Rate). Each such notice to the Agent (a "Committed Loan Request") shall be substantially in the form of Exhibit C and --------- shall specify (i) the Funding Date (which shall be a Business Day), (ii) the aggregate amount of the Loans requested (in an amount permitted under clause (b) ---------- below), (iii) whether each Loan shall be a LIBOR Rate Loan, a CD Rate Loan or a Base Rate Loan and (iv) except for a Base Rate Loan, the Loan Period therefor (subject to the limitations set forth in the definition of Loan Period). (b) Amount and Increments of Committed Loans. Each Committed Loan ---------------------------------------- Request shall contemplate Committed Loans in a minimum aggregate amount of $25,000,000 or a higher integral multiple of $1,000,000, not to exceed in the aggregate (for all requested Committed Loans) the Available Commitment. (c) Funding of Committed Loans. -------------------------- (i) Not later than 1:30 p.m., New York City time, on the Funding Date of a Committed Loan, each Bank shall, subject to this Section 3.2(c), -------------- provide the Agent at its Notice Office with -16- immediately available funds covering such Bank's Committed Loan (provided -------- that a Bank's obligation to provide funds to the Agent shall be deemed satisfied by such Bank's delivery to the Agent at its Notice Office not later than 1:30 p.m., New York City time, of a federal reserve wire confirmation number covering the proceeds of such Bank's Committed Loan) and the Agent shall pay over such funds to the Company not later than 2:00 p.m., New York City time, on such day if the Agent shall have received the documents required under Section 10 with respect to such Loan and the other ---------- conditions precedent to the making of such Loan shall have been satisfied not later than 10:00 a.m., New York City time, on such day. If the Agent does not receive such documents or such other conditions precedent have not been satisfied prior to such time, then (A) the Agent shall not pay over such funds to the Company, (B) the Company's Committed Loan Request related to such Loan shall be deemed cancelled in its entirety, (C) in the case of Committed Loan Requests relative to LIBOR Rate Loans and CD Rate Loans, the Company shall be liable to each Bank in accordance with Section 7.4(b) and -------------- (D) the Agent shall return the amount previously provided to the Agent by each Bank on the next following Business Day. (ii) The Company agrees, notwithstanding its previous delivery of any documents required under Section 10 with respect to a particular Loan, ---------- immediately to notify the Agent of any failure by it to satisfy the conditions precedent to the making of such Loan. The Agent shall be entitled to assume, after it has received each of the documents required under Section 10 with respect to a particular Loan, that each of the ---------- conditions precedent to the making of such Loan has been satisfied absent actual knowledge to the contrary received by the Agent prior to the time of the receipt of such documents. Unless the Agent shall have notified the Banks prior to 10:30 a.m., New York City time, on the Funding Date of any Loan that the Agent has actual knowledge that the conditions precedent to the making of such Loan have not been satisfied, the Banks shall be entitled to assume that such conditions precedent have been satisfied. (d) Repayment of Loans. If any Bank is to make a Committed Loan ------------------ hereunder on a day on which the Company is to repay (or has elected to prepay, pursuant to Section 5.2) all or any part of any outstanding Loan held by such ----------- Bank, the proceeds of such new Committed Loan shall be applied to make such repayment and only an amount equal to the positive difference, if any, between the amount being borrowed and the amount being repaid shall be requested by the Agent to be made available by such Bank to the Agent as provided in Section ------- 3.2(c). - - ------ Section 3.3. Maturity of Committed Loans. Except for a Base Rate --------------------------- Loan, which shall mature on the Termination Date, a Committed Loan made by a Bank shall mature on the last day of the Loan Period applicable to such Committed Loan, but in no event later than the Termination Date for such Bank. -17- Section 3.4. Committed Notes. The Committed Loans of each Bank shall --------------- be evidenced by a Committed Note payable to the order of such Bank in the original principal amount of such Bank's Commitment. Each Bank shall record in its records, or at its option on the schedule attached to its Committed Note, the date and amount of each Loan made by such Bank thereunder, each repayment or prepayment thereof, and, if applicable, the dates on which the Loan Period for such Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Note. The failure to so record or any error in so recording any such amount or any payment thereof shall not, however, limit or otherwise affect the obligations of the Company hereunder or under such Committed Note to repay the principal amount of each Committed Loan together with all interest accruing thereon. SECTION 4. INTEREST AND FEES. Section 4.1. Interest Rates. The Company hereby promises to pay -------------- interest on the unpaid principal amount of each Loan for the period commencing on the Funding Date until such Loan is paid in full, as follows: (a) if such Loan is a Bid Loan, at a rate per annum equal to the Absolute Rate or the LIBOR Rate, as applicable, offered by the applicable Bank and accepted by the Company for such Bid Loan; (b) if such Loan is a Base Rate Loan, at a rate per annum equal to the Base Rate from time to time in effect; (c) if such Loan is a Committed Loan that is a LIBOR Rate Loan, at a rate per annum equal to the LIBOR Rate applicable to the Loan Period for such Loan; and (d) if such Loan is a CD Rate Loan, at a rate per annum equal to the CD Rate applicable to the Loan Period for such Loan; provided, however, that after the maturity of any Loan (whether by acceleration - - -------- ------- or otherwise), such Loan shall bear interest on the unpaid principal amount thereof at a rate per annum (calculated on the basis of a 360-day year for the actual number of days involved) equal to the Base Rate from time to time in effect (but not less than the interest rate in effect for such Loan immediately prior to maturity) plus 1% per annum. Section 4.2. Interest Payment Dates. Except for Base Rate Loans, as ---------------------- to which accrued interest shall be payable on the last day of each calendar quarter and on the Termination Date, accrued interest on each Loan shall be payable in arrears on the last day of the Loan Period therefor and (i) with respect to each LIBOR Rate Loan with a Loan Period of six months, on the day that is three months after the first day of such Loan Period (or, if there is no day in such third month numerically corresponding to such first day of the Loan Period, on the last Business -18- Day of such month), (ii) with respect to each CD Rate Loan with a Loan Period of 180 days, on the day that is 90 days after the first day of such Loan Period and (iii) with respect to each Absolute Rate Loan with a Loan Period exceeding 90 days, on the day that is 90 days after the first day of such Loan Period. After the maturity of any Loan, accrued interest on such Loan shall be payable on demand. If any interest payment date falls on a day that is not a Business Day, such interest payment date shall be postponed to the next succeeding Business Day and the interest paid shall cover the period of postponement (except that if the Loan is a LIBOR Rate Loan and the next succeeding Business Day falls in the next succeeding calendar month, such interest payment date shall be the immediately preceding Business Day). Section 4.3. Setting and Notice of Committed Loan Rates. The ------------------------------------------ applicable interest rate for each Committed Loan hereunder shall be determined by the Agent and notice thereof shall be given by the Agent promptly to the Company and to each Bank. Each determination of the applicable interest rate by the Agent shall be conclusive and binding upon the parties hereto in the absence of demonstrable error. In the case of LIBOR Rate Loans and CD Rate Loans, each Reference Bank agrees to use its best efforts to notify the Agent in a timely fashion of its applicable rate after the Agent's request therefor under Section 2.2(a) and -------------- Section 3.2(a) (as contemplated in the definitions of Base LIBOR and CD Base - - -------------- Rate). If as to any Loan Period any one or more of the Reference Banks is unable or for any reason fails to notify the Agent of its applicable rate by 11:30 a.m., New York City time, two Business Days before the Funding Date with respect to a LIBOR Rate Loan or by 10:30 a.m., New York City time, on the Funding Date with respect to a CD Rate Loan, then the applicable LIBOR Rate or CD Rate, as the case may be, shall be determined on the basis of the rate or rates of which the Agent is given notice by the remaining Reference Bank or Banks by such time. If none of the Reference Banks notifies the Agent of the applicable rate prior to 11:30 a.m., New York City time, two Business Days before the Funding Date with respect to the LIBOR Rate or by 10:30 a.m., New York City time, on the Funding Date with respect to the CD Rate, then (i) the Agent shall promptly notify the other parties thereof and (ii) at the option of the Company the Committed Loan Request delivered by the Company pursuant to Section 3.2(a) with respect to such Funding Date shall be cancelled or shall be - - -------------- deemed to have specified a Base Rate Loan. The Agent shall, upon written request of the Company or any Bank, deliver to the Company or such Bank a statement showing the computations used by the Agent in determining the interest rate applicable to any LIBOR Rate Loan or CD Rate Loan. Section 4.4. Facility Fee. The Company agrees to pay to the Agent ------------ for the accounts of the Banks pro rata in accordance with their respective --- ---- Percentages an annual facility fee computed by multiplying the average daily amount of the Aggregate Commitment (whether used or unused) by the applicable percentage determined with respect to such facility fee -19- in accordance with Schedule II hereto. Such fee shall be payable quarterly in ----------- arrears on the last Business Day of March, June, September and December of each year (beginning with the last Business Day of March, 1996) until the Commitments have expired or have been terminated and on the date of such expiration or termination (and, in the case of any Terminating Bank, such Bank's Termination Date), in each case for the period then ending for which such facility fee has not previously been paid. Section 4.5. Agent's Fees. The Company agrees promptly to pay to the ------------ Agent such fees as may be agreed from time to time by the Company and the Agent. Section 4.6. Computation of Interest and Fees. Interest on LIBOR Rate -------------------------------- Loans, CD Rate Loans and Base Rate Loans where the Base Rate is calculated in reference to the Federal Funds Rate, and facility and utilization fees shall be computed for the actual number of days elapsed on the basis of a 360-day year; interest on Base Rate Loans where the Base Rate is calculated in reference to the Prime Rate shall be computed for the actual number of days elapsed on the basis of a 365/366 day year, as the case may be. The interest rate applicable to each LIBOR Rate Loan, CD Rate Loan and Base Rate Loan, and (to the extent applicable) after the maturity of any other type of Loan, the interest rate applicable to such Loan, shall change simultaneously with each change in the LIBOR Rate, the CD Rate or the Base Rate, as applicable. SECTION 5. REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS. Section 5.1. Voluntary Termination or Reduction of the Commitments. The ----------------------------------------------------- Company may at any time on at least 5 days' prior irrevocable notice received by the Agent (which shall promptly on the same day or on the next Business Day advise each Bank thereof) permanently reduce the amount of the Commitments (such reduction to be pro rata among the Banks according to their respective Percentages) to an amount not less than the aggregate principal amount of all outstanding Loans. Any such reduction shall be in the amount of $5,000,000 or an integral multiple thereof. Concurrently with any such reduction, the Company shall prepay the principal of any Committed Loans outstanding to the extent that the aggregate amount of such Loans outstanding shall then exceed the Aggregate Commitment, as so reduced. The Company may from time to time on like irrevocable notice terminate the Commitments upon payment in full of all Loans, all interest accrued thereon, all fees and all other obligations of the Company hereunder; provided, however, that the Company may not at any time terminate the -------- ------- Commitments if any Bid Loan is outstanding (unless the holder of each such outstanding Bid Loan has given its prior written consent to the concurrent repayment of such Bid Loan). Section 5.2. Voluntary Prepayments. The Company may voluntarily prepay --------------------- Loans (other than Bid Loans, which may only be prepaid with the prior written consent of the holder thereof) without premium or penalty, -20- except as may be required pursuant to subsection (e) below, in whole or in part, -------------- provided that (a) each prepayment shall be in an aggregate principal amount of - - -------- $10,000,000 or an integral multiple of $1,000,000 in excess thereof, (b) except for the prepayment of the aggregate amount of all Loans outstanding, no such prepayment shall result in there being less than $10,000,000 in Loans outstanding in the aggregate, (c) the Company shall give the Agent at its Notice Office (which shall promptly advise each Bank) not less than three Business Days' prior notice thereof specifying the Loans to be prepaid and the date and amount of prepayment, (d) any prepayment of principal of any Loan shall include accrued interest to the date of prepayment on the principal amount being prepaid and (e) any prepayment of a LIBOR Rate Loan or a CD Rate Loan shall be subject to the provisions of Section 7.4. ----------- SECTION 6. MAKING AND PRORATION OF PAYMENTS; SET-OFF; TAXES. Section 6.1. Making of Payments. Except as provided in Section ------------------ ------- 3.2(d) all payments (including those made pursuant to Sections 5.1 and 5.2) of - - ------ ------------ --- principal of, or interest on, the Loans and all payments of fees shall be made by the Company to the Agent in immediately available funds at its Payment Office not later than 12:00 Noon, New York City time, on the date due; and funds received after that hour shall be deemed to have been received by the Agent on the next following Business Day. The Agent shall promptly remit to each Bank or other holder of a Note its share (if any) of each such payment. All payments under Section 7 shall be made by the Company directly to the Persons entitled --------- thereto. Section 6.2. Pro Rata Treatment; Sharing. --------------------------- (a) Except as required pursuant to Section 7 or Section 13.8, each --------- ------------ payment or prepayment of principal of any Committed Loans, each payment of interest on the Committed Loans, and each payment of the facility fee shall be allocated pro rata among the Banks in accordance with their respective --- ---- Percentages. Each payment of principal of any Bid Borrowing shall be allocated pro rata among the Banks participating in such Bid Borrowing in accordance with - - --- ---- the respective principal amounts of their outstanding Bid Loans comprising such Bid Borrowing. Each payment of interest on any Bid Borrowing shall be allocated pro rata among the Banks participating in such Bid Borrowing in accordance with - - --- ---- the respective amounts of accrued and unpaid interest on their outstanding Bid Loans comprising such Bid Borrowing. (b) If any Bank or other holder of a Committed Loan shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of principal of, interest on or fees or other amounts with respect to any Committed Loan in excess of the share of payments and other recoveries (exclusive of payments or recoveries under Section 7 or --------- pursuant to Section 13.8) such Bank or other holder would have received if such ------------ payment had been distributed pursuant to the provisions of Section 6.2(a), such -------------- Bank or other holder shall purchase -21- from the other Banks or holders, in a manner to be specified by the Agent, such participations in the Committed Loans held by them as shall be necessary so that all such payments of principal and interest with respect to the Committed Loans shall be shared by the Banks and other holders pro rata in accordance with their --- ---- respective Percentages; provided, however, that if all or any portion of the -------- ------- excess payment or other recovery is thereafter recovered from such purchasing Bank or holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) If any Bank or other holder of a Bid Loan shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of principal of, interest on or fees or other amounts with respect to any Bid Loan in excess of the share of payments and other recoveries (exclusive of payments or recoveries pursuant to Section 7 or --------- Section 13.8) such Bank or other holder would have received if such payment had - - ------------ been distributed pursuant to the provisions of Section 6.2(a), such Bank or -------------- other holder shall purchase from the other Banks or holders participating in such Bid Borrowing, in a manner to be specified by the Agent, such participations in the Bid Loans held by them as shall be necessary so that all such payments of principal and interest with respect to the Bid Loans shall be shared by the Banks and other holders participating in such Bid Borrowing in a manner consistent with Section 6.2(a); provided, however, that if all or any -------------- -------- ------- portion of the excess payment or other recovery is thereafter recovered from such purchasing Bank or holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Section 6.3. Set-off. The Company agrees that the Agent, each ------- holder of a Note, each Assignee and each Participant has all rights of set-off and bankers' lien provided by applicable law, and the Company further agrees that at any time (i) any amount owing by the Company under this Agreement is due to any such Person or (ii) any Event of Default exists, each such Person may apply to the payment of any amount payable hereunder any and all balances, credits, deposits, accounts or moneys of the Company then or thereafter with such Person. Section 6.4. Taxes, etc. (a) All payments made by the Company to the ----------- Agent, any Bank, any Assignee or any Participant under this Agreement and the Notes shall be made without any set-off or counterclaim, and free and clear of and without deduction for or on account of any present or future Taxes now or hereafter imposed (except to the extent that such withholding or deduction is compelled by law or results from the breach, by the recipient of a payment, of its agreement contained in Section 6.4(b) or would not be required if the -------------- representation or warranty contained in Section 6.4(b) were true), excluding any -------------- Taxes generally assessed on the overall net income of the Agent, any Bank, any Assignee or any Participant, as the case may be, by the government or other authority of the country in which the Agent, such Bank, such Assignee or such Participant is incorporated or in which its Funding Office or the office -22- through which it is acting is located. If the Company is compelled by law to make any such deductions or withholdings it will: (i) pay to the relevant authorities the full amount required to be so withheld or deducted, (ii) except to the extent that such withholding or deduction results from the breach by the recipient of a payment of its agreement contained in Section 6.4(b) or would not be required if the representation or warranty -------------- contained in Section 6.4(b) were true, pay such additional amounts as may -------------- be necessary in order that the net amount received by the Agent, each Bank, each Assignee and each Participant after such deductions or withholdings (including any required deduction or withholding on such additional amounts) shall equal the amount such payee would have received had no such deductions or withholdings been made, and (iii) promptly forward to the Agent (for delivery to such payee) an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authorities. Moreover, if any Taxes are directly asserted against the Agent, any Bank, any Assignee or any Participant, such payee may pay such Taxes and the Company shall promptly pay such additional amount (including, without limitation, any penalties, interest or expenses) as may be necessary in order that the net amount received by such payee after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such payee would have received had no such Taxes been asserted. For purposes of this Section 6.4, a ----------- distribution hereunder by the Agent or any Bank to or for the account of any Bank, Assignee or Participant shall be deemed to be a payment by the Company. The Company's agreement under this Section 6.4 shall survive repayment of the ----------- Loans, cancellation of the Notes or any termination of this Agreement. (b) In consideration of, and as a condition to, the Company's undertakings in Section 6.4(a), each Bank (other than a Bank that is organized -------------- and existing under the laws of the United States of America or any State thereof) agrees to execute and deliver to the Agent at its Payment Office for delivery to the Company, before the first scheduled payment date in each year, two United States Internal Revenue Service Forms 1001 or 4224, or any successor forms, as appropriate, properly completed and claiming complete exemption from withholding and deduction of United States federal Taxes. Each Bank represents and warrants to the Company that, at the date of this Agreement, or at the time such Bank becomes a Bank hereunder pursuant to Section 13.4.1, its Funding -------------- Office is entitled to receive payments of principal and interest hereunder without deduction for or on account of any Taxes imposed by the United States or any political subdivision thereof. -23- SECTION 7. INCREASED COSTS AND SPECIAL PROVISIONS FOR ABSOLUTE RATE LOANS, LIBOR RATE LOANS AND CD RATE LOANS. Section 7.1. Increased Costs. (a) If (i) Regulation D of the Board --------------- of Governors of the Federal Reserve System or (ii) after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any Funding Office of such Bank) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, (A) shall subject any Bank (or any Funding Office of such Bank) to any tax, duty or other charge with respect to its LIBOR Rate Loans, its CD Rate Loans, its Notes or its obligation to make LIBOR Rate Loans or CD Rate Loans, or shall change the basis of taxation of payments to any Bank (or any Funding Office of such Bank) of the principal of or interest on its LIBOR Rate Loans, its CD Rate Loans or any other amounts due under this Agreement in respect of its LIBOR Rate Loans, its CD Rate Loans or its obligation to make LIBOR Rate Loans or CD Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its Funding Office imposed by any Governmental Authority of the country in which such Bank is incorporated or in which such Bank's Funding Office is located); (B) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System, but excluding any reserve included in the determination of additional interest pursuant to Section 4.1), special ----------- deposit, assessment (including any assessment for insurance of deposits) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or any Funding Office of such Bank); or (C) shall impose on any Bank (or any Funding Office of such Bank) any other condition affecting its LIBOR Rate Loans, its CD Rate Loans, its Notes or its obligation to make or maintain LIBOR Rate Loans or CD Rate Loans; and the result of any of the foregoing is to increase the cost to (or to impose an additional cost on) such Bank (or any Funding Office of such Bank) of making or maintaining any LIBOR Rate Loan or CD Rate Loans, or to reduce the amount of any sum received or receivable by such Bank (or such Bank's Funding Office) under this Agreement or under its Notes with respect thereto, then within 10 days after demand by such Bank (which demand shall be accompanied by a statement setting forth the basis of such demand), the Company shall pay directly to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or such reduction (without duplication of any amounts which have been reimbursed pursuant to Section 6.4). ----------- -24- (b) If, after the date hereof, any Bank shall determine that the adoption, effectiveness or phase-in of any applicable law, rule, guideline or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any Funding Office of such Bank or any Person controlling such Bank) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Bank or any Person controlling such Bank as a consequence of its obligations hereunder to a level below that which such Bank or such controlling Person could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or such controlling Person's policies with respect to capital adequacy), then, from time to time, within 10 days after demand by such Bank (which demand shall be accompanied by a statement setting forth the basis of such demand), the Company shall pay directly to such Bank such additional amount or amounts as will compensate such Bank or such controlling Person for such reduction. (c) Each Bank shall promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section 7.1 and will ----------- designate a different Funding Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in such Bank's sole judgment, be otherwise disadvantageous to such Bank. Section 7.2. Basis for Determining Interest Rate Inadequate or -------------------------------------------------- Unfair. If with respect to the Loan Period for any LIBOR Rate Loan or CD Rate - - ------ Loan: (a) the Agent is advised by two or more Reference Banks that deposits in Dollars (in the applicable amounts) are not being offered to such Reference Banks in the relevant market for such Loan Period, or the Agent otherwise determines (which determination shall be binding and conclusive on all parties) that, by reason of circumstances affecting the LIBOR market or the certificate of deposit market, adequate and reasonable means do not exist for ascertaining the applicable LIBOR Rate or CD Rate; or (b) the Required Banks advise the Agent that the LIBOR Rate or CD Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Required Banks of maintaining or funding LIBOR Rate Loans or CD Rate Loans for such Loan Period, or that the making or funding of LIBOR Rate Loans or CD Rate Loans has become impracticable as a result of an event occurring after the date of this Agreement which in such Required Banks' opinion materially affects LIBOR Rate Loans or CD Rate Loans, then (i) the Agent shall promptly notify the other parties thereof and (ii) so - - ---- long as such circumstances shall continue, no Bank shall be under -25- any obligation to make any LIBOR Rate Loan or CD Rate Loan, as the case may be. Section 7.3. Changes in Law Rendering Certain Loans Unlawful. In the ----------------------------------------------- event that any change in (including the adoption of any new) applicable laws or regulations, or in the interpretation of applicable laws or regulations by any Governmental Authority or other regulatory body charged with the administration thereof, should make it (or in the good faith judgment of such Bank raise a substantial question as to whether it is) unlawful for a Bank to make, maintain or fund any LIBOR Rate Loan, then (a) such Bank shall promptly notify each of the other parties hereto, (b) upon the effectiveness of such event and so long as such unlawfulness shall continue, the obligation of such Bank to make LIBOR Rate Loans shall be suspended and any request by the Company for LIBOR Rate Loans shall, as to such Bank, be deemed to be a request for a Base Rate Loan, if said LIBOR Rate Loan is a Committed Loan, or an Absolute Rate Loan if said LIBOR Rate Loan is a Bid Loan and (c) on the last day of the current Loan Period for such Bank's LIBOR Rate Loans (or, in any event, if such Bank so requests on such earlier date as may be required by the relevant law, regulation or interpretation) such Bank's Loans which are LIBOR Rate Loans shall cease to be maintained as LIBOR Rate Loans and shall thereafter bear interest at a floating rate per annum equal to the Base Rate, if said LIBOR Rate Loan is a Committed Loan, or at an Absolute Rate, which Absolute Rate shall be the LIBOR Rate in effect during such Loan Period, if said LIBOR Rate Loan is a Bid Loan. If at any time the event giving rise to such unlawfulness shall no longer exist, then such Bank shall promptly notify the Company and the Agent. Section 7.4. Funding Losses. The Company hereby agrees that upon -------------- demand by any Bank (which demand shall be accompanied by a statement setting forth the basis for the calculations of the amount being claimed) the Company will indemnify such Bank against any net loss or expense which such Bank may sustain or incur (including, without limitation, any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain any LIBOR Rate Loan, CD Rate Loan or Absolute Rate Loan), as reasonably determined by such Bank, as a result of (a) any payment or mandatory or voluntary prepayment (including, without limitation, any payment pursuant to Section 7.3 or any payment resulting from acceleration) ----------- of any LIBOR Rate Loan, CD Rate Loan or Absolute Rate Loan of such Bank on a date other than the last day of the Loan Period for such Loan or (b) any failure of the Company to borrow any Loans on the originally scheduled Funding Date specified therefor pursuant to this Agreement (including, without limitation, any failure to borrow resulting from any failure to satisfy the conditions precedent to such borrowing). For this purpose, all notices to the Agent pursuant to this Agreement (including, without limitation, all acceptances of Bids) shall be deemed to be irrevocable. Section 7.5. Discretion of Banks as to Manner of Funding. ------------------------------------------- Notwithstanding any provision of this Agreement to the contrary (but subject to Section 7.1(c)), each Bank shall be entitled to fund and - - -------------- -26- maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Bank had actually funded and maintained each LIBOR Rate Loan, CD Rate Loan or Absolute Rate Loan during the Loan Period for such Loan through the purchase of deposits having a maturity corresponding to such Loan Period and bearing an interest rate equal to the rate borne by such Loan for such Loan Period. Section 7.6. Conclusiveness of Statements; Survival of Provisions. ---------------------------------------------------- Determinations and statements of any Bank pursuant to this Section 7 shall be --------- conclusive absent demonstrable error, and each Bank may use reasonable averaging and attribution methods in determining compensation pursuant to Section 7.1 or ----------- 7.4. The provisions of this Section 7 shall survive termination of this - - --- --------- Agreement and payment of the Notes. SECTION 8. REPRESENTATIONS AND WARRANTIES. To induce the Banks to enter into this Agreement and to make Loans hereunder, the Company hereby makes the following representations and warranties to the Agent and the Banks, which representations and warranties shall survive the execution and delivery of this Agreement and the Notes and the disbursement of the initial Loans hereunder: Section 8.1. Organization, etc. The Company is a corporation duly ------------------ organized, validly existing and in good standing under the laws of the State of California; each corporate Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; each other Subsidiary (if any) is an entity duly organized and validly existing under the laws of the jurisdiction of its organization; and each of the Company and each Subsidiary has the power to own its property and to carry on its business as now being conducted and is duly qualified and in good standing as a foreign corporation or other entity authorized to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, except where the failure to be so qualified or in good standing could not reasonably be expected to have a Material Adverse Effect. Section 8.2. Authorization; Consents; No Conflict. The execution and ------------------------------------ delivery by the Company of this Agreement and the Notes, the borrowings hereunder and the performance by the Company of its obligations under this Agreement and the Notes (a) are within the corporate powers of the Company, (b) have been duly authorized by all necessary corporate action on the part of the Company, (c) have received all necessary approvals, authorizations, consents, registrations, notices, exemptions and licenses (if any shall be required) from Governmental Authorities and other Persons, except for any such approvals, authorizations, consents, registrations, notices, exemptions or licenses non- receipt of which could not reasonably be expected to have a Material Adverse Effect, (d) do not -27- and will not contravene or conflict with any provision of (i) law, (ii) any judgment, decree or order to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound, (iii) the charter, by-laws or other organizational documents of the Company or any Subsidiary or (iv) any provision of any agreement or instrument binding on the Company or any Subsidiary, or any agreement or instrument of which the Company is aware affecting the properties of the Company or any Subsidiary, except with respect to (i), (ii) and (iv) above, for any such contravention or conflict which could not reasonably be expected to have a Material Adverse Effect and (e) do not and will not result in or require the creation or imposition of any Lien on any of the Company's or its Subsidiaries' properties. Section 8.3. Validity and Binding Nature. This Agreement is, and the --------------------------- Notes when duly executed and delivered will be, legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. Section 8.4. Financial Statements. The Company's audited -------------------- consolidated financial statements as at December 31, 1994, and unaudited consolidated financial statements as at September 30, 1995, a copy of each of which has been furnished to each Bank, have been prepared in conformity with generally accepted accounting principles in the United States applied on a basis consistent with that of the preceding fiscal year and fairly present the financial condition of the Company and its Subsidiaries as at such dates and the results of their operations for the periods then ended, and since the date of such audited consolidated financial statements there has been no material adverse change in the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. Section 8.5. Litigation and Contingent Liabilities. All Litigation ------------------------------------- Actions, taken as a whole, could not reasonably be expected to have a Material Adverse Effect. Other than any liability incident to such Litigation Actions or provided for or disclosed in the financial statements referred to in Section ------- 8.4, neither the Company nor any Subsidiary has any contingent liabilities which - - --- are material to the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. Section 8.6. Employee Benefit Plans. Each employee benefit plan (as ---------------------- defined in Section 3(3) of ERISA) as to which the Company, or any Subsidiary or any ERISA Affiliate may have any liability complies in all material respects with all applicable requirements of law and regulations. During the twelve- consecutive-month period prior to the execution and delivery of this Agreement, (i) no steps have been taken to terminate any Plan and no contribution failure has occurred with respect to any Plan sufficient to give rise to a lien under section 302(f) of ERISA, (ii) no -28- Reportable Event has occurred with respect to any Plan and (iii) neither the Company nor any ERISA Affiliate has either withdrawn or instituted steps to withdraw from any Multiemployer Plan, except in any such case for actions which individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. No condition exists or event or transaction has occurred in connection with any Plan which could reasonably be expected to result in the incurrence by the Company, any Subsidiary or any ERISA Affiliate of any material liability, fine or penalty (imposed by Section 4975 of the Code or Section 502(i) of ERISA or otherwise). Neither the Company nor any ERISA Affiliate is a member of, or contributes to, any Multiemployer Plan. Neither the Company nor any ERISA Affiliate has any contingent liability with respect to any post retirement benefit under an employee welfare benefit plan (as defined in section 3(i) of ERISA), other than liability for continuation coverage described in Part 6 of Title I of ERISA. Section 8.7. Investment Company Act. The Company is not an ---------------------- "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. Section 8.8. Public Utility Holding Company Act. Neither the ---------------------------------- Company nor any Subsidiary is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 8.9. Regulation U. Neither the Company nor any Subsidiary is ------------ engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System). Section 8.10. Information. ----------- (a) All information with respect to the Company contained in the December 6, 1995 memorandum furnished by the Agent to the Banks and all information heretofore furnished by the Company to the Agent or any Bank is, to the best of the Company's knowledge after due inquiry, true and accurate in every material respect as of the date thereof, and none of such information contains any material misstatement of fact or omits to state any material fact necessary to make such information not misleading. (b) All information furnished by the Company to the Agent or any Bank on and after the date hereof shall be, to the best of the Company's knowledge after due inquiry, true and accurate in every material respect as of the date of such information, and none of such information shall contain any material misstatement of fact or shall omit to state any material fact necessary to make such information not misleading. -29- Section 8.11. Compliance with Applicable Laws, etc. The Company and ------------------------------------- its Subsidiaries are in material compliance with the requirements of all applicable laws, rules, regulations, and orders of all Governmental Authorities (including, without limitation, all applicable environmental laws). Neither the Company nor any Subsidiary is in default under any agreement or instrument to which the Company or such Subsidiary is a party or by which it or any of its properties or assets is bound, which default could reasonably be expected to have a Material Adverse Effect on the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. No Event of Default or Unmatured Event of Default has occurred and is continuing. Section 8.12. Insurance. Each of the Company and each Subsidiary --------- maintains, or, in the case of any property owned by the Company or any Subsidiary and leased to lessees, has caused such lessees to maintain, insurance with financially sound and reputable insurers to such extent and against such hazards and liabilities as is commonly maintained, or caused to be maintained, as the case may be, by companies similarly situated. Section 8.13. Taxes. Each of the Company and each Subsidiary has ----- filed all tax returns which are required to have been filed and has paid, or made adequate provisions for the payment of, all of its Taxes which are due and payable, except such Taxes, if any, as are being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by generally accepted accounting principles have been established and except where failure to pay such Taxes, individually or in the aggregate, cannot reasonably be expected to have a Material Adverse Effect. Section 8.14. Use of Proceeds. The proceeds of the Loans will be --------------- used by the Company to support the Company's commercial paper program and for other general corporate purposes. Section 8.15. Pari Passu. All obligations and liabilities of the ---------- Company hereunder shall rank at least equally and ratably (pari passu) in ---- ----- priority with all other unsubordinated, unsecured obligations of the Company to any other creditor. Section 8.16. Ownership and Liens. Each of the Company and each ------------------- Subsidiary has title to, or valid leasehold interests in, all of its properties and assets, real and personal, including the properties and assets, and leasehold interests reflected in the financial statements referred to in Section ------- 8.4 (other than any properties or assets disposed of in the ordinary course of - - --- business) other than such imperfections in title or leasehold interests which could not, in the aggregate, reasonably be expected to have a Material Adverse Effect, and none of the properties and assets owned by the Company or any of its Subsidiaries and none of its leasehold interests is subject to any Lien, except as disclosed in such financial statements or as may be permitted under this Agreement. -30- SECTION 9. COVENANTS. Until the expiration or termination of the Commitments, and thereafter until all obligations of the Company hereunder and under the Notes are paid in full, the Company agrees that, unless at any time the Required Banks shall otherwise expressly consent in writing, it will: Section 9.1. Reports, Certificates and Other Information. Furnish to ------------------------------------------- the Agent with sufficient copies for each Bank which the Agent shall promptly furnish to each Bank: 9.1.1. Audited Financial Statements. As soon as available, and in ---------------------------- any event within 95 days after each fiscal year of the Company, a copy of the audited financial statements and annual audit report of the Company and its Subsidiaries for such fiscal year prepared on a consolidated basis and in conformity with generally accepted accounting principles in the United States and certified by Ernst & Young or by another independent certified public accountant of recognized national standing selected by the Company and satisfactory to the Required Banks. 9.1.2. Interim Reports. As soon as available, and in any event --------------- within 50 days after each quarter (except the last quarter) of each fiscal year of the Company, a copy of the unaudited financial statements of the Company and its Subsidiaries for such quarter prepared in a manner consistent with the audited financial statements referred to in Section ------- 9.1.1, signed by the Company's chief financial officer and consisting ----- of at least a balance sheet as at the close of such quarter and statements of earnings and cash flows for such quarter and for the period from the beginning of such fiscal year to the close of such quarter. 9.1.3. Certificates. Contemporaneously with the furnishing of a copy ------------ of each annual audit report and of each set of quarterly statements provided for in this Section 9.1, a certificate of the Company dated the ----------- date of delivery of such annual report or such quarterly statements and signed by the Company's chief financial officer, to the effect that no Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it and containing a computation of, and showing compliance with, each of the financial ratios and restrictions contained in this Section 9. --------- 9.1.4. Certain Notices. Forthwith upon learning of the occurrence of --------------- any of the following, written notice thereof, describing the same and the steps being taken by the Company or the Subsidiary affected with respect thereto: (i) the occurrence of an Event of Default or an Unmatured Event of Default; -31- (ii) the institution of any Litigation Action, provided that -------- the Company need not give notice of any new Litigation Action unless such Litigation Action, together with all other pending Litigation Actions, could, if adversely determined, reasonably be expected to have a Material Adverse Effect; (iii) the entry of any judgment or decree against the Company or any Subsidiary if the aggregate amount of all judgments and decrees then outstanding against the Company and all Subsidiaries exceeds $10,000,000 after deducting (i) the amount with respect to which the Company or any Subsidiary is insured and with respect to which the insurer has not denied coverage in writing, and (ii) the amount for which the Company or any Subsidiary is otherwise indemnified if the terms of such indemnification are satisfactory to the Agent and the Required Banks; (iv) the occurrence of a Reportable Event with respect to any Plan; the institution of any steps by the Company, any ERISA Affiliate, the PBGC or any other Person to terminate any Plan; the institution of any steps by the Company or any ERISA Affiliate to withdraw from any Plan; the incurrence of any material increase in the contingent liability of the Company or any Subsidiary with respect to any post-retirement welfare benefits; or the failure of the Company or any other Person to make a required contribution to a Plan if such failure is sufficient to give rise to a lien under Section 302(f) of ERISA; provided, however, that no notice shall be required of any of -------- ------- the foregoing unless the circumstance could reasonably be expected to have a Material Adverse Effect; or (v) the occurrence of a material adverse change in the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. 9.1.5. SEC Filings. Promptly after the filing or making thereof, ----------- copies of all 8-K's (other than 8-K's relating solely to the issuance by the Company of securities pursuant to an effective registration statement), 10-Q's, 10-K's, and other material reports or registration statements filed by the Company or any Subsidiary with or to any securities exchange or the Securities and Exchange Commission. 9.1.6. Other Information. From time to time such other information ----------------- concerning the Company and its Subsidiaries as any Bank or the Agent may reasonably request. Section 9.2. Existence. Maintain and preserve, and, subject to the --------- provisions of clauses (w), (x), (y) and (z) of Section 9.9, cause each ------- --- --- --- --- ----------- Subsidiary to maintain and preserve, its respective existence as a corporation or other form of business organization, as the case may be, and all rights, privileges, licenses, patents, patent rights, copyrights, trademarks, trade names, franchises and other authority to the extent -32- material and necessary for the conduct of its respective business in the ordinary course as conducted from time to time, except as may be determined by the Board of Directors of the Company in good faith to wind up and dissolve a Subsidiary that is not necessary or material to the business of the Company in its ordinary course as conducted from time to time. Section 9.3. Nature of Business. Engage, and cause each Subsidiary ------------------ to engage, in substantially the same fields of business as it is engaged in on the date hereof. Section 9.4. Books, Records and Access. Maintain, and cause each ------------------------- Subsidiary to maintain, complete and accurate books and records in which full and correct entries in conformity with generally accepted accounting principles in the United States shall be made of all dealings and transactions in relation to its respective business and activities. Permit, and cause each Subsidiary to permit, access by the Agent and each Bank to the books and records of the Company and such Subsidiary during normal business hours, and permit, and cause each Subsidiary to permit, the Agent and each Bank to make copies of such books and records. Section 9.5. Insurance. Maintain, and cause each Subsidiary to --------- maintain, such insurance as is described in Section 8.12. ------------ Section 9.6. Repair. Maintain, preserve and keep, and cause each ------ Subsidiary to maintain, preserve and keep, its material properties in good repair, working order and condition, and from time to time make, and cause each Subsidiary to make, all necessary and proper repairs, renewals, replacements, additions, betterments and improvements thereto so that at all times the efficiency thereof shall be fully preserved and maintained. In the case of properties leased by the Company or any Subsidiary to lessees, the Company may satisfy its obligations related to such properties under the previous sentence by causing, or by causing each Subsidiary to cause, such lessees to perform such obligations. Section 9.7. Taxes. Pay, and cause each Subsidiary to pay, when due, ----- all of its Taxes, unless and only to the extent that the Company or such Subsidiary, as the case may be, is contesting any such Taxes in good faith and by appropriate proceedings and the Company or such Subsidiary has set aside on its books such reserves or other appropriate provisions therefor as may be required by generally accepted accounting principles in the United States, except where failure to pay such Taxes, individually or in the aggregate, cannot reasonably be expected to have a Material Adverse Effect. Section 9.8. Compliance. Comply, and cause each Subsidiary to ---------- comply, in all material respects with all statutes and governmental rules and regulations applicable to it; and use reasonable efforts to cause, and cause each Subsidiary to use reasonable efforts to cause, each lessee of property owned by the Company or any Subsidiary to comply in all material respects with all statutes, governmental rules and regulations applicable -33- to such property or applicable to such lessee in connection with its leasing. Section 9.9. Merger, Purchase and Sale. Except with respect to any ------------------------- Permitted Acquisition, not, and not permit any Subsidiary to: (a) be a party to any merger or consolidation; (b) transfer, convey, lease or otherwise dispose of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole; or (c) purchase or otherwise acquire all or substantially all the assets of any Person unless such purchase or acquisition is a Permitted Acquisition by the Company. Notwithstanding the foregoing: (w) the Company may merge or consolidate with a person that is a U.S. corporation; (x) any Wholly-owned Subsidiary may merge into the Company or into or with any other Wholly-owned Subsidiary; (y) any Wholly-owned Subsidiary may consolidate with any other Wholly-owned Subsidiary so long as immediately thereafter 100% of the voting stock or other ownership interest of the resulting Person is owned by the Company or another Wholly-owned Subsidiary; and (z) any Wholly-owned Subsidiary may sell, transfer, convey, lease or assign all or a substantial part of its assets to the Company or another Wholly-owned Subsidiary; provided, in each of the cases described in preceding clauses (w), (x), (y) and - - -------- ------- --- --- --- (z), that immediately thereafter and after giving effect thereto no Event of - - --- Default or Unmatured Event of Default shall have occurred and be continuing and in the case of any (i) merger in which the Company is not the surviving entity or (ii) consolidation to which the Company is a party, the surviving entity or the Person formed by such consolidation, as the case may be, shall assume the Company's obligations and performance of the Company's covenants under this Agreement in a writing satisfactory in form and substance to the Agent. Section 9.10. Consolidated Indebtedness to Consolidated Tangible Net ------------------------------------------------------ Worth Ratio. Not permit the ratio of Consolidated Indebtedness to Consolidated - - ----------- Tangible Net Worth to exceed 600% on and as of the last day of any fiscal year or 650% at any other time. Section 9.11. Fixed Charge Coverage Ratio. Not permit the Fixed --------------------------- Charge Coverage Ratio on the last day of any quarter of any fiscal year of the Company to be less than 125%. -34- Section 9.12. Consolidated Tangible Net Worth. Not permit the ------------------------------- Company's Consolidated Tangible Net Worth to be less than $1,500,000,000 plus 50% of (a) the cumulative net income (but without deduction for cumulative net losses) of the Company and its Subsidiaries determined on a consoli dated basis in accordance with United States generally accepted accounting principles, (b) the cumulative equity capital contributions from AIG and (c) the net proceeds from the sale of preferred stock, in each case for the period from September 30, 1994 to and including the date of any determination hereunder. Section 9.13. Restricted Payments. Not declare or pay any dividends ------------------- whatsoever or make any distribution on any capital stock of the Company (except in shares of, or warrants or rights to subscribe for or purchase shares of, capital stock of the Company), and not, and not permit any Subsidiary to, make any payment to acquire or retire shares of capital stock of the Company, at any time when (i) an Event of Default as described in Section 11.1 has occurred and ------------ is continuing and there are Loans outstanding hereunder or (ii) an Event of Default as described in Section 11.1.1 has occurred and is continuing and there -------------- are no Loans outstanding hereunder; provided, however, that notwithstanding the -------- ------- foregoing, this Section 9.13 shall not prohibit (x) the payment of dividends on ------------ any of the Company's market auction preferred stock that was sold to the public pursuant to an effective registration statement under the Securities Act of 1933 or (y) the payment of dividends within 30 days of the declaration thereof if such declaration was not prohibited by this Section 9.13. ------------ Section 9.14. Liens. Not, and not permit any Subsidiary to, create ----- or permit to exist any Lien upon or with respect to any of its properties or assets of any kind, now owned or hereafter acquired, or on any income or profits therefrom, except for ------ (a) Liens existing on date hereof that are reflected in the financial statements of the Company dated prior to the date hereof; (b) Liens upon or in any property (other than property acquired for lease to a Person other than the Company or a Subsidiary) acquired or held by the Company or a Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness permitted under Section 9.15 incurred or guaranteed by the Company or any Subsidiary ------------ prior to, at the time of, or within 60 days after the later of the acquisition, completion of construction or commencement of full operation of such property, which Indebtedness was incurred or guaranteed solely for the purpose of financing the acquisition of such property or construction or improvements thereon; provided, however, that in the case of any such -------- ------- acquisition, construction or improvement, the Lien shall not apply to any property theretofore owned by the Company or a Subsidiary, other than, in the case of any such construction or improvement, any theretofore unimproved real property on which the property so constructed, or the improvement, is located; -35- (c) Liens securing the Indebtedness of a Subsidiary owing to the Company or to a Wholly-owned Subsidiary; (d) Liens on property of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Subsidiary or at the time of a purchase, lease or other acquisition of the properties of a corporation or firm as an entirety or substantially as an entirety by the Company or a Subsidiary, provided that any such Lien shall not extend -------- to or cover any assets or properties of the Company or such Subsidiary owned by the Company or such Subsidiary prior to such merger, consolidation, purchase, lease or acquisition, unless otherwise permitted under this Section 9.14; ------------ (e) leases or subleases granted to others in the ordinary and usual course of the Company's business; (f) easements, rights of way, restrictions and other similar charges or encumbrances not interfering with the ordinary conduct of the business of the Company or any Subsidiary; (g) banker's Liens arising, other than by contract, in the ordinary and usual course of the Company's business; (h) Liens incurred or deposits made in the ordinary course of business in connection with surety and appeal bonds, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money), provided, however, that the obligation so secured is not overdue or is -------- ------- being contested in good faith and by appropriate proceedings diligently pursued; (i) any replacement or successive replacement in whole or in part of any Lien referred to in the foregoing clauses (a) to (h), inclusive, ----------- --- provided, however, that the principal amount of any Indebtedness secured by -------- ------- the Lien shall not be increased and the principal repayment schedule and maturity of such Indebtedness shall not be extended and (i) such replacement shall be limited to all or a part of the property which secured the Lien so replaced (plus improvements and construction on such property), or (ii) if the property which secured the Lien so replaced has been destroyed, condemned or damaged and pursuant to the terms of the Lien other property has been substituted therefor, then such replacement shall be limited to all or part of such substituted property; (j) Liens created by or resulting from any litigation or other proceeding which is being contested in good faith by appropriate proceedings, including Liens arising out of judgments or awards against the Company or any Subsidiary with respect to which the Company or such Subsidiary is in good faith prosecuting an appeal or proceedings for review; or Liens incurred by the Company or any Subsidiary for the purpose of obtaining a stay or discharge in the -36- course of any litigation or other proceeding to which the Company or such Subsidiary is a party; (k) carrier's, warehouseman's, mechanic's, landlord's and materialmen's Liens, Liens for Taxes, assessments and other governmental charges and other similar Liens, in each case arising in the ordinary course of business, securing obligations that are not incurred in connection with the obtaining of any advance or credit and which are either not overdue or are being contested in good faith and by appropriate proceedings diligently pursued; (l) Liens securing Indebtedness of each of the Company's Wholly-owned Subsidiaries to be incorporated outside the United States for the purpose of providing subsidized financing of the acquisition of Airbus Industrie aircraft, the repayment obligations of which will be supported by guaranties issued by certain European government export credit agencies (the European Credit Agency Export Finance Program or "ECA Program") and a Company Guaranty and a pledge of the assets of (including any rights to or interests in any reserve or security deposit held by) each such Wholly- owned Subsidiary, provided that such Liens shall encumber only the assets -------- of (including any rights to or interests in any reserve or security deposit held by) each such Wholly-owned Subsidiary, and provided further, that the -------- ------- aggregate amount of Indebtedness of all such Wholly-owned Subsidiaries secured by Liens does not at the time exceed $2 billion during the 1995 fiscal year of the Company and $3 billion thereafter, minus in either case the amount of outstanding Liens permitted under Section 9.14(m); and --------------- (m) other Liens securing Indebtedness of the Company or any Subsidiary in an aggregate amount which, together with all other outstanding Indebtedness of the Company and the Subsidiaries secured by Liens not listed in clauses (a) through (l) of this Section 9.14, does not ----------- --- ------------ at the time exceed 12.5% of the Consolidated Tangible Net Worth of the Company as shown on its audited consolidated financial statements as of the end of the fiscal year preceding the date of determination minus the amount of outstanding Liens permitted under Section 9.14(l). --------------- Section 9.15. Leases. Not, and not permit any Subsidiary to, become ------ obligated, as lessee, under any lease of real or personal property if at the time of entering into such lease and after giving effect thereto the aggregate Operating Lease Rentals would exceed 20% of Consolidated Indebtedness. Section 9.16. Use of Proceeds. Not permit any proceeds of the Loans --------------- to be used, either directly or indirectly, (a) for the payment of any dividend or for the repurchase of any of the Company's equity securities; -37- (b) for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying any margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time; (c) for the purpose, whether immediate, incidental or ultimate, of acquiring directly or indirectly any of the outstanding shares of voting stock of any corporation which (i) has announced that it will oppose such acquisition or (ii) has commenced any litigation which alleges that any such acquisition violates, or will violate, applicable law; or (d) for any other purpose except (i) to support the Company's commercial paper program or (ii) for general corporate purposes in the ordinary course of business. Section 9.17. Transactions with Related Parties. Not, and not permit --------------------------------- any Subsidiary to, enter into or be a party to any transaction or arrangement, including, without limitation, the purchase, sale, lease or exchange of property or the rendering of any service, with any Related Party, except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtained in a comparable arm's- length transaction with a Person not a Related Party. Section 9.18. Securitization. Promptly after the receipt thereof, -------------- apply the proceeds from the securitization of assets (aircraft lease portfolio securitizations), net of expenses related to any such securitization, to the repayment of Indebtedness. SECTION 10. CONDITIONS TO LENDING. Section 10.1. Conditions Precedent to All Loans. Each Bank's --------------------------------- obligation to make each Loan is subject to the following conditions precedent: 10.1.1. No Default. (a) No Event of Default or Unmatured Event of ---------- Default has occurred and is continuing or will result from the making of such Loan, (b) the representations and warranties contained in Section 8 --------- are true and correct in all material respects as of the date of such requested Loan, with the same effect as though made on the date of such Loan (it being understood that each request for a Loan shall automatically constitute a representation and warranty by the Company that, as at the requested date of such Loan, (x) all conditions under this Section 10.1.1 -------------- shall be satisfied and (y) after the making of such Loan the aggregate principal amount of all outstanding Loans will not exceed the Aggregate Commitment). 10.1.2. Documents. The Agent shall have received (a) a certificate --------- signed by an Authorized Officer of the Company as to -38- compliance with Section 10.1.1, which requirement shall be deemed satisfied -------------- by the submission of a properly completed Notice of Competitive Bid Borrowing or Committed Loan Request and (b) such other documents as the Agent may reasonably request in support of such Loan. 10.1.3. Litigation. No Litigation Action not disclosed in writing by ---------- the Company to the Agent and the Banks prior to the date of the last previous Loan hereunder (or, in the case of the initial Loan, prior to the date of execution and delivery of this Agreement) ("New Litigation") has been instituted and no development not so disclosed has occurred in any other Litigation Action ("Existing Litigation"), unless the resolution of all New Litigation and Existing Litigation against the Company and its Subsidiaries could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Section 10.2. Conditions to the Availability of the Commitments. The ------------------------------------------------- obligations of each Bank hereunder are subject to, and the Banks' Commitments shall not become available until the date on which each of the following conditions precedent shall have been satisfied or waived in writing by the Required Banks: 10.2.1. Revolving Credit Agreement. The Agent shall have received -------------------------- this Agreement duly executed and delivered by each of the Banks and the Company and each of the Banks shall have received a fully executed Committed Note and a fully executed Bid Note. 10.2.2. Evidence of Corporate Action. The Agent shall have received ---------------------------- certified copies of all corporate actions taken by the Company to authorize this Agreement and the Notes. 10.2.3. Incumbency and Signatures. The Agent shall have received a ------------------------- certificate of the Secretary or an Assistant Secretary of the Company certifying the names of the officer or officers of the Company authorized to sign this Agreement, the Notes and the other documents provided for in this Agreement to be executed by the Company, together with a sample of the true signature of each such officer (it being understood that the Agent and each Bank may conclu sively rely on such certificate until formally advised by a like certificate of any changes therein). 10.2.4. Good Standing Certificates. The Agent shall have received -------------------------- such good standing certificates of state officials with respect to the incorporation of the Company, or other matters, as the Agent or the Banks may reasonably request. 10.2.5. Opinions of Company Counsel. The Agent shall have received --------------------------- favorable written opinions of O'Melveny & Myers, counsel for the Company, in substantially the form of Exhibit G, and the Corporate Counsel of the --------- Company, in substantially the form of Exhibit H. --------- -39- 10.2.6. Opinion of Agent's Counsel. The Agent shall have received a -------------------------- favorable written opinion of Sullivan & Cromwell, counsel to the Agent, with respect to documents received by the Agent and the Banks and such legal matters as the Agent reasonably may require. 10.2.7. Other Documents. The Agent shall have received such other --------------- certificates and documents as the Agent or the Banks reasonably may require. 10.2.8. Fees. The Agent shall have received for the account of the ---- Agent, the arrangement fee, as previously agreed to between the Company and the Agent and the Agent's fees payable to the Funding Date pursuant to Section 4.5 hereof. ----------- 10.2.9. Material Adverse Change. Since the date of the audited ----------------------- financial statements identified in Section 8.4 hereof, there shall not have ----------- occurred any material adverse change in the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. 10.2.10. Termination of Revolving Credit Facilities. The Company ------------------------------------------ shall have paid all amounts owing and otherwise satisfied and discharged all of its obligations arising under each of the Revolving Credit Agreements, dated as of February 2, 1995, as amended, among the Company, the Agent and the banks named therein, and such agreements shall have been terminated and of no further force and effect, evidence of which shall have been made available to the Agent. SECTION 11. EVENTS OF DEFAULT AND THEIR EFFECT. Section 11.1. Events of Default. Each of the following shall ----------------- constitute an Event of Default under this Agreement: 11.1.1. Non-Payment of Notes, etc. Default in the payment when due -------------------------- of any principal of any Loan; or default, and continuance thereof for five days, in the payment when due of any interest on any Loan or any fees payable by the Company hereunder. 11.1.2. Non-Payment of Other Indebtedness for Borrowed Money. ---------------------------------------------------- Default in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any principal of, interest on or fees incurred in connection with any other Indebtedness of, or guaranteed by, the Company or any Significant Subsidiary (except (i) any such Indebtedness of any Subsidiary to the Company or to any other Subsidiary and (ii) any Indebtedness hereunder) and, if a default in the payment of interest or fees, continuance of such default for five days, in the case of interest, or 30 days, in the case of fees, or default in the performance or observance of any obligation or condition with respect to any such other Indebtedness if the effect of such default (subject to any applicable grace period) is -40- to accelerate the maturity of any such Indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity; provided, however, that the aggregate principal amount of all Indebtedness -------- ------- as to which there has occurred any default as described above shall equal or exceed $50,000,000. 11.1.3. Bankruptcy, Insolvency, etc. The Company or any Significant ---------------------------- Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or the Company or any Significant Subsidiary applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for the Company or such Significant Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for the Company or any Significant Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any warrant of attachment or similar legal process is issued against any substantial part of the property of the Company or any of its Significant Subsidiaries which is not released within 60 days of service; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding (except the voluntary dissolution, not under any bankruptcy or insolvency law, of a Significant Subsidiary), is commenced in respect of the Company or any Significant Subsidiary, and, if such case or proceeding is not commenced by the Company or such Significant Subsidiary it is consented to or acquiesced in by the Company or such Significant Subsidiary or remains for 60 days undismissed; or the Company or any Significant Subsidiary takes any corporate action to authorize, or in furtherance of, any of the foregoing. 11.1.4. Non-Compliance with this Agreement. Failure by the Company ---------------------------------- to comply with or to perform any of the Company's covenants herein or any other provision of this Agreement (and not constituting an Event of Default under any of the other provisions of this Section 11.1) and continuance of ------------ such failure for 30 days (or, if the Company failed to give notice of such non-compliance or nonperformance pursuant to Section 9.1.4 within one ------------- Business Day after obtaining actual knowledge thereof, 30 days less the number of days elapsed between the date the Company obtained such actual knowledge and the date the Company gives the notice pursuant to Section ------- 9.1.4, but in no event less than one Business Day) after notice thereof to ----- the Company from the Agent, any Bank, or the holder of any Note. 11.1.5. Representations and Warranties. Any representation or ------------------------------ warranty made by the Company herein is untrue or misleading in any material respect when made or deemed made; or any schedule, statement, report, notice, or other writing furnished by the Company to the Agent or any Bank is false or misleading in any material respect on the date -41- as of which the facts therein set forth are stated or certified; or any certification made or deemed made by the Company to the Agent or any Bank is untrue or misleading in any material respect on or as of the date made or deemed made. 11.1.6. Employee Benefit Plans. The institution by the Company or ---------------------- any ERISA Affiliate of steps to terminate any Plan if, in order to effectuate such termination, (i) the Company or any ERISA Affiliate would be required to make a contribution to such Plan or would incur a liability or obligation to such Plan in an amount in excess of $10,000,000 and (ii) immediately after giving effect to the payment or satisfaction of such contribution, liability or obligation (if made or undertaken by the Company or any Subsidiary) an Event of Default or Unmatured Event of Default would exist and be continuing; or the institution by the PBGC of steps to terminate any Plan; or a contribution failure occurs with respect to a Plan sufficient to give rise to a lien under Section 302(f) of ERISA securing an amount in excess of $10,000,000. 11.1.7. Litigation. There shall be entered against the Company or ---------- any Subsidiary one or more judgments or decrees in excess of $10,000,000 in the aggregate at any one time outstanding for the Company and all Subsidiaries and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof, excluding those judgments or decrees for and to the extent to which the Company or any Subsidiary is insured and with respect to which the insurer has not denied coverage in writing or for and to the extent to which the Company or any Subsidiary is otherwise indemnified if the terms of such indemnification are satisfactory to the Required Banks; and 11.1.8. Change of Ownership. AIG shall cease to own beneficially at ------------------- least 51% of all of the outstanding shares of the common stock of the Company. Section 11.2. Effect of Event of Default. If any Event of Default -------------------------- described in Section 11.1.3 shall occur, the Commitments (if they have not -------------- theretofore terminated) shall immediately terminate and all Loans and all interest and other amounts due hereunder shall become immediately due and payable, all without presentment, demand or notice of any kind; and, in the case of any other Event of Default, the Agent may, and upon written request of the Required Banks shall, declare the Commitments (if they have not theretofore terminated) to be terminated and all Loans and all interest and other amounts due hereunder to be due and payable, whereupon the Commitments (if they have not theretofore terminated) shall immediately terminate and all Loans and all interest and other amounts due hereunder shall become immediately due and payable, all without presentment, demand or notice of any kind. The Agent shall promptly advise the Company and each Bank of any such declaration, but failure to do so shall not impair the effect of such declaration. -42- SECTION 12. THE AGENT. Section 12.1. Authorization. Each Bank and the holder of each Note ------------- authorizes the Agent to act on behalf of such Bank or holder to the extent provided herein and in any other document or instrument delivered hereunder or in connection herewith, and to take such other action as may be reasonably incidental thereto. Subject to the provisions of Section 12.3, the Agent will ------------ take such action permitted by any agreement delivered in connection with this Agreement as may be requested in writing by the Required Banks or if required under Section 13.1, all of the Banks. The Agent shall promptly remit in ------------ immediately available funds to each Bank or other holder its share of all payments received by the Agent for the account of such Bank or holder, and shall promptly transmit to each Bank (or share with each Bank the contents of) each notice it receives from the Company pursuant to this Agreement. Section 12.2. Indemnification. The Banks agree to indemnify the --------------- Agent in its capacity as such (to the extent not reimbursed by the Company), ratably according to their respective Percentages, from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Bank shall be liable for the payment to the Agent of -------- any portion of such actions, causes of action, suits, losses, liabilities, damages and expenses resulting from the Agent's or its employees' or agents' gross negligence or willful misconduct. Without limiting the foregoing, subject to Section 13.5 each Bank agrees to reimburse the Agent promptly upon demand for ------------ its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent in such capacity in connection with the preparation, execution or enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement or any amendments or supplements hereto or thereto to the extent that the Agent is not reimbursed for such expenses by the Company. All obligations provided for in this Section 12.2 shall survive ------------ repayment of the Loans, cancellation of the Notes or any termination of this Agreement. Section 12.3. Action on Instructions of the Required Banks. As to -------------------------------------------- any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but the Agent shall in all cases be fully protected in acting or refraining from acting upon the written instructions from (i) the Required Banks, except for instructions which under the express provisions hereof must be received by the Agent from all Banks and (ii) in the case of such instructions, from all Banks. In no event will the Agent be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. The relationship between the -43- Agent and the Banks is and shall be that of agent and principal only and nothing herein contained shall be construed to constitute the Agent a trustee for any holder of a Note or of a participation therein nor to impose on the Agent duties and obligations other than those expressly provided for herein. Section 12.4. Payments. (a) The Agent shall be entitled to assume -------- that each Bank has made its Loan available in accordance with Section 2.3 or ----------- Section 3.2(c), as applicable, unless such Bank notifies the Agent at its Notice - - -------------- Office prior to 11:00 a.m., New York City time, on the Funding Date for such Loan that it does not intend to make such Loan available, it being understood that no such notice shall relieve such Bank of any of its obligations under this Agreement. If the Agent makes any payment to the Company on the assumption that a Bank has made the proceeds of such Loan available to the Agent but such Bank has not in fact made the proceeds of such Loan available to the Agent, such Bank shall pay to the Agent on demand an amount equal to the amount of such Bank's Loan, together with interest thereon for each day that elapses from and including such Funding Date to but excluding the Business Day on which the proceeds of such Bank's Loan become immediately available to the Agent at its Payment Office prior to 12:00 Noon, New York City time, at the Federal Funds Rate for each such day, based upon a year of 360 days. A certificate of the Agent submitted to any Bank with respect to any amounts owing under this Section ------- 12.4(a) shall be conclusive absent demonstrable error. If the proceeds of such - - ------- Bank's Loan are not made available to the Agent at its Payment Office by such Bank within three Business Days of such Funding Date, the Agent shall be entitled to recover such amount on demand from the Company, together with interest thereon for each day that elapses from and including such Funding Date to but excluding the Business Day on which such proceeds become immediately available to the Agent prior to 12:00 Noon, New York City time, (i) in the case of a Bid Loan, at the rate per annum applicable thereto and (ii) in the case of a Committed Loan, at the rate per annum applicable to Base Rate Loans hereunder, in either case based upon a year of 360 days. Nothing in this paragraph (a) ------------- shall relieve any Bank of any obligation it may have hereunder to make any Loan or prejudice any rights which the Company may have against any Bank as a result of any default by such Bank hereunder. (b) The Agent shall be entitled to assume that the Company has made all payments due hereunder from the Company on the due date thereof unless it receives notification prior to any such due date from the Company that the Company does not intend to make any such payment, it being understood that no such notice shall relieve the Company of any of its obligations under this Agreement. If the Agent distributes any payment to a Bank hereunder in the belief that the Company has paid to the Agent the amount thereof but the Company has not in fact paid to the Agent such amount, such Bank shall pay to the Agent on demand (which shall be made by telegram, telex, facsimile or personal delivery) an amount equal to the amount of the payment made by the Agent to such Bank, together with interest thereon for each day that elapses from and including the date on which the Agent made such payment to but excluding the Business Day on -44- which the amount of such payment is returned to the Agent at its Payment Office in immediately available funds prior to 12:00 Noon, New York City time, at the Federal Funds Rate for each such day, based upon a year of 360 days. If the amount of such payment is not returned to the Agent in immediately available funds within three Business Days after demand by the Agent, such Bank shall pay to the Agent on demand an amount calculated in the manner specified in the preceding sentence after substituting the term "Base Rate" for the term "Federal Funds Rate". A certificate of the Agent submitted to any Bank with respect to amounts owing under this Section 12.4(b) shall be conclusive absent demonstrable --------------- error. Section 12.5. Exculpation. The Agent shall be entitled to rely upon ----------- advice of counsel concerning legal matters, and upon this Agreement and any Note, security agreement, schedule, certificate, statement, report, notice or other writing which it believes to be genuine or to have been presented by a proper person. Neither the Agent nor any of its directors, officers, employees or agents shall (i) be responsible for any recitals, representations or warranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of, this Agreement, any Note or any other instrument or document delivered hereunder or in connection herewith, (ii) be deemed to have knowledge of an Event of Default or Unmatured Event of Default until after having received actual notice thereof from the Company or a Bank, (iii) be under any duty to inquire into or pass upon any of the foregoing matters, or to make any inquiry concerning the performance by the Company or any other obligor of its obligations or (iv) in any event, be liable as such for any action taken or omitted by it or them, except for its or their own gross negligence or willful misconduct. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, the Agent in its individual capacity. Section 12.6. Credit Investigation. Each Bank acknowledges, and -------------------- shall cause each Assignee or Participant to acknowledge in its assignment or participation agreement with such Bank, that it has (i) made and will continue to make such inquiries and has taken and will take such care on its own behalf as would have been the case had the Loans been made directly by such Bank or other applicable Person to the Company without the intervention of the Agent or any other Bank and (ii) independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made and will continue to make its own credit analysis and decisions relating to this Agreement. Each Bank agrees and acknowledges, and shall cause each Assignee or Participant to agree and acknowledge in its assignment or participation agreement with such Bank, that the Agent makes no representations or warranties about the creditworthiness of the Company or any other party to this Agreement or with respect to the legality, validity, sufficiency or enforceability of this Agreement or any Note. Section 12.7. UBS and Affiliates. UBS and each of its successors as ------------------ Agent shall have the same rights and powers hereunder as any other Bank and may exercise or refrain from exercising the same as though -45- it were not the Agent, and UBS and any such successor and its Affiliates may accept deposits from, lend money to and generally engage, and continue to engage, in any kind of business with the Company or any Affiliate thereof as if UBS or such successor were not the Agent hereunder. Section 12.8. Resignation. The Agent may resign as such at any time ----------- upon at least 30 days' prior notice to the Company and the Banks. In the event of any such resignation, Banks having an aggregate Percentage of more than 50% shall as promptly as practicable appoint a successor Agent reasonably acceptable to the Company. If no successor Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent reasonably acceptable to the Company, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof or under the laws of another country which is doing business in the United States of America and having a combined capital, surplus and undivided profits of at least $1,000,000,000. Upon the acceptance of any appointment as Agent hereunder by a suc cessor agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from all further duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 12 shall ---------- inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 13. GENERAL. Section 13.1. Waiver; Amendments. No delay on the part of the Agent, ------------------ any Bank, or the holder of any Loan in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective unless the same shall be in writing and signed and delivered by the Agent and by Banks having an aggregate Percentage of not less than the aggregate Percentage expressly designated herein with respect thereto or, in the absence of such designation as to any provision of this Agreement or the Notes, by the Required Banks, and then any amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent (i) shall extend or increase the amount of the Commitments, extend the due date for any amount payable hereunder, reduce or waive any fee hereunder, change the definition of "Required Banks" or Percentage in Section 1, amend or modify Section 4.1 or change any of the defined terms --------- ----------- used in Section 4.1, amend or modify Section 4.4, Section 4.6, Section 11.1.1 or ----------- ----------- ----------- -------------- Section 11.1.8, modify this Section 13.1 or otherwise change the aggregate - - -------------- ------------ Percentage required to effect an amendment, modification, waiver or consent without the written consent of all Banks , -46- (ii) shall waive any of the conditions precedent specified in Section 10.1 for ------------ the making of any Loan without the written consent of the Bank which is to make such Loan or (iii) shall extend the scheduled maturity or reduce the principal amount of, or rate of interest on, or extend the due date for any amount payable under, any Loan without the written consent of the holder of the Note evidencing such Loan. Amendments, modifications, waivers and consents of the type described in clause (iii) of the preceding sentence with respect to Bid Loans or Bid Notes ------------ may be effected with the written consent of the holder of such Bid Loans or Bid Notes and no consent of any other Bank or other holder shall be required in connection therewith. No provisions of Section 12 shall be amended, modified or ---------- waived without the Agent's written consent. Section 13.2. Notices. Except as otherwise expressly provided in ------- this Agreement, any notice hereunder to the Company, the Agent, or any Bank or other holder of a Loan shall be in writing and, if by telegram, telex, facsimile or personal delivery, shall be deemed to have been given and received when sent and, if mailed, shall be deemed to have been given and received three Business Days after the date when sent by registered or certified mail, postage prepaid, and addressed to the Company, the Agent, or such Bank (or other holder) at its address shown below its signature hereto or at such other address as it may, by written notice received by the other parties to this Agreement, have designated as its address for such purpose. The Agent, any Bank or the holder of any Note giving any waiver, consent or notice to, or making any request upon, the Company hereunder shall promptly notify the Agent thereof. Correspondence of the type described in Section 2.2 with respect to Bid Loans and notices of Committed Loan ----------- Requests made by the Company shall, except as otherwise provided herein, be directed to the persons specified for such purpose for each party on the signature pages hereof or in subsequent writings among the parties. Additional copies of certain notices which any party may have requested on the signature pages hereof need not be delivered at the same time as the primary notices to such party, but the party delivering such primary notices shall use reasonable efforts to distribute such copies on the same Business Day as that on which such primary notices were distributed. Section 13.3. Computations. Where the character or amount of any ------------ asset or liability or item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made, for the purpose of this Agreement, such determination or calculation shall, at any time and to the extent applicable and except as otherwise specified in this Agreement, be made in accordance with generally accepted accounting principles in the United States applied on a basis consistent with those in effect as at the date of the Company's audited financial statements referred to in Section ------- 8.4. If there should be any material change in generally accepted accounting - - --- principles in the United States after the date hereof which materially affects the financial covenants in this Agreement, the parties hereto agree to negotiate in good faith appropriate revisions of such covenants (it being understood, however, that such covenants shall remain in full force and effect in -47- accordance with their existing terms pending the execution by the Company and the Banks of any such amendment). Section 13.4. Assignments; Participations. Each Bank may assign, or --------------------------- sell participations in, its Loans and its Commitment to one or more other Persons in accordance with this Section 13.4 (and the Company consents to the ------------ disclosure of any information obtained by any Bank in connection herewith to any actual or prospective Assignee or Participant). Section 13.4.1. Assignments. Any Bank may with the written consents ----------- of the Company and the Agent (which consents will not be unreasonably withheld or delayed) at any time assign and delegate to one or more commercial banks or other financial institutions (any Person to whom an assignment and delegation is made being herein called an "Assignee") all or any fraction of such Bank's Loans and Commitment (which assignment and delegation shall be of a constant, and not a varying, percentage of such assigning Bank's Loans and Commitment); each such assignment of a Bank's Commitment, when considered in aggregate with any simultaneous assignment by such Bank pursuant to the $1,250,000,000 Revolving Credit Agreement executed by the parties hereto on the date hereof, shall be in the minimum aggregate amount of $10,000,000 or in integral multiples of $1,000,000 in excess thereof; provided that any such Assignee will comply, if applicable, -------- with the provisions contained in the first sentence of Section 6.4(b) and -------------- shall be deemed to have made, on the date of the effectiveness of such assignment and delegation, the representation and warranty set forth in the second sentence of Section 6.4(b); and provided further, that the Company -------------- -------- ------- and the Agent shall be entitled to continue to deal solely and directly with such assigning Bank in connection with the interests so assigned and delegated to an Assignee until such assigning Bank and/or such Assignee shall have: (i) given written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee, substantially in the form of Exhibit I, --------- to the Company and the Agent; (ii) provided evidence satisfactory to the Company and the Agent that, as of the date of such assignment and delegation, the Company will not be required to pay any costs, fees, taxes or other amounts of any kind or nature with respect to the interest assigned in excess of those payable by the Company with respect to such interest prior to such assignment; (iii) paid to the Agent for the account of the Agent a processing fee of $2,500; and (iv) provided to the Agent evidence reasonably satisfactory to the Agent that the assigning Bank has complied with the provisions of the last sentence of Section 12.6. ------------ -48- Upon receipt of the foregoing items and the consents of the Company and the Agent, (x) the Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee, such Assignee shall have the rights and obligations of a Bank hereunder and under the other instruments and documents executed in connection herewith, and (y) the assigning Bank, to the extent that rights and obligations hereunder have been assigned and delegated by it, shall be released from its obligations hereunder. The Agent may from time to time (and upon the request of the Company or any Bank after any change therein shall) distribute a revised Schedule I indicating any changes in the Banks party hereto ---------- or the respective Percentages of such Banks. Within five Business Days after the Company's receipt of notice from the Agent of the effectiveness of any such assignment and delegation, the Company shall execute and deliver to the Agent (for delivery to the relevant Assignee) new Notes in favor of such Assignee and, if the assigning Bank has retained Loans and a Commitment hereunder, replacement Notes in favor of the assigning Bank (such Notes to be in exchange for, but not in payment of, the Notes previously held by such assigning Bank). Each such Note shall be dated the date of the predecessor Notes. The assigning Bank shall promptly mark the predecessor Notes "exchanged" and deliver them to the Company. Any attempted assignment and delegation not made in accordance with this Section 13.4.1 shall be null and void. - - -------------- The foregoing consent requirement shall not be applicable in the case of, and this Section 13.4.1 shall not restrict, any assignment or other transfer by -------------- any Bank of all or any portion of such Bank's Loans to any Federal Reserve Bank; provided that such Federal Reserve Bank shall not be considered a "Bank" for - - -------- purposes of this Agreement. Section 13.4.2. Participations. Any Bank may at any time sell to one or -------------- more commercial banks or other Persons (any such commercial bank or other Person being herein called a "Participant") participating interests in any of its Loans, its Commitment or any other interest of such Bank hereunder; provided, -------- however, that - - ------- (a) no participation contemplated in this Section 13.4.2 shall -------------- relieve such Bank from its Commitment or its other obligations hereunder; (b) such Bank shall remain solely responsible for the performance of its Commitment and such other obligations hereunder and such Bank shall retain the sole right and responsibility to enforce the obligations of the Company hereunder, including the right to approve any amendment, modification or waiver of any provision of this Agreement (subject to Section 13.4.2(d) below); ----------------- (c) the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement; -49- (d) no Participant, unless such Participant is an affiliate of such Bank, or is itself a Bank, shall be entitled to require such Bank to take or refrain from taking any action hereunder, except that such Bank may agree with any Participant that such Bank will not, without such Participant's consent, take any actions of the type described in the third sentence of Section 13.1; ------------ (e) the Company shall not be required to pay any amount under Sections 4.1, 6.4 or 7.1 that is greater than the amount which the Company ------------ --- --- would have been required to pay had no participating interest been sold; (f) no Participant may further participate any interest in any Committed Loan (and each participation agreement shall contain a restriction to such effect). The Company acknowledges and agrees that, to the extent permitted by applicable law, each Participant shall be considered a Bank for purposes of Sections 7.1, 7.4, 13.5 and 13.6, and by ------------ --- ---- ---- its acceptance of a participation herein, each Participant agrees to be bound by the provisions of Section 6.2(b) as if such Participant were a -------------- Bank; and (g) such Bank shall have provided to the Agent evidence reasonably satisfactory to the Agent that such Bank has complied with the provisions of the last sentence of Section 12.6. ------------ Section 13.5. Costs, Expenses and Taxes. The Company agrees to pay ------------------------- on demand (a) all out-of-pocket costs and expenses of the Agent (including the fees and out-of-pocket expenses of counsel for the Agent (and of local counsel, if any, who may be retained by said counsel) in an amount not to exceed an amount separately agreed to between the Agent and the Company), in connection with the preparation, execution, delivery and administration of this Agreement, the Notes and all other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith and (b) all out-of-pocket costs and expenses (including reasonable attorneys' fees and legal expenses and allocated costs of staff counsel) incurred by the Agent and each Bank in connection with the enforcement of this Agreement, the Notes or any such other instruments or documents. Each Bank agrees to reimburse the Agent for such Bank's pro rata share (based upon its respective Percentage) of any such costs or expenses incurred by the Agent on behalf of all the Banks and not paid by the Company other than any fees and out-of-pocket expenses of counsel for the Agent which exceed the amount which the Company has agreed with the Agent to reimburse. In addition, the Company agrees to pay, and to hold the Agent and the Banks harmless from all liability for, any stamp or other Taxes which may be payable in connection with the execution and delivery of this Agreement, the borrowings hereunder, the issuance of the Notes or the execution and delivery of any other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided for in this Section 13.5 shall survive repayment of the Loans, cancellation of the ------------ Notes or any termination of this Agreement. -50- Section 13.6. Indemnification. In consideration of the execution and --------------- delivery of this Agreement by the Agent and the Banks, the Company hereby agrees to indemnify, exonerate and hold each of the Banks, the Agent, and each of the officers, directors, employees and agents of the Banks and Agent (collectively herein called the "Bank Parties" and individually called a "Bank Party") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees and disbursements (collectively herein called the "Indemnified Liabilities"), incurred by the Bank Parties or any of them as a result of, or arising out of, or relating to (i) this Agreement, the Notes or the Loans or (ii) the direct or indirect use of proceeds of any of the Loans or any credit extended hereunder, except for any such Indemnified Liabilities arising on account of such Bank Party's gross negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. All obligations provided for in this Section ------- 13.6 shall survive repayment of the Loans, cancellation of the Notes or any - - ---- termination of this Agreement. Section 13.7. Regulation U. Each Bank represents that it in good ------------ faith is not relying, either directly or indirectly, upon any margin stock (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) as collateral security for the extension or maintenance by it of any credit provided for in this Agreement. Section 13.8. Extension of Termination Dates; Removal of Banks; ------------------------------------------------- Substitution of Banks. (a) Not more than 60 days nor less than 45 days prior - - --------------------- to the then-effective Termination Date, the Company may, at its option, request all the Banks then party to this Agreement to extend their scheduled Termination Dates by an additional 364 days by means of a letter, addressed to each such Bank and the Agent, substantially in the form of Exhibit J. Each such Bank --------- electing (in its sole discretion) so to extend its scheduled Termination Date shall execute and deliver not earlier than the 30th day nor later than the 20th day prior to the then-effective Termination Date counterparts of such letter to the Company and the Agent, whereupon (unless Banks with an aggregate Percentage in excess of 25% decline to extend their respective scheduled Termination Dates, in which event the Agent shall notify all the Banks thereof and no such extension shall occur), such Bank's scheduled Termination Date shall be extended, effective only as of the date that is such Bank's then-current scheduled Termination Date, to the date that is 364 days after such Bank's then- current scheduled Termination Date. Any Bank that declines or fails to respond to the Company's request for such extension shall be deemed to have not extended its scheduled Termination Date. (b) With respect to any Bank (i) on account of which the Company is required to make any deductions or withholdings or pay any additional amounts, as contemplated by Section 6.4, (ii) on account of which the ----------- -51- Company is required to pay any additional amounts, as contemplated by Section ------- 7.1, (iii) for which it is illegal to make a LIBOR Rate Loan, as - - --- contemplated by Section 7.3 or (iv)which has declined to extend such ----------- Bank's scheduled Termination Date and Banks with an aggregate Percentage in excess of 75% have elected to extend their respective Termination Dates, the Company may in its discretion, upon not less than 30 days' prior written notice to the Agent and each Bank, remove such Bank as a party hereto. Each such notice shall specify the date of such removal (which shall be a Business Day and, if such Bank has any outstanding Bid Loans, shall (unless otherwise agreed by such Bank) be on or after the last day of the Loan Period for the Bid Loan of such Bank having the latest maturity date), which shall thereupon become the scheduled Termination Date for such Bank. (c) In the event that any Bank does not extend its scheduled Termination Date pursuant to subsection (a) above or is the subject of a notice -------------- of removal pursuant to subsection (b) above, then, at any time prior to the -------------- Termination Date for such Bank (a "Terminating Bank"), the Company may, at its option, arrange to have one or more other commercial banks or financial institutions (which may be a Bank or Banks and each of which shall herein be called a "Successor Bank") succeed to all or a percentage of the Terminating Bank's outstanding Loans, if any, and rights under this Agreement and assume all or a like percentage (as the case may be) of such Terminating Bank's undertaking to make Loans pursuant hereto and other obligations hereunder (as if (i) in the case of any Bank electing not to extend its scheduled Termination Date pursuant to subsection (a) above, such Successor Bank had extended its scheduled -------------- Termination Date pursuant to such subsection (a) and (ii) in the case of any -------------- Bank that is the subject of a notice of removal pursuant to subsection (b) -------------- above, no such notice of removal had been given by the Company). Such succession and assumption shall be effected by means of one or more agreements supplemental to this Agreement among the Terminating Bank, the Successor Bank, the Company and the Agent. On and as of the effective date of each such supplemental agreement, each Successor Bank party thereto shall be and become a Bank for all purposes of this Agreement and to the same extent as any other Bank hereunder and shall be bound by and entitled to the benefits of this Agreement in the same manner as any other Bank. (d) On the Termination Date for any Terminating Bank, such Terminating Bank's Commitment shall terminate and the Company shall pay in full all of such Terminating Bank's Loans (except to the extent assigned pursuant to subsection (c) above) and all other amounts payable to such Bank hereunder - - -------------- (including any amounts payable pursuant to Section 7.4 on account of such ----------- payment); provided that if an Event of Default or Unmatured Event of Default -------- exists on the date scheduled as any Terminating Bank's Termination Date, such Terminating Bank's scheduled Termination Date shall be extended to the first Business Day thereafter on which (i) no Event of Default or Unmatured Event of Default exists (without regard to any waiver or amendment that makes this Agreement less restrictive for the Company, other than as described in clause ------ (ii) below) or (ii) the Required Banks (which for purposes of this subsection - - ---- ---------- (d) shall be determined based upon - - --- -52- the respective Percentages and aggregate Commitments of all Banks other than any Terminating Bank whose scheduled Termination Date has been extended pursuant to this proviso) waive or amend the provisions of this Agreement to cure all existing Events of Default or Unmatured Events of Default or agree to permit any borrowing hereunder notwithstanding the existence of any such event. Notwithstanding the foregoing, any Terminating Bank may, in its sole discretion, by notice to the Company and the Agent, terminate such Terminating Bank's Commitment as of such Terminating Bank's scheduled Termination Date. In the event that UBS shall become a Terminating Bank, the Required Banks with the consent of the Company (which consent shall not be unreasonably withheld) shall appoint another Bank or other Person as Agent, which shall have all of the rights and obligations of the Agent upon the effective date of and pursuant to an agreement supplemental hereto among the Company and the Banks, and thereupon UBS, as Agent, shall be relieved from its obligations as Agent hereunder, it being understood that the provisions of Section 12 shall inure to the benefit of ---------- UBS as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no such successor Agent shall be appointed within 30 days of the Termination Date of the Agent, then the Agent shall, on behalf of the Banks, appoint a successor Agent in accordance with the provisions set forth in Section 12.8 for a resigning Agent. ------------ (e) To the extent that all or a portion of any Terminating Bank's obligations are not assumed pursuant to subsection (c) above, the Aggregate -------------- Commitment shall be reduced on the applicable Termination Date and each Bank's percentage of the reduced Aggregate Commitment shall be revised pro rata to reflect such Terminating Bank's absence. The Agent shall distribute a revised Schedule I indicating such revisions promptly after the applicable Termination - - ---------- Date. Such revised Schedule I shall be deemed conclusive in the absence of ---------- demonstrable error. (f) The Agent agrees to use reasonable commercial efforts to assist the Company in locating one or more commercial banks or other financial institutions to replace any Terminating Bank prior to such Terminating Bank's Termination Date. Section 13.9. Captions. Section captions used in this Agreement are -------- for convenience only and shall not affect the construction of this Agreement. Section 13.10. Governing Law; Severability. THIS AGREEMENT AND EACH --------------------------- NOTE SHALL BE A CONTRACT MADE UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. All obligations of the Company and the rights of the Agent, the Banks and any other holders of the Notes expressed herein or in the Notes shall be in addition to and not in limitation of those provided by applicable law. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be -53- ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 13.11. Counterparts; Effectiveness. This Agreement may be --------------------------- executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. When counterparts of this Agreement executed by each party shall have been lodged with the Agent (or, in the case of any Bank as to which an executed counterpart shall not have been so lodged, the Agent shall have received telegraphic, telex or other written confirmation of execution of a counterpart hereof by such Bank), this Agreement shall become effective as of the date hereof and the Agent shall so inform all of the parties hereto. Section 13.12. Further Assurances. The Company agrees to do such ------------------ other acts and things, and to deliver to the Agent and each Bank such additional agreements, powers and instruments, as the Agent or any Bank may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to better assure and confirm unto the Agent and each Bank their respective rights, powers and remedies hereunder. Section 13.13. Successors and Assigns. This Agreement shall be ---------------------- binding upon the Company, the Banks and the Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Banks and the Agent and the respective successors and assigns of the Banks and the Agent. Subject to Section 9.9, the Company may not assign any of its rights or ----------- delegate any of its duties under this Agreement without the prior written consent of all of the Banks. Section 13.14. Waiver of Jury Trial. THE COMPANY, THE AGENT AND EACH -------------------- BANK HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. -54- Delivered at Los Angeles, California as of the day and year first above written. INTERNATIONAL LEASE FINANCE CORPORATION By: /s/ Alan H. Lund ---------------------------------- Name: ALAN H. LUND Title: Executive Vice President and CFO By: /s/ Pamela S.Hendry ---------------------------------- Name: PAMELA S. HENDRY Title: Vice President and Treasurer 1999 Avenue of the Stars 39th Floor Los Angeles, California 90067 Attention: Pam Hendry Telephone: (310) 788-1999 Facsimile: (310) 788-1990 Telex: 69-1400 INTERLEAS BVHL -55- Agent: UNION BANK OF SWITZERLAND, acting through its Los Angeles Branch, in its individual corporate capacity and as Agent By: /s/ Philip A. Stephens --------------------------------- Name: PHILIP A. STEPHENS Title: Vice President By: /s/ Thomas G. Jackson ---------------------------------- Name: THOMAS G. JACKSON Title: Managing Director 444 South Flower Street Suite 4600 Los Angeles, California 90071 Attention: Philip Stephens Telephone: (213) 489-0600 Facsimile: (213) 489-0697 Telex: 6831878 UBSLSA Managing Agents: COMMERZBANK AKTIENGESELLSCHAFT, LOS ANGELES BRANCH By: /s/ Christian Jagenberg --------------------------------- Name: CHRISTIAN JAGENBERG Title: Senior Vice President and Manager By: /s/ Karla Wirth --------------------------------- Name: KARLA WIRTH Title: Assistant Treasurer 660 South Figueroa Street Suite 1450 Los Angeles, California 90017 Attention: Werner Schmidbauer Telephone: (213) 623-8223 Facsimile: (213) 623-0039 Telex: 678338 -56- BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK AKTIENGESELLSCHAFT, CAYMAN ISLANDS BRANCH By: /s/ Wolfgang H. Haugk --------------------------------- Name: WOLFGANG H. HAUGK Title: First Vice President By: /s/ Wolfgang Novotny --------------------------------- Name: WOLFGANG NOVOTNY Title: Vice President Financial Square 32 Old Slip, 32nd Floor New York, New York 10005 Attention: Wolfgang Novotny Telephone: (212) 440-0789 Facsimile: (212) 440-0741 Telex: 175850 Co-Agents: THE BANK OF NEW YORK By: /s/ Lisa Y. Brown --------------------------------- Name: LISA Y. BROWN Title: Vice President By:___________________________________ Name:_________________________________ Title:________________________________ 10990 Wilshire Boulevard Suite 1700 Los Angeles, California 90024 Attention: Jonathan Rollins Telephone: (310) 996-8658 Facsimile: (310) 996-8667 -57- THE BANK OF NOVA SCOTIA By: /s/ John Quick --------------------------------- Name: JOHN QUICK Title: Officer 101 California Street 48th Floor San Francisco, California 94111 Attention: Alan Pendergast Telephone: (415) 986-1100 Facsimile: (415) 397-0791 Telex: 00340602 THE BANK OF TOKYO, LIMITED, NEW YORK AGENCY By: /s/ Yukio Yanaka --------------------------------- Name: YUKIO YANAKA Title: Senior Vice President 1251 Avenue of the Americas New York, New York 10116-3138 Attention: Michael Irwin Telephone: (212) 782-4316 Facsimile: (212) 782-6445 THE CHASE MANHATTAN BANK, N.A. By: /s/ Sherwood E. Exum, Jr. --------------------------------- Name: SHERWOOD E. EXUM, JR. Title: Managing Director One Chase Manhattan Plaza New York, New York 10081 Attention: Sherwood E. Exum, Jr. Telephone: (212) 552-4655 Facsimile: (212) 552-5879 Telex: 62910 -58- CHEMICAL BANK By: /s/ James B. Treger --------------------------------- Name: JAMES B. TREGER Title: Vice President 270 Park Avenue New York, New York 10017 Attention: Mathis Shinnick Telephone: (212) 270-1012 Facsimile: (212) 270-1469 THE DAI-ICHI KANGYO BANK, LTD., LOS ANGELES AGENCY By: /s/ Tomohiro Nozaki --------------------------------- Name: TOMOHIRO NOZAKI Title: Senior Vice President and Joint General Manager 555 West 5th Street Fifth Floor Los Angeles, California 90013 Attention: Israel Carmeli Telephone: (213) 243-4760 Facsimile: (213) 624-5258 Telex: 67-4 516/DKB-LSA DEUTSCHE BANK AG, LOS ANGELES BRANCH & CAYMAN ISLANDS BRANCH By: /s/ Ross A. Howard --------------------------------- Name: ROSS A. HOWARD Title: Vice President By: /s/ J. Scott Jessup --------------------------------- Name: J. SCOTT JESSUP Title: Vice President 550 South Hope Street Suite 1850 Los Angeles, California 90071 Attention: Ross A. Howard, Christina Moore Telephone: (213) 627-8200 Facsimile: (213) 627-9779 -59- DRESDNER BANK AG, LOS ANGELES AGENCY & GRAND CAYMAN BRANCH By: /s/ Sidney S. Jordan --------------------------------- Name: SIDNEY S. JORDAN Title: Vice President By: /s/ Vitol Wiacek --------------------------------- Name: VITOL WIACEK Title: Assistant Vice President 725 South Figueroa Street Suite 3950 Los Angeles, California 90017-5439 Attention: Barbara J. Readick Telephone: (213) 489-5720 Facsimile: (213) 627-3819 Telex: 4720286 FIRST INTERSTATE BANK OF CALIFORNIA By: /s/ Thomas J. Helotes --------------------------------- Name: THOMAS J. HELOTES Title: Vice President By: /s/ Jonathan S. David --------------------------------- Name: JONATHAN S. DAVID Title: Assistant Vice President 707 Wilshire Boulevard, W16-14 Los Angeles, California 90017 Attention: Thomas J. Helotes Telephone: (213) 614-4122 Facsimile: (213) 614-2569 -60- THE FUJI BANK, LIMITED By: /s/ Nobuhiro Umemura --------------------------------- Name: NOBUHIRO UMEMURA Title: Joint General Manager 333 South Grand Avenue Suite 2500 Los Angeles, California 90071 Attention: Bryan Stapleton Telephone: (213) 253-4152 Facsimile: (213) 253-4198 ROYAL BANK OF CANADA By: /s/ D.G. Calancie --------------------------------- Name: D.G. CALANCIE Title: Senior Manager 1 Financial Square Corporate Banking East, U.S.A. New York, New York 10005-3531 Attention: D.G. Calancie Telephone: (212) 428-6445 Facsimile: (212) 428-6459 THE SAKURA BANK, LTD., LOS ANGELES AGENCY By: /s/ Ofusa Sato --------------------------------- Name: OFUSA SATO Title: Senior Vice President and Assistant General Manager By:___________________________________ Name:_________________________________ Title:________________________________ 515 South Figueroa Street Suite 400 Los Angeles, California 90071 Attention: J.R. Hainer Telephone: (213) 489-6479 Facsimile: (213) 623-8692 Telex: 67-7185 -61- THE SANWA BANK, LIMITED By: /s/ Stephen C. Small --------------------------------- Name: STEPHEN C. SMALL Title: Vice President and Area Manager Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attention: Stephen C. Small Telephone: (212) 339-6201 Facsimile: (212) 754-1304 Telex: 232423 RCA SOCIETE GENERALE By: /s/ Maureen Kelly --------------------------------- Name: MAUREEN KELLY Title: Vice President 2029 Century Park East Suite 2900 Los Angeles, California 90067 Attention: Maureen Kelly, Su Fei Koo Telephone: (310) 788-7110, 788-7107 Facsimile: (310) 551-1537 Telex: 188273 Lead Managers: THE ASAHI BANK, LTD., LOS ANGELES AGENCY By: /s/ Jun Kosuge --------------------------------- Name: JUN KOSUGE Title: Senior Deputy General Manager 635 West 7th Street Los Angeles, California 90017 Attention: Tsuyoshi Sakai Telephone: (213) 626-6266 Facsimile: (213) 620-1564 Telex: 67256 -62- BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By: /s/ Wilfried Freudenberger --------------------------------- Name: WILFRIED FREUDENBERGER Title: Executive Vice President and General Manager By: /s/ Peter Obermann --------------------------------- Name: PETER OBERMANN Title: Senior Vice President and Manager Lending Division 560 Lexington Avenue 17th Floor New York, New York 10022 Attention: Sean O'Sullivan Telephone: (212) 310-9913 Facsimile: (212) 310-9868 Telex: TRT 177130 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK By: /s/ Robert B. Herber --------------------------------- Name: ROBERT B. HERBER Title: Vice President By: /s/ Pamela D. Ingram --------------------------------- Name: PAMELA D. INGRAM Title: Assistant Vice President 609 Fifth Avenue New York, New York 10017-1021 Attention: Robert B. Herber Telephone: (212) 745-1581 Facsimile: (212) 745-1556 Telex: 234476/666755 MCI -63- KREDIETBANK NV By: /s/ Robert Snauffer --------------------------------- Name: ROBERT SNAUFFER Title: Vice President By: /s/ Armen Karozichian --------------------------------- Name: ARMEN KAROZICHIAN Title: Vice President 125 West 55th Street 10th Floor New York, New York 10019 Attention: Roxanne Cheng - CA Telephone: (213) 624-0401 Facsimile: (213) 629-5801 Attention: Robert Snauffer - NY Telephone: (212) 541-0700 Facsimile: (212) 956-5580 THE MITSUI TRUST & BANKING COMPANY, LIMITED, LOS ANGELES AGENCY By: /s/ Ken Takahashi --------------------------------- Name: KEN TAKAHASHI Title: General Manager and Agent 611 West 6th Street Suite 3800 Los Angeles, California 90017 Attention: Michael Testa Telephone: (213) 614-7155 Facsimile: (213) 622-0378 -64- WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK AND CAYMAN ISLANDS BRANCHES By: /s/ Kenneth R. Crespo --------------------------------- Name: KENNETH R. CRESPO Title: Vice President By: /s/ Laura Spichiger --------------------------------- Name: LAURA SPICHIGER Title: Associate 1211 Avenue of the Americas 24th Floor New York, New York 10036 Attention: Laura Spichiger Telephone: (212) 852-6012 Facsimile: (212) 852-6148 Managers: BANCA NAZIONALE DEL LAVORO, S.p.A. - NEW YORK BRANCH By: /s/ Carlo Vecchi --------------------------------- Name: CARLO VECCHI Title: Senior Vice President By: /s/ Giulio Giovine --------------------------------- Name: GIULIO GIOVINE Title: Vice President 25 West 51st Street New York, New York 10019 Attention: Adolph Mascari Telephone: (212) 581-0710 Facsimile: (212) 765-2978 Telex: 62840 -65- BANCO CENTRAL HISPANOAMERICANO, SAN FRANCISCO AGENCY By: /s/ G. Innerarity --------------------------------- Name: G. INNERARITY Title: Senior Vice President and General Manager By:___________________________________ Name:_________________________________ Title:________________________________ 100 Pine Street, Suite 2950 San Francisco, California 94111 Attention: Fernando Laseca Telephone: (415) 398-6333 Facsimile: (415) 398-3173 Telex: 470598 CENT SF BANCO DI NAPOLI S.p.A. By: /s/ Claude P. Mapes --------------------------------- Name: CLAUDE P. MAPES Title: First Vice President By: /s/ Vito Spada --------------------------------- Name: VITO SPADA Title: Executive Vice President 4 East 54th Street New York, New York 10022 Attention: Claude P. Mapes Telephone: (212) 872-2435 Facsimile: (212) 872-2426 Telex: 420634 -66- BANK OF HAWAII By: /s/ D. Edward Wohlleb --------------------------------- Name: D. EDWARD WOHLLEB Title: Vice President 130 Merchant Street 20th Floor Honolulu, Hawaii 96813 Attention: Curtis W. Chinn Telephone: (808) 537-8433 Facsimile: (808) 537-8301 Telex: 7238434 BANQUE NATIONALE DE PARIS By: /s/ Clive Bettles --------------------------------- Name: CLIVE BETTLES Title: Senior Vice President and Manager By: /s/ Tjalling Terpstra --------------------------------- Name: TJALLING TERPSTRA Title: Vice President 725 South Figueroa Street Suite 2090 Los Angeles, California 90017 Attention: Tjalling Terpstra Telephone: (213) 488-9120 Facsimile: (213) 488-9602 Telex: 6734168 BNPLA BARCLAYS BANK PLC By: /s/ Francis C. Constantinople --------------------------------- Name: FRANCIS C. CONSTANTINOPLE Title: Director 222 Broadway New York, New York 10038 Attention: Frank Constantinople Telephone: (212) 412-7634 Facsimile: (212) 412-5610 -67- CIBC, INC. By: /s/ Stephen D. Reynolds --------------------------------- Name: STEPHEN D. REYNOLDS Title: Director 425 Lexington Avenue New York, New York 10017 Attention: Stephen D. Reynolds Telephone: (212) 856-3566 Facsimile: (212) 856-3613 CREDIT SUISSE By: /s/ Marilou Palenzuela --------------------------------- Name: MARILOU PALENZUELA Title: Member of Senior Management By: /s/ Mark A. Sampson --------------------------------- Name: MARK A. SAMPSON Title: Associate 633 West 5th Street, 64th Floor Los Angeles, CA 90071 Attention: Mark Sampson Telephone: (213) 955-8200 Facsimile: (213) 955-8245 FIRST HAWAIIAN BANK By: /s/ Robert M. Wheeler, III --------------------------------- Name: ROBERT M. WHEELER, III Title: Vice President 1132 Bishop Street 19th Floor Honolulu, Hawaii 96813 Attention: Robert M. Wheeler, III Telephone: (808) 525-6367 Facsimile: (808) 525-6372 Telex: 7238329 -68- FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: /s/ Judy Flukinger --------------------------------- Name: JUDY FLUKINGER Title: Vice President One First Union Center 301 South College Street Charlotte, North Carolina 28202-0745 Attention: John E. Reid Telephone: (704) 383-1385 Facsimile: (704) 374-2802 Telex: 684-3115 THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY By: /s/ Toshinari Iyoda --------------------------------- Name: TOSHINARI IYODA Title: Senior Vice President 350 South Grand Avenue Suite 1500 Los Angeles, California 90071 Attention: Craig Papayania Telephone: (213) 893-6441 Facsimile: (213) 488-9840 Telex: 6831123 -69- ISTITUTO BANCARIO SAN PAOLO DI TORINO S.p.A. By: /s/ Donald W. Brown --------------------------------- Name: DONALD W. BROWN Title: Branch Manager By: /s/ Glen Binder --------------------------------- Name: GLEN BINDER Title: Vice President 444 South Flower Street, Suite 4550 Los Angeles, California 90071 Attention: Glen Binder Telephone: (213) 489-3100 Facsimile: (213) 622-2514 Telex: 220045 PNC BANK, NATIONAL ASSOCIATION By: /s/ Kirk Seagers --------------------------------- Name: KIRK SEAGERS Title: Assistant Vice President Broad & Chestnut Streets 13th Floor Philadelphia, PA 19101 Attention: Kirk Seagers Telephone: (215) 585-5081 Facsimile: (215) 585-7615 THE TOKAI BANK, LTD. LOS ANGELES AGENCY By: /s/ Masahiko Saito --------------------------------- Name: MASAHIKO SAITO Title: Assistant General Manager 300 South Grand Avenue Los Angeles, CA 90071 Attention: Kenji Oshigane Telephone: (213) 972-0200, ext. 8451 Facsimile: (213) 689-3200 -70- THE TOYO TRUST & BANKING CO., LTD., LOS ANGELES AGENCY By: /s/ Kenji Fujikawa --------------------------------- Name: KENJI FUJIKAWA Title: General Manager 444 South Flower Street, Suite 1550 Los Angeles, California 90071 Attention: Steven K. Rubinstein Telephone: (213) 624-2424 Facsimile: (213) 624-5874 Telex: 215288 Participants: THE BANK OF CALIFORNIA, N.A. By: /s/ Robert J. Vernagallo --------------------------------- Name: ROBERT J. VERNAGALLO Title: Vice President 400 California Street San Francisco, CA 94104 Attention: Robert J. Vernagallo Telephone: (415) 765-2614 Facsimile: (415) 765-2634 CITICORP USA, INC. By: /s/ Stephen P. Zwick --------------------------------- Name: STEPHEN P. ZWICK Title: Vice President 399 Park Avenue 12th Floor New York, New York 10043 Attention: Peter Bickford Telephone: (212) 559-8146 Facsimile: (212) 935-4285 -71- SCHEDULE I SCHEDULE OF BANKS
Bank Commitment - - ---- ---------- (in millions) Union Bank of Switzerland..................... $ 56.25 Commerzbank Aktiengesellschaft................ 50.00 Bayerische Hypotheken-und Wechsel-Bank Aktiengesellschaft........................... 48.75 The Bank of New York.......................... 38.00 The Bank of Nova Scotia....................... 38.00 The Bank of Tokyo, Limited.................... 38.00 The Chase Manhattan Bank, N.A................. 38.00 Deutsche Bank AG.............................. 38.00 Dresdner Bank AG.............................. 38.00 The Fuji Bank, Limited........................ 38.00 Societe Generale.............................. 38.00 Royal Bank of Canada.......................... 37.50 DG Bank Deutsche Genossenschaftsbank.......... 35.00 Chemical Bank................................. 31.50 The Dai-Ichi Kangyo Bank, Ltd................. 31.50 First Interstate Bank of California........... 31.50 The Sakura Bank, Ltd.......................... 31.50 The Sanwa Bank, Limited....................... 31.50 Bayerische Landesbank Girozentrale............ 27.50 The Mitsui Trust & Banking Company, Limited... 27.50 Westdeutsche Landesbank Girozentrale.......... 25.00 The Asahi Bank, Ltd........................... 20.00 Kredietbank NV................................ 20.00 The Tokai Bank, Ltd........................... 18.75 Banco di Napoli S.p.A......................... 16.00 Banca Nazionale del Lavoro, S.p.A............. 15.00 Banque Nationale de Paris..................... 14.00 Banco Central Hispanoamericano................ 12.50 Bank of Hawaii................................ 12.50 Istituto Bancario San Paolo di Torino S.p.A... 12.50 The Toyo Trust & Banking Co., Ltd............. 12.00 Barclays Bank PLC............................. 10.00 CIBC, Inc..................................... 10.00 Credit Suisse................................. 10.00 First Union National Bank of North Carolina... 10.00 The Industrial Bank of Japan, Limited......... 10.00 PNC Bank, National Association................ 10.00 Citicorp USA, Inc............................. 7.50 First Hawaiian Bank........................... 6.25 The Bank of California, N.A................... 4.00
SCHEDULE II FEES AND MARGINS (IN BASIS POINTS) =============================================================================== Facility Fee 7.00 - - ------------------------------------------------------------------------------- Margins: LIBOR 28.00 CD 40.50 Base -- -------------------------------------- Competitive Bid Option As Bid by the Banks. ===============================================================================
Exhibit A FORM OF NOTICE OF COMPETITIVE BID BORROWING ________________, 19__ Union Bank of Switzerland, as Agent 299 Park Avenue New York, New York 10171-0026 Attention: James Broadus Ladies and Gentlemen: This instrument constitutes a Notice of Competitive Bid Borrowing under, and as defined by, the $1,000,000,000 Revolving Credit Agreement, dated as of January 19, 1996 (as amended, modified or supplemented, the "Credit Agreement"), among International Lease Finance Corporation (the "Company"), Union Bank of Switzerland, in its individual corporate capacity and as Agent, and certain financial institutions referred to therein. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. The Company hereby requests (a) Bid Loan(s), subject to the terms of the Credit Agreement, as follows: (a) Funding Date: ________________, 19__. (b) Aggregate principal amount of Bid Loans requested: $____________. (c) Loan Period(s):/1/ Absolute Rate Loans: ___ days ___ days ___ days LIBOR Rate Loans: __ months __ months __ months (d) Account of the Company to be credited: __________ ____________________ /1/ The Company may select up to three loan periods per Notice of Competitive Bid Borrowing. A-1 The officer of the Company signing this Notice of Competitive Bid Borrowing hereby certifies that the following statements are true on the date hereof and will be true on the proposed Funding Date: (a) Before and after giving effect to the Bid Loans requested hereby, no Event of Default or Unmatured Event of Default shall have occurred and be continuing or shall result from the making of such Loan; and (b) Before and after giving effect to the Bid Loans requested hereby, the representations and warranties set forth in Section 8 of the Credit --------- Agreement shall be true and correct in all material respects as of the date of such requested Loans with the same effect as though made on the date of such Bid Loans. Very truly yours, INTERNATIONAL LEASE FINANCE CORPORATION By:_________________________________ Its:________________________________ A-2 Exhibit B FORM OF BID FROM [Name of Bank] (Contact Person:___________) ______________, 19__ Union Bank of Switzerland, as Agent 299 Park Avenue New York, New York 10171-0026 Attention: James Broadus Ladies and Gentlemen: This instrument constitutes a Bid under, and as defined by, the $1,000,000,000 Revolving Credit Agreement, dated as of January 19, 1996 (as amended, modified or supplemented, the "Credit Agreement"), among International Lease Finance Corporation (the "Company"), Union Bank of Switzerland in its individual capacity and as Agent, and certain financial institutions referred to therein, including the undersigned. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. (1) The Company's related Notice of Competitive Bid Borrowing, dated _____________, 19__, inviting this Bid has requested a Bid Loan, subject to the terms and conditions of the Credit Agreement, in the aggregate principal amount of $____________ with a Funding Date of _______________, 19__. (2) The undersigned hereby offers to make the following Bid Loan(s) on the Funding Date:/2/ ____________________ /2/ $10,000,000 or a higher integral multiple of $1,000,000. B-1 (a) Loan Period of ___ days ___ months
- - ----------------------------------------------------------------------------- Principal Amount Interest Rate or Minimum Maximum LIBOR +/- Margin - - ----------------------------------------------------------------------------- 1. $/3/ $* /4/ 2. $* $* ** 3. $* $* ** 4. $* $* ** - - -----------------------------------------------------------------------------
(3) The undersigned's lending office for the proposed Bid Loan is ________________________. (4) The undersigned acknowledges that the offer(s) set forth above, subject to the satisfaction of the applicable conditions precedent set forth in the Credit Agreement, irrevocably obligate(s) the undersigned to make the Bid Loan(s) for which any offer(s) are accepted, in whole or in part, in accordance with the terms of the Credit Agreement. Very truly yours, [NAME OF BANK] By:_________________________________ Its:________________________________ _________________ /3/ $10,000,000 or a higher integral multiple of $1,000,000 for each interest rate (i.e., Portion) for each Loan Period. /4/ Specify the interest rate per annum (expressed as a percentage to four decimal places) in the case of an Absolute Rate Loan and the margin above or below LIBOR in the case of a LIBOR Rate Loan. B-2 Exhibit C FORM OF COMMITTED LOAN REQUEST ________________, 19__ Union Bank of Switzerland, as Agent 299 Park Avenue New York, New York 10171-0026 Attention: James Broadus Ladies and Gentlemen: This constitutes a Committed Loan Request under, and as defined by, the $1,000,000,000 Revolving Credit Agreement, dated as of January 19, 1996 (as amended, modified or supplemented, the "Credit Agreement"), among International Lease Finance Corporation (the "Company"), Union Bank of Switzerland, in its individual capacity and as Agent, and certain financial institutions referred to therein. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. The Company hereby requests that the Banks make Committed Loans to it, subject to the terms and conditions of the Credit Agreement, as follows: (a) Funding Date: ______________, 19__. (b) Aggregate principal amount of Committed Loans requested: $_____________. (c) Loan Period: _____________. (e) Type of Loans: [LIBOR Rate Loans] [Base Rate Loans] [CD Rate Loans] The officer of the Company signing this Committed Loan Request hereby certifies that: (a) Before and after giving effect to the Committed Loans requested hereby, no Event of Default or Unmatured Event of Default shall have occurred and be continuing or shall result from the making of such Loans; (b) Before and after giving effect to the Loans requested hereby, the representations and C-1 warranties set forth in Section 8 of the Credit Agreement shall be --------- true and correct in all material respects with the same effect as though made on the date of such Loans; and (c) After the making of the Loans requested hereby, the aggregate principal amount of all outstanding Loans will not exceed the Aggregate Commitment. Very truly yours, INTERNATIONAL LEASE FINANCE CORPORATION By:__________________________________ Its:_________________________________ C-2 Exhibit D FORM OF BID NOTE $1,000,000,000 January 19, 1996 International Lease Finance Corporation, a California corporation (the "Company"), for value received, hereby promises to pay to the order of [NAME OF BANK] (the "Bank"), at the New York branch office of Union Bank of Switzerland, as Agent (the "Agent"), at 299 Park Avenue, New York, New York 10171-0026 on January 17, 1997, or at such other place, to such other person or at such other time and date as provided for in the $1,000,000,000 Revolving Credit Agreement (as amended, modified or supplemented, the "Credit Agreement"), dated as of January 19, 1996, among the Company, the Agent, and the financial institutions named therein, in lawful money of the United States, the principal sum of $1,000,000,000 Dollars or, if less, the aggregate unpaid principal amount of all Bid Loans made by the Bank to the Company pursuant to the Credit Agreement. This Bid Note shall bear interest as set forth in the Credit Agreement for Bid Borrowings (as defined in the Credit Agreement). Except as otherwise provided in the Credit Agreement with respect to LIBOR Rate Loans, if interest or principal on any loan evidenced by this Note becomes due and payable on a day which is not a Business Day (as defined in the Credit Agreement) the maturity thereof shall be extended D-1 to the next succeeding Business Day, and interest shall be payable thereon at the rate herein specified during such extension. This Note is one of the Bid Notes referred to in the Credit Agreement. This Note is subject to prepayment in whole or in part, and the maturity of this Note is subject to acceleration, upon the terms provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of California, without reference to principles of conflicts of law. All Bid Loans made by the Bank to the Company pursuant to the Credit Agreement and all payments of principal thereof may be indicated by the Bank upon the grid attached hereto which is a part of this Note. Such notations shall be rebuttable presumptive evidence of the aggregate unpaid principal amount of all Bid Loans made by the Bank pursuant to the Credit Agreement. INTERNATIONAL LEASE FINANCE CORPORATION By_____________________________________ Title: D-2 Bid Loans and Payments of Principal -----------------------------------
Name of Principal Amount of Unpaid Person Funding Amount Interest Interest Loan Principal Principal Making Date of Loan Method Rate Period Paid Balance Notation - - -------- --------- -------- -------- ------ --------- --------- -------- ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
D-3 Exhibit E FORM OF COMMITTED NOTE $_______________ January 19, 1996 International Lease Finance Corporation, a California corporation (the "Company"), for value received, hereby promises to pay to the order of [NAME OF BANK] (the "Bank"), at the New York branch office of Union Bank of Switzerland, as Agent (the "Agent"), at 299 Park Avenue, New York, New York 10171-0026 on January 17, 1997, or at such other place, to such other person or at such other time and date as provided for in the $1,000,000,000 Revolving Credit Agreement (as amended, modified or supplemented, the "Credit Agreement"), dated as of January 19, 1996, among the Company, the Agent, and the financial institutions named therein, in lawful money of the United States, the principal sum of $_________ Dollars or, if less, the aggregate unpaid principal amount of all Committed Loans made by the Bank to the Company pursuant to the Credit Agreement. This Committed Note shall bear interest as set forth in the Credit Agreement for Base Rate Loans, CD Rate Loans and LIBOR Rate Loans (as defined in the Credit Agreement), as the case may be. Except as otherwise provided in the Credit Agreement with respect to LIBOR Rate Loans, if interest or principal on any loan evidenced by this Note becomes due and payable on a day which is not a Business Day (as defined in E-1 the Credit Agreement) the maturity thereof shall be extended to the next succeeding Business Day, and interest shall be payable thereon at the rate herein specified during such extension. This Note is one of the Committed Notes referred to in the Credit Agreement. This Note is subject to prepayment in whole or in part, and the maturity of this Note is subject to acceleration, upon the terms provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of California, without reference to principles of conflicts of law. All Committed Loans made by the Bank to the Company pursuant to the Credit Agreement and all payments of principal thereof may be indicated by the Bank upon the grid attached hereto which is a part of this Note. Such notations shall be rebuttable presumptive evidence of the aggregate unpaid principal amount of all Committed Loans made by the Bank pursuant to the Credit Agreement. INTERNATIONAL LEASE FINANCE CORPORATION By_____________________________________ Title: E-2 Committed Loans and Payments of Principal -----------------------------------------
Name of Principal Amount of Unpaid Person Funding Amount Interest Interest Loan Principal Principal Making Date of Loan Method Rate Period Paid Balance Notation - - -------- --------- -------- -------- ------ --------- --------- -------- ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
E-3 Exhibit F FIXED CHARGE COVERAGE RATIO/5/ FOR THE PERIOD ENDED SEPTEMBER 30, 1995
12 Months Ended September 30, 1995 (Dollars in thousands) ---------------------- Earnings Net Income................................... $185,162 Add: Provision for income taxes................. 110,732 Fixed charges.............................. 558,401 Less: Capitalized interest....................... (51,823) ---------------------- Earnings as adjusted (A)..................... 802,472 ====================== Preferred dividend requirements.............. $ 11,428 Ratio of income before provision for income taxes to net income................ 156% ---------------------- Preferred dividend factor on pretax basis............................... 17,866 Fixed charges Interest expense........................... 506,578 Capitalized interest....................... 51,823 Estimate of minimum rents under operating leases representing the interest factor.......................... 0 Fixed charges as adjusted.................... 558,401 ---------------------- Fixed charges and preferred stock dividends (B)........................ $576,267 ====================== Ratio of earnings to fixed charges and preferred stock dividends ((A) divided by (B))*..................................... 1.39 to 1.00 ======================
__________________________ /5/ As calculated pursuant to Section 9.11 and the definition of Fixed Charge ------------ Coverage Ratio set forth in Section 1.2. ----------- F-1 Exhibit G January 19, 1996 To the Banks and the Agent Referred to Below c/o Union Bank of Switzerland 444 South Flower Street Suite 4600 Los Angeles, California 90071 Ladies and Gentlemen: We have acted as special counsel for International Lease Finance Corporation (the "Company") in connection with a $1,250,000,000 Revolving Credit Agreement and a $1,000,000,000 Revolving Credit Agreement, in each case dated as of January 19, 1996 among the Company, Union Bank of Switzerland acting through its Los Angeles Branch, in its individual capacity and as Agent, and certain financial institutions ("Banks") signatory thereto (collectively, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein as therein defined. In our capacity as such counsel, we have examined originals, or copies certified or otherwise identified to our satisfaction as being true copies of such records, documents or other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. We have been furnished, and have relied upon, certificates of officers of the Company with respect to certain factual matters regarding the Company. As to matters of fact, we have also relied on the representations and warranties made by the Company in the Credit Agreement. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary. Except with respect to the Company and its Subsidiaries, in our review and examination we have assumed the authenticity of documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as conformed or photostatic copies. For the purpose of the opinions hereinafter expressed, we have assumed the due execution and delivery, pursuant to due authorization, of each document referred to in this opinion by each party thereto other than the Company and its subsidiaries, that each document constitutes the legally valid and binding obligation of each such other party and that such other person is duly organized, validly G-1 The Banks and the Agent -2- existing and in good standing under the laws of its jurisdiction of organization. We have investigated such questions of law for the purpose of rendering this opinion as we have deemed necessary. We are opining herein as to the effect on the subject transactions of only United States federal law and the laws of the State of California. Upon the basis of the foregoing, we are of the opinion that: 1. Each of the Company and Interlease Management Corporation, Interlease Aviation Corporation, Atlantic International Aviation Holdings, Inc., Aircraft SPC-1, Inc., Aircraft SPC-2, Inc. and ILFC Aircraft Holding Corporation has been duly incorporated and is existing and in good standing under the laws of the State of California. 2. The Company has the corporate power to own its properties and conduct its business as described in the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1994. 3. The Company has the corporate power and corporate authority to enter into the Credit Agreement, to make the borrowings under the Credit Agreement, to execute and deliver the Notes and to incur the obligations provided for therein, all of which have been duly authorized by all necessary corporate action on the part of the Company. 4. No authorizations, consents, approvals, registrations, filings and licenses with or from any California or federal court or governmental agency or body are necessary for the borrowing, the execution and delivery of the Credit Agreement and the Notes, and the performance by the Company of its obligations thereunder and under the Notes. 5. The Credit Agreement and the Notes have been duly executed and delivered by the Company and constitute the legally valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms. 6. Neither the execution and delivery of the Credit Agreement by the Company, nor the performance thereof by the Company on or prior to the date hereof nor the payment of the Notes violates the Articles of Incorporation or Bylaws of the G-2 The Banks and the Agent -3- Company, breaches or results in a default under any of the agreements, instruments, contracts, orders, injunctions or judgments identified to us in an officer's certificate of the Company (a copy of which is being delivered to you concurrently herewith) as agreements, instruments, contracts, orders, injunctions or judgments binding on the Company or by which its assets are bound which have provisions relating to the issuance by the Company of debt and which the breach of, or default under, would have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole, or violates any present federal or California statute, rule or regulation binding on the Company or its assets. 7. The making of the Loans and the use of the proceeds thereof as provided in the Credit Agreement will not violate Regulation U, G, T or X of the Board of Governors of the Federal Reserve System. 8. The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Our opinions in paragraph 5 above as to the validity, binding effect or enforceability of the Credit Agreement and the Notes are subject to bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. Our opinions rendered in paragraphs 4 and 6 above are based upon our review only of those statutes, rules and regulations which, in our experience, are normally applicable to transactions of the type contemplated by the Credit Agreement and the Notes. In rendering our opinions in paragraph 4 above, we have assumed that each Bank is a sophisticated financial institution capable of evaluating the merits and risks relating to the Notes, and that each Bank has been provided access to such information relating to the Company as such Bank has requested. Except as expressly set forth in paragraph 7 above, we are not expressing any opinion as to the effect of the Agent's or any Bank's compliance with any state or federal laws or regulations applicable to the transactions contemplated by the G-3 The Banks and the Agent -4- Company because of the nature of the Agent's or any Bank's business. This opinion is furnished to you in connection with the Company's execution and delivery of the Credit Agreement, is solely for your benefit and the benefit of your successors and assigns, and may not be relied upon by, nor may copies be delivered to, any other person, without our prior written consent. Very truly yours, G-4 Exhibit H January 19, 1996 To the Banks and the Agent Referred to Below c/o Union Bank of Switzerland 444 South Flower Street Suite 4600 Los Angeles, California 90071 Ladies and Gentlemen: I am General Counsel for International Lease Finance Corporation (the "Company") and am rendering this opinion in connection with a $1,250,000,000 Revolving Credit Agreement and a $1,000,000,000 Revolving Credit Agreement, in each case dated as of January 19, 1996 among the Company, Union Bank of Switzerland acting through its Los Angeles Branch, in its individual capacity and as Agent, and certain financial institutions ("Banks") signatory thereto (collectively, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein as therein defined. I have examined originals, or copies certified or otherwise identified to my satisfaction as being true copies, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. I am opining herein as to the effect on the subject transactions of only United States federal law and the laws of the State of California. Upon the basis of the foregoing, I am of the opinion that: 1. The Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which the ownership or leasing of its property or the conduct of its business requires it to be so qualified; provided, however, that the Company may not be so -------- ------- qualified in certain jurisdictions, the effect of which would not have a Material Adverse Effect on the Company. 2. To the best of my knowledge, Interlease Aviation Corporation, ILFC Aircraft Holding Corporation, Interlease H-1 The Banks and the Agent -2- Management Corporation, Aircraft SPC-1, Inc., Aircraft SPC-2, Inc. and Atlantic International Aviation Holdings, Inc., a wholly owned subsidiary of Interlease Management Corporation, are the only domestic Subsidiaries of the Company. 3. No Subsidiary of the Company nor all of the Subsidiaries of the Company taken as a whole is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. 4. There is no pending or, to the best of my knowledge, threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries which, individually or in the aggregate, would have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole. This opinion is furnished to you in connection with the Company's execution and delivery of the Credit Agreement, is solely for your benefit and the benefit of your successors and assigns, and may not be relied upon by, nor may copies be delivered to, any other person without my prior written consent. Very truly yours, Julie I. Sackman General Counsel H-2 Exhibit I ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _______________, 199_ between [ASSIGNOR] (the "Assignor") and [ASSIGNEE] (the "Assignee"). W I T N E S S E T H - - - - - - - - - - WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the $1,000,000,000 Revolving Credit Agreement dated as of January 19, 1996 (the "Credit Agreement") among International Lease Finance Corporation (the "Company"), the Assignor and Union Bank of Switzerland, in its individual corporate capacity and as Agent (the "Agent"), and certain financial institutions referred to therein; WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Committed Loans in an aggregate principal amount at any time outstanding not to exceed $___________; WHEREAS, Committed Loans and Bid Loans made by the Assignor under the Credit Agreement in the respective aggregate principal amounts of $____________ and $____________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $ /6/ (the "Assigned ------- Amount"), together with $ * aggregate principal amount outstanding of --------- Committed Loans and $ /7/ aggregate principal amount outstanding of Bid ------- Loans (collectively, the "Assigned Loans"), and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on the terms set forth in the Credit Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: ____________________ /6/ See Section 13.4.1 for minimum requirements. -------------- /7/ Assignment of Bid Loans is optional. I-1 SECTION 1. Definitions. All capitalized terms not otherwise defined ----------- herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the ---------- Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount and the Assigned Loans, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount and the Assigned Loans. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of - - --------- the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale -------- contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the --------- date hereof in Federal funds an amount equal to $_________/8/. It is understood that facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Company and the Agent. This Agreement is ------------------------------------ conditioned upon the consent of the Company and the Agent pursuant to Section ------- 13.8 of the CreditAgreement. The execution of this Agreement by the Company and - - ---- the Agent is evidence of this consent. Pursuant to Section 13.8 the Company ------------ agrees to execute and deliver a Bid __________________ /8/ Amount should combine principal and face together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. I-2 Note and a Committed Note, each payable to the order of the Assignee and evidencing the assignment and assumption provided for herein. The Company also agrees to execute replacement Notes in favor of the Assignor if the Assignor has retained any Commitment. SECTION 5. Non-Reliance on Assignor. The Assignor makes no ------------------------ representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Company, or the validity and enforceability of the obligations of the Company in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Company. SECTION 6. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of California. SECTION 7. Counterparts. This Agreement may be signed in any number ------------ of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By___________________________ Title: [ASSIGNEE] By___________________________ Title: I-3 Consented, and with respect to Section 4, agreed: INTERNATIONAL LEASE FINANCE CORPORATION By___________________________ Title: Consented: UNION BANK OF SWITZERLAND, as Agent By___________________________ Title: By___________________________ Title: I-4 Exhibit J FORM OF REQUEST FOR EXTENSION OF TERMINATION DATE ___________, 19__ [ADDRESSED TO EACH BANK] [ADDRESSED TO THE AGENT] Attention: Ladies and Gentlemen: This instrument constitutes [a notice to the Agent of] a request for the extension of the Termination Date pursuant to Section 13.8 of the ------------ $1,000,000,000 Revolving Credit Agreement, dated as of January 19, 1996 (as amended, modified or supplemented, the "Credit Agreement"), among International Lease Finance Corporation (the "Company"), Union Bank of Switzerland, in its individual corporate capacity and as Agent, and certain financial institutions referred to therein. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. The Company [hereby requests that you extend your] [has sent a letter to each Bank that is now a party to the Credit Agreement asking such Bank to extend its] now scheduled Termination Date under the Credit Agreement by 364 days. The officer of the Company signing this instrument hereby certifies that: (a) Before and after giving effect to the extension of the Termination Date requested hereby, no Event of Default or Unmatured Event of Default shall have occurred and be continuing [and all Loans payable prior to the date hereof shall have been paid in full]; and (b) Before and after giving effect to the extension of the Termination Date requested hereby, the representations and warranties set forth in Section 8 --------- of the Credit J-1 Agreement shall be true and correct in all material respects with the same effect as though made on the date hereof. Very truly yours, INTERNATIONAL LEASE FINANCE CORPORATION By:__________________________ Its:_________________________ Confirmed and accepted, subject to the terms and conditions of the Credit Agreement, as of the date first above written: [NAME OF BANK] By:___________________________ Its: J-2 EX-10.14 5 REVOLVING CREDIT AGREEMENT ($1,250,000,000) CONFORMED COPY -------------- 10.14 $1,250,000,000 REVOLVING CREDIT AGREEMENT DATED AS OF JANUARY 19, 1996 AMONG INTERNATIONAL LEASE FINANCE CORPORATION UNION BANK OF SWITZERLAND LOS ANGELES BRANCH AND THE OTHER BANKS (AS DEFINED HEREIN) TABLE OF CONTENTS
Page ---- SECTION 1. CERTAIN DEFINITIONS................................... 1 Section 1.1. Terms Generally............................... 1 Section 1.2. Specific Terms................................ 2 SECTION 2. BID LOANS AND BID NOTES............................... 15 Section 2.1. Making of Bid Loans........................... 15 Section 2.2. Procedure for Bid Loans....................... 15 Section 2.3. Funding of Bid Loans.......................... 18 Section 2.4. Bid Notes..................................... 18 SECTION 3. COMMITTED LOANS AND NOTES............................. 19 Section 3.1. Agreement to Make Committed Loans............. 19 Section 3.2. Procedure for Committed Loans................. 19 Section 3.3. Maturity of Committed Loans................... 21 Section 3.4. Committed Notes............................... 21 SECTION 4. INTEREST AND FEES..................................... 21 Section 4.1. Interest Rates................................ 21 Section 4.2. Interest Payment Dates........................ 22 Section 4.3. Setting and Notice of Committed Loan Rates.... 22 Section 4.4. Facility Fee.................................. 23 Section 4.5. Agent's Fees.................................. 24 Section 4.6. Utilization Fee............................... 24 Section 4.7. Computation of Interest and Fees.............. 24 SECTION 5. REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS.............................. 24 Section 5.1. Voluntary Termination or Reduction of the Commitments............................ 24 Section 5.2. Voluntary Prepayments......................... 25 SECTION 6. MAKING AND PRORATION OF PAYMENTS; SET-OFF; TAXES................................................. 25 Section 6.1. Making of Payments............................ 25 Section 6.2. Pro Rata Treatment; Sharing................... 26 Section 6.3. Set-off....................................... 27 Section 6.4. Taxes, etc.................................... 27 SECTION 7. INCREASED COSTS AND SPECIAL PROVISIONS FOR ABSOLUTE RATE LOANS, LIBOR RATE LOANS AND CD RATE LOANS......................................... 29 Section 7.1. Increased Costs............................... 29 Section 7.2. Basis for Determining Interest Rate Inadequate or Unfair.......................... 30 Section 7.3. Changes in Law Rendering Certain Loans Unlawful................................ 31 Section 7.4. Funding Losses................................ 32
i Section 7.5. Discretion of Banks as to Manner of Funding... 32 Section 7.6. Conclusiveness of Statements; Survival of Provisions........................ 32 SECTION 8. REPRESENTATIONS AND WARRANTIES........................ 33 Section 8.1. Organization, etc............................. 33 Section 8.2. Authorization; Consents; No Conflict.......... 33 Section 8.3. Validity and Binding Nature................... 34 Section 8.4. Financial Statements.......................... 34 Section 8.5. Litigation and Contingent Liabilities......... 34 Section 8.6. Employee Benefit Plans........................ 34 Section 8.7. Investment Company Act........................ 35 Section 8.8. Public Utility Holding Company Act............ 35 Section 8.9. Regulation U.................................. 35 Section 8.10. Information................................... 35 Section 8.11. Compliance with Applicable Laws, etc.......... 36 Section 8.12. Insurance..................................... 36 Section 8.13. Taxes......................................... 36 Section 8.14. Use of Proceeds............................... 37 Section 8.15. Pari Passu.................................... 37 Section 8.16. Ownership and Liens........................... 37 SECTION 9. COVENANTS............................................. 37 Section 9.1. Reports, Certificates and Other Information... 37 Section 9.2. Existence..................................... 39 Section 9.3. Nature of Business............................ 40 Section 9.4. Books, Records and Access..................... 40 Section 9.5. Insurance..................................... 40 Section 9.6. Repair........................................ 40 Section 9.7. Taxes......................................... 40 Section 9.8. Compliance.................................... 41 Section 9.9. Merger, Purchase and Sale..................... 41 Section 9.10. Consolidated Indebtedness to Consolidated Tangible Net Worth Ratio...................... 42 Section 9.11. Fixed Charge Coverage Ratio................... 42 Section 9.12. Consolidated Tangible Net Worth............... 42 Section 9.13. Restricted Payments........................... 42 Section 9.14. Liens......................................... 43 Section 9.15. Leases........................................ 45 Section 9.16. Use of Proceeds............................... 46 Section 9.17. Transactions with Related Parties............. 46 Section 9.18. Securitization................................ 46 SECTION 10. CONDITIONS TO LENDING................................. 46
ii Section 10.1. Conditions Precedent to All Loans............. 46 Section 10.2. Conditions to the Availability of the Commitments............................... 47 SECTION 11. EVENTS OF DEFAULT AND THEIR EFFECT.................... 49 Section 11.1. Events of Default............................. 49 Section 11.2. Effect of Event of Default.................... 51 SECTION 12. THE AGENT............................................. 52 Section 12.1. Authorization................................. 52 Section 12.2. Indemnification............................... 52 Section 12.3. Action on Instructions of the Required Banks.. 53 Section 12.4. Payments...................................... 53 Section 12.5. Exculpation................................... 55 Section 12.6. Credit Investigation.......................... 55 Section 12.7. UBS and Affiliates............................ 56 Section 12.8. Resignation................................... 56 SECTION 13. GENERAL 56 Section 13.1. Waiver; Amendments............................ 56 Section 13.2. Notices....................................... 57 Section 13.3. Computations.................................. 58 Section 13.4. Assignments; Participations................... 58 Section 13.5. Costs, Expenses and Taxes..................... 61 Section 13.6. Indemnification............................... 62 Section 13.7. Regulation U.................................. 62 Section 13.8. Extension of Termination Dates; Removal of Banks; Substitution of Banks....... 63 Section 13.9. Captions...................................... 65 Section 13.10. Governing Law; Severability................... 65 Section 13.11. Counterparts; Effectiveness................... 65 Section 13.12. Further Assurances............................ 66 Section 13.13. Successors and Assigns........................ 66 Section 13.14. Waiver of Jury Trial.......................... 66
iii SCHEDULES AND EXHIBITS Schedule I Schedule of Banks (Sections 1.2 and 13.8) Schedule II Fees and Margins (Sections 1.2, 4.4 and 4.6) Exhibit A Form of Notice of Competitive Bid Borrowing (Sections 1.2 and 2.2) Exhibit B Form of Bid (Sections 1.2 and 2.2) Exhibit C Form of Committed Loan Request (Section 3.2) Exhibit D Form of Bid Note (Section 1.2) Exhibit E Form of Committed Note (Section 1.2) Exhibit F Fixed Charge Coverage Ratio (Sections 1.2 and 9.11) Exhibit G Form of Opinion of O'Melveny & Myers, Counsel for the Company (Section 10.2.5) Exhibit H Form of Opinion of the General Counsel of the Company (Section 10.2.5) Exhibit I Form of Assignment and Assumption Agreement (Section 13.4.1) Exhibit J Form of Request For Extension of Termination Date (Section 13.8) iv REVOLVING CREDIT AGREEMENT -------------------------- REVOLVING CREDIT AGREEMENT (this "Agreement"), dated as of January 19, 1996, among INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation (herein called the "Company"), the financial institutions listed on the signature pages hereof (herein, together with their respective successors and assigns, collectively called the "Banks" and individually each called a "Bank") and UNION BANK OF SWITZERLAND, acting through its Los Angeles Branch (herein, in its individual capacity, together with its successors and assigns, called "UBS"), as agent for the Banks (herein, in such capacity, together with its successors and assigns in such capacity, called the "Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company has requested the Banks to lend up to $1,250,000,000 to the Company on a revolving basis to enable the Company to support its commercial paper program and for other general corporate purposes; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows: SECTION 1. CERTAIN DEFINITIONS. Section 1.1. Terms Generally. The definitions ascribed to terms in --------------- this Section 1 and elsewhere in this Agreement shall apply equally to both the --------- singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The words "hereby", "herein", "hereof", "hereunder" and words of similar import refer to this Agreement as a whole (including any exhibits and schedules hereto) and not merely to the specific section, paragraph or clause in which such word appears. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of and Exhibits and Schedules to this Agreement unless the context shall otherwise require. Section 1.2. Specific Terms. When used herein, the following terms -------------- shall have the following meanings: Absolute Rate means a rate of interest per annum, expressed as a ------------- percentage to four decimal places and set forth in a Bid for a particular Bid Loan amount and a particular Loan Period. Absolute Rate Loan means any Loan which bears interest at an Absolute ------------------ Rate. Affiliate means, with respect to any Person, any other Person directly --------- or indirectly controlling, controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through ownership of stock, by contract or otherwise. Agent - see Preamble. ----- -------- Aggregate Commitment means $1,250,000,000, as reduced by any reduction -------------------- in the Commitments made from time to time pursuant to Section 5.1 or 13.8. ----------- ---- Agreement - see Preamble. --------- -------- AIG means American International Group, Inc. --- Assessment Rate means, at any time, the then current rate as --------------- determined by the Agent after consultation with the Reference Banks, for the lowest annual assessment payable by banks to the FDIC (or any successor) for the FDIC's or such successor's insuring dollar deposits in the United States and, when used with respect to a Loan Period for a CD Rate Loan, shall mean such rate as in effect from time to time during such Loan Period. Assignee - see Section 13.4.1. -------- -------------- Authorized Officer of the Company means any of the Chairman of the ------------------ Board, the President, the Executive Vice President and Chief Financial Officer, the Treasurer, the Controller and the Assistant Controller of the Company. Available Commitment - see Section 2.2(a). -------------------- -------------- Bank - see Preamble. ---- -------- Bank Parties - see Section 13.6. ------------ ------------ -2- Base LIBOR means, with respect to any Loan Period for a LIBOR Rate ---------- Loan, the rate per annum determined by the Agent to be the arithmetic mean (rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next higher 1/16 of 1%) of the respective rates of interest communicated by the Reference Banks to the Agent as the rate at which Dollar deposits are offered to the Reference Banks by leading banks in the London interbank deposit market at approximately 11:00 a.m., London time, on the second full Business Day preceding the first day of such Loan Period in an amount substantially equal to the amount of such LIBOR Rate Loan for such Reference Banks and for a period equal to such Loan Period. Base Rate means a fluctuating interest rate per annum, as shall be in --------- effect from time to time, which rate per annum shall be equal to the higher of (i) the Prime Rate and (ii) one half of one percent per annum above the Federal Funds Rate. Base Rate Loan means any Loan which bears interest at the Base Rate. -------------- Bid means one or more offers by a Bank to make one or more Bid Loans, --- submitted to the Agent by telephone no later than the Submission Deadline and promptly confirmed in writing on the same day on a duly completed and executed form substantially similar to Exhibit B, personally delivered or transmitted by --------- facsimile to the Agent. Bid Borrowing - see Section 2.2(a). ------------- -------------- Bid Loan means a Loan in Dollars that is an Absolute Rate Loan or a -------- LIBOR Rate Loan made pursuant to Section 2. --------- Bid Note means a promissory note of the Company, substantially in the -------- form of Exhibit D, duly completed, evidencing Bid Loans made to the Company, as --------- such note may be amended, modified or supplemented or supplanted pursuant to Section 13.4.1 from time to time. - - -------------- Business Day means any day of the year on which banks are open for ------------ commercial banking business in the city of New York and in Los Angeles and, if the applicable Business Day relates to the determination of LIBOR for any LIBOR Rate Loan any such Business Day on which dealings in deposits in Dollars are transacted in the London interbank market. -3- Capitalized Lease means any lease under which any obligations of the ----------------- lessee are, or are required to be, capitalized on a balance sheet of the lessee in accordance with generally accepted accounting principles in the United States. Capitalized Rentals means, as of the date of any determination, the ------------------- amount at which the obligations of the lessee, due and to become due under all Capitalized Leases under which the Company or any Subsidiary is a lessee, are reflected as a liability on a consolidated balance sheet of the Company and its Subsidiaries. CD Base Rate means with respect to any Loan Period for a CD Rate Loan ------------ the average of the bid rates (rounded to the nearest 1/100 of 1% or, if there is no nearest 1/100 of 1%, to the next higher 1/100 of 1%) quoted at 10:00 a.m., New York City time (or as soon thereafter as is practi cable), on the first Business Day of such Loan Period by two or more New York certificate of deposit dealers of recognized standing, selected by the Agent, for the purchase at face value of 30-day, 60-day, 90-day or 180-day, as the case may be, certificates of deposit sold by the Reference Banks in the secondary market in an amount substantially equal to the amount of such CD Rate Loan. CD Rate means, with respect to any Loan Period, the rate per annum ------- determined pursuant to the following formula, which rate shall change during such Loan Period as and when the Reserve Percentage or the Assessment Rate shall change: CDBR CD Rate = -------- + AR + ARM 1 - RP where: ------ CDBR = CD Base Rate for such Loan Period for a CD Rate Loan AR = Assessment Rate ARM = The applicable rate margin with respect to CD Rate Loans set forth in Schedule II hereto RP = Reserve Percentage CD Rate Loan means any Loan that bears interest at the CD Rate. ------------ -4- Code means the Internal Revenue Code of 1986, as amended. ---- Commitments means the Banks' commitments to make Committed Loans ----------- hereunder; and Commitment as to any Bank means the amount set forth opposite ---------- such Bank's name on Schedule I (as reduced in accordance with Section 5.1, or as ---------- ----------- periodically revised in accordance with Section 13.4 or Section 13.8). ------------ ------------ Committed Loan means a Loan in Dollars that is a Base Rate Loan, CD -------------- Rate Loan or LIBOR Rate Loan made pursuant to Section 3. --------- Committed Loan Request - see Section 3.2(a). ---------------------- -------------- Committed Note means a promissory note of the Company, substantially -------------- in the form of Exhibit E, duly completed, evidencing Committed Loans to the --------- Company, as such note may be amended, modified or supplemented or supplanted pursuant to Section 13.4.1 from time to time. -------------- Company - see Preamble. ------- -------- Consolidated Indebtedness means, as of the date of any determination, ------------------------- the total amount of Indebtedness, less the amount of current and deferred income taxes and rentals received in advance of the Company and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles in the United States. Consolidated Tangible Net Worth means, as of the date of any ------------------------------- determination, the total of shareholders' equity (including capital stock, additional paid-in capital and retained earnings after deducting treasury stock), less the sum of the total amount of goodwill, organization expenses, unamortized debt issue costs (determined on an after tax basis), deferred assets other than prepaid insurance and prepaid taxes, the excess of cost of shares acquired over book value of related assets, surplus resulting from any revaluation write-up of assets subsequent to September 30, 1994 and such other assets as are properly classified as intangible assets, all determined in accordance with generally accepted accounting principles in the United States consolidating the Company and its Subsidiaries. Dollar, and $, refer to the lawful money of the United States. ------ -5- ERISA means the Employee Retirement Income Security Act of 1974, as ----- amended. ERISA Affiliate means any corporation, trade or business that is, --------------- along with the Company or any Subsidiary, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in sections 414(b) and 414(c), respectively, of the Code or section 4001 of ERISA. Eurodollar Reserve Percentage means for any day in any Loan Period for ----------------------------- any LIBOR Rate Loan that percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor thereto) or other U.S. government agency for determining the reserve requirement (including, without limitations, any marginal, basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion dollars in respect of eurocurrency funding liabilities. LIBOR shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. Event of Default means any of the events described in Section 11.1. ---------------- ------------ Existing Litigation - see Section 10.1.3. ------------------- --------------- FASB 13 means the Statement of Financial Accounting Standards No. 13 ------- (Accounting for Leases) as in effect on the date hereof. FDIC means the Federal Deposit Insurance Corporation. ---- Federal Funds Rate means, for any day, the rate set forth in the ------------------ weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System (including any such successor publication, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, -6- the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m., New York City time, on such day by each of three leading brokers of Federal funds trans actions in New York City, selected by the Agent. The rate for any day which is not a Business Day shall be the rate for the immediately preceding Business Day. Fixed Charge Coverage Ratio on the last day of any quarter of any --------------------------- fiscal year of the Company means the ratio for the period of four fiscal quarters ending on such day of earnings to combined fixed charges and preferred stock dividends referred to in Paragraph (d)(1)(i) of Item 503 of Regulation S-K of the Securities and Exchange Commission, as amended from time to time, and determined pursuant to Paragraphs (d)(2) through (d)(10) of such Item 503 with the Company as "registrant" (such ratio for the four fiscal quarters ended September 30, 1995 is attached hereto as Exhibit F); provided, however, that if --------- -------- ------- the Required Banks in their sole discretion determine that amendments to Regulation S-K subsequent to the date hereof substantially modify the provisions of such Item 503, "Fixed Charge Coverage Ratio" shall have the meaning determined by this definition without regard to any such amendments. Funding Date means the date on which any Loan is scheduled to be ------------ disbursed. Funding Office means, with respect to any Bank, any office or offices -------------- of such Bank or Affiliate or Affiliates of such Bank through which such Bank shall fund or shall have funded any Loan. A Funding Office may be, at such Bank's option, either a domestic or foreign office of such Bank or a domestic or foreign office of an Affiliate of such Bank. Governmental Authority means any nation or government, any state or ---------------------- other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. Guaranties by any Person means all obligations (other than ---------- endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness -7- or obligation or any property or assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation or (ii) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, (c) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness or obligation or (d) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof; provided, however, that the obligation described in clause (c) shall -------- ------- ---------- not include (i) obligations of a buyer under an agreement with a seller to purchase goods or services entered into in the ordinary course of such buyer's and seller's businesses unless such agreement requires that such buyer make payment whether or not delivery is ever made of such goods or services and (ii) remarketing agreements where the remaining debt on an aircraft does not exceed the aircraft's net book value, determined in accordance with industry standards, except that clause (c) shall apply to the amount of remaining debt under a ---------- remarketing agreement that exceeds the net book value of the aircraft. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. Indebtedness of any Person means and includes all obligations of such ------------ Person which in accordance with generally accepted accounting principles in the United States shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all: (a) obligations of such Person for borrowed money or which have been incurred in connection with the acquisition of property or assets (other than security and other deposits on flight equipment); (b) obligations secured by any Lien or other charge upon property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations; -8- (c) obligations created or arising under any conditional sale, or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property; (d) Capitalized Rentals of such Person under any Capitalized Lease; (e) obligations evidenced by bonds, debentures, notes or other similar instruments; and (f) Guaranties by such Person to the extent required pursuant to the definition thereof. Indemnified Liabilities - see Section 13.6. ----------------------- ------------ Investment means any investment, made in cash or by delivery of any ---------- kind of property or asset, in any Person, whether (i) by acquisition of (x) shares of stock or similar interest, (y) Indebtedness or (z) other obligation or security or (ii) by loan, advance or capital contribution, or otherwise. For purposes of this Agreement, Investment shall exclude any notes receivable and any finance or sales-type leases entered into by the Company or any of its Subsidiaries in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto and minus the amount of any portion of such Investment repaid to such Person in cash as a return of capital, but without any other adjustment for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. LIBOR means with respect to any Loan Period the rate per annum ----- (rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next higher 1/16 of 1%), determined pursuant to the following formula: Base LIBOR ----------------------------------- LIBOR = (1 - Eurodollar Reserve Percentage) LIBOR Rate means (i) with respect to Committed Loans that are LIBOR ---------- Rate Loans, LIBOR plus the applicable rate margin set forth in Schedule II and ----------- (ii) with respect to Bid Loans that are LIBOR Rate Loans, LIBOR plus or minus the rate margin set forth in a Bid for a particular Bid Loan amount and a particular Loan Period. -9- LIBOR Rate Loan means any Loan which bears interest at a LIBOR Rate. --------------- Lien means any mortgage, pledge, lien, security interest or other ---- charge, encumbrance or preferential arrangement, including the retained security title of a conditional vendor or lessor. Litigation Actions means all litigation, claims and arbitration ------------------ proceedings, proceedings before any Governmental Authority or investigations which are pending or, to the knowledge of the Company, threatened against, or affecting, the Company or any Subsidiary. Loan Period means (i) with respect to any Absolute Rate Loan, the ----------- period commencing on such Loan's Funding Date and ending not less than 14 days thereafter nor more than 183 days thereafter as specified in the Bid Loan Request related to such Bid Loan, (ii) with respect to any LIBOR Rate Loan, the period commencing on such Loan's Funding Date and ending 1, 2, 3 or 6 months thereafter as selected by the Company pursuant to Section 3.2(a) or specified in -------------- the Bid Loan Request, as the case may be and (iii) with respect to any CD Rate Loan, the period commencing on such Loan's Funding Date and ending 30, 60, 90 or 180 days thereafter as selected by the Company pursuant to Section 3.2(a); -------------- provided, however, that - - -------- ------- (a) if a Loan Period would otherwise end on a day which is not a Business Day, such Loan Period shall end on the next succeeding Business Day (unless, in the case of a LIBOR Rate Loan, such next succeeding Business Day would fall in the next succeeding calendar month, in which case such Loan Period shall end on the next preceding Business Day); (b) in the case of a Loan Period for any LIBOR Rate Loan, if there exists no day numerically corresponding to the day such Loan was made in the month in which the last day of such Loan Period would otherwise fall, such Loan Period shall end on the last Business Day of such month; and (c) on the date of the making of any Loan by a Bank, the Loan Period for such Loan shall not extend beyond the then-scheduled Termination Date for such Bank. Loans means, collectively, the Bid Loans and the Committed Loans and, ----- individually, any Bid Loan or Committed Loan. -10- Material Adverse Effect shall mean (i) any material adverse effect on ----------------------- the business, properties, condition (financial or otherwise) or operations, present or prospective, of the Company and its Subsidiaries, taken as a whole since any stated reference date or from and after the date of determination, as the case may be, (ii) any material adverse effect on the ability of the Company to perform its obligations hereunder and under the Notes or (iii) any adverse effect on the legality, validity, binding effect or enforceability of any material provision of this Agreement or any Note. Multiemployer Plan has the meaning assigned to such term in section ------------------ 3(37) of ERISA. New Litigation - see Section 10.1.3. -------------- -------------- Notes means, collectively, the Bid Notes and the Committed Notes; and ----- Note means any individual Bid Note or Committed Note. - - ---- Notice of Competitive Bid Borrowing - see Section 2.2(a). ----------------------------------- -------------- Notice Office means the New York Branch of UBS which, as of the date ------------- hereof, is 299 Park Avenue, New York, New York 10071-0026, Attn: James Broadus, Telecopy Number (212) 821-3259; Telephone (212) 821-3227. Operating Lease means any lease other than a Capitalized Lease; --------------- provided, however, that leases with an original term of less than one year shall - - -------- ------- not be Operating Leases. Operating Lease Rental of an Operating Lease means, as of the date of ---------------------- any determination thereof, the net present value of the aggregate unpaid amount due at such date and to become due from the Company or any Subsidiary, on a consolidated basis, as lessee under such Operating Lease discounted at such lessee's incremental borrowing rate or if the interest rate implicit in such Operating Lease can be practically determined and is smaller, at such interest rate, such present value and interest rate being determined in accordance with standard financial practice and such borrowing rate being determined in accordance with FASB 13, excluding from such aggregate amount all amounts which are in excess of the minimum aggregate unpaid amount due at such date and to become due from such lessee under such Operating Lease assuming that such lessee would take or fail to take all actions with respect to all termination, renewal, purchase and other options as would produce the least amount -11- becoming due under such Operating Lease, and "Operating Lease Rentals" means, as of the date of any determination, the aggregate Operating Lease Rental of all Operating Leases as of such date. Participant - see Section 13.4.2. ----------- -------------- Payment Office means the New York Branch of UBS which, as of the date -------------- hereof, is at 299 Park Avenue, New York, New York 10071-0026 Attn: James Broadus. PBGC means the Pension Benefit Guaranty Corporation and any entity ---- succeeding to any or all of its functions under ERISA. Percentage means as to any Bank the ratio, expressed as a percentage, ---------- that such Bank's Commitment as set forth opposite such Bank's name on Schedule -------- I, as periodically revised in accordance with Section 13.4 or 13.8, bears to the - - - ------------ ---- Aggregate Commitment or, if the Commitments have been terminated, the ratio, expressed as a percentage, that the aggregate principal amount of such Bank's outstanding Loans bears to the aggregate principal amount of all outstanding Loans. Permitted Acquisitions means purchases or other acquisitions, or ---------------------- Investments by acquisition of shares of stock, for which cumulatively and in the aggregate since the date hereof the Company has not given consideration in value exceeding $100,000,000. Person means an individual or a corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. Plan means, at any date, any employee pension benefit plan (as defined ---- in section 3(2) of ERISA) which is subject to Title IV of ERISA (other than a Multiemployer Plan) and to which the Company or any ERISA Affiliate may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. Prime Rate means the rate of interest publicly announced from time to ---------- time by the New York Branch of UBS as its prime commercial lending rate. -12- Reference Banks means UBS, The Bank of Nova Scotia, Commerzbank AG and --------------- The Bank of New York. Related Party means, for purposes of Section 9.17 only, any Person ------------- ------------ (other than a Subsidiary): (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company; (ii) which beneficially owns or holds five percent or more of the equity interest of the Company; or (iii) twenty percent or more of the equity interest of which is beneficially owned or held by the Company or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Reportable Event has the meaning assigned to such term in section 4043 ---------------- of ERISA. Required Banks means Banks having an aggregate Percentage of 66 2/3% -------------- or more. Reserve Percentage means for any day, that percentage, expressed as a ------------------ decimal, which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including any marginal, supplemental or emergency reserve requirements) for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the relevant Loan Period and in an amount of $100,000 or more. The CD Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage. Significant Subsidiary means any Subsidiary which is so defined ---------------------- pursuant to Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission. Submission Deadline - see Section 2.2(b). ------------------- -------------- Subsidiary means any Person of which or in which the Company and its ---------- other Subsidiaries own directly or indirectly 50% or more of: -13- (a) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such Person, if it is a corporation; (b) the capital interest or profits interest of such Person, if it is a partnership, joint venture or similar entity; or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated organization; provided, however, that so long as (i) the Company continues to own not more - - -------- ------- than 50% of Pacific Ocean Leasing, Ltd. and (ii) Pacific Ocean Leasing, Ltd. does not materially alter the manner in which it conducts the business in which it is currently engaged, Pacific Ocean Leasing, Ltd. shall not be considered a Subsidiary within the foregoing definition for purposes of this Agreement. Successor Bank - see Section 13.8(c). -------------- --------------- Taxes with respect to any Person means income, excise and other taxes, ----- and all assessments, imposts, duties and other governmental charges or levies, imposed upon such Person, its income or any of its properties, franchises or assets by any Governmental Authority. Terminating Bank - see Section 13.8(c). ---------------- --------------- Termination Date means, with respect to any Bank, the earliest to ---------------- occur of (i) the fifth anniversary of the date of this Agreement or such later date as may be agreed to by such Bank pursuant to Section 13.8(a), (ii) the date --------------- on which the Commitments shall terminate pursuant to Section 11.2 or the ------------ Commitments shall be reduced to zero pursuant to Section 5.1 and (iii) the date ----------- specified as such Bank's Termination Date pursuant to Section 13.8(b), or, if in --------------- any case (other than clause (ii) above) such day is not a Business Day, the next ----------- succeeding Business Day; in all cases, subject to the provisions of Section ------- 13.8(d). - - ------- UBS - see Preamble. --- -------- Unmatured Event of Default means any event which if it continues -------------------------- uncured will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default. -14- Wholly-owned Subsidiary means any Person of which or in which the ----------------------- Company and its other Wholly-owned Subsidiaries own directly or indirectly 100% of: (a) the issued and outstanding shares of stock (except shares required as directors' qualifying shares); (b) the capital interest or profits interest of such Person, if it is a partnership, joint venture or similar entity; or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated organization. SECTION 2. BID LOANS AND BID NOTES. Section 2.1. Making of Bid Loans. On the terms and subject to the ------------------- conditions of this Agreement, each Bank, severally and for itself alone, may (but is not obligated to) make Bid Loans to the Company from time to time on or after the date hereof and prior to the date which is the fourteenth day preceding such Bank's Termination Date in amounts equal to such Bank's Bids that have been accepted as provided in Section 2.2(c); provided that the aggregate -------------- -------- principal amount of all outstanding Loans shall not at any time exceed the then Aggregate Commitment. Section 2.2. Procedure for Bid Loans. ----------------------- (a) Bid Loan Request. Whenever the Company desires to incur a ---------------- competitive bid borrowing (a "Bid Borrowing"), it shall give the Agent written notice (or telephonic notice promptly confirmed in writing), such notice to be delivered to the Agent at its Notice Office no later than 12:00 Noon (New York City time), at least three Business Days prior to any proposed LIBOR Rate Loan and at least one Business Day prior to any proposed Absolute Rate Loan. Each such notice shall be substantially in the form of Exhibit A hereto (each a --------- "Notice of Competitive Bid Borrowing"), and shall specify in each case (i) the date of such proposed Bid Borrowing (which shall be a Business Day), (ii) the aggregate amount of the proposed Bid Borrowing, (iii) whether the proposed Bid Borrowing is to be an Absolute Rate Loan or a LIBOR Rate Loan and the Loan Period, (iv) the maturity date for repayment of each Bid Loan to be made as part of such borrowing (which maturity date shall not be earlier than one month after the date of any proposed LIBOR Rate Loan or 14 days after the date of any proposed -15- Absolute Rate Loan or later than the earliest to occur of (x) six months after the date of such proposed Bid Loan, (y) the Termination Date and (z) if the proposed Bid Loan has an interest rate that is the LIBOR Rate, the last day of the proposed Loan Period), (v) the interest payment date or dates relating thereto, (vi) the account of the Company to which the proceeds of such Bid Borrowing are to be credited and (vii) any other terms to be applicable to such Bid Borrowing. The Agent shall promptly give each Bank written notice (or telephonic notice promptly confirmed in writing) of each such request for a Bid Borrowing received by it from the Company. Each Notice of Competitive Bid Borrowing shall contemplate Bid Loans in a minimum aggregate principal amount of $10,000,000 or a higher integral multiple of $1,000,000, not to exceed, however, the excess of the then Aggregate Commitment over the aggregate principal amount of all outstanding Loans, calculated as of the relevant Funding Date, assuming that the Company will pay, when due, all Loans maturing on or prior to such Funding Date (the "Available Commitment"). (b) Bidding Procedure. Each Bank shall, if in its sole discretion it ----------------- elects to do so, irrevocably offer to make one or more Bid Loans to the Company as part of such proposed Bid Borrowing at a rate or rates of interest specified by such Bank in its sole discretion and determined by such Bank independently of each other Bank, by notifying by telephone confirmed in writing to the Agent at its Notice Office (which shall give prompt notice thereof to the Company), before 10:00 a.m. (New York City time) on the date (the "Submission Deadline") that is (x) in the case of a proposed Absolute Rate Loan, the same day as the date of such proposed Bid Loan and (y) in the case of a proposed LIBOR Rate Loan, two Business Days before, the date of such proposed Bid Loan, of the minimum amount and maximum amount of each Bid Loan that such Bank would be willing to make as part of such proposed Bid Borrowing (which amounts may, subject to the proviso in Section 2.1, exceed such Bank's Commitment), the rate ----------- or rates of interest therefor and such Bank's lending office with respect to such Bid Loan; provided that if the Agent in its capacity as a Bank shall, in -------- its sole discretion, elect to make any such offer, it shall notify the Company of such offer before 8:30 a.m. (New York City time) on the Submission Deadline. (c) Acceptance of Bids. The Company shall, in turn, before 10:30 ------------------ a.m. (New York City time) on the Submission Deadline, either: (i) cancel such proposed Bid Borrowing by giving the Agent notice to that effect; or -16- (ii) accept (such acceptance to be irrevocable) one or more of the offers made by any Bank or Banks pursuant to clause (b) above by giving ---------- notice (in writing or by telephone confirmed in writing) to the Agent of the amount of each Bid Loan (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Company by the Agent on behalf of such Bank for such Bid Borrowing pursuant to clause (b) above) to be made by such Bank as part of such Bid ---------- Borrowing, and reject any remaining offers made by any Bank pursuant to clause (b) above by giving the Agent notice to that effect; provided that ---------- -------- for any maturity date acceptance of offers may only be made on the basis of ascending Absolute Rates (in the case of an Absolute Rate Loan) or floating rates (in the case of a LIBOR Rate Loan), in each case commencing with the lowest rate so offered and only as to offers made in conformity with the terms hereof; provided further, however, if offers are made by two or more -------- ------- ------- Banks at the same rate or rates and acceptance of all such equal offers would result in a greater principal amount of Bid Loans being accepted than the aggregate principal amount requested by the Company, the Company shall have the right to accept one or more of such equal offers in their entirety and reject the other equal offer or offers or to allocate acceptance among all such equal offers (but giving effect to the minimum and maximum amounts specified for each such offer pursuant to clause (b) above), as the Company ---------- may elect in its sole discretion. For the avoidance of doubt, the Company may accept offers whose aggregate principal amount is greater than or less than the requested aggregate amount as specified in the related Notice of Competitive Bid Borrowing, subject to the proviso in Section 2.1. ----------- (d) Cancellation of Bid Borrowing. If the Company notifies the Agent ----------------------------- that such proposed Bid Borrowing is cancelled pursuant to clause (c)(i) above, ------------- the Agent shall give prompt notice thereof to the Banks and such Bid Borrowing shall not be made. (e) Notification of Acceptance. If the Company accepts one or more -------------------------- of the offers made by any Bank or Banks pursuant to clause (c)(ii) above, the -------------- Agent shall in turn promptly notify (x) each Bank that has made an offer as described in clause (b) above, of the date and aggregate amount of such Bid ---------- Borrowing and whether or not any offer or offers made by such Bank pursuant to clause (b) above have been accepted by the Company and (y) each Bank that is to - - ---------- make a Bid Loan as part of such Bid Borrowing, of the amount -17- of each Bid Loan to be made by such Bank as part of such Bid Borrowing. (f) Reliance. The Agent may rely and act upon notice given by -------- telephone by individuals reasonably believed by the Agent to be those designated to the Agent by the Company or by any Bank in writing from time to time, without waiting for receipt of written confirmation thereof, and the Company hereby agrees to indemnify and hold harmless the Agent from and against any and all losses, costs, expenses, damages, claims, actions or other proceedings relating to such reliance. Section 2.3. Funding of Bid Loans. No later than 1:00 p.m. (New York -------------------- City time) on the date specified in each Notice of Competitive Bid Borrowing, each Bank will make available the Bid Loan, if any, to be made by such Bank as part of the Bid Borrowing requested to be made on such date in the manner provided below. All amounts shall be made available to the Agent in Dollars and immediately available funds at the Payment Office of the Agent and the Agent promptly will make available to the Company at its account specified in the relevant Notice of Competitive Bid Borrowing the aggregate of the amounts so made available in the type of funds received. Unless the Agent shall have been notified by any Bank which has submitted a bid pursuant to Section 2.2(b) prior -------------- to the date of the proposed Bid Borrowing that such Bank does not intend to make available to the Agent its portion, if any, of the Bid Borrowing to be made on such date, the Agent may assume that such Bank has made such amount available to the Agent on such date of Bid Borrowing, and the Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Company a corresponding amount. Section 2.4. Bid Notes. The Bid Loans of each Bank shall be --------- evidenced by a Bid Note payable to the order of such Bank in the original principal amount of the Aggregate Commitment. Each Bank shall record in its records, or at its option on the schedule attached to its Bid Note, the date and amount of each Bid Loan made by such Bank, each repayment thereof, and the dates on which the Loan Period for such Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Note. The failure to so record or any error in so recording any such amount or any payment thereof shall not, however, limit or otherwise affect the obligations of the Company hereunder or under such Bid Note to repay the principal amount of each Bid Loan together with all interest accruing thereon. -18- SECTION 3. COMMITTED LOANS AND NOTES. Section 3.1. Agreement to Make Committed Loans. On the terms and --------------------------------- subject to the conditions of this Agreement, each Bank, severally and for itself alone, agrees to make Loans (herein collectively called "Committed Loans" and individually each called a "Committed Loan") on a revolving basis from time to time before such Bank's Termination Date in such Bank's Percentage of such aggregate amounts as the Company may from time to time request as provided in Section 3.2; provided that (a) the aggregate principal amount of all outstanding - - ----------- -------- Committed Loans of any Bank shall not at any time exceed the amount set forth opposite such Bank's name on Schedule I (as reduced in accordance with Section ---------- ------- 5.1, 13.4 or 13.8) and (b) the aggregate principal amount of all outstanding - - --- ---- ---- Committed Loans of all Banks plus the aggregate principal amount of all outstanding Bid Loans of all Banks shall not at any time exceed the then Aggregate Commitment. Section 3.2. Procedure for Committed Loans. ----------------------------- (a) Committed Loan Requests. The Company shall give the Agent ----------------------- irrevocable telephonic notice at the Notice Office (promptly confirmed in writing on the same day), not later than 10:30 a.m., New York City time, (i) at least three Business Days prior to the Funding Date in the case of LIBOR Rate Loans, (ii) at least two Business Days prior to the Funding Date in the case of CD Rate Loans or (iii) on the Funding Date in the case of Base Rate Loans, of each requested Committed Loan, and the Agent shall promptly advise each Bank thereof and, in the case of a LIBOR Rate Loan or a CD Rate Loan, request each Reference Bank to notify the Agent of its applicable rate (as contemplated in the definitions of Base LIBOR and CD Base Rate). Each such notice to the Agent (a "Committed Loan Request") shall be substantially in the form of Exhibit C and --------- shall specify (i) the Funding Date (which shall be a Business Day), (ii) the aggregate amount of the Loans requested (in an amount permitted under clause (b) ---------- below), (iii) whether each Loan shall be a LIBOR Rate Loan, a CD Rate Loan or a Base Rate Loan and (iv) except for a Base Rate Loan, the Loan Period therefor (subject to the limitations set forth in the definition of Loan Period). (b) Amount and Increments of Committed Loans. Each Committed Loan ---------------------------------------- Request shall contemplate Committed Loans in a minimum aggregate amount of $25,000,000 or a higher integral multiple of $1,000,000, not to exceed in the aggregate (for all requested Committed Loans) the Available Commitment. -19- (c) Funding of Committed Loans. -------------------------- (i) Not later than 1:30 p.m., New York City time, on the Funding Date of a Committed Loan, each Bank shall, subject to this Section 3.2(c), -------------- provide the Agent at its Notice Office with immediately available funds covering such Bank's Committed Loan (provided that a Bank's obligation to -------- provide funds to the Agent shall be deemed satisfied by such Bank's delivery to the Agent at its Notice Office not later than 1:30 p.m., New York City time, of a federal reserve wire confirmation number covering the proceeds of such Bank's Committed Loan) and the Agent shall pay over such funds to the Company not later than 2:00 p.m., New York City time, on such day if the Agent shall have received the documents required under Section ------- 10 with respect to such Loan and the other conditions precedent to the -- making of such Loan shall have been satisfied not later than 10:00 a.m., New York City time, on such day. If the Agent does not receive such documents or such other conditions precedent have not been satisfied prior to such time, then (A) the Agent shall not pay over such funds to the Company, (B) the Company's Committed Loan Request related to such Loan shall be deemed cancelled in its entirety, (C) in the case of Committed Loan Requests relative to LIBOR Rate Loans and CD Rate Loans, the Company shall be liable to each Bank in accordance with Section 7.4(b) and (D) the -------------- Agent shall return the amount previously provided to the Agent by each Bank on the next following Business Day. (ii) The Company agrees, notwithstanding its previous delivery of any documents required under Section 10 with respect to a particular Loan, ---------- immedi ately to notify the Agent of any failure by it to satisfy the conditions precedent to the making of such Loan. The Agent shall be entitled to assume, after it has received each of the documents required under Section 10 with respect to a particular Loan, that each of the ---------- conditions precedent to the making of such Loan has been satisfied absent actual knowledge to the contrary received by the Agent prior to the time of the receipt of such documents. Unless the Agent shall have notified the Banks prior to 10:30 a.m., New York City time, on the Funding Date of any Loan that the Agent has actual knowledge that the conditions precedent to the making of such Loan have not been satisfied, the Banks shall be entitled to assume that such conditions precedent have been satisfied. -20- (d) Repayment of Loans. If any Bank is to make a Committed Loan ------------------ hereunder on a day on which the Company is to repay (or has elected to prepay, pursuant to Section 5.2) all or any part of any outstanding Loan held by such ----------- Bank, the proceeds of such new Committed Loan shall be applied to make such repayment and only an amount equal to the positive difference, if any, between the amount being borrowed and the amount being repaid shall be requested by the Agent to be made available by such Bank to the Agent as provided in Section ------- 3.2(c). - - ------ Section 3.3. Maturity of Committed Loans. Except for a Base Rate --------------------------- Loan, which shall mature on the Termination Date, a Committed Loan made by a Bank shall mature on the last day of the Loan Period applicable to such Committed Loan, but in no event later than the Termination Date for such Bank. Section 3.4. Committed Notes. The Committed Loans of each Bank shall --------------- be evidenced by a Committed Note payable to the order of such Bank in the original principal amount of such Bank's Commitment. Each Bank shall record in its records, or at its option on the schedule attached to its Committed Note, the date and amount of each Loan made by such Bank thereunder, each repayment or prepayment thereof, and, if applicable, the dates on which the Loan Period for such Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Note. The failure to so record or any error in so recording any such amount or any payment thereof shall not, however, limit or otherwise affect the obligations of the Company hereunder or under such Committed Note to repay the principal amount of each Committed Loan together with all interest accruing thereon. SECTION 4. INTEREST AND FEES. Section 4.1. Interest Rates. The Company hereby promises to pay -------------- interest on the unpaid principal amount of each Loan for the period commencing on the Funding Date until such Loan is paid in full, as follows: (a) if such Loan is a Bid Loan, at a rate per annum equal to the Absolute Rate or the LIBOR Rate, as applicable, offered by the applicable Bank and accepted by the Company for such Bid Loan; -21- (b) if such Loan is a Base Rate Loan, at a rate per annum equal to the Base Rate from time to time in effect; (c) if such Loan is a Committed Loan that is a LIBOR Rate Loan, at a rate per annum equal to the LIBOR Rate applicable to the Loan Period for such Loan; and (d) if such Loan is a CD Rate Loan, at a rate per annum equal to the CD Rate applicable to the Loan Period for such Loan; provided, however, that after the maturity of any Loan (whether by acceleration - - -------- ------- or otherwise), such Loan shall bear interest on the unpaid principal amount thereof at a rate per annum (calculated on the basis of a 360-day year for the actual number of days involved) equal to the Base Rate from time to time in effect (but not less than the interest rate in effect for such Loan immediately prior to maturity) plus 1% per annum. Section 4.2. Interest Payment Dates. Except for Base Rate Loans, as ---------------------- to which accrued interest shall be payable on the last day of each calendar quarter and on the Termination Date, accrued interest on each Loan shall be payable in arrears on the last day of the Loan Period therefor and (i) with respect to each LIBOR Rate Loan with a Loan Period of six months, on the day that is three months after the first day of such Loan Period (or, if there is no day in such third month numerically corresponding to such first day of the Loan Period, on the last Business Day of such month), (ii) with respect to each CD Rate Loan with a Loan Period of 180 days, on the day that is 90 days after the first day of such Loan Period and (iii) with respect to each Absolute Rate Loan with a Loan Period exceeding 90 days, on the day that is 90 days after the first day of such Loan Period. After the maturity of any Loan, accrued interest on such Loan shall be payable on demand. If any interest payment date falls on a day that is not a Business Day, such interest payment date shall be postponed to the next succeeding Business Day and the interest paid shall cover the period of postponement (except that if the Loan is a LIBOR Rate Loan and the next succeeding Business Day falls in the next succeeding calendar month, such interest payment date shall be the immediately preceding Business Day). Section 4.3. Setting and Notice of Committed Loan Rates. The ------------------------------------------ applicable interest rate for each Committed Loan hereunder shall be determined by the Agent and notice thereof shall be given by the Agent promptly to the Company and to each Bank. Each determination of the applicable -22- interest rate by the Agent shall be conclusive and binding upon the parties hereto in the absence of demonstrable error. In the case of LIBOR Rate Loans and CD Rate Loans, each Reference Bank agrees to use its best efforts to notify the Agent in a timely fashion of its applicable rate after the Agent's request therefor under Section 2.2(a) and -------------- Section 3.2(a) (as contemplated in the definitions of Base LIBOR and CD Base - - -------------- Rate). If as to any Loan Period any one or more of the Reference Banks is unable or for any reason fails to notify the Agent of its applicable rate by 11:30 a.m., New York City time, two Business Days before the Funding Date with respect to a LIBOR Rate Loan or by 10:30 a.m., New York City time, on the Funding Date with respect to a CD Rate Loan, then the applicable LIBOR Rate or CD Rate, as the case may be, shall be determined on the basis of the rate or rates of which the Agent is given notice by the remaining Reference Bank or Banks by such time. If none of the Reference Banks notifies the Agent of the applicable rate prior to 11:30 a.m., New York City time, two Business Days before the Funding Date with respect to the LIBOR Rate or by 10:30 a.m., New York City time, on the Funding Date with respect to the CD Rate, then (i) the Agent shall promptly notify the other parties thereof and (ii) at the option of the Company the Committed Loan Request delivered by the Company pursuant to Section 3.2(a) with respect to such Funding Date shall be cancelled or shall be - - -------------- deemed to have specified a Base Rate Loan. The Agent shall, upon written request of the Company or any Bank, deliver to the Company or such Bank a statement showing the computations used by the Agent in determining the interest rate applicable to any LIBOR Rate Loan or CD Rate Loan. Section 4.4. Facility Fee. The Company agrees to pay to the Agent ------------ for the accounts of the Banks pro rata in accordance with their respective --- ---- Percentages an annual facility fee computed by multiplying the average daily amount of the Aggregate Commitment (whether used or unused) by the applicable percentage determined with respect to such facility fee in accordance with Schedule II hereto. Such fee shall be payable quarterly in arrears on the last - - ----------- Business Day of March, June, September and December of each year (beginning with the last Business Day of March, 1996) until the Commitments have expired or have been terminated and on the date of such expiration or termination (and, in the case of any Terminating Bank, such Bank's Termination Date), in each case for the period then ending for which such facility fee has not previously been paid. Section 4.5. Agent's Fees. The Company agrees promptly to pay to the ------------ Agent such fees as may be agreed from time to time by the Company and the Agent. Section 4.6. Utilization Fee. The Company agrees to pay to the Agent --------------- for the accounts of the Banks pro rata in accordance with their respective --- ---- Percentages an annual utilization fee computed by multiplying the average daily amount of Committed Loans outstanding on each day by the applicable percentage specified with respect to such utilization fee on Schedule II hereto for each ----------- day on which the ratio (expressed as a percentage) of the aggregate principal amount of Committed Loans outstanding to the then effective Aggregate Commitment exceeds 50%. Such utilization fee shall be payable quarterly in arrears on the last Business Day of March, June, September and December of each year (beginning with the last Business Day of March, 1996) until all Commitments have expired or have been terminated and on the date of such expiration or termination (and, in the case of any Terminating Bank, such Bank's Termination Date), in each case for the period then ending for which such utilization fee has not previously been paid. Section 4.7. Computation of Interest and Fees. Interest on LIBOR -------------------------------- Rate Loans, CD Rate Loans and Base Rate Loans where the Base Rate is calculated in reference to the Federal Funds Rate, and facility and utilization fees shall be computed for the actual number of days elapsed on the basis of a 360-day year; interest on Base Rate Loans where the Base Rate is calculated in reference to the Prime Rate shall be computed for the actual number of days elapsed on the basis of a 365/366 day year, as the case may be. The interest rate applicable to each LIBOR Rate Loan, CD Rate Loan and Base Rate Loan, and (to the extent applicable) after the maturity of any other type of Loan, the interest rate applicable to such Loan, shall change simultaneously with each change in the LIBOR Rate, the CD Rate or the Base Rate, as applicable. SECTION 5. REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS. Section 5.1. Voluntary Termination or Reduction of the Commitments. ----------------------------------------------------- The Company may at any time on at least 5 days' prior irrevocable notice received by the Agent (which shall promptly on the same day or on the next Business Day advise each Bank thereof) permanently reduce the amount of the Commitments (such reduction to be pro rata among the Banks according to their respective Percentages) to an amount not less than the aggregate principal amount of -24- all outstanding Loans. Any such reduction shall be in the amount of $5,000,000 or an integral multiple thereof. Concurrently with any such reduction, the Company shall prepay the principal of any Committed Loans outstanding to the extent that the aggregate amount of such Loans outstanding shall then exceed the Aggregate Commitment, as so reduced. The Company may from time to time on like irrevocable notice terminate the Commitments upon payment in full of all Loans, all interest accrued thereon, all fees and all other obligations of the Company hereunder; provided, however, that the Company may not at any time terminate the -------- ------- Commitments if any Bid Loan is outstanding (unless the holder of each such outstanding Bid Loan has given its prior written consent to the concurrent repayment of such Bid Loan). Section 5.2. Voluntary Prepayments. The Company may voluntarily --------------------- prepay Loans (other than Bid Loans, which may only be prepaid with the prior written consent of the holder thereof) without premium or penalty, except as may be required pursuant to subsection (e) below, in whole or in part, provided that -------------- -------- (a) each prepayment shall be in an aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof, (b) except for the prepayment of the aggregate amount of all Loans outstanding, no such prepayment shall result in there being less than $10,000,000 in Loans outstanding in the aggregate, (c) the Company shall give the Agent at its Notice Office (which shall promptly advise each Bank) not less than three Business Days' prior notice thereof specifying the Loans to be prepaid and the date and amount of prepayment, (d) any prepayment of principal of any Loan shall include accrued interest to the date of prepayment on the principal amount being prepaid and (e) any prepayment of a LIBOR Rate Loan or a CD Rate Loan shall be subject to the provisions of Section 7.4. ----------- SECTION 6. MAKING AND PRORATION OF PAYMENTS; SET-OFF; TAXES. Section 6.1. Making of Payments. Except as provided in Section ------------------ ------- 3.2(d) all payments (including those made pursuant to Sections 5.1 and 5.2) of - - ------ ------------ --- principal of, or interest on, the Loans and all payments of fees shall be made by the Company to the Agent in immediately available funds at its Payment Office not later than 12:00 Noon, New York City time, on the date due; and funds received after that hour shall be deemed to have been received by the Agent on the next following Business Day. The Agent shall promptly remit to each Bank or other holder of a Note its -25- share (if any) of each such payment. All payments under Section 7 shall be made --------- by the Company directly to the Persons entitled thereto. Section 6.2. Pro Rata Treatment; Sharing. --------------------------- (a) Except as required pursuant to Section 7 or Section 13.8, each --------- ------------ payment or prepayment of principal of any Committed Loans, each payment of interest on the Committed Loans, and each payment of the facility fee or the utilization fee shall be allocated pro rata among the Banks in accordance with --- ---- their respective Percentages. Each payment of principal of any Bid Borrowing shall be allocated pro rata among the Banks participating in such Bid Borrowing --- ---- in accordance with the respective principal amounts of their outstanding Bid Loans comprising such Bid Borrowing. Each payment of interest on any Bid Borrowing shall be allocated pro rata among the Banks participating in such Bid --- ---- Borrowing in accordance with the respective amounts of accrued and unpaid interest on their outstanding Bid Loans comprising such Bid Borrowing. (b) If any Bank or other holder of a Committed Loan shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of principal of, interest on or fees or other amounts with respect to any Committed Loan in excess of the share of payments and other recoveries (exclusive of payments or recoveries under Section 7 or --------- pursuant to Section 13.8) such Bank or other holder would have received if such ------------ payment had been distributed pursuant to the provisions of Section 6.2(a), such -------------- Bank or other holder shall purchase from the other Banks or holders, in a manner to be specified by the Agent, such participations in the Committed Loans held by them as shall be necessary so that all such payments of principal and interest with respect to the Committed Loans shall be shared by the Banks and other holders pro rata in accordance with their respective Percentages; provided, --- ---- -------- however, that if all or any portion of the excess payment or other recovery is - - ------- thereafter recovered from such purchasing Bank or holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) If any Bank or other holder of a Bid Loan shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of principal of, interest on or fees or other amounts with respect to any Bid Loan in excess of the share of payments and other recoveries (exclusive of -26- payments or recoveries pursuant to Section 7 or Section 13.8) such Bank or other --------- ------------ holder would have received if such payment had been distributed pursuant to the provisions of Section 6.2(a), such Bank or other holder shall purchase from the -------------- other Banks or holders participating in such Bid Borrowing, in a manner to be specified by the Agent, such participations in the Bid Loans held by them as shall be necessary so that all such payments of principal and interest with respect to the Bid Loans shall be shared by the Banks and other holders participating in such Bid Borrowing in a manner consistent with Section 6.2(a); -------------- provided, however, that if all or any portion of the excess payment or other - - -------- ------- recovery is thereafter recovered from such purchasing Bank or holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Section 6.3. Set-off. The Company agrees that the Agent, each holder ------- of a Note, each Assignee and each Participant has all rights of set-off and bankers' lien provided by applicable law, and the Company further agrees that at any time (i) any amount owing by the Company under this Agreement is due to any such Person or (ii) any Event of Default exists, each such Person may apply to the payment of any amount payable hereunder any and all balances, credits, deposits, accounts or moneys of the Company then or thereafter with such Person. Section 6.4. Taxes, etc. (a) All payments made by the Company to the ----------- Agent, any Bank, any Assignee or any Participant under this Agreement and the Notes shall be made without any set-off or counterclaim, and free and clear of and without deduction for or on account of any present or future Taxes now or hereafter imposed (except to the extent that such withholding or deduction is compelled by law or results from the breach, by the recipient of a payment, of its agreement contained in Section 6.4(b) or would not be required if the -------------- representation or warranty contained in Section 6.4(b) were true), excluding any -------------- Taxes generally assessed on the overall net income of the Agent, any Bank, any Assignee or any Participant, as the case may be, by the government or other authority of the country in which the Agent, such Bank, such Assignee or such Participant is incorporated or in which its Funding Office or the office through which it is acting is located. If the Company is compelled by law to make any such deductions or withholdings it will: (i) pay to the relevant authorities the full amount required to be so withheld or deducted; -27- (ii) except to the extent that such withholding or deduction results from the breach by the recipient of a payment of its agreement contained in Section 6.4(b) or would not be required if the representation or warranty -------------- contained in Section 6.4(b) were true, pay such additional amounts as may -------------- be necessary in order that the net amount received by the Agent, each Bank, each Assignee and each Participant after such deductions or withholdings (including any required deduction or withholding on such additional amounts) shall equal the amount such payee would have received had no such deductions or withholdings been made; and (iii) promptly forward to the Agent (for delivery to such payee) an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authorities. Moreover, if any Taxes are directly asserted against the Agent, any Bank, any Assignee or any Participant, such payee may pay such Taxes and the Company shall promptly pay such additional amount (including, without limitation, any penalties, interest or expenses) as may be necessary in order that the net amount received by such payee after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such payee would have received had no such Taxes been asserted. For purposes of this Section 6.4, a ----------- distribution hereunder by the Agent or any Bank to or for the account of any Bank, Assignee or Participant shall be deemed to be a payment by the Company. The Company's agreement under this Section 6.4 shall survive repayment of the ----------- Loans, cancellation of the Notes or any termination of this Agreement. (b) In consideration of, and as a condition to, the Company's undertakings in Section 6.4(a), each Bank (other than a Bank that is organized -------------- and existing under the laws of the United States of America or any State thereof) agrees to execute and deliver to the Agent at its Payment Office for delivery to the Company, before the first scheduled payment date in each year, two United States Internal Revenue Service Forms 1001 or 4224, or any successor forms, as appropriate, properly completed and claiming complete exemption from withholding and deduction of United States federal Taxes. Each Bank represents and warrants to the Company that, at the date of this Agreement, or at the time such Bank becomes a Bank hereunder pursuant to Section 13.4.1, its Funding -------------- Office is entitled to receive payments of principal and interest hereunder without deduction for or on account of any Taxes imposed by the United States or any political subdivision thereof. -28- SECTION 7. INCREASED COSTS AND SPECIAL PROVISIONS FOR ABSOLUTE RATE LOANS, LIBOR RATE LOANS AND CD RATE LOANS. Section 7.1. Increased Costs. (a) If (i) Regulation D of the Board --------------- of Governors of the Federal Reserve System or (ii) after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any Funding Office of such Bank) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, (A) shall subject any Bank (or any Funding Office of such Bank) to any tax, duty or other charge with respect to its LIBOR Rate Loans, its CD Rate Loans, its Notes or its obligation to make LIBOR Rate Loans or CD Rate Loans, or shall change the basis of taxation of payments to any Bank (or any Funding Office of such Bank) of the principal of or interest on its LIBOR Rate Loans, its CD Rate Loans or any other amounts due under this Agreement in respect of its LIBOR Rate Loans, its CD Rate Loans or its obligation to make LIBOR Rate Loans or CD Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its Funding Office imposed by any Governmental Authority of the country in which such Bank is incorporated or in which such Bank's Funding Office is located); (B) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System, but excluding any reserve included in the determination of additional interest pursuant to Section 4.1), special ----------- deposit, assessment (including any assessment for insurance of deposits) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or any Funding Office of such Bank); or (C) shall impose on any Bank (or any Funding Office of such Bank) any other condition affecting its LIBOR Rate Loans, its CD Rate Loans, its Notes or its obligation to make or maintain LIBOR Rate Loans or CD Rate Loans; -29- and the result of any of the foregoing is to increase the cost to (or to impose an additional cost on) such Bank (or any Funding Office of such Bank) of making or maintaining any LIBOR Rate Loan or CD Rate Loans, or to reduce the amount of any sum received or receivable by such Bank (or such Bank's Funding Office) under this Agreement or under its Notes with respect thereto, then within 10 days after demand by such Bank (which demand shall be accompanied by a statement setting forth the basis of such demand), the Company shall pay directly to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or such reduction (without duplication of any amounts which have been reimbursed pursuant to Section 6.4). ----------- (b) If, after the date hereof, any Bank shall determine that the adoption, effectiveness or phase-in of any applicable law, rule, guideline or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any Funding Office of such Bank or any Person controlling such Bank) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Bank or any Person controlling such Bank as a consequence of its obligations hereunder to a level below that which such Bank or such controlling Person could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or such controlling Person's policies with respect to capital adequacy), then, from time to time, within 10 days after demand by such Bank (which demand shall be accompanied by a statement setting forth the basis of such demand), the Company shall pay directly to such Bank such additional amount or amounts as will compensate such Bank or such controlling Person for such reduction. (c) Each Bank shall promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section 7.1 and will ----------- designate a different Funding Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in such Bank's sole judgment, be otherwise disadvantageous to such Bank. Section 7.2. Basis for Determining Interest Rate Inadequate or ------------------------------------------------- Unfair. If with respect to the Loan Period for any LIBOR Rate Loan or CD Rate - - ------ Loan: -30- (a) the Agent is advised by two or more Reference Banks that deposits in Dollars (in the applicable amounts) are not being offered to such Reference Banks in the relevant market for such Loan Period, or the Agent otherwise determines (which determination shall be binding and conclusive on all parties) that, by reason of circumstances affecting the LIBOR market or the certificate of deposit market, adequate and reasonable means do not exist for ascertaining the applicable LIBOR Rate or CD Rate; or (b) the Required Banks advise the Agent that the LIBOR Rate or CD Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Required Banks of maintaining or funding LIBOR Rate Loans or CD Rate Loans for such Loan Period, or that the making or funding of LIBOR Rate Loans or CD Rate Loans has become impracticable as a result of an event occurring after the date of this Agreement which in such Required Banks' opinion materially affects LIBOR Rate Loans or CD Rate Loans; then (i) the Agent shall promptly notify the other parties thereof and (ii) so - - ---- long as such circumstances shall continue, no Bank shall be under any obligation to make any LIBOR Rate Loan or CD Rate Loan, as the case may be. Section 7.3. Changes in Law Rendering Certain Loans Unlawful. In the ----------------------------------------------- event that any change in (including the adoption of any new) applicable laws or regulations, or in the interpretation of applicable laws or regulations by any Governmental Authority or other regulatory body charged with the administration thereof, should make it (or in the good faith judgment of such Bank raise a substantial question as to whether it is) unlawful for a Bank to make, maintain or fund any LIBOR Rate Loan, then (a) such Bank shall promptly notify each of the other parties hereto, (b) upon the effectiveness of such event and so long as such unlawfulness shall continue, the obligation of such Bank to make LIBOR Rate Loans shall be suspended and any request by the Company for LIBOR Rate Loans shall, as to such Bank, be deemed to be a request for a Base Rate Loan, if said LIBOR Rate Loan is a Committed Loan, or an Absolute Rate Loan if said LIBOR Rate Loan is a Bid Loan and (c) on the last day of the current Loan Period for such Bank's LIBOR Rate Loans (or, in any event, if such Bank so requests on such earlier date as may be required by the relevant law, regulation or interpretation) such Bank's Loans which are LIBOR Rate Loans shall cease to be maintained as LIBOR Rate Loans and shall thereafter bear interest at a floating rate per annum equal to the Base Rate, if said LIBOR Rate Loan is a Committed -31- Loan, or at an Absolute Rate, which Absolute Rate shall be the LIBOR Rate in effect during such Loan Period, if said LIBOR Rate Loan is a Bid Loan. If at any time the event giving rise to such unlawfulness shall no longer exist, then such Bank shall promptly notify the Company and the Agent. Section 7.4. Funding Losses. The Company hereby agrees that upon -------------- demand by any Bank (which demand shall be accompanied by a statement setting forth the basis for the calculations of the amount being claimed) the Company will indemnify such Bank against any net loss or expense which such Bank may sustain or incur (including, without limitation, any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain any LIBOR Rate Loan, CD Rate Loan or Absolute Rate Loan), as reasonably determined by such Bank, as a result of (a) any payment or mandatory or voluntary prepayment (including, without limitation, any payment pursuant to Section 7.3 or any payment resulting from acceleration) ----------- of any LIBOR Rate Loan, CD Rate Loan or Absolute Rate Loan of such Bank on a date other than the last day of the Loan Period for such Loan or (b) any failure of the Company to borrow any Loans on the originally scheduled Funding Date specified therefor pursuant to this Agreement (including, without limitation, any failure to borrow resulting from any failure to satisfy the conditions precedent to such borrowing). For this purpose, all notices to the Agent pursuant to this Agreement (including, without limitation, all acceptances of Bids) shall be deemed to be irrevocable. Section 7.5. Discretion of Banks as to Manner of Funding. ------------------------------------------- Notwithstanding any provision of this Agreement to the contrary (but subject to Section 7.1(c)), each Bank shall be entitled to fund and maintain its funding of - - -------------- all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Bank had actually funded and maintained each LIBOR Rate Loan, CD Rate Loan or Absolute Rate Loan during the Loan Period for such Loan through the purchase of deposits having a maturity corresponding to such Loan Period and bearing an interest rate equal to the rate borne by such Loan for such Loan Period. Section 7.6. Conclusiveness of Statements; Survival of Provisions. ---------------------------------------------------- Determinations and statements of any Bank pursuant to this Section 7 shall be --------- conclusive absent demonstrable error, and each Bank may use reasonable averaging and attribution methods in determining compensation pursuant to Section 7.1 or ----------- 7.4. The provisions - - --- -32- of this Section 7 shall survive termination of this Agreement and payment of the --------- Notes. SECTION 8. REPRESENTATIONS AND WARRANTIES. To induce the Banks to enter into this Agreement and to make Loans hereunder, the Company hereby makes the following representations and warranties to the Agent and the Banks, which representations and warranties shall survive the execution and delivery of this Agreement and the Notes and the disbursement of the initial Loans hereunder: Section 8.1. Organization, etc. The Company is a corporation duly ------------------ organized, validly existing and in good standing under the laws of the State of California; each corporate Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; each other Subsidiary (if any) is an entity duly organized and validly existing under the laws of the jurisdiction of its organization; and each of the Company and each Subsidiary has the power to own its property and to carry on its business as now being conducted and is duly qualified and in good standing as a foreign corporation or other entity authorized to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, except where the failure to be so qualified or in good standing could not reasonably be expected to have a Material Adverse Effect. Section 8.2. Authorization; Consents; No Conflict. The execution and ------------------------------------ delivery by the Company of this Agreement and the Notes, the borrowings hereunder and the performance by the Company of its obligations under this Agreement and the Notes (a) are within the corporate powers of the Company, (b) have been duly authorized by all necessary corporate action on the part of the Company, (c) have received all necessary approvals, authorizations, consents, registrations, notices, exemptions and licenses (if any shall be required) from Governmental Authorities and other Persons, except for any such approvals, authorizations, consents, registrations, notices, exemptions or licenses non- receipt of which could not reasonably be expected to have a Material Adverse Effect, (d) do not and will not contravene or conflict with any provision of (i) law, (ii) any judgment, decree or order to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound, (iii) the charter, by-laws or other organizational documents of the Company or any Subsidiary or (iv) any provision of any agreement or -33- instrument binding on the Company or any Subsidiary, or any agreement or instrument of which the Company is aware affecting the properties of the Company or any Subsidiary, except with respect to (i), (ii) and (iv) above, for any such contravention or conflict which could not reasonably be expected to have a Material Adverse Effect and (e) do not and will not result in or require the creation or imposition of any Lien on any of the Company's or its Subsidiaries' properties. Section 8.3. Validity and Binding Nature. This Agreement is, and the --------------------------- Notes when duly executed and delivered will be, legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. Section 8.4. Financial Statements. The Company's audited -------------------- consolidated financial statements as at December 31, 1994, and unaudited consolidated financial statements as at September 30, 1995, a copy of each of which has been furnished to each Bank, have been prepared in conformity with generally accepted accounting principles in the United States applied on a basis consistent with that of the preceding fiscal year and fairly present the financial condition of the Company and its Subsidiaries as at such dates and the results of their operations for the periods then ended, and since the date of such audited consolidated financial statements there has been no material adverse change in the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. Section 8.5. Litigation and Contingent Liabilities. All Litigation ------------------------------------- Actions, taken as a whole, could not reasonably be expected to have a Material Adverse Effect. Other than any liability incident to such Litigation Actions or provided for or disclosed in the financial statements referred to in Section ------- 8.4, neither the Company nor any Subsidiary has any contingent liabilities which - - --- are material to the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. Section 8.6. Employee Benefit Plans. Each employee benefit plan (as ---------------------- defined in Section 3(3) of ERISA) as to which the Company, or any Subsidiary or any ERISA Affiliate may have any liability complies in all material respects with all applicable requirements of law and -34- regulations. During the twelve-consecutive-month period prior to the execution and delivery of this Agreement, (i) no steps have been taken to terminate any Plan and no contribution failure has occurred with respect to any Plan sufficient to give rise to a lien under section 302(f) of ERISA, (ii) no Reportable Event has occurred with respect to any Plan and (iii) neither the Company nor any ERISA Affiliate has either withdrawn or instituted steps to withdraw from any Multiemployer Plan, except in any such case for actions which individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. No condition exists or event or transaction has occurred in connection with any Plan which could reasonably be expected to result in the incurrence by the Company, any Subsidiary or any ERISA Affiliate of any material liability, fine or penalty (imposed by Section 4975 of the Code or Section 502(i) of ERISA or otherwise). Neither the Company nor any ERISA Affiliate is a member of, or contributes to, any Multiemployer Plan. Neither the Company nor any ERISA Affiliate has any contingent liability with respect to any post retirement benefit under an employee welfare benefit plan (as defined in section 3(i) of ERISA), other than liability for continuation coverage described in Part 6 of Title I of ERISA. Section 8.7. Investment Company Act. The Company is not an ---------------------- "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. Section 8.8. Public Utility Holding Company Act. Neither the Company ---------------------------------- nor any Subsidiary is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 8.9. Regulation U. Neither the Company nor any Subsidiary is ------------ engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System). Section 8.10. Information. ----------- (a) All information with respect to the Company contained in the December 6, 1995 memorandum furnished by the Agent to the Banks and all information heretofore furnished by the Company to the Agent or any Bank is, to the best of the Company's knowledge after -35- due inquiry, true and accurate in every material respect as of the date thereof, and none of such information contains any material misstatement of fact or omits to state any material fact necessary to make such information not misleading. (b) All information furnished by the Company to the Agent or any Bank on and after the date hereof shall be, to the best of the Company's knowledge after due inquiry, true and accurate in every material respect as of the date of such information, and none of such information shall contain any material misstatement of fact or shall omit to state any material fact necessary to make such information not misleading. Section 8.11. Compliance with Applicable Laws, etc. The Company and ------------------------------------- its Subsidiaries are in material compliance with the requirements of all applicable laws, rules, regulations, and orders of all Governmental Authorities (including, without limitation, all applicable environmental laws). Neither the Company nor any Subsidiary is in default under any agreement or instrument to which the Company or such Subsidiary is a party or by which it or any of its properties or assets is bound, which default could reasonably be expected to have a Material Adverse Effect on the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. No Event of Default or Unmatured Event of Default has occurred and is continuing. Section 8.12. Insurance. Each of the Company and each Subsidiary --------- maintains, or, in the case of any property owned by the Company or any Subsidiary and leased to lessees, has caused such lessees to maintain, insurance with financially sound and reputable insurers to such extent and against such hazards and liabilities as is commonly maintained, or caused to be maintained, as the case may be, by companies similarly situated. Section 8.13. Taxes. Each of the Company and each Subsidiary has ----- filed all tax returns which are required to have been filed and has paid, or made adequate provisions for the payment of, all of its Taxes which are due and payable, except such Taxes, if any, as are being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by generally accepted accounting principles have been established and except where failure to pay such Taxes, individually or in the aggregate, cannot reasonably be expected to have a Material Adverse Effect. -36- Section 8.14. Use of Proceeds. The proceeds of the Loans will be --------------- used by the Company to support the Company's commercial paper program and for other general corporate purposes. Section 8.15. Pari Passu. All obligations and liabilities of the ---------- Company hereunder shall rank at least equally and ratably (pari passu) in ---- ----- priority with all other unsubordinated, unsecured obligations of the Company to any other creditor. Section 8.16. Ownership and Liens. Each of the Company and each ------------------- Subsidiary has title to, or valid leasehold interests in, all of its properties and assets, real and personal, including the properties and assets, and leasehold interests reflected in the financial statements referred to in Section ------- 8.4 (other than any properties or assets disposed of in the ordinary course of - - --- business) other than such imperfections in title or leasehold interests which could not, in the aggregate, reasonably be expected to have a Material Adverse Effect, and none of the properties and assets owned by the Company or any of its Subsidiaries and none of its leasehold interests is subject to any Lien, except as disclosed in such financial statements or as may be permitted under this Agreement. SECTION 9. COVENANTS. Until the expiration or termination of the Commitments, and thereafter until all obligations of the Company hereunder and under the Notes are paid in full, the Company agrees that, unless at any time the Required Banks shall otherwise expressly consent in writing, it will: Section 9.1. Reports, Certificates and Other Information. Furnish to ------------------------------------------- the Agent with sufficient copies for each Bank which the Agent shall promptly furnish to each Bank: 9.1.1. Audited Financial Statements. As soon as available, and in ---------------------------- any event within 95 days after each fiscal year of the Company, a copy of the audited financial statements and annual audit report of the Company and its Subsidiaries for such fiscal year prepared on a consolidated basis and in conformity with generally accepted accounting principles in the United States and certified by Ernst & Young or by another independent certified public accountant of recognized national standing selected by the Company and satisfactory to the Required Banks. -37- 9.1.2. Interim Reports. As soon as available, and in any event --------------- within 50 days after each quarter (except the last quarter) of each fiscal year of the Company, a copy of the unaudited financial statements of the Company and its Subsidiaries for such quarter prepared in a manner consistent with the audited financial statements referred to in Section ------- 9.1.1, signed by the Company's chief financial officer and consisting of at ----- least a balance sheet as at the close of such quarter and statements of earnings and cash flows for such quarter and for the period from the beginning of such fiscal year to the close of such quarter. 9.1.3. Certificates. Contemporaneously with the furnishing of a copy ------------ of each annual audit report and of each set of quarterly statements provided for in this Section 9.1, a certificate of the Company dated the ----------- date of delivery of such annual report or such quarterly statements and signed by the Company's chief financial officer, to the effect that no Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it and containing a computation of, and showing compliance with, each of the financial ratios and restrictions contained in this Section 9. --------- 9.1.4. Certain Notices. Forthwith upon learning of the occurrence of --------------- any of the following, written notice thereof, describing the same and the steps being taken by the Company or the Subsidiary affected with respect thereto: (i) the occurrence of an Event of Default or an Unmatured Event of Default; (ii) the institution of any Litigation Action, provided that -------- the Company need not give notice of any new Litigation Action unless such Litigation Action, together with all other pending Litigation Actions, could, if adversely determined, reasonably be expected to have a Material Adverse Effect; (iii) the entry of any judgment or decree against the Company or any Subsidiary if the aggregate amount of all judgments and decrees then outstanding against the Company and all Subsidiaries exceeds $10,000,000 after deducting (i) the amount with respect to which the Company -38- or any Subsidiary is insured and with respect to which the insurer has not denied coverage in writing and (ii) the amount for which the Company or any Subsidiary is otherwise indemnified if the terms of such indemnification are satisfactory to the Agent and the Required Banks; (iv) the occurrence of a Reportable Event with respect to any Plan; the institution of any steps by the Company, any ERISA Affiliate, the PBGC or any other Person to terminate any Plan; the institution of any steps by the Company or any ERISA Affiliate to withdraw from any Plan; the incurrence of any material increase in the contingent liability of the Company or any Subsidiary with respect to any post-retirement welfare benefits; or the failure of the Company or any other Person to make a required contribution to a Plan if such failure is sufficient to give rise to a lien under Section 302(f) of ERISA; provided, however, that no notice shall be required of any of -------- ------- the foregoing unless the circumstance could reasonably be expected to have a Material Adverse Effect; or (v) the occurrence of a material adverse change in the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. 9.1.5. SEC Filings. Promptly after the filing or making thereof, ----------- copies of all 8-K's (other than 8-K's relating solely to the issuance by the Company of securities pursuant to an effective registration statement), 10-Q's, 10-K's, and other material reports or registration statements filed by the Company or any Subsidiary with or to any securities exchange or the Securities and Exchange Commission. 9.1.6. Other Information. From time to time such other information ----------------- concerning the Company and its Subsidiaries as any Bank or the Agent may reasonably request. Section 9.2. Existence. Maintain and preserve, and, subject to the --------- provisions of clauses (w), (x), (y) and (z) of Section 9.9, cause each ------- --- --- --- --- ----------- Subsidiary to maintain and preserve, its respective existence as a corporation or other form of business organization, as the case may be, and all rights, privileges, licenses, patents, patent rights, copyrights, trademarks, trade names, franchises and other -39- authority to the extent material and necessary for the conduct of its respective business in the ordinary course as conducted from time to time, except as may be determined by the Board of Directors of the Company in good faith to wind up and dissolve a Subsidiary that is not necessary or material to the business of the Company in its ordinary course as conducted from time to time. Section 9.3. Nature of Business. Engage, and cause each Subsidiary ------------------ to engage, in substantially the same fields of business as it is engaged in on the date hereof. Section 9.4. Books, Records and Access. Maintain, and cause each ------------------------- Subsidiary to maintain, complete and accurate books and records in which full and correct entries in conformity with generally accepted accounting principles in the United States shall be made of all dealings and transactions in relation to its respective business and activities. Permit, and cause each Subsidiary to permit, access by the Agent and each Bank to the books and records of the Company and such Subsidiary during normal business hours, and permit, and cause each Subsidiary to permit, the Agent and each Bank to make copies of such books and records. Section 9.5. Insurance. Maintain, and cause each Subsidiary to --------- maintain, such insurance as is described in Section 8.12. ------------ Section 9.6. Repair. Maintain, preserve and keep, and cause each ------ Subsidiary to maintain, preserve and keep, its material properties in good repair, working order and condition, and from time to time make, and cause each Subsidiary to make, all necessary and proper repairs, renewals, replacements, additions, betterments and improvements thereto so that at all times the efficiency thereof shall be fully preserved and maintained. In the case of properties leased by the Company or any Subsidiary to lessees, the Company may satisfy its obligations related to such properties under the previous sentence by causing, or by causing each Subsidiary to cause, such lessees to perform such obligations. Section 9.7. Taxes. Pay, and cause each Subsidiary to pay, when due, ----- all of its Taxes, unless and only to the extent that the Company or such Subsidiary, as the case may be, is contesting any such Taxes in good faith and by appropriate proceedings and the Company or such Subsidiary has set aside on its books such reserves or other appropriate provisions therefor as may be required by generally accepted accounting principles in the United -40- States, except where failure to pay such Taxes, individually or in the aggregate, cannot reasonably be expected to have a Material Adverse Effect. Section 9.8. Compliance. Comply, and cause each Subsidiary to ---------- comply, in all material respects with all statutes and governmental rules and regulations applicable to it; and use reasonable efforts to cause, and cause each Subsidiary to use reasonable efforts to cause, each lessee of property owned by the Company or any Subsidiary to comply in all material respects with all statutes, governmental rules and regulations applicable to such property or applicable to such lessee in connection with its leasing. Section 9.9. Merger, Purchase and Sale. Except with respect to any ------------------------- Permitted Acquisition, not, and not permit any Subsidiary to: (a) be a party to any merger or consolidation; (b) transfer, convey, lease or otherwise dispose of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole; or (c) purchase or otherwise acquire all or substantially all the assets of any Person unless such purchase or acquisition is a Permitted Acquisition by the Company. Notwithstanding the foregoing: (w) the Company may merge or consolidate with a person that is a U.S. corporation; (x) any Wholly-owned Subsidiary may merge into the Company or into or with any other Wholly-owned Subsidiary; (y) any Wholly-owned Subsidiary may consolidate with any other Wholly-owned Subsidiary so long as immediately thereafter 100% of the voting stock or other ownership interest of the resulting Person is owned by the Company or another Wholly-owned Subsidiary; and (z) any Wholly-owned Subsidiary may sell, transfer, convey, lease or assign all or a substantial part of its assets to the Company or another Wholly-owned Subsidiary; -41- provided, in each of the cases described in preceding clauses (w), (x), (y) and - - -------- ------- --- --- --- (z), that immediately thereafter and after giving effect thereto no Event of - - --- Default or Unmatured Event of Default shall have occurred and be continuing and in the case of any (i) merger in which the Company is not the surviving entity or (ii) consolidation to which the Company is a party, the surviving entity or the Person formed by such consolidation, as the case may be, shall assume the Company's obligations and performance of the Company's covenants under this Agreement in a writing satisfactory in form and substance to the Agent. Section 9.10. Consolidated Indebtedness to Consolidated Tangible Net ------------------------------------------------------ Worth Ratio. Not permit the ratio of Consolidated Indebtedness to Consolidated - - ----------- Tangible Net Worth to exceed 600% on and as of the last day of any fiscal year or 650% at any other time. Section 9.11. Fixed Charge Coverage Ratio. Not permit the Fixed --------------------------- Charge Coverage Ratio on the last day of any quarter of any fiscal year of the Company to be less than 125%. Section 9.12. Consolidated Tangible Net Worth. Not permit the ------------------------------- Company's Consolidated Tangible Net Worth to be less than $1,500,000,000 plus 50% of (a) the cumulative net income (but without deduction for cumulative net losses) of the Company and its Subsidiaries determined on a consolidated basis in accordance with United States generally accepted accounting principles, (b) the cumulative equity capital contributions from AIG and (c) the net proceeds from the sale of preferred stock, in each case for the period from September 30, 1994 to and including the date of any determination hereunder. Section 9.13. Restricted Payments. Not declare or pay any dividends ------------------- whatsoever or make any distribution on any capital stock of the Company (except in shares of, or warrants or rights to subscribe for or purchase shares of, capital stock of the Company), and not, and not permit any Subsidiary to, make any payment to acquire or retire shares of capital stock of the Company, at any time when (i) an Event of Default as described in Section 11.1 has occurred and ------------ is continuing and there are Loans outstanding hereunder or (ii) an Event of Default as described in Section 11.1.1 has occurred and is continuing and there -------------- are no Loans outstanding hereunder; provided, however, that notwithstanding the -------- ------- foregoing, this Section 9.13 shall not prohibit (x) the payment of dividends on ------------ any of the Company's market auction preferred stock that was sold to the public pursuant to an effective registration statement -42- under the Securities Act of 1933 or (y) the payment of dividends within 30 days of the declaration thereof if such declaration was not prohibited by this Section 9.13. - - ------------ Section 9.14. Liens. Not, and not permit any Subsidiary to, create ----- or permit to exist any Lien upon or with respect to any of its properties or assets of any kind, now owned or hereafter acquired, or on any income or profits therefrom, except for ------ (a) Liens existing on date hereof that are reflected in the financial statements of the Company dated prior to the date hereof; (b) Liens upon or in any property (other than property acquired for lease to a Person other than the Company or a Subsidiary) acquired or held by the Company or a Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness permitted under Section 9.15 incurred or guaranteed by the Company or any Subsidiary ------------ prior to, at the time of, or within 60 days after the later of the acquisition, completion of construction or commencement of full operation of such property, which Indebtedness was incurred or guaranteed solely for the purpose of financing the acquisition of such property or construction or improvements thereon; provided, however, that in the case of any such -------- ------- acquisition, construction or improvement, the Lien shall not apply to any property theretofore owned by the Company or a Subsidiary, other than, in the case of any such construction or improvement, any theretofore unimproved real property on which the property so constructed, or the improvement, is located; (c) Liens securing the Indebtedness of a Subsidiary owing to the Company or to a Wholly-owned Subsidiary; (d) Liens on property of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Subsidiary or at the time of a purchase, lease or other acquisition of the properties of a corporation or firm as an entirety or substantially as an entirety by the Company or a Subsidiary, provided that any such Lien shall not extend -------- to or cover any assets or properties of the Company or such Subsidiary owned by the Company or such Subsidiary prior to such merger, consolidation, purchase, lease or acquisition, unless otherwise permitted under this Section 9.14; ------------ -43- (e) leases or subleases granted to others in the ordinary and usual course of the Company's business; (f) easements, rights of way, restrictions and other similar charges or encumbrances not interfering with the ordinary conduct of the business of the Company or any Subsidiary; (g) banker's Liens arising, other than by contract, in the ordinary and usual course of the Company's business; (h) Liens incurred or deposits made in the ordinary course of business in connection with surety and appeal bonds, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money), provided, however, that the obligation so secured is not overdue or is -------- ------- being contested in good faith and by appropriate proceedings diligently pursued; (i) any replacement or successive replacement in whole or in part of any Lien referred to in the foregoing clauses (a) to (h), inclusive, ----------- --- provided, however, that the principal amount of any Indebtedness secured by -------- ------- the Lien shall not be increased and the principal repayment schedule and maturity of such Indebtedness shall not be extended and (i) such replacement shall be limited to all or a part of the property which secured the Lien so replaced (plus improvements and construction on such property) or (ii) if the property which secured the Lien so replaced has been destroyed, condemned or damaged and pursuant to the terms of the Lien other property has been substituted therefor, then such replacement shall be limited to all or part of such substituted property; (j) Liens created by or resulting from any litigation or other proceeding which is being contested in good faith by appropriate proceedings, including Liens arising out of judgments or awards against the Company or any Subsidiary with respect to which the Company or such Subsidiary is in good faith prosecuting an appeal or proceedings for review; or Liens incurred by the Company or any Subsidiary for the purpose of obtaining a stay or discharge in the course of any litigation or other proceeding to which the Company or such Subsidiary is a party; -44- (k) carrier's, warehouseman's, mechanic's, landlord's and materialmen's Liens, Liens for Taxes, assessments and other governmental charges and other similar Liens, in each case arising in the ordinary course of business, securing obligations that are not incurred in connection with the obtaining of any advance or credit and which are either not overdue or are being contested in good faith and by appropriate proceedings diligently pursued; (l) Liens securing Indebtedness of each of the Company's Wholly-owned Subsidiaries to be incorporated outside the United States for the purpose of providing subsidized financing of the acquisition of Airbus Industrie aircraft, the repayment obligations of which will be supported by guaranties issued by certain European government export credit agencies (the European Credit Agency Export Finance Program or "ECA Program") and a Company Guaranty and a pledge of the assets of (including any rights to or interests in any reserve or security deposit held by) each such Wholly- owned Subsidiary, provided that such Liens shall encumber only the assets -------- of (including any rights to or interests in any reserve or security deposit held by) each such Wholly-owned Subsidiary, and provided further, that the -------- ------- aggregate amount of Indebtedness of all such Wholly-owned Subsidiaries secured by Liens does not at the time exceed $2 billion during the 1995 fiscal year of the Company and $3 billion thereafter, minus in either case the amount of outstanding Liens permitted under Section 9.14(m); and --------------- (m) other Liens securing Indebtedness of the Company or any Subsidiary in an aggregate amount which, together with all other outstanding Indebtedness of the Company and the Subsidiaries secured by Liens not listed in clauses (a) through (l) of this Section 9.14, does not ----------- --- ------------ at the time exceed 12.5% of the Consolidated Tangible Net Worth of the Company as shown on its audited consolidated financial statements as of the end of the fiscal year preceding the date of determination minus the amount of outstanding Liens permitted under Section 9.14(l). --------------- Section 9.15. Leases. Not, and not permit any Subsidiary to, become ------ obligated, as lessee, under any lease of real or personal property if at the time of entering into such lease and after giving effect thereto the aggregate Operating Lease Rentals would exceed 20% of Consolidated Indebtedness. -45- Section 9.16. Use of Proceeds. Not permit any proceeds of the Loans --------------- to be used, either directly or indirectly, (a) for the payment of any dividend or for the repurchase of any of the Company's equity securities; (b) for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying any margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time; (c) for the purpose, whether immediate, incidental or ultimate, of acquiring directly or indirectly any of the outstanding shares of voting stock of any corporation which (i) has announced that it will oppose such acquisition or (ii) has commenced any litigation which alleges that any such acquisition violates, or will violate, applicable law; or (d) for any other purpose except (i) to support the Company's commercial paper program or (ii) for general corporate purposes in the ordinary course of business. Section 9.17. Transactions with Related Parties. Not, and not permit --------------------------------- any Subsidiary to, enter into or be a party to any transaction or arrangement, including, without limitation, the purchase, sale, lease or exchange of property or the rendering of any service, with any Related Party, except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtained in a comparable arm's- length transaction with a Person not a Related Party. Section 9.18. Securitization. Promptly after the receipt thereof, -------------- apply the proceeds from the securitization of assets (aircraft lease portfolio securitizations), net of expenses related to any such securitization, to the repayment of Indebtedness. SECTION 10. CONDITIONS TO LENDING. Section 10.1. Conditions Precedent to All Loans. Each Bank's --------------------------------- obligation to make each Loan is subject to the following conditions precedent: -46- 10.1.1. No Default. (a) No Event of Default or Unmatured Event of ---------- Default has occurred and is continuing or will result from the making of such Loan, (b) the representations and warranties contained in Section 8 --------- are true and correct in all material respects as of the date of such requested Loan, with the same effect as though made on the date of such Loan (it being understood that each request for a Loan shall automatically constitute a representation and warranty by the Company that, as at the requested date of such Loan, (x) all conditions under this Section 10.1.1 -------------- shall be satisfied and (y) after the making of such Loan the aggregate principal amount of all outstanding Loans will not exceed the Aggregate Commitment). 10.1.2. Documents. The Agent shall have received (a) a certificate --------- signed by an Authorized Officer of the Company as to compliance with Section 10.1.1, which requirement shall be deemed satisfied by the -------------- submission of a properly completed Notice of Competitive Bid Borrowing or Committed Loan Request and (b) such other documents as the Agent may reasonably request in support of such Loan. 10.1.3. Litigation. No Litigation Action not disclosed in writing by ---------- the Company to the Agent and the Banks prior to the date of the last previous Loan hereunder (or, in the case of the initial Loan, prior to the date of execution and delivery of this Agreement) ("New Litigation") has been instituted and no development not so disclosed has occurred in any other Litigation Action ("Existing Litigation"), unless the resolution of all New Litigation and Existing Litigation against the Company and its Subsidiaries could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Section 10.2. Conditions to the Availability of the Commitments. The ------------------------------------------------- obligations of each Bank hereunder are subject to, and the Banks' Commitments shall not become available until the date on which each of the following conditions precedent shall have been satisfied or waived in writing by the Required Banks: 10.2.1. Revolving Credit Agreement. The Agent shall have received -------------------------- this Agreement duly executed and delivered by each of the Banks and the Company and each of the Banks shall have received a fully executed Committed Note and a fully executed Bid Note. -47- 10.2.2. Evidence of Corporate Action. The Agent shall have received ---------------------------- certified copies of all corporate actions taken by the Company to authorize this Agreement and the Notes. 10.2.3. Incumbency and Signatures. The Agent shall have received a ------------------------- certificate of the Secretary or an Assistant Secretary of the Company certifying the names of the officer or officers of the Company authorized to sign this Agreement, the Notes and the other documents provided for in this Agreement to be executed by the Company, together with a sample of the true signature of each such officer (it being understood that the Agent and each Bank may conclusively rely on such certificate until formally advised by a like certificate of any changes therein). 10.2.4. Good Standing Certificates. The Agent shall have received -------------------------- such good standing certificates of state officials with respect to the incorporation of the Company, or other matters, as the Agent or the Banks may reasonably request. 10.2.5. Opinions of Company Counsel. The Agent shall have received --------------------------- favorable written opinions of O'Melveny & Myers, counsel for the Company, in substantially the form of Exhibit G, and the Corporate Counsel of the --------- Company, in substantially the form of Exhibit H. --------- 10.2.6. Opinion of Agent's Counsel. The Agent shall have received a -------------------------- favorable written opinion of Sullivan & Cromwell, counsel to the Agent, with respect to documents received by the Agent and the Banks and such legal matters as the Agent reasonably may require. 10.2.7. Other Documents. The Agent shall have received such other --------------- certificates and documents as the Agent or the Banks reasonably may require. 10.2.8. Fees. The Agent shall have received for the account of the ---- Agent, the arrangement fee, as previously agreed to between the Company and the Agent and the Agent's fees payable to the Funding Date pursuant to Section 4.5 hereof. ----------- 10.2.9. Material Adverse Change. Since the date of the audited ----------------------- financial statements identified in Section 8.4 hereof, there shall not have ----------- occurred any material adverse change in the business, credit, -48- operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. 10.2.10. Termination of Revolving Credit Facilities. The Company ------------------------------------------ shall have paid all amounts owing and otherwise satisfied and discharged all of its obligations arising under each of the Revolving Credit Agreements, dated as of February 2, 1995, as amended, among the Company, the Agent and the banks named therein, and such agreements shall have been terminated and of no further force and effect, evidence of which shall have been made available to the Agent. SECTION 11. EVENTS OF DEFAULT AND THEIR EFFECT. Section 11.1. Events of Default. Each of the following shall ----------------- constitute an Event of Default under this Agreement: 11.1.1. Non-Payment of Notes, etc. Default in the payment when due -------------------------- of any principal of any Loan; or default, and continuance thereof for five days, in the payment when due of any interest on any Loan or any fees payable by the Company hereunder. 11.1.2. Non-Payment of Other Indebtedness for Borrowed Money. ---------------------------------------------------- Default in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any principal of, inter est on or fees incurred in connection with any other Indebtedness of, or guaranteed by, the Company or any Significant Subsidiary (except (i) any such Indebtedness of any Subsidiary to the Company or to any other Subsidiary and (ii) any Indebtedness hereunder) and, if a default in the payment of interest or fees, continuance of such default for five days, in the case of interest, or 30 days, in the case of fees, or default in the performance or observance of any obligation or condition with respect to any such other Indebtedness if the effect of such default (subject to any applicable grace period) is to accelerate the maturity of any such Indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity; provided, however, that the aggregate principal amount of all -------- ------- Indebtedness as to which there has occurred any default as described above shall equal or exceed $50,000,000. -49- 11.1.3. Bankruptcy, Insolvency, etc. The Company or any Significant ---------------------------- Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or the Company or any Significant Subsidiary applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for the Company or such Significant Subsidiary or any property thereof, or makes a general assignment for the benefit of credi tors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for the Company or any Significant Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any warrant of attachment or similar legal process is issued against any substantial part of the property of the Company or any of its Significant Subsidiaries which is not released within 60 days of service; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding (except the voluntary dissolution, not under any bankruptcy or insolvency law, of a Significant Subsidiary), is commenced in respect of the Company or any Significant Subsidiary, and, if such case or proceeding is not commenced by the Company or such Significant Subsidiary it is consented to or acquiesced in by the Company or such Significant Subsidiary or remains for 60 days undismissed; or the Company or any Significant Subsidiary takes any corporate action to authorize, or in furtherance of, any of the foregoing. 11.1.4. Non-Compliance with this Agreement. Failure by the Company to ---------------------------------- comply with or to perform any of the Company's covenants herein or any other provision of this Agreement (and not constituting an Event of Default under any of the other provisions of this Section 11.1) and continuance of ------------ such failure for 30 days (or, if the Company failed to give notice of such non-compliance or nonperformance pursuant to Section 9.1.4 within one ------------- Business Day after obtaining actual knowledge thereof, 30 days less the number of days elapsed between the date the Company obtained such actual knowledge and the date the Company gives the notice pursuant to Section ------- 9.1.4, but in no event less than one Business Day) after notice thereof to ----- the Company from the Agent, any Bank, or the holder of any Note. 11.1.5. Representations and Warranties. Any representation or ------------------------------ warranty made by the Company herein -50- is untrue or misleading in any material respect when made or deemed made; or any schedule, statement, report, notice, or other writing furnished by the Company to the Agent or any Bank is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or any certification made or deemed made by the Company to the Agent or any Bank is untrue or misleading in any material respect on or as of the date made or deemed made. 11.1.6. Employee Benefit Plans. The institution by the Company or ---------------------- any ERISA Affiliate of steps to terminate any Plan if, in order to effectuate such termination, (i) the Company or any ERISA Affiliate would be required to make a contribution to such Plan or would incur a liability or obligation to such Plan in an amount in excess of $10,000,000 and (ii) immediately after giving effect to the payment or satisfaction of such contribution, liability or obligation (if made or undertaken by the Company or any Subsidiary) an Event of Default or Unmatured Event of Default would exist and be continuing; or the institution by the PBGC of steps to terminate any Plan; or a contribution failure occurs with respect to a Plan sufficient to give rise to a lien under Section 302(f) of ERISA securing an amount in excess of $10,000,000. 11.1.7. Litigation. There shall be entered against the Company or ---------- any Subsidiary one or more judgments or decrees in excess of $10,000,000 in the aggregate at any one time outstanding for the Company and all Subsidiaries and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof, excluding those judgments or decrees for and to the extent to which the Company or any Subsidiary is insured and with respect to which the insurer has not denied coverage in writing or for and to the extent to which the Company or any Subsidiary is otherwise indemnified if the terms of such indemnification are satisfactory to the Required Banks; and 11.1.8. Change of Ownership. AIG shall cease to own beneficially at ------------------- least 51% of all of the outstanding shares of the common stock of the Company. Section 11.2. Effect of Event of Default. If any Event of Default -------------------------- described in Section 11.1.3 shall occur, the Commitments (if they have not -------------- theretofore terminated) shall immediately terminate and all Loans and all interest -51- and other amounts due hereunder shall become immediately due and payable, all without presentment, demand or notice of any kind; and, in the case of any other Event of Default, the Agent may, and upon written request of the Required Banks shall, declare the Commitments (if they have not theretofore terminated) to be terminated and all Loans and all interest and other amounts due hereunder to be due and payable, whereupon the Commitments (if they have not theretofore terminated) shall immediately terminate and all Loans and all interest and other amounts due hereunder shall become immediately due and payable, all without presentment, demand or notice of any kind. The Agent shall promptly advise the Company and each Bank of any such declaration, but failure to do so shall not impair the effect of such declaration. SECTION 12. THE AGENT. Section 12.1. Authorization. Each Bank and the holder of each Note ------------- authorizes the Agent to act on behalf of such Bank or holder to the extent provided herein and in any other document or instrument delivered hereunder or in connection herewith, and to take such other action as may be reasonably incidental thereto. Subject to the provisions of Section 12.3, the Agent will ------------ take such action permitted by any agreement delivered in connection with this Agreement as may be requested in writing by the Required Banks or if required under Section 13.1, all of the Banks. The Agent shall promptly remit in ------------ immediately available funds to each Bank or other holder its share of all payments received by the Agent for the account of such Bank or holder, and shall promptly transmit to each Bank (or share with each Bank the contents of) each notice it receives from the Company pursuant to this Agreement. Section 12.2. Indemnification. The Banks agree to indemnify the --------------- Agent in its capacity as such (to the extent not reimbursed by the Company), ratably according to their respective Percentages, from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Bank shall be liable for the payment to the Agent of -------- any portion of such actions, causes of action, suits, losses, liabilities, damages and -52- expenses resulting from the Agent's or its employees' or agents' gross negligence or willful misconduct. Without limiting the foregoing, subject to Section 13.5 each Bank agrees to reimburse the Agent promptly upon demand for - - ------------ its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent in such capacity in connection with the preparation, execution or enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement or any amendments or supplements hereto or thereto to the extent that the Agent is not reimbursed for such expenses by the Company. All obligations provided for in this Section 12.2 shall survive ------------ repayment of the Loans, cancellation of the Notes or any termination of this Agreement. Section 12.3. Action on Instructions of the Required Banks. As to -------------------------------------------- any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but the Agent shall in all cases be fully protected in acting or refraining from acting upon the written instructions from (i) the Required Banks, except for instructions which under the express provisions hereof must be received by the Agent from all Banks and (ii) in the case of such instructions, from all Banks. In no event will the Agent be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. The relationship between the Agent and the Banks is and shall be that of agent and principal only and nothing herein contained shall be construed to constitute the Agent a trustee for any holder of a Note or of a participation therein nor to impose on the Agent duties and obligations other than those expressly provided for herein. Section 12.4. Payments. (a) The Agent shall be entitled to assume -------- that each Bank has made its Loan available in accordance with Section 2.3 or ----------- Section 3.2(c), as applicable, unless such Bank notifies the Agent at its Notice - - -------------- Office prior to 11:00 a.m., New York City time, on the Funding Date for such Loan that it does not intend to make such Loan available, it being understood that no such notice shall relieve such Bank of any of its obligations under this Agreement. If the Agent makes any payment to the Company on the assumption that a Bank has made the proceeds of such Loan available to the Agent but such Bank has not in fact made the proceeds of such Loan available to the Agent, such Bank shall pay to the Agent on demand an amount equal to the amount of such Bank's Loan, together with interest thereon for each day that elapses from and including such -53- Funding Date to but excluding the Business Day on which the proceeds of such Bank's Loan become immediately available to the Agent at its Payment Office prior to 12:00 Noon, New York City time, at the Federal Funds Rate for each such day, based upon a year of 360 days. A certificate of the Agent submitted to any Bank with respect to any amounts owing under this Section 12.4(a) shall be --------------- conclusive absent demonstrable error. If the proceeds of such Bank's Loan are not made available to the Agent at its Payment Office by such Bank within three Business Days of such Funding Date, the Agent shall be entitled to recover such amount on demand from the Company, together with interest thereon for each day that elapses from and including such Funding Date to but excluding the Business Day on which such proceeds become immediately available to the Agent prior to 12:00 Noon, New York City time, (i) in the case of a Bid Loan, at the rate per annum applicable thereto and (ii) in the case of a Committed Loan, at the rate per annum applicable to Base Rate Loans hereunder, in either case based upon a year of 360 days. Nothing in this paragraph (a) shall relieve any Bank of any ------------- obligation it may have hereunder to make any Loan or prejudice any rights which the Company may have against any Bank as a result of any default by such Bank hereunder. (b) The Agent shall be entitled to assume that the Company has made all payments due hereunder from the Company on the due date thereof unless it receives notification prior to any such due date from the Company that the Company does not intend to make any such payment, it being understood that no such notice shall relieve the Company of any of its obligations under this Agreement. If the Agent distributes any payment to a Bank hereunder in the belief that the Company has paid to the Agent the amount thereof but the Company has not in fact paid to the Agent such amount, such Bank shall pay to the Agent on demand (which shall be made by telegram, telex, facsimile or personal delivery) an amount equal to the amount of the payment made by the Agent to such Bank, together with interest thereon for each day that elapses from and including the date on which the Agent made such payment to but excluding the Business Day on which the amount of such payment is returned to the Agent at its Payment Office in immediately available funds prior to 12:00 Noon, New York City time, at the Federal Funds Rate for each such day, based upon a year of 360 days. If the amount of such payment is not returned to the Agent in immediately available funds within three Business Days after demand by the Agent, such Bank shall pay to the Agent on demand an amount calculated in the manner specified in the preceding sentence after substituting the term "Base Rate" for the -54- term "Federal Funds Rate". A certificate of the Agent submitted to any Bank with respect to amounts owing under this Section 12.4(b) shall be conclusive --------------- absent demonstrable error. Section 12.5. Exculpation. The Agent shall be entitled to rely upon ----------- advice of counsel concerning legal matters, and upon this Agreement and any Note, security agreement, schedule, certificate, statement, report, notice or other writing which it believes to be genuine or to have been presented by a proper person. Neither the Agent nor any of its directors, officers, employees or agents shall (i) be responsible for any recitals, representations or warranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of, this Agreement, any Note or any other instrument or document delivered hereunder or in connection herewith, (ii) be deemed to have knowledge of an Event of Default or Unmatured Event of Default until after having received actual notice thereof from the Company or a Bank, (iii) be under any duty to inquire into or pass upon any of the foregoing matters, or to make any inquiry concerning the performance by the Company or any other obligor of its obligations or (iv) in any event, be liable as such for any action taken or omitted by it or them, except for its or their own gross negligence or willful misconduct. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, the Agent in its individual capacity. Section 12.6. Credit Investigation. Each Bank acknowledges, and -------------------- shall cause each Assignee or Participant to acknowledge in its assignment or participation agreement with such Bank, that it has (i) made and will continue to make such inquiries and has taken and will take such care on its own behalf as would have been the case had the Loans been made directly by such Bank or other applicable Person to the Company without the intervention of the Agent or any other Bank and (ii) independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made and will continue to make its own credit analysis and decisions relating to this Agreement. Each Bank agrees and acknowledges, and shall cause each Assignee or Participant to agree and acknowledge in its assignment or participation agreement with such Bank, that the Agent makes no representations or warranties about the creditworthiness of the Company or any other party to this Agreement or with respect to the legality, validity, sufficiency or enforceability of this Agreement or any Note. -55- Section 12.7. UBS and Affiliates. UBS and each of its successors as ------------------ Agent shall have the same rights and powers hereunder as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and UBS and any such successor and its Affiliates may accept deposits from, lend money to and generally engage, and continue to engage, in any kind of business with the Company or any Affiliate thereof as if UBS or such successor were not the Agent hereunder. Section 12.8. Resignation. The Agent may resign as such at any time ----------- upon at least 30 days' prior notice to the Company and the Banks. In the event of any such resignation, Banks having an aggregate Percentage of more than 50% shall as promptly as practicable appoint a successor Agent reasonably acceptable to the Company. If no successor Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent reasonably acceptable to the Company, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof or under the laws of another country which is doing business in the United States of America and having a combined capital, surplus and undivided profits of at least $1,000,000,000. Upon the acceptance of any appointment as Agent hereunder by a suc cessor agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from all further duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section ------- 12 shall inure to its benefit as to any actions taken or omitted to be taken by - - -- it while it was Agent under this Agreement. SECTION 13. GENERAL. Section 13.1. Waiver; Amendments. No delay on the part of the Agent, ------------------ any Bank, or the holder of any Loan in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective unless the same shall be in writing and signed and delivered by the Agent and by Banks having an aggregate -56- Percentage of not less than the aggregate Percentage expressly designated herein with respect thereto or, in the absence of such designation as to any provision of this Agreement or the Notes, by the Required Banks, and then any amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent (i) shall extend or increase the amount of the Commitments, extend the due date for any amount payable hereunder, reduce or waive any fee hereunder, change the definition of "Required Banks" or Percentage in Section 1, --------- amend or modify Section 4.1 or change any of the defined terms used in Section ----------- ------- 4.1, amend or modify Section 4.4, Section 4.6, Section 11.1.1 or Section 11.1.8, - - --- ----------- ----------- -------------- -------------- modify this Section 13.1 or otherwise change the aggregate Percentage required ------------ to effect an amendment, modification, waiver or consent without the written consent of all Banks, (ii) shall waive any of the conditions precedent specified in Section 10.1 for the making of any Loan without the written consent of the ------------ Bank which is to make such Loan or (iii) shall extend the scheduled maturity or reduce the principal amount of, or rate of interest on, or extend the due date for any amount payable under, any Loan without the written consent of the holder of the Note evidencing such Loan. Amendments, modifications, waivers and consents of the type described in clause (iii) of the preceding sentence with ------------ respect to Bid Loans or Bid Notes may be effected with the written consent of the holder of such Bid Loans or Bid Notes and no consent of any other Bank or other holder shall be required in connection therewith. No provisions of Section 12 shall be amended, modified or waived without the Agent's written - - ---------- consent. Section 13.2. Notices. Except as otherwise expressly provided in ------- this Agreement, any notice hereunder to the Company, the Agent, or any Bank or other holder of a Loan shall be in writing and, if by telegram, telex, facsimile or personal delivery, shall be deemed to have been given and received when sent and, if mailed, shall be deemed to have been given and received three Business Days after the date when sent by registered or certified mail, postage prepaid, and addressed to the Company, the Agent, or such Bank (or other holder) at its address shown below its signature hereto or at such other address as it may, by written notice received by the other parties to this Agreement, have designated as its address for such purpose. The Agent, any Bank or the holder of any Note giving any waiver, consent or notice to, or making any request upon, the Company hereunder shall promptly notify the Agent thereof. Correspondence of the type described in Section 2.2 with respect to Bid Loans and notices of ----------- -57- Committed Loan Requests made by the Company shall, except as otherwise provided herein, be directed to the persons specified for such purpose for each party on the signature pages hereof or in subsequent writings among the parties. Additional copies of certain notices which any party may have requested on the signature pages hereof need not be delivered at the same time as the primary notices to such party, but the party delivering such primary notices shall use reasonable efforts to distribute such copies on the same Business Day as that on which such primary notices were distributed. Section 13.3. Computations. Where the character or amount of any ------------ asset or liability or item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made, for the purpose of this Agreement, such determination or calculation shall, at any time and to the extent applicable and except as otherwise specified in this Agreement, be made in accordance with generally accepted accounting principles in the United States applied on a basis consistent with those in effect as at the date of the Company's audited financial statements referred to in Section ------- 8.4. If there should be any material change in generally accepted accounting - - --- principles in the United States after the date hereof which materially affects the financial covenants in this Agreement, the parties hereto agree to negotiate in good faith appropriate revisions of such covenants (it being understood, however, that such covenants shall remain in full force and effect in accordance with their existing terms pending the execution by the Company and the Banks of any such amendment). Section 13.4. Assignments; Participations. Each Bank may assign, or --------------------------- sell participations in, its Loans and its Commitment to one or more other Persons in accordance with this Section 13.4 (and the Company consents to the ------------ disclosure of any information obtained by any Bank in connection herewith to any actual or prospective Assignee or Participant). Section 13.4.1. Assignments. Any Bank may with the written consents ----------- of the Company and the Agent (which consents will not be unreasonably withheld or delayed) at any time assign and delegate to one or more commercial banks or other financial institutions (any Person to whom an assignment and delegation is made being herein called an "Assignee") all or any fraction of such Bank's Loans and Commitment (which assignment and delegation shall be of a constant, and not a varying, percentage of such assigning Bank's Loans and -58- Commitment); each such assignment of a Bank's Commitment, when considered in aggregate with any simultaneous assignment by such Bank pursuant to the $1,000,000,000 Revolving Credit Agreement executed by the parties hereto on the date hereof, shall be in the minimum aggregate amount of $10,000,000 or in integral multiples of $1,000,000 in excess thereof; provided that any -------- such Assignee will comply, if applicable, with the provisions contained in the first sentence of Section 6.4(b) and shall be deemed to have made, on -------------- the date of the effectiveness of such assignment and delegation, the representation and warranty set forth in the second sentence of Section ------- 6.4(b); and provided further, that the Company and the Agent shall be ------ -------- ------- entitled to continue to deal solely and directly with such assigning Bank in connection with the interests so assigned and delegated to an Assignee until such assigning Bank and/or such Assignee shall have: (i) given written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee, substantially in the form of Exhibit I, --------- to the Company and the Agent; (ii) provided evidence satisfactory to the Company and the Agent that, as of the date of such assignment and delegation, the Company will not be required to pay any costs, fees, taxes or other amounts of any kind or nature with respect to the interest assigned in excess of those payable by the Company with respect to such interest prior to such assignment; (iii) paid to the Agent for the account of the Agent a processing fee of $2,500; and (iv) provided to the Agent evidence reasonably satisfactory to the Agent that the assigning Bank has complied with the provisions of the last sentence of Section 12.6. ------------ Upon receipt of the foregoing items and the consents of the Company and the Agent, (x) the Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee, such Assignee shall have the rights and obligations of a Bank hereunder and under the other instruments and documents executed in connection herewith and (y) the assigning Bank, to the -59- extent that rights and obligations hereunder have been assigned and delegated by it, shall be released from its obligations hereunder. The Agent may from time to time (and upon the request of the Company or any Bank after any change therein shall) distribute a revised Schedule I indicating any changes in the ---------- Banks party hereto or the respective Percentages of such Banks. Within five Business Days after the Company's receipt of notice from the Agent of the effectiveness of any such assignment and delegation, the Company shall execute and deliver to the Agent (for delivery to the relevant Assignee) new Notes in favor of such Assignee and, if the assigning Bank has retained Loans and a Commitment hereunder, replacement Notes in favor of the assigning Bank (such Notes to be in exchange for, but not in payment of, the Notes previously held by such assigning Bank). Each such Note shall be dated the date of the predecessor Notes. The assigning Bank shall promptly mark the predecessor Notes "exchanged" and deliver them to the Company. Any attempted assignment and delegation not made in accordance with this Section 13.4.1 shall be null and void. -------------- The foregoing consent requirement shall not be applicable in the case of, and this Section 13.4.1 shall not restrict, any assignment or other transfer -------------- by any Bank of all or any portion of such Bank's Loans to any Federal Reserve Bank; provided that such Federal Reserve Bank shall not be considered a "Bank" -------- for purposes of this Agreement. Section 13.4.2. Participations. Any Bank may at any time sell to -------------- one or more commercial banks or other Persons (any such commercial bank or other Person being herein called a "Participant") participating interests in any of its Loans, its Commitment or any other interest of such Bank hereunder; provided, however, that - - -------- ------- (a) no participation contemplated in this Section 13.4.2 shall -------------- relieve such Bank from its Commitment or its other obligations hereunder; (b) such Bank shall remain solely responsible for the performance of its Commitment and such other obligations hereunder and such Bank shall retain the sole right and responsibility to enforce the obligations of the Company hereunder, including the right to approve any amendment, modification or waiver of any provision of this Agreement (subject to Section 13.4.2(d) below); ----------------- (c) the Company and the Agent shall continue to deal solely and directly with such Bank in connection -60- with such Bank's rights and obligations under this Agreement; (d) no Participant, unless such Participant is an affiliate of such Bank, or is itself a Bank, shall be entitled to require such Bank to take or refrain from taking any action hereunder, except that such Bank may agree with any Participant that such Bank will not, without such Participant's consent, take any actions of the type described in the third sentence of Section 13.1; ------------ (e) the Company shall not be required to pay any amount under Sections 4.1, 6.4 or 7.1 that is greater than the amount which the Company ------------ --- --- would have been required to pay had no participating interest been sold; (f) no Participant may further participate any interest in any Committed Loan (and each participation agreement shall contain a restriction to such effect). The Company acknowledges and agrees that, to the extent permitted by applicable law, each Participant shall be considered a Bank for purposes of Sections 7.1, 7.4, 13.5 and 13.6, and by ------------ --- ---- ---- its acceptance of a participation herein, each Participant agrees to be bound by the provisions of Section 6.2(b) as if such Participant were a -------------- Bank; and (g) such Bank shall have provided to the Agent evidence reasonably satisfactory to the Agent that such Bank has complied with the provisions of the last sentence of Section 12.6. ------------ Section 13.5. Costs, Expenses and Taxes. The Company agrees to pay ------------------------- on demand (a) all out-of-pocket costs and expenses of the Agent (including the fees and out-of-pocket expenses of counsel for the Agent (and of local counsel, if any, who may be retained by said counsel) in an amount not to exceed an amount separately agreed to between the Agent and the Company), in connection with the preparation, execution, delivery and administration of this Agreement, the Notes and all other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith and (b) all out-of-pocket costs and expenses (including reasonable attorneys' fees and legal expenses and allocated costs of staff counsel) incurred by the Agent and each Bank in connection with the enforcement of this Agreement, the Notes or any such other instruments or documents. Each Bank agrees to reimburse the Agent for such Bank's pro rata share -61- (based upon its respective Percentage) of any such costs or expenses incurred by the Agent on behalf of all the Banks and not paid by the Company other than any fees and out-of-pocket expenses of counsel for the Agent which exceed the amount which the Company has agreed with the Agent to reimburse. In addition, the Company agrees to pay, and to hold the Agent and the Banks harmless from all liability for, any stamp or other Taxes which may be payable in connection with the execution and delivery of this Agreement, the borrowings hereunder, the issuance of the Notes or the execution and delivery of any other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided for in this Section 13.5 shall ------------ survive repayment of the Loans, cancellation of the Notes or any termination of this Agreement. Section 13.6. Indemnification. In consideration of the execution and --------------- delivery of this Agreement by the Agent and the Banks, the Company hereby agrees to indemnify, exonerate and hold each of the Banks, the Agent, and each of the officers, directors, employees and agents of the Banks and Agent (collectively herein called the "Bank Parties" and individually called a "Bank Party") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees and disbursements (collectively herein called the "Indemnified Liabilities"), incurred by the Bank Parties or any of them as a result of, or arising out of, or relating to (i) this Agreement, the Notes or the Loans or (ii) the direct or indirect use of proceeds of any of the Loans or any credit extended hereunder, except for any such Indemnified Liabilities arising on account of such Bank Party's gross negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. All obligations provided for in this Section ------- 13.6 shall survive repayment of the Loans, cancellation of the Notes or any - - ---- termination of this Agreement. Section 13.7. Regulation U. Each Bank represents that it in good ------------ faith is not relying, either directly or indirectly, upon any margin stock (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) as collateral security for the extension or maintenance by it of any credit provided for in this Agreement. -62- Section 13.8. Extension of Termination Dates; Removal of Banks; ------------------------------------------------- Substitution of Banks. (a) Not more than 90 days nor less than 60 days prior to - - --------------------- the then-effective Termination Date, the Company may, at its option, request all the Banks then party to this Agreement to extend their scheduled Termination Dates by one calendar year by means of a letter, addressed to each such Bank and the Agent, substantially in the form of Exhibit J. Each such Bank electing (in --------- its sole discretion) so to extend its scheduled Termination Date shall execute and deliver prior to the 30th day following receipt of such request counterparts of such letter to the Company and the Agent, whereupon (unless Banks with an aggregate Percentage in excess of 25% decline to extend their respective scheduled Termination Dates, in which event the Agent shall notify all the Banks thereof and no such extension shall occur), such Bank's scheduled Termination Date shall be extended to January 19 of the year immediately succeeding such Bank's then-current scheduled Termination Date. Any Bank that declines or fails to respond to the Company's request for such extension shall be deemed to have not extended its scheduled Terminate Date. (b) With respect to any Bank (i) on account of which the Company is required to make any deductions or withholdings or pay any additional amounts, as contemplated by Section 6.4, (ii) on account of which the Company is required ----------- to pay any additional amounts, as contemplated by Section 7.1, (iii) for which ----------- it is illegal to make a LIBOR Rate Loan, as contemplated by Section 7.3 or (iv) ----------- which has declined to extend such Bank's scheduled Termination Date and Banks with an aggregate Percentage in excess of 75% have elected to extend their respective Termination Dates, the Company may in its discretion, upon not less than 30 days' prior written notice to the Agent and each Bank, remove such Bank as a party hereto. Each such notice shall specify the date of such removal (which shall be a Business Day and, if such Bank has any outstanding Bid Loans, shall (unless otherwise agreed by such Bank) be on or after the last day of the Loan Period for the Bid Loan of such Bank having the latest maturity date), which shall thereupon become the scheduled Termination Date for such Bank. (c) In the event that any Bank does not extend its scheduled Termination Date pursuant to subsection (a) above or is the subject of a notice -------------- of removal pursuant to subsection (b) above, then, at any time prior to the -------------- Termination Date for such Bank (a "Terminating Bank"), the Company may, at its option, arrange to have one or more other commercial banks or financial institutions (which may be a Bank or Banks and each of which shall herein be called a "Successor Bank") succeed to all or a percentage -63- of the Terminating Bank's outstanding Loans, if any, and rights under this Agreement and assume all or a like percentage (as the case may be) of such Terminating Bank's undertaking to make Loans pursuant hereto and other obligations hereunder (as if (i) in the case of any Bank electing not to extend its scheduled Termination Date pursuant to subsection (a) above, such Successor -------------- Bank had extended its scheduled Termination Date pursuant to such subsection (a) -------------- and (ii) in the case of any Bank that is the subject of a notice of removal pursuant to sub section (b) above, no such notice of removal had been given by --------------- the Company). Such succession and assumption shall be effected by means of one or more agreements supplemental to this Agreement among the Terminating Bank, the Successor Bank, the Company and the Agent. On and as of the effective date of each such supplemental agreement, each Successor Bank party thereto shall be and become a Bank for all purposes of this Agreement and to the same extent as any other Bank hereunder and shall be bound by and entitled to the benefits of this Agreement in the same manner as any other Bank. (d) On the Termination Date for any Terminating Bank, such Terminating Bank's Commitment shall terminate and the Company shall pay in full all of such Terminating Bank's Loans (except to the extent assigned pursuant to subsection (c) above) and all other amounts payable to such Bank hereunder - - -------------- (including any amounts payable pursuant to Section 7.4 on account of such ----------- payment); provided that if an Event of Default or Unmatured Event of Default -------- exists on the date scheduled as any Terminating Bank's Termination Date, such Terminating Bank's scheduled Termination Date shall be extended to the first Business Day thereafter on which (i) no Event of Default or Unmatured Event of Default exists (without regard to any waiver or amendment that makes this Agreement less restrictive for the Company, other than as described in clause ------ (ii) below) or (ii) the Required Banks (which for purposes of this subsection - - ---- ---------- (d) shall be determined based upon the respective Percentages and aggregate - - --- Commitments of all Banks other than any Terminating Bank whose scheduled Termination Date has been extended pursuant to this proviso) waive or amend the provisions of this Agreement to cure all existing Events of Default or Unmatured Events of Default or agree to permit any borrowing hereunder notwithstanding the existence of any such event. In the event that UBS shall become a Terminating Bank, the Required Banks with the consent of the Company (which consent shall not be unreasonably withheld) shall appoint another Bank or other Person as Agent, which shall have all of the rights and obligations of the Agent upon the effective date of and pursuant to an agreement -64- supplemental hereto among the Company and the Banks, and thereupon UBS, as Agent, shall be relieved from its obliga tions as Agent hereunder, it being understood that the provisions of Section 12 shall inure to the benefit of UBS ---------- as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no such successor Agent shall be appointed within 30 days of the Termination Date of the Agent, then the Agent shall, on behalf of the Banks, appoint a successor Agent in accordance with the provisions set forth in Section ------- 12.8 for a resigning Agent. - - ---- (e) To the extent that all or a portion of any Terminating Bank's obligations are not assumed pursuant to subsection (c) above, the Aggregate -------------- Commitment shall be reduced on the applicable Termination Date and each Bank's percentage of the reduced Aggregate Commitment shall be revised pro rata to reflect such Terminating Bank's absence. The Agent shall distribute a revised Schedule I indicating such revisions promptly after the applicable Termination - - ---------- Date. Such revised Schedule I shall be deemed conclusive in the absence of ---------- demonstrable error. (f) The Agent agrees to use reasonable commercial efforts to assist the Company in locating one or more commercial banks or other financial institutions to replace any Terminating Bank prior to such Terminating Bank's Termination Date. Section 13.9. Captions. Section captions used in this Agreement are -------- for convenience only and shall not affect the construction of this Agreement. Section 13.10. Governing Law; Severability. THIS AGREEMENT AND EACH --------------------------- NOTE SHALL BE A CONTRACT MADE UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. All obligations of the Company and the rights of the Agent, the Banks and any other holders of the Notes expressed herein or in the Notes shall be in addition to and not in limitation of those provided by applicable law. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 13.11. Counterparts; Effectiveness. This Agreement may be --------------------------- executed in any number of counterparts and -65- by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. When counterparts of this Agreement executed by each party shall have been lodged with the Agent (or, in the case of any Bank as to which an executed counterpart shall not have been so lodged, the Agent shall have received telegraphic, telex or other written confirmation of execution of a counterpart hereof by such Bank), this Agreement shall become effective as of the date hereof and the Agent shall so inform all of the parties hereto. Section 13.12. Further Assurances. The Company agrees to do such ------------------ other acts and things, and to deliver to the Agent and each Bank such additional agreements, powers and instruments, as the Agent or any Bank may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to better assure and confirm unto the Agent and each Bank their respective rights, powers and remedies hereunder. Section 13.13. Successors and Assigns. This Agreement shall be ---------------------- binding upon the Company, the Banks and the Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Banks and the Agent and the respective successors and assigns of the Banks and the Agent. Subject to Section 9.9, the Company may not assign any of its rights or ----------- delegate any of its duties under this Agreement without the prior written consent of all of the Banks. Section 13.14. Waiver of Jury Trial. THE COMPANY, THE AGENT AND EACH -------------------- BANK HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. -66- Delivered at Los Angeles, California as of the day and year first above written. INTERNATIONAL LEASE FINANCE CORPORATION By: /s/ Alan H. Lund ----------------------------------- Name: ALAN H. LUND Title: Executive Vice President and CFO By: /s/ Pamela S. Hendry ----------------------------------- Name: PAMELA S. HENDRY Title: Vice President and Treasurer 1999 Avenue of the Stars 39th Floor Los Angeles, California 90067 Attention: Pam Hendry Telephone: (310) 788-1999 Facsimile: (310) 788-1990 Telex: 69-1400 INTERLEAS BVHL -67- Agent: UNION BANK OF SWITZERLAND, acting through its Los Angeles Branch, in its individual corporate capacity and as Agent By: /s/ Philip A. Stephens ----------------------------------- Name: PHILIP A. STEPHENS Title: Vice President By: /s/ Thomas G. Jackson ----------------------------------- Name: THOMAS G. JACKSON Title: Managing Director 444 South Flower Street Suite 4600 Los Angeles, California 90071 Attention: Philip Stephens Telephone: (213) 489-0600 Facsimile: (213) 489-0697 Telex: 6831878 UBSLSA Managing Agents: COMMERZBANK AKTIENGESELLSCHAFT, LOS ANGELES BRANCH By: /s/ Christian Jagenberg ---------------------------------- Name: CHRISTIAN JAGENBERG Title: Senior Vice President and Manager By: /s/ Karla Wirth ---------------------------------- Name: KARLA WIRTH Title: Assistant Treasurer 660 South Figueroa Street Suite 1450 Los Angeles, California 90017 Attention: Werner Schmidbauer Telephone: (213) 623-8223 Facsimile: (213) 623-0039 Telex: 678338 -68- BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK AKTIENGESELLSCHAFT, CAYMAN ISLANDS BRANCH By: /s/ Wolfgang H. Haugk ----------------------------------- Name: WOLFGANG H. HAUGK Title: First Vice President By: /s/ Wolfgang Novotny ----------------------------------- Name: WOLFGANG NOVOTNY Title: Vice President Financial Square 32 Old Slip, 32nd Floor New York, New York 10005 Attention: Wolfgang Novotny Telephone: (212) 440-0789 Facsimile: (212) 440-0741 Telex: 175850 Co-Agents: THE BANK OF NEW YORK By: /s/ Lisa Y. Brown ----------------------------------- Name: LISA Y. BROWN Title: Vice President By:_____________________________________ Name:___________________________________ Title:__________________________________ 10990 Wilshire Boulevard Suite 1700 Los Angeles, California 90024 Attention: Jonathan Rollins Telephone: (310) 996-8658 Facsimile: (310) 996-8667 -69- THE BANK OF NOVA SCOTIA By: /s/ John Quick ----------------------------------- Name: JOHN QUICK Title: Officer 101 California Street 48th Floor San Francisco, California 94111 Attention: Alan Pendergast Telephone: (415) 986-1100 Facsimile: (415) 397-0791 Telex: 00340602 THE BANK OF TOKYO, LIMITED, NEW YORK AGENCY By: /s/ Yukio Yanaka ----------------------------------- Name: YUKIO YANAKA Title: Senior Vice President 1251 Avenue of the Americas New York, New York 10116-3138 Attention: Michael Irwin Telephone: (212) 782-4316 Facsimile: (212) 782-6445 THE CHASE MANHATTAN BANK, N.A. By: /s/ Sherwood E. Exum, Jr. ----------------------------------- Name: SHERWOOD E. EXUM, JR. Title: Managing Director One Chase Manhattan Plaza New York, New York 10081 Attention: Sherwood E. Exum, Jr. Telephone: (212) 552-4655 Facsimile: (212) 552-5879 Telex: 62910 -70- CHEMICAL BANK By: /s/ James B. Treger ----------------------------------- Name: JAMES B. TREGER Title: Vice President 270 Park Avenue New York, New York 10017 Attention: Mathis Shinnick Telephone: (212) 270-1012 Facsimile: (212) 270-1469 THE DAI-ICHI KANGYO BANK, LTD., LOS ANGELES AGENCY By: /s/ Tomohiro Nozaki ----------------------------------- Name: TOMOHIRO NOZAKI Title: Senior Vice President and Joint General Manager 555 West 5th Street Fifth Floor Los Angeles, California 90013 Attention: Israel Carmeli Telephone: (213) 243-4760 Facsimile: (213) 624-5258 Telex: 67-4 516/DKB-LSA DEUTSCHE BANK AG, LOS ANGELES BRANCH & CAYMAN ISLANDS BRANCH By: /s/ Ross A. Howard ----------------------------------- Name: ROSS A. HOWARD Title: Vice President By: /s/ J. Scott Jessup ----------------------------------- Name: J. SCOTT JESSUP Title: Vice President 550 South Hope Street Suite 1850 Los Angeles, California 90071 Attention: Ross A. Howard, Christina Moore Telephone: (213) 627-8200 Facsimile: (213) 627-9779 -71- DRESDNER BANK AG, LOS ANGELES AGENCY & GRAND CAYMAN BRANCH By: /s/ Sidney S. Jordan ----------------------------------- Name: SIDNEY S. JORDAN Title: Vice President By: /s/ Vitol Wiacek ----------------------------------- Name: VITOL WIACEK Title: Assistant Vice President 725 South Figueroa Street Suite 3950 Los Angeles, California 90017-5439 Attention: Barbara J. Readick Telephone: (213) 489-5720 Facsimile: (213) 627-3819 Telex: 4720286 FIRST INTERSTATE BANK OF CALIFORNIA By: /s/ Thomas J. Helotes ----------------------------------- Name: THOMAS J. HELOTES Title: Vice President By: /s/ Jonathan S. David ----------------------------------- Name: JONATHAN S. DAVID Title: Assistant Vice President 707 Wilshire Boulevard, W16-14 Los Angeles, California 90017 Attention: Thomas J. Helotes Telephone: (213) 614-4122 Facsimile: (213) 614-2569 -72- THE FUJI BANK, LIMITED By: /s/ Nobuhiro Umemura ----------------------------------- Name: NOBUHIRO UMEMURA Title: Joint General Manager 333 South Grand Avenue Suite 2500 Los Angeles, California 90071 Attention: Bryan Stapleton Telephone: (213) 253-4152 Facsimile: (213) 253-4198 ROYAL BANK OF CANADA By: /s/ D.G. Calancie ----------------------------------- Name: D.G. CALANCIE Title: Senior Manager 1 Financial Square Corporate Banking East, U.S.A. New York, New York 10005-3531 Attention: D.G. Calancie Telephone: (212) 428-6445 Facsimile: (212) 428-6459 THE SAKURA BANK, LTD., LOS ANGELES AGENCY By: /s/ Ofusa Sato ----------------------------------- Name: OFUSA SATO Title: Senior Vice President and Assistant General Manager By:_____________________________________ Name:___________________________________ Title:__________________________________ 515 South Figueroa Street Suite 400 Los Angeles, California 90071 Attention: J.R. Hainer Telephone: (213) 489-6479 Facsimile: (213) 623-8692 Telex: 67-7185 -73- THE SANWA BANK, LIMITED By: /s/ Stephen C. Small ----------------------------------- Name: STEPHEN C. SMALL Title: Vice President and Area Manager Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attention: Stephen C. Small Telephone: (212) 339-6201 Facsimile: (212) 754-1304 Telex: 232423 RCA SOCIETE GENERALE By: /s/ Maureen Kelly ----------------------------------- Name: MAUREEN KELLY Title: Vice President 2029 Century Park East Suite 2900 Los Angeles, California 90067 Attention: Maureen Kelly, Su Fei Koo Telephone: (310) 788-7110, 788-7107 Facsimile: (310) 551-1537 Telex: 188273 Lead Managers: THE ASAHI BANK, LTD., LOS ANGELES AGENCY By: /s/ Jun Kosuge ---------------------------------- Name: JUN KOSUGE Title: Senior Deputy General Manager 635 West 7th Street Los Angeles, California 90017 Attention: Tsuyoshi Sakai Telephone: (213) 626-6266 Facsimile: (213) 620-1564 Telex: 67256 -74- BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By: /s/ Wilfried Freudenberger ----------------------------------- Name: WILFRIED FREUDENBERGER Title: Executive Vice President and General Manager By: /s/ Peter Obermann ----------------------------------- Name: PETER OBERMANN Title: Senior Vice President and Manager Lending Division 560 Lexington Avenue 17th Floor New York, New York 10022 Attention: Sean O'Sullivan Telephone: (212) 310-9913 Facsimile: (212) 310-9868 Telex: TRT 177130 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK By: /s/ Robert B. Herber ----------------------------------- Name: ROBERT B. HERBER Title: Vice President By: /s/ Pamela D. Ingram ----------------------------------- Name: PAMELA D. INGRAM Title: Assistant Vice President 609 Fifth Avenue New York, New York 10017-1021 Attention: Robert B. Herber Telephone: (212) 745-1581 Facsimile: (212) 745-1556 Telex: 234476/666755 MCI -75- KREDIETBANK NV By: /s/ Robert Snauffer ----------------------------------- Name: ROBERT SNAUFFER Title: Vice President By: /s/ Armen Karozichian ----------------------------------- Name: ARMEN KAROZICHIAN Title: Vice President 125 West 55th Street 10th Floor New York, New York 10019 Attention: Roxanne Cheng - CA Telephone: (213) 624-0401 Facsimile: (213) 629-5801 Attention: Robert Snauffer - NY Telephone: (212) 541-0700 Facsimile: (212) 956-5580 THE MITSUI TRUST & BANKING COMPANY, LIMITED, LOS ANGELES AGENCY By: /s/ Ken Takahashi ----------------------------------- Name: KEN TAKAHASHI Title: General Manager and Agent 611 West 6th Street Suite 3800 Los Angeles, California 90017 Attention: Michael Testa Telephone: (213) 614-7155 Facsimile: (213) 622-0378 -76- WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK AND CAYMAN ISLANDS BRANCHES By: /s/ Kenneth R. Crespo ----------------------------------- Name: KENNETH R. CRESPO Title: Vice President By: /s/ Laura Spichiger ----------------------------------- Name: LAURA SPICHIGER Title: Associate 1211 Avenue of the Americas 24th Floor New York, New York 10036 Attention: Laura Spichiger Telephone: (212) 852-6012 Facsimile: (212) 852-6148 Managers: BANCA NAZIONALE DEL LAVORO, S.p.A. - NEW YORK BRANCH By: /s/ Carlo Vecchi ----------------------------------- Name: CARLO VECCHI Title: Senior Vice President By: /s/ Giulio Giovine ----------------------------------- Name: GIULIO GIOVINE Title: Vice President 25 West 51st Street New York, New York 10019 Attention: Adolph Mascari Telephone: (212) 581-0710 Facsimile: (212) 765-2978 Telex: 62840 -77- BANCO CENTRAL HISPANOAMERICANO, SAN FRANCISCO AGENCY By: /s/ G. Innerarity ----------------------------------- Name: G. INNERARITY Title: Senior Vice President and General Manager By:____________________________________ Name:__________________________________ Title:_________________________________ 100 Pine Street, Suite 2950 San Francisco, California 94111 Attention: Fernando Laseca Telephone: (415) 398-6333 Facsimile: (415) 398-3173 Telex: 470598 CENT SF BANCO DI NAPOLI S.p.A. By: /s/ Claude P. Mapes ----------------------------------- Name: CLAUDE P. MAPES Title: First Vice President By: /s/ Vito Spada ----------------------------------- Name: VITO SPADA Title: Executive Vice President 4 East 54th Street New York, New York 10022 Attention: Claude P. Mapes Telephone: (212) 872-2435 Facsimile: (212) 872-2426 Telex: 420634 -78- BANK OF HAWAII By: /s/ D. Edward Wohlleb ----------------------------------- Name: D. EDWARD WOHLLEB Title: Vice President 130 Merchant Street 20th Floor Honolulu, Hawaii 96813 Attention: Curtis W. Chinn Telephone: (808) 537-8433 Facsimile: (808) 537-8301 Telex: 7238434 BANQUE NATIONALE DE PARIS By: /s/ Clive Bettles ----------------------------------- Name: CLIVE BETTLES Title: Senior Vice President and Manager By: /s/ Tjalling Terpstra ----------------------------------- Name: TJALLING TERPSTRA Title: Vice President 725 South Figueroa Street Suite 2090 Los Angeles, California 90017 Attention: Tjalling Terpstra Telephone: (213) 488-9120 Facsimile: (213) 488-9602 Telex: 6734168 BNPLA BARCLAYS BANK PLC By: /s/ Francis C. Constantinople ----------------------------------- Name: FRANCIS C. CONSTANTINOPLE Title: Director 222 Broadway New York, New York 10038 Attention: Frank Constantinople Telephone: (212) 412-7634 Facsimile: (212) 412-5610 -79- CIBC, INC. By: /s/ Stephen D. Reynolds --------------------------------- Name: STEPHEN D. REYNOLDS Title: Director 425 Lexington Avenue New York, New York 10017 Attention: Stephen D. Reynolds Telephone: (212) 856-3566 Facsimile: (212) 856-3613 CREDIT SUISSE By: /s/ Marilou Palenzuela --------------------------------- Name: MARILOU PALENZUELA Title: Member of Senior Management By: /s/ Mark A. Sampson --------------------------------- Name: MARK A. SAMPSON Title: Associate 633 West 5th Street, 64th Floor Los Angeles, CA 90071 Attention: Mark Sampson Telephone: (213) 955-8200 Facsimile: (213) 955-8245 FIRST HAWAIIAN BANK By: /s/ Robert M. Wheeler, III --------------------------------- Name: ROBERT M. WHEELER, III Title: Vice President 1132 Bishop Street 19th Floor Honolulu, Hawaii 96813 Attention: Robert M. Wheeler, III Telephone: (808) 525-6367 Facsimile: (808) 525-6372 Telex: 7238329 -80- FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: /s/ Judy Flukinger --------------------------------- Name: JUDY FLUKINGER Title: Vice President One First Union Center 301 South College Street Charlotte, North Carolina 28202-0745 Attention: John E. Reid Telephone: (704) 383-1385 Facsimile: (704) 374-2802 Telex: 684-3115 THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY By: /s/ Toshinari Iyoda --------------------------------- Name: TOSHINARI IYODA Title: Senior Vice President 350 South Grand Avenue Suite 1500 Los Angeles, California 90071 Attention: Craig Papayania Telephone: (213) 893-6441 Facsimile: (213) 488-9840 Telex: 6831123 -81- ISTITUTO BANCARIO SAN PAOLO DI TORINO S.p.A. By: /s/ Donald W. Brown --------------------------------- Name: DONALD W. BROWN Title: Branch Manager By: /s/ Glen Binder --------------------------------- Name: GLEN BINDER Title: Vice President 444 South Flower Street, Suite 4550 Los Angeles, California 90071 Attention: Glen Binder Telephone: (213) 489-3100 Facsimile: (213) 622-2514 Telex: 220045 PNC BANK, NATIONAL ASSOCIATION By: /s/ Kirk Seagers --------------------------------- Name: KIRK SEAGERS Title: Assistant Vice President Broad & Chestnut Streets 13th Floor Philadelphia, PA 19101 Attention: Kirk Seagers Telephone: (215) 585-5081 Facsimile: (215) 585-7615 THE TOKAI BANK, LTD. LOS ANGELES AGENCY By: /s/ Masahiko Saito --------------------------------- Name: MASAHIKO SAITO Title: Assistant General Manager 300 South Grand Avenue Los Angeles, CA 90071 Attention: Kenji Oshigane Telephone: (213) 972-0200, ext. 8451 Facsimile: (213) 689-3200 -82- THE TOYO TRUST & BANKING CO., LTD., LOS ANGELES AGENCY By: /s/ Kenji Fujikawa --------------------------------- Name: KENJI FUJIKAWA Title: General Manager 444 South Flower Street, Suite 1550 Los Angeles, California 90071 Attention: Steven K. Rubinstein Telephone: (213) 624-2424 Facsimile: (213) 624-5874 Telex: 215288 Participants: THE BANK OF CALIFORNIA, N.A. By: /s/ Robert J. Vernagallo --------------------------------- Name: ROBERT J. VERNAGALLO Title: Vice President 400 California Street San Francisco, CA 94104 Attention: Robert J. Vernagallo Telephone: (415) 765-2614 Facsimile: (415) 765-2634 CITICORP USA, INC. By: /s/ Stephen P. Zwick --------------------------------- Name: STEPHEN P. ZWICK Title: Vice President 399 Park Avenue 12th Floor New York, New York 10043 Attention: Peter Bickford Telephone: (212) 559-8146 Facsimile: (212) 935-4285 -83- SCHEDULE I SCHEDULE OF BANKS
Bank Commitment - - ---- ---------- (in millions) Union Bank of Switzerland............................................ $ 68.75 Commerzbank Aktiengesellschaft....................................... 62.50 Bayerische Hypotheken-und Wechsel-Bank Aktiengesellschaft.................................................. 59.25 The Bank of New York................................................. 46.00 The Bank of Nova Scotia.............................................. 46.00 The Bank of Tokyo, Limited........................................... 46.00 The Chase Manhattan Bank, N.A........................................ 46.00 Deutsche Bank AG..................................................... 46.00 Dresdner Bank AG..................................................... 46.00 The Fuji Bank, Limited............................................... 46.00 Societe Generale..................................................... 46.00 Chemical Bank........................................................ 43.50 The Dai-Ichi Kangyo Bank, Ltd........................................ 43.50 First Interstate Bank of California.................................. 43.50 The Sakura Bank, Ltd................................................. 43.50 The Sanwa Bank, Limited.............................................. 43.50 Royal Bank of Canada................................................. 37.50 Westdeutsche Landesbank Girozentrale................................. 37.50 The Asahi Bank, Ltd.................................................. 30.00 Kredietbank NV....................................................... 30.00 Banco di Napoli S.p.A................................................ 24.00 Banca Nazionale del Lavoro, S.p.A.................................... 22.50 Bayerische Landesbank Girozentrale................................... 22.50 The Mitsui Trust & Banking Company, Limited.......................... 22.50 Banque Nationale de Paris............................................ 21.00 Banco Central Hispanoamericano....................................... 18.75 Bank of Hawaii....................................................... 18.75 First Hawaiian Bank.................................................. 18.75 Istituto Bancario San Paolo di Torino S.p.A.......................... 18.75 The Toyo Trust & Banking Co., Ltd.................................... 18.00 Barclays Bank PLC.................................................... 15.00 CIBC, Inc............................................................ 15.00 Credit Suisse........................................................ 15.00 DG Bank Deutsche Genossenschaftsbank................................. 15.00 First Union National Bank of North Carolina.......................... 15.00 The Industrial Bank of Japan, Limited................................ 15.00 PNC Bank, National Association....................................... 15.00 Citicorp USA, Inc.................................................... 11.25 The Tokai Bank, Ltd.................................................. 11.25 The Bank of California, N.A.......................................... 6.00
SCHEDULE II FEES AND MARGINS (IN BASIS POINTS)
======================================================================================================== UNSUBORDINATED UNSECURED AA3/AA- A2/A OR A3/A-/(1)/ BAA2/BBB BAA3/BBB- LONG-TERM DEBT RATINGS OR HIGHER/(1)/ HIGHER BUT OR HIGHER OR BELOW/(1)/ LOWER THAN BUT LOWER AA3/AA-/(1)/ THAN A3/A-/(1)/ - - -------------------------------------------------------------------------------------------------------- Facility Fee 9.00 10.00 12.50 25.00 37.50 - - -------------------------------------------------------------------------------------------------------- Margins: LIBOR 21.00 25.00 30.00 45.00 60.00 CD 33.50 37.50 42.50 57.50 72.50 Base -- -- -- -- -- ------------------------------------------------------------------------------ Competitive Bid Option As Bid by the Banks - - -------------------------------------------------------------------------------------------------------- Utilization Fee: Borrowing/(2)/ 5.00 5.00 5.00 5.00 5.00 ========================================================================================================
(1) In determining the applicable fees or rate margin, the effective date of any fee or margin change shall be the date on which either Standard & Poor's Ratings Group or Moody's Investors Service, Inc. announces a change in the rating of the Company's Unsubordinated Unsecured Long-Term Debt, if such change results in a change in any applicable fee or rate margin. In the event of a split rating as between Standard & Poor's Ratings Group and Moody's Investors Service, Inc., the lower rating shall apply. (2) Applicable when the aggregate amount of Committed Loans outstanding is greater than 50% of the Aggregate Commitments. Exhibit A FORM OF NOTICE OF COMPETITIVE BID BORROWING ________________, ____ Union Bank of Switzerland, as Agent 299 Park Avenue New York, New York 10171-0026 Attention: James Broadus Ladies and Gentlemen: This instrument constitutes a Notice of Competitive Bid Borrowing under, and as defined by, the $1,250,000,000 Revolving Credit Agreement, dated as of January 19, 1996 (as amended, modified or supplemented, the "Credit Agreement"), among International Lease Finance Corporation (the "Company"), Union Bank of Switzerland, in its individual corporate capacity and as Agent, and certain financial institutions referred to therein. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. The Company hereby requests (a) Bid Loan(s), subject to the terms of the Credit Agreement, as follows: (a) Funding Date: ________________, ____. (b) Aggregate principal amount of Bid Loans requested: $____________. (c) Loan Period(s):/*/ Absolute Rate Loans: ___ days ___ days ___ days LIBOR Rate Loans: __ months __ months __ months (d) Account of the Company to be credited: __________ ___________________ /*/ The Company may select up to three loan periods per Notice of Competitive Bid Borrowing. A-1 The officer of the Company signing this Notice of Competitive Bid Borrowing hereby certifies that the following statements are true on the date hereof and will be true on the proposed Funding Date: (a) Before and after giving effect to the Bid Loans requested hereby, no Event of Default or Unmatured Event of Default shall have occurred and be continuing or shall result from the making of such Loan; and (b) Before and after giving effect to the Bid Loans requested hereby, the representations and warranties set forth in Section 8 of the Credit --------- Agreement shall be true and correct in all material respects as of the date of such requested Loans with the same effect as though made on the date of such Bid Loans. Very truly yours, INTERNATIONAL LEASE FINANCE CORPORATION By:_________________________ Its:________________________ A-2 Exhibit B FORM OF BID FROM [Name of Bank] (Contact Person:___________) ______________, ____ Union Bank of Switzerland, as Agent 299 Park Avenue New York, New York 10171-0026 Attention: James Broadus Ladies and Gentlemen: This instrument constitutes a Bid under, and as defined by, the $1,250,000,000 Revolving Credit Agreement, dated as of January 19, 1996 (as amended, modified or supplemented, the "Credit Agreement"), among International Lease Finance Corporation (the "Company"), Union Bank of Switzerland in its individual capacity and as Agent, and certain financial institutions referred to therein, including the undersigned. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. (1) The Company's related Notice of Competitive Bid Borrowing, dated _____________, ____, inviting this Bid has requested a Bid Loan, subject to the terms and conditions of the Credit Agreement, in the aggregate principal amount of $____________ with a Funding Date of _______________, ____. (2) The undersigned hereby offers to make the following Bid Loan(s) on the Funding Date:/*/ ____________________ /*/ $10,000,000 or a higher integral multiple of $1,000,000. B-1 (a) Loan Period of ___ days ___ months
- - ------------------------------------------------------------------------- Principal Amount Interest Rate or Minimum Maximum LIBOR + Margin - - - ------------------------------------------------------------------------- 1. $/*/ $/*/ /**/ 2. $/*/ $/*/ /**/ 3. $/*/ $/*/ /**/ 4. $/*/ $/*/ /**/
(3) The undersigned's lending office for the proposed Bid Loan is ________________________. (4) The undersigned acknowledges that the offer(s) set forth above, subject to the satisfaction of the applicable conditions precedent set forth in the Credit Agreement, irrevocably obligate(s) the undersigned to make the Bid Loan(s) for which any offer(s) are accepted, in whole or in part, in accordance with the terms of the Credit Agreement. Very truly yours, [NAME OF BANK] By:_________________________ Its:________________________ _____________________ /*/ $10,000,000 or a higher integral multiple of $1,000,000 for each interest rate (i.e., Portion) for each Loan Period. /**/ Specify the interest rate per annum (expressed as a percentage to four decimal places) in the case of an Absolute Rate Loan and the margin above or below LIBOR in the case of a LIBOR Rate Loan. B-2 Exhibit C FORM OF COMMITTED LOAN REQUEST ________________, ____ Union Bank of Switzerland, as Agent 299 Park Avenue New York, New York 10171-0026 Attention: James Broadus Ladies and Gentlemen: This constitutes a Committed Loan Request under, and as defined by, the $1,250,000,000 Revolving Credit Agreement, dated as of January 19, 1996 (as amended, modified or supplemented, the "Credit Agreement"), among International Lease Finance Corporation (the "Company"), Union Bank of Switzerland, in its individual capacity and as Agent, and certain financial institutions referred to therein. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. The Company hereby requests that the Banks make Committed Loans to it, subject to the terms and conditions of the Credit Agreement, as follows: (a) Funding Date: ______________, ____. (b) Aggregate principal amount of Committed Loans requested: $_____________. (c) Loan Period: _____________. (e) Type of Loans: [LIBOR Rate Loans] [Base Rate Loans] [CD Rate Loans] The officer of the Company signing this Committed Loan Request hereby certifies that: (a) Before and after giving effect to the Committed Loans requested hereby, no Event of Default or Unmatured Event of Default shall have occurred and be continuing or shall result from the making of such Loans; (b) Before and after giving effect to the Loans requested hereby, the representations and C-1 warranties set forth in Section 8 of the Credit Agreement shall be --------- true and correct in all material respects with the same effect as though made on the date of such Loans; and (c) After the making of the Loans requested hereby, the aggregate principal amount of all outstanding Loans will not exceed the Aggregate Commitment. Very truly yours, INTERNATIONAL LEASE FINANCE CORPORATION By:_________________________ Its:________________________ C-2 Exhibit D FORM OF BID NOTE $1,250,000,000 January 19, 1996 International Lease Finance Corporation, a California corporation (the "Company"), for value received, hereby promises to pay to the order of [NAME OF BANK] (the "Bank"), at the New York branch office of Union Bank of Switzerland, as Agent (the "Agent"), at 299 Park Avenue, New York, New York 10171-0026 on January 19, 2001, or at such other place, to such other person or at such other time and date as provided for in the $1,250,000,000 Revolving Credit Agreement (as amended, modified or supplemented, the "Credit Agreement"), dated as of January 19, 1996, among the Company, the Agent, and the financial institutions named therein, in lawful money of the United States, the principal sum of $1,250,000,000 Dollars or, if less, the aggregate unpaid principal amount of all Bid Loans made by the Bank to the Company pursuant to the Credit Agreement. This Bid Note shall bear interest as set forth in the Credit Agreement for Bid Borrowings (as defined in the Credit Agreement). Except as otherwise provided in the Credit Agreement with respect to LIBOR Rate Loans, if interest or principal on any loan evidenced by this Note becomes due and payable on a day which is not a Business Day (as defined in the Credit Agreement) the maturity thereof shall be extended D-1 to the next succeeding Business Day, and interest shall be payable thereon at the rate herein specified during such extension. This Note is one of the Bid Notes referred to in the Credit Agreement. This Note is subject to prepayment in whole or in part, and the maturity of this Note is subject to acceleration, upon the terms provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of California, without reference to principles of conflicts of law. All Bid Loans made by the Bank to the Company pursuant to the Credit Agreement and all payments of principal thereof may be indicated by the Bank upon the grid attached hereto which is a part of this Note. Such notations shall be rebuttable presumptive evidence of the aggregate unpaid principal amount of all Bid Loans made by the Bank pursuant to the Credit Agreement. INTERNATIONAL LEASE FINANCE CORPORATION By_____________________________________ Title: D-2 Bid Loans and Payments of Principal -----------------------------------
Name of Principal Amount of Unpaid Person Funding Amount Interest Interest Loan Principal Principal Making Date of Loan Method Rate Period Paid Balance Notation - - ------- --------- -------- -------- ------ --------- --------- -------- __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________
D-3 Exhibit E FORM OF COMMITTED NOTE $_______________ January 19, 1996 International Lease Finance Corporation, a California corporation (the "Company"), for value received, hereby promises to pay to the order of [NAME OF BANK] (the "Bank"), at the New York branch office of Union Bank of Switzerland, as Agent (the "Agent"), at 299 Park Avenue, New York, New York 10171-0026 on January 19, 2001, or at such other place, to such other person or at such other time and date as provided for in the $1,250,000,000 Revolving Credit Agreement (as amended, modified or supplemented, the "Credit Agreement"), dated as of January 19, 1996, among the Company, the Agent, and the financial institutions named therein, in lawful money of the United States, the principal sum of $_________ Dollars or, if less, the aggregate unpaid principal amount of all Committed Loans made by the Bank to the Company pursuant to the Credit Agreement. This Committed Note shall bear interest as set forth in the Credit Agreement for Base Rate Loans, CD Rate Loans and LIBOR Rate Loans (as defined in the Credit Agreement), as the case may be. Except as otherwise provided in the Credit Agreement with respect to LIBOR Rate Loans, if interest or principal on any loan evidenced by this Note becomes due and payable on a day which is not a Business Day (as defined in E-1 the Credit Agreement) the maturity thereof shall be extended to the next succeeding Business Day, and interest shall be payable thereon at the rate herein specified during such extension. This Note is one of the Committed Notes referred to in the Credit Agreement. This Note is subject to prepayment in whole or in part, and the maturity of this Note is subject to acceleration, upon the terms provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of California, without reference to principles of conflicts of law. All Committed Loans made by the Bank to the Company pursuant to the Credit Agreement and all payments of principal thereof may be indicated by the Bank upon the grid attached hereto which is a part of this Note. Such notations shall be rebuttable presumptive evidence of the aggregate unpaid principal amount of all Committed Loans made by the Bank pursuant to the Credit Agreement. INTERNATIONAL LEASE FINANCE CORPORATION By_____________________________________ Title: E-2 Committed Loans and Payments of Principal -----------------------------------------
Name of Principal Amount of Unpaid Person Funding Amount Interest Interest Loan Principal Principal Making Date of Loan Method Rate Period Paid Balance Notation - - ------- --------- -------- -------- ------ --------- --------- -------- __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________
E-3 Exhibit F FIXED CHARGE COVERAGE RATIO/*/ FOR THE PERIOD ENDED SEPTEMBER 30, 1995
12 Months Ended September 30, 1995 (Dollars in thousands) --------------------------- Earnings Net Income.............................. $185,162 Add: Provision for income taxes............ 110,732 Fixed charges......................... 558,401 Less: Capitalized interest.................. (51,823) ----------------- Earnings as adjusted (A)................ 802,472 ================= Preferred dividend requirements......... $ 11,428 Ratio of income before provision for income taxes to net income.......... 156% ----------------- Preferred dividend factor on pretax basis.......................... 17,866 Fixed charges Interest expense...................... 506,578 Capitalized interest.................. 51,823 Estimate of minimum rents under operating leases representing the interest factor..................... 0 Fixed charges as adjusted............... 558,401 ----------------- Fixed charges and preferred stock dividends (B)................... $576,267 ================= Ratio of earnings to fixed charges and preferred stock dividends ((A) divided by (B))*................................ 1.39 to 1.00 =================
___________________ /*/ As calculated pursuant to Section 9.11 and the definition of Fixed ------------ Charge Coverage Ratio set forth in Section 1.2. ----------- F-1 Exhibit G January 19, 1996 To the Financial Institutions and the Agent Referred to Below c/o Union Bank of Switzerland 444 South Flower Street Suite 4600 Los Angeles, California 90071 Ladies and Gentlemen: We have acted as special counsel for International Lease Finance Corporation (the "Company") in connection with a $1,250,000,000 Revolving Credit Agreement and a $1,000,000,000 Revolving Credit Agreement, in each case dated as of January 19, 1996 among the Company, Union Bank of Switzerland acting through its Los Angeles Branch, in its individual capacity and as Agent, and certain financial institutions ("Banks") signatory thereto (collectively, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein as therein defined. In our capacity as such counsel, we have examined originals, or copies certified or otherwise identified to our satisfaction as being true copies of such records, documents or other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. We have been furnished, and have relied upon, certificates of officers of the Company with respect to certain factual matters regarding the Company. As to matters of fact, we have also relied on the representations and warranties made by the Company in the Credit Agreement. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary. Except with respect to the Company and its Subsidiaries, in our review and examination we have assumed the authenticity of documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as conformed or photostatic copies. For the purpose of the opinions hereinafter expressed, we have assumed the due execution and delivery, pursuant to due authorization, of each document referred to in this opinion by each party thereto other than the Company and its subsidiaries, that each document constitutes the legally valid and binding obligation of each such other party and that such other person is duly organized, validly G-1 The Banks and the Agent -2- existing and in good standing under the laws of its jurisdiction of organization. We have investigated such questions of law for the purpose of rendering this opinion as we have deemed necessary. We are opining herein as to the effect on the subject transactions of only United States federal law and the laws of the State of California. Upon the basis of the foregoing, we are of the opinion that: 1. Each of the Company and Interlease Management Corporation, Interlease Aviation Corporation, Atlantic International Aviation Holdings, Inc., Aircraft SPC-1, Inc., Aircraft SPC-2, Inc. and ILFC Aircraft Holding Corporation has been duly incorporated and is existing and in good standing under the laws of the State of California. 2. The Company has the corporate power to own its properties and conduct its business as described in the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1994. 3. The Company has the corporate power and corporate authority to enter into the Credit Agreement, to make the borrowings under the Credit Agreement, to execute and deliver the Notes and to incur the obligations provided for therein, all of which have been duly authorized by all necessary corporate action on the part of the Company. 4. No authorizations, consents, approvals, registrations, filings and licenses with or from any California or federal court or governmental agency or body are necessary for the borrowing, the execution and delivery of the Credit Agreement and the Notes, and the performance by the Company of its obligations thereunder and under the Notes. 5. The Credit Agreement and the Notes have been duly executed and delivered by the Company and constitute the legally valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms. 6. Neither the execution and delivery of the Credit Agreement by the Company, nor the performance thereof by the Company on or prior to the date hereof nor the payment of the Notes violates the Articles of Incorporation or Bylaws of the G-2 The Banks and the Agent -3- Company, breaches or results in a default under any of the agreements, instruments, contracts, orders, injunctions or judgments identified to us in an officer's certificate of the Company (a copy of which is being delivered to you concurrently herewith) as agreements, instruments, contracts, orders, injunctions or judgments binding on the Company or by which its assets are bound which have provisions relating to the issuance by the Company of debt and which the breach of, or default under, would have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole, or violates any present federal or California statute, rule or regulation binding on the Company or its assets. 7. The making of the Loans and the use of the proceeds thereof as provided in the Credit Agreement will not violate Regulation U, G, T or X of the Board of Governors of the Federal Reserve System. 8. The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Our opinions in paragraph 5 above as to the validity, binding effect or enforceability of the Credit Agreement and the Notes are subject to bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. Our opinions rendered in paragraphs 4 and 6 above are based upon our review only of those statutes, rules and regulations which, in our experience, are normally applicable to transactions of the type contemplated by the Credit Agreement and the Notes. In rendering our opinions in paragraph 4 above, we have assumed that each Bank is a sophisticated financial institution capable of evaluating the merits and risks relating to the Notes, and that each Bank has been provided access to such information relating to the Company as such Bank has requested. Except as expressly set forth in paragraph 7 above, we are not expressing any opinion as to the effect of the Agent's or any Bank's compliance with any state or federal laws or regulations applicable to the transactions contemplated by the G-3 The Banks and the Agent -4- Company because of the nature of the Agent's or any Bank's business. This opinion is furnished to you in connection with the Company's execution and delivery of the Credit Agreement, is solely for your benefit and the benefit of your successors and assigns, and may not be relied upon by, nor may copies be delivered to, any other person, without our prior written consent. Very truly yours, G-4 Exhibit H January 19, 1996 To the Financial Institutions and the Agent Referred to Below c/o Union Bank of Switzerland 444 South Flower Street Suite 4600 Los Angeles, California 90071 Ladies and Gentlemen: I am General Counsel for International Lease Finance Corporation (the "Company") and am rendering this opinion in connection with a $1,250,000,000 Revolving Credit Agreement and a $1,000,000,000 Revolving Credit Agreement, in each case dated as of January 19, 1996 among the Company, Union Bank of Switzerland acting through its Los Angeles Branch, in its individual capacity and as Agent, and certain financial institutions ("Banks") signatory thereto (collectively, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein as therein defined. I have examined originals, or copies certified or otherwise identified to my satisfaction as being true copies, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. I am opining herein as to the effect on the subject transactions of only United States federal law and the laws of the State of California. Upon the basis of the foregoing, I am of the opinion that: 1. The Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which the ownership or leasing of its property or the conduct of its business requires it to be so qualified; provided, however, that the Company may not be so -------- ------- qualified in certain jurisdictions, the effect of which would not have a Material Adverse Effect on the Company. 2. To the best of my knowledge, Interlease Aviation Corporation, ILFC Aircraft Holding Corporation, Interlease Management Corporation, Aircraft SPC-1, Inc., Aircraft SPC-2, H-1 The Banks and the Agent -2- Inc. and Atlantic International Aviation Holdings, Inc., a wholly owned subsidiary of Interlease Management Corporation, are the only domestic Subsidiaries of the Company. 3. No Subsidiary of the Company nor all of the Subsidiaries of the Company taken as a whole is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. 4. There is no pending or, to the best of my knowledge, threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries which, individually or in the aggregate, would have a Material Adverse effect on the Company and its Subsidiaries taken as a whole. This opinion is furnished to you in connection with the Company's execution and delivery of the Credit Agreement, is solely for your benefit and the benefit of your successors and assigns, and may not be relied upon by, nor may copies be delivered to, any other person without my prior written consent. Very truly yours, Julie I. Sackman General Counsel H-2 Exhibit I ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of ____________________, ____ between [ASSIGNOR] (the "Assignor") and [ASSIGNEE] (the "Assignee"). W I T N E S S E T H - - - - - - - - - - WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the $1,250,000,000 Revolving Credit Agreement dated as of January 19, 1996 (the "Credit Agreement") among International Lease Finance Corporation (the "Company"), the Assignor and Union Bank of Switzerland, in its individual corporate capacity and as Agent (the "Agent"), and certain financial institutions referred to therein; WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Committed Loans in an aggregate principal amount at any time outstanding not to exceed $___________; WHEREAS, Committed Loans and Bid Loans made by the Assignor under the Credit Agreement in the respective aggregate principal amounts of $____________ and $____________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $ /*/ (the "Assigned Amount") ---------- together with $ /*/ aggregate principal amount outstanding of Committed --------- Loans and $ /**/ aggregate principal amount outstanding of Bid Loans -------- (collectively, the "Assigned Loans"), and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on the terms set forth in the Credit Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: ____________________ /*/ See Section 13.4.1 for minimum requirements. -------------- /**/ Assignment of Bid Loans is optional. I-1 SECTION 1. Definitions. All capitalized terms not otherwise defined ----------- herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the ---------- Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount and the Assigned Loans, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount and the Assigned Loans. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale -------- contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount equal to $_________/*/. It is understood that facility fees and utilization fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. ____________________ /*/ Amount should combine principal and face together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. I-2 SECTION 4. Consent of the Company and the Agent. This Agreement is ------------------------------------ conditioned upon the consent of the Company and the Agent pursuant to Section ------- 13.8 of the Credit Agreement. The execution of this Agreement by the Company - - ---- and the Agent is evidence of this consent. Pursuant to Section 13.8 the Company ------------ agrees to execute and deliver a Bid Note and a Committed Note, each payable to the order of the Assignee and evidencing the assignment and assumption provided for herein. The Company also agrees to execute replacement Notes in favor of the Assignor if the Assignor has retained any Commitment. SECTION 5. Non-Reliance on Assignor. The Assignor makes no ------------------------ representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Company, or the validity and enforceability of the obligations of the Company in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Company. SECTION 6. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of California. SECTION 7. Counterparts. This Agreement may be signed in any number ------------ of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. I-3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By________________________________ Title: [ASSIGNEE] By________________________________ Title: Consented, and with respect to Section 4, agreed: INTERNATIONAL LEASE FINANCE CORPORATION By____________________________ Title: Consented: UNION BANK OF SWITZERLAND, as Agent By____________________________ Title: By____________________________ Title: I-4 Exhibit J FORM OF REQUEST FOR EXTENSION OF TERMINATION DATE ________________, ____ [ADDRESSED TO EACH BANK] [ADDRESSED TO THE AGENT] Attention: Ladies and Gentlemen: This instrument constitutes [a notice to the Agent of] a request for the extension of the Termination Date pursuant to Section 13.8 of the ------------ $1,250,000,000 Revolving Credit Agreement, dated as of January 19, 1996 (as amended, modified or supplemented, the "Credit Agreement"), among International Lease Finance Corporation (the "Company"), Union Bank of Switzerland, in its individual corporate capacity and as Agent, and certain financial institutions referred to therein. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. The Company [hereby requests that you extend your] [has sent a letter to each Bank that is now a party to the Credit Agreement asking such Bank to extend its] now scheduled Termination Date under the Credit Agreement by one calendar year. The officer of the Company signing this instrument hereby certifies that: (a) Before and after giving effect to the extension of the Termination Date requested hereby, no Event of Default or Unmatured Event of Default shall have occurred and be continuing [and all Loans payable prior to the date hereof shall have been paid in full]; and J-1 (b) Before and after giving effect to the extension of the Termination Date requested hereby, the representations and warranties set forth in Section 8 --------- of the Credit Agreement shall be true and correct in all material respects with the same effect as though made on the date hereof. Very truly yours, INTERNATIONAL LEASE FINANCE CORPORATION By:_________________________ Its:________________________ Confirmed and accepted, subject to the terms and conditions of the Credit Agreement, as of the date first above written: [NAME OF BANK] By:____________________________ Its: EX-10.15 6 AMEND. #9 TO AIRBUS PURCHASE AGREEMENT EXHIBIT 10.15 AMENDMENT NO. 9 TO THE AIRBUS A321 PURCHASE AGREEMENT DATED AS OF FEBRUARY 14, 1990 BETWEEN AVSA, S.A.R.L. AND INTERNATIONAL LEASE FINANCE CORPORATION This Amendment No. 9 (hereinafter referred to as the "Amendment") entered into as of February 23, 1996, by and between AVSA, S.A.R.L, a societe a responsabilite limitee organized and existing under the laws of the Republic of France, having its registered office located at 2, Rond-Point Maurice Bellonte, 31700 Blagnac, France (hereinafter referred to as the "Seller") and INTERNATIONAL LEASE FINANCE CORPORATION, a corporation organized and existing under the laws of the State of California, having its principal corporate offices located at 1999 Avenue of the Stars, 39th Floor, Los Angeles, CA 90067, U.S.A. (hereinafter referred to as the "Buyer"); WITNESSETH WHEREAS, the Buyer and the Seller entered into a certain A321 Purchase Agreement, dated as of February 14, 1990, relating to the sale by the Seller and the purchase by the Buyer of twelve (12) firmly ordered Airbus Industrie A321 model aircraft (the "Aircraft") and four (4) option Airbus Industrie A321 model aircraft (the "A321 Purchase Agreement"), which agreement has been further amended by and supplemented with all Exhibits, Appendices and Letter Agreements attached thereto and has been amended by Amendment No. 1 dated as of June 18, 1991, Amendment No. 2 dated as of December 10, 1992, Amendment No. 3 dated as of January 3, 1994, Amendment No. 4 dated as of February 28, 1994, Amendment No. 5 dated as of September 23, 1994, Amendment No. 6 dated as of December 27, 1994 (the "A321 Amendment No. 6"), Amendment No. 7 dated as of July 5, 1995 and Amendment No. 8 dated as of October 4, 1995; 1 WHEREAS, the Buyer and the Seller entered into a certain General Terms Agreement, dated as of November 10, 1988, which agreement, as previously amended and supplemented together with all Exhibits, Appendices, and Letter Agreements attached thereto is hereinafter called the "G.T.A."; WHEREAS, in line with the terms of Paragraph 6 of Letter Agreement No. 1 dated December 27, 1994, the Seller hereby confirms the availability of a version of the Airbus Industrie A321 model aircraft featuring a Maximum Design Take-Off Weight of 89 metric tonnes (the "A321-200 Aircraft") and the Buyer confirms its desire to * ; The parties agree that this Amendment shall formally amend and constitute part of the A321 Purchase Agreement. NOW, THEREFORE, IT IS AGREED AS FOLLOWS : A. * - - -- 1. * - - -- * 2. A321-200 SPECIFICATION - - -- ---------------------- Paragraph 2 of Part C of Amendment No. 8 to the A321 Purchase Agreement is hereby superseded and replaced by the following paragraph with respect to the A321-200 Aircraft: QUOTE The A321-200 Aircraft shall be manufactured in accordance with the A321-200 Standard Specification referred to in Amendment No. 8 to the A321 Purchase Agreement as amended by the change orders set forth in Exhibit B to the Amendment No. 8 * . Such A321-200 Standard Specification, as so amended, is hereinafter referred to as the "A321-200 Specification". The A321-200 Specification may be further modified from time to time pursuant to the General Terms Agreement. 3. PRICE - - -- ----- * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 2 The terms and conditions of Paragraph 3, Part C of the A321 Amendment No. 8 are cancelled and replaced by the following provisions, with respect to the A321-200 Aircraft: QUOTE 4.1 Base Price of the A321-200 Aircraft - - --- ----------------------------------- The Base Price of the each A321-200 Aircraft is the sum of: - the Base Price of the A321-200 Airframe, and - the Base Price of the Propulsion Systems. 4.1.1 Base Price of the A321-200 Airframe for the Remaining - - ----- ------------------------------------------------------ The Base Price of the Airframe shall be the sum of: (i) the Base Price of the standard A321-200 airframe as described in Paragraph 2, Part C, of Amendment No. 8 to the A321 Purchase Agreement, excluding Buyer Furnished Equipment and SCN's at delivery conditions prevailing in * , which is * , and (ii) the Base Price of all change orders set forth in Exhibit "A" to the Amendment No. 8 to the A321 Purchase Agreement that are mutually agreed upon prior to the execution and delivery of the Amendment No. 8 to the A321 Purchase Agreement, at delivery conditions prevailing in * , which is * . The Base Price of the A321-200 Airframe is subject to adjustment to the date of delivery of the relevant A321-200 Aircraft in accordance with the Airframe Price Revision Formula set forth in Appendix 1 of A321 Amendment No. 6. 4.1.2 Base Price of the CFM International 56-5B3 Propulsion Systems - - ----- ------------------------------------------------------------- The Base Price of a set of CFM 56-5B3 Propulsion Systems is the sum of the Base Prices quoted below in (i) and (ii): (i) Base Price of the CFM 56-5B3 Engines - - ---------------------------------------- The Base Price of a set of two (2) CFM 56-5B3 engines and additional standard equipment at delivery conditions prevailing in * is * . Said Base Price has been calculated with reference to the Reference Price indicated by CFM International of * as defined by the Reference Composite Price Index of 111.82 and in accordance with delivery conditions prevailing in * . Said Reference Price is subject to adjustment to the date of delivery of the relevant A321-200 Aircraft in accordance with the CFM International Price Revision Formula set forth in Appendix 2 of * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 3 A321 Amendment No. 6. (ii) Base Price of Nacelles and Thrust Reversers - - ------------------------------------------------ The Base Price of a set of two (2) nacelles and two (2) thrust reversers for the CFM 56-5B3 shall be as set forth in Paragraph 3 of A321 Amendment No. 6. Said Base Price is subject to adjustment to the date of delivery of the relevant A321-200 Aircraft in accordance with the Airframe Price Revision Formula set forth in Appendix 1 of A321 Amendment No. 6. 4.1.3 Base Price of the IAE V2533-A5 Propulsion Systems - - ----- ------------------------------------------------- The Base Price of a set of two (2) IAE V2533-A5 Propulsion Systems including related equipment, nacelles and thrust reversers, at delivery conditions prevailing in * is * . Said Base Price has been calculated with reference to the Reference Price indicated by IAE of * in accordance with theoretical delivery conditions prevailing in * . Said Reference Price is subject to adjustment to the date of delivery of the relevant A321-200 Aircraft in accordance with the IAE Price Revision Formula set forth in Appendix 3 of A321 Amendment No. 6. 4.2 Selection of Propulsion Systems and validity of the Propulsion Systems - - --- ---------------------------------------------------------------------- Reference Prices - - ---------------- The terms and conditions of the quoted provisions of Paragraph 4.2 and 4.3 of Paragraph 3 of A321 Amendment No. 6 shall apply to the A321-200 Aircraft. UNQUOTE 4. * PREDELIVERY PAYMENTS - - -- --------------------------- Upon execution of this Amendment, the Buyer shall pay to the Seller * . B. EFFECT OF AMENDMENT - - -- ------------------- The A321 Purchase Agreement shall be deemed to be amended to the extent herein provided, and, except as specifically amended hereby, shall continue in full force and effect in accordance with its original terms. All capitalized terms not otherwise defined herein shall have the meanings provided for in the A321 Purchase Agreement. This Amendment shall be effective upon satisfaction of all conditions hereof and of the A321 Purchase Agreement. * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 4 C. CONFIDENTIALITY - - -- --------------- Subject to any legal or governmental requirements of disclosure, the parties (which for this purpose shall include their employees, agents and advisors) shall maintain the terms and conditions of this Amendment and any reports or other data furnished hereunder strictly confidential. Without limiting the generality of the foregoing, the Buyer shall use its best efforts to limit the disclosure of the contents of this Amendment, to the extent legally permissible, in any filing that the Buyer is required to make with any governmental agency, and the Buyer shall make all applications that may be necessary to implement the foregoing. The Buyer and the Seller shall consult with each other prior to making any public disclosure, otherwise permitted hereunder, of this Amendment or the terms and conditions hereof. The provisions of this Paragraph D shall survive any termination of this Amendment. D. GOVERNING LAW AND JURISDICTION - - -- ------------------------------ THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PERFORMANCE OF THIS AMENDMENT SHALL BE DETERMINED ALSO IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ANY DISPUTE ARISING HEREUNDER SHALL BE REFERRED TO THE FEDERAL OR STATE COURTS LOCATED IN NEW YORK CITY, NEW YORK, AND EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO AND ACCEPTS SUCH JURISDICTION. THE UNITED NATIONS CONVENTION ON THE INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS AMENDMENT. 5 If the foregoing correctly sets forth our understanding, please execute this Amendment in the space provided below, whereupon this Amendment shall constitute part of the A321 Purchase Agreement as of the date first above written. Agreed and Accepted, Yours sincerely, INTERNATIONAL LEASE AVSA, S.A.R.L. FINANCE CORPORATION By: /s/ R.G. Duncan By: /s/ Mario Schuler ------------------------- ------------------------------- R.G. Duncan Its: Senior Vice President Its: Director Sales Leasing Market Division 6 EXHIBIT 1 --------- LIST OF ELECTED AIRCRAFT ------------------------
AIRCRAFT DELIVERY RANK MONTH 14 A321 Firm * 15 A321 Firm * 16 A321 Firm * 17 A321 Firm * 18 A321 Firm * 19 A321 Firm * 20 A321 Firm * 21 A321 Firm * 22 A321 Firm * 23 A321 Firm * 24 A321 Firm * 25 A321 Firm * 26 A321 Firm * 27 A321 Firm * 28 A321 Firm * 29 A321 Firm * 30 A321 Firm * 31 A321 Firm * 32 A321 Firm * 33 A321 Firm * 34 A321 Firm * 35 A321 Firm * 36 A321 Firm * 37 A321 Firm * 38 A321 Firm * 1 A321 Option *
* PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 7 EX-10.16 7 AMEND. #10 TO AIRBUS PURCHASE AGREEMENT EXHIBIT 10.16 AMENDMENT NO. 10 TO THE AIRBUS A321 PURCHASE AGREEMENT DATED AS OF FEBRUARY 14, 1990 BETWEEN AVSA, S.A.R.L. AND INTERNATIONAL LEASE FINANCE CORPORATION This Amendment No. 10 (hereinafter referred to as the "Amendment") entered into as of February 23, 1996, by and between AVSA, S.A.R.L., a Societe a Responsabilite Limitee organized and existing under the laws of the Republic of France, having its registered office located at 2, Rond-Point Maurice Bellonte, 31700 Blagnac, France (hereinafter referred to as the "Seller") and INTERNATIONAL LEASE FINANCE CORPORATION, a corporation organized and existing under the laws of the State of California, having its principal corporate offices located at 1999 Avenue of the Stars, 39th Floor, Los Angeles, CA 90067, U.S.A. (hereinafter referred to as the "Buyer") ; WITNESSETH WHEREAS, the Buyer and the Seller entered into a certain A321 Purchase Agreement, dated as of February 14, 1990, relating to the sale by the Seller and the purchase by the Buyer of twelve (12) firmly ordered Airbus Industrie A321- 100 model aircraft (the "Aircraft") and four (4) option Airbus Industrie A321- 100 model aircraft (the "Option Aircraft"), which agreement, as previously amended by and supplemented with all Exhibits, Appendices, and Letter Agreements attached thereto and as amended by Amendment No. 1 dated as of June 18, 1991, Amendment No. 2 dated as of December 10, 1992, Amendment No. 3 dated as of January 3, 1994, Amendment No. 4 dated as of February 28, 1994, Amendment No. 5 dated as of September 23, 1994, Amendment No. 6 dated as of December 27, 1994, Amendment No. 7 dated as of July 5, 1995, Amendment No. 8 dated as of October 4, 1995, and Amendment No. 9 dated as of February 23, 1996 is hereinafter called the "Purchase Agreement". WHEREAS, the Buyer now wishes to increase its order by three (3) firmly ordered A321-200 aircraft (individually and collectively referred to as the "Incremental Aircraft") and one (1) option A321-200 aircraft (the "Incremental Option Aircraft"). Amdt. 10-1 WHEREAS, the Seller is a sales subsidiary of Airbus Industrie G.I.E. (the "Manufacturer") and will purchase the Incremental Aircraft from the Manufacturer for resale to the Buyer. 1. INCREMENTAL ORDER - - -- ----------------- 1.1 The Buyer hereby firmly orders three (3) Incremental Aircraft and takes an option to order firmly one (1) Incremental Option Aircraft. It is agreed that the terms and conditions of the sale and purchase of the Incremental Aircraft and the Incremental Option Aircraft shall be * , except as specifically set forth to the contrary in this Amendment. 2. SPECIFICATION - - -- ------------- Sub-clause 3.2 of the Purchase Agreement as it applies to the 1994 Aircraft is hereby superseded and replaced by the following provisions with respect to the Incremental Aircraft and the Incremental Option Aircraft: QUOTE The Incremental Aircraft shall be manufactured in accordance with the Standard Specification, Document No. E000.02000 Issue 1 dated June 30, 1995 (a copy of which is annexed as Exhibit A to Amendment No. 10) as amended by the change orders set forth in Exhibit B to Amendment No. 10 * . Such Standard Specification is hereinafter referred to as the "Specification". The Specification may be further modified from time to time pursuant to the General Terms Agreement. UNQUOTE 3. PRICE - - -- ----- 3.1 Sub-clause 4.1.1 of the Purchase Agreement as it applies to the 1994 Aircraft is hereby superseded and replaced by the following provisions with respect to the Incremental Aircraft: QUOTE 4.1.1 Base Price of the Airframe - - ----- -------------------------- The Base Price of the Airframe shall be the Base Price of the standard A321-200 * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Amdt. 10-2 airframe as described in Exhibit A to Amendment No. 10 * at delivery conditions prevailing in * , which is * , and (ii) the Base Price of all change orders mutually agreed and set forth in Exhibit B to Amendment No. 10 at delivery conditions prevailing in * , which is * . This Base Price of the Airframe is subject to adjustment to the date of delivery in accordance with the Airframe Price Revision Formula set forth in Appendix 1 to Amendment No. 6. UNQUOTE 3.2 Sub-clause 4.2 of the Purchase Agreement as it applies to the 1994 Aircraft is hereby superseded and replaced by the following provisions with respect to the Incremental Aircraft: QUOTE 4.2 Selection of the Propulsion Systems - - --- ----------------------------------- The Buyer shall notify the Seller in writing no later than * months prior to the delivery of each Incremental Aircraft of its selection of the Propulsion Systems to be installed at delivery on such Incremental Aircraft. The previous sentence notwithstanding, (i) the Seller reserves the right to increase this * month lead time should it become necessary due to commercial or industrial constraints imposed on the Seller, and (ii) the Seller will reduce this * month lead time should commercial and industrial conditions allow such a reduction. UNQUOTE 4. DELIVERY -------- The delivery schedule for Aircraft and Option Aircraft as set forth in Sub- clause 5.1 of the Purchase Agreement is hereby amended by the addition of the following three (3) Incremental Aircraft and one Incremental Option Aircraft: QUOTE (i) Incremental Aircraft -------------------- * * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Amdt. 10-3 (ii) Incremental Option Aircraft --------------------------- * UNQUOTE 5. PREDELIVERY PAYMENTS -------------------- Subclause 6.2 of the Purchase Agreement regarding Predelivery Payments * , shall apply to the Incremental Aircraft save that the first payment thereunder in respect of the Incremental Aircraft shall be made on the date hereof. 6. * * 7. OPTION EXERCISE --------------- In the case of the Option Incremental Aircraft, the Buyer shall notify the Seller of its wish to exercise an option to purchase no later than the first day of the * month prior to the scheduled month of delivery for that particular aircraft. * Upon due receipt of due notice, and subject to payment of all predelivery payments then due, such aircraft shall be deemed to be an Incremental Aircraft, with all the relevant credits and concessions thereto. 8. CONFIDENTIALITY --------------- Subject to any legal or governmental requirements of disclosure, the parties (which for this purpose shall include their employees, agents and advisors) shall maintain the terms and conditions of this Amendment and any reports or other data furnished hereunder strictly confidential. Without limiting the generality of the foregoing, the Buyer shall use its best efforts to limit the disclosure of the contents of this Amendment, to the extent legally permissible, in any filing that the Buyer is required to make with any governmental agency, and the Buyer shall make all applications that may be necessary to implement the foregoing. The Buyer and the Seller shall consult with each other prior to making any public disclosure, otherwise permitted hereunder, of this Amendment or the terms and conditions thereof. The provisions of this Paragraph 8 shall survive any termination of this Amendment. * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Amdt. 10-4 9. EFFECT OF AMENDMENT ------------------- The Purchase Agreement shall be deemed to be amended to the extent herein provided, and except as specifically amended hereby, shall continue in full force and effect in accordance with its original terms. All capitalised terms not otherwise defined shall have the meanings provided for in the Purchase Agreement. 10. GOVERNING LAW AND JURISDICTION ------------------------------ THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PERFORMANCE OF THIS AMENDMENT SHALL BE DETERMINED ALSO IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ANY DISPUTE ARISING HEREUNDER SHALL BE REFERRED TO THE FEDERAL OR STATE COURTS LOCATED IN NEW YORK CITY, NEW YORK, AND EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO AND ACCEPTS SUCH JURISDICTION. THE UNITED NATIONS CONVENTION ON THE INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS AMENDMENT. If the foregoing correctly sets forth our understanding, please execute this Amendment in the space provided below, whereupon this Amendment shall constitute part of the Purchase Agreement, as of the date first above written. Agreed and Accepted Yours sincerely, INTERNATIONAL LEASE AVSA, S.A.R.L. FINANCE CORPORATION By: /s/ R.G. Duncan By: /s/ Mario Schuler ------------------------- ------------------------------- R.G. Duncan Its: Senior Vice President Its: Director Sales Leasing Market Division Amdt. 10-5 EXHIBIT A --------- Standard A321-200 Specification Registrant will furnish supplementally a copy of the Standard A321-200 Specification to the Securities and Exchange Commission upon request. Amdt. 10-6 EXHIBIT B --------- [SCN's] Amdt. 10-7
- - ------------------------------------------------------------------------------------------------------------------------------------ CUSTOMER: ILFC Definition of a AIRCRAFT TYPE: A321-200 ILFC A321-200 DELIVERY POSITION(s): applicable Baseline Aircraft BASELINE/EXHIBIT B SPECIFICATION STD. SPEC VERSION: Ref. Issue 1, no Revision ISSUED BY: AVSA/JP APPLICABLE P.A. REF.
- - ------------------------------------------------------------------------------------------------------------------------------------ PRICE RFC TITLE USD COMMENTS 12L NR * PER A/C - - ------------------------------------------------------------------------------------------------------------------------------------ 02E2001 FAA Type Design items incl. Ozone Converter * 02E2002 Emergency Equipment partly * * First Aid Kit, PBE 02E2003 Avionics * 11E2001 Install Identification Plates * 21E2001 Ventilation of complete Aft Cargo * Compartment 23E2001 Single HF Installation and full * * Provisions for a second one * * 23E2002 Three FM Immune VHF System * Installation 23E2003 Hot Mike Capability (CVR) 23E2005 Boarding Music / Announcement System * System * 23E2005 System Provisions for PES - - ------------------------------------------------------------------------------------------------------------------------------------
* PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ILFC A321 Baseline Spec. Page 1 of 3
- - ------------------------------------------------------------------------------------------------------------------------------------ 23E2005 System Provisions for Video Monitor System OHSC * 24E2001 Galley Power increased to 70 KVA * 25E2001 Fourth Occupant Seat in Cockpit * 25E2002 Cabin Configuration 220 Pax * as per Draw. AI 321-25.3215 * 25E2002 Stretcher Loading Capability Lavatory D * 25E2002 Installation of Double Bench aft of Lav. B * 25E2003 Interior Colour Scheme * 25E2004 System Provisions for Cargo Cpt. Convertibility * 25E2005 Cargo Floor Panels for Heavy Usage * 25E2006 Cargo Cpt. - Full Bulk Kit Installation * 25E2007 Cabin Emergency Equipment Installation * 28E2001 System Provisions for one ACT * 28E2002 Installation of one ACT * 31E2001 US Units of Indication * 32E2001 Installation of BF Goodrich/ Messier Wheels and Brakes * 33E2001 Floor Prox. Escape Path Marking - Lumi * 34E2001 Full Provisions for 2nd ADF System * 34E2002 TCAS II complete Provisions * incl. ATC Transp. and Gables Control Panel 34E2003 Installation of ILS Collins, FM Immune * 34E2004 DME Collins * * 34E2005 Radio Altimeter Collins * 34E2006 GPS System Provisions C1/C3 * 34E2007 GPS Installation, Litton * 34E2008 Inst. of a JET Electr.- Standby Altitude Indicator * - - -----------------------------------------------------------------------------------------------------------------------------------
* PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ILFC A321 Baseline Spec. Page 2 of 3
- - ------------------------------------------------------------------------------------------------------------------------------------ 35E2001 Flight Crew 02 Cylinder 77.1 FT3 * 49E2001 APIC APU. APS 3200 * 72E2001 Engines V 2533-A5 * Covers only Airframe Repercussions - - ------------------------------------------------------------------------------------------------------------------------------------ Total Amount per aircraft, in* * or Total Amount, per aircraft, in* * - - -----------------------------------------------------------------------------------------------------------------------------------
* * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ILFC A321 Baseline Spec. Page 3 of 3 EX-10.17 8 LETTER AGREEMENT #1 TO AIRBUS PURCHASE AGREEMENT EXHIBIT 10.17 February 23, 1996 To: International Lease Finance Corporation 1999, Avenue of the Stars Los Angeles CALIFORNIA LETTER AGREEMENT NO. 1 Dear Sirs, Reference is made to a certain Amendment No. 3 to the A319 Purchase Agreement dated December 10, 1992, Amendment No. 14 to the A320 Purchase Agreement dated November 10, 1988, and Amendment No. 10 to the A321 Purchase Agreement dated February 14, 1990, all three Amendments being dated February 23, 1996 (together the "Amendments"). In consideration of the order for twelve (12) firm and three (3) optional Airbus narrowbody aircraft as set forth in the Amendments (the "Incremental Order"), AVSA and ILFC agree to the following arrangements, which shall be effective upon, part of and subject to execution of the Amendments. 1. * 1.1 * * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1 * 1.2 * 1.3 * 1.4 * 2. * * * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 2 * 3. * * 4. * * 5. * 5.1 * * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 3 * 5.2 * 5.3 * 6. * * 7. Collateralisation of Predelivery Payments ----------------------------------------- The parties acknowledge that AVSA currently holds predelivery payments from ILFC under various aircraft purchase agreements between the parties, and that the amount of predelivery payments will vary from time to time as aircraft are delivered and/or more delivery payments are made. ILFC hereby pledges that, in the event ILFC should fail to make on its due date any material payment owing under any existing purchase agreement (with due regard to any grace period that may exist under such agreement), * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 4 AVSA may apply any amount of any predelivery payment ot then holds with respect to any aircraft to compensate for damages AVSA may suffer as a result of ILFC's failure to make such payment in a timely manner. The utilization of prior predelivery payments to compensate for damages will not serve as a cure of the default for failure to make timely payment. Further, a default will consequently also then exist with respect to the aircraft whose predelivery payment(s) may have been utilized as compensation for damages. Such damages may include but not be limited to interest on moneys due and storage, reconfiguration or remarketing of aircraft. This unrestricted right is without prejudice, and in addition, to any other rights AVSA may have in the event of such default by ILFC. This specific right shall expire upon due payment by ILFC to AVSA of the predelivery payment due 24 months prior to delivery of the last Incremental Aircraft ordered pursuant to the Amendments. 8. * * 9. Confidentiality --------------- Subject to any legal or governmental requirements of disclosure, the parties (which for this purpose shall include their employees, agents and advisors) shall maintain the terms and conditions of this Letter Agreement and any reports or other data furnished hereunder strictly confidential. Without limiting the generality of the foregoing, the ILFC shall use its best efforts to limit the disclosure of the contents of this Letter Agreement, to the extent legally permissible, in any filing that ILFC is required to make with any governmental agency, and the ILFC shall make all applications that may be necessary to implement the foregoing. ILFC and AVSA shall consult with each other prior to making any public disclosure, otherwise permitted hereunder, of this Letter Agreement or the terms and conditions thereof. The provisions of this Paragraph 9 shall survive any termination of this Letter Agreement. * PURSUANT TO 17 CFR 240.24b-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 5 10. Jurisdiction ------------ THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PERFORMANCE OF THIS LETTER AGREEMENT SHALL BE DETERMINED ALSO IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ANY DISPUTE ARISING HEREUNDER SHALL BE REFERRED TO THE FEDERAL OR STATE COURTS LOCATED IN NEW YORK CITY, NEW YORK, AND EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO AND ACCEPTS SUCH JURISDICTION. THE UNITED NATIONS CONVENTION ON THE INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS LETTER AGREEMENT. The existing agreements between AVSA and ILFC shall be deemed amended to the extent herein provided, and, except as specifically amended hereby, shall continue in full force and effect in accordance with their original terms. All capitalized terms not otherwise defined herein shall have the meanings provided for in the existing agreements. If the foregoing correctly set forth our understanding, please executve this Amendment in the space provided below, whereupon this Amendment shall constitute part of the Agreement. Agreed and Accepted Yours sincerely, INTERNATIONAL LEASE AVSA, S.A.R.L. FINANCE CORPORATION By: /s/ R.G. Duncan By: /s/ Mario Schuler -------------------- -------------------------- R.G. Duncan Its: Senior Vice President Its: Director Sales Leasing Market Division 6 EX-12 9 COMPUTATION OF RATIOS EXHIBIT 12 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
YEARS ENDED DECEMBER 31, ------------------------------------------------ 1991 1992 1993 1994 1995 -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) Earnings Net income.................. $ 89,530 $157,749 $168,565 $201,943 $196,437 Add: Provision for income taxes. 50,170 88,491 109,075 110,064 141,909 Fixed charges.............. 230,984 279,827 340,568 421,170 592,519 Less: Capitalized interest....... 38,947 36,291 39,363 44,610 51,091 -------- -------- -------- -------- -------- Earnings as adjusted (A).... $331,737 $489,776 $578,845 $688,567 $879,774 ======== ======== ======== ======== ======== Preferred dividend requirements............... $ -- $ -- $ 2,692 $ 6,890 $ 13,096 Ratio of income before provision for income taxes to net income............. 156% 156% 165% 155% 172% -------- -------- -------- -------- -------- Preferred dividend factor on pretax basis........... -- -- 4,442 10,680 22,525 -------- -------- -------- -------- -------- Fixed charges Interest expense........... 192,037 243,536 301,205 376,560 541,428 Capitalized interest....... 38,947 36,291 39,363 44,610 51,091 -------- -------- -------- -------- -------- Fixed charges as adjusted (B)........................ 230,984 279,827 340,568 421,170 592,519 -------- -------- -------- -------- -------- Fixed charges and preferred stock dividends(C)......... $230,984 $279,827 $345,010 $431,850 $615,044 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges ((A) divided by (B))........................ 1.44x 1.75x 1.70x 1.63x 1.48x ===== ===== ===== ===== ===== Ratio of earnings to fixed charges and preferred stock dividends ((A) divided by (C))..................... 1.44x 1.75x 1.68x 1.59x 1.43x
===== ===== ===== ===== ===== EX-23 10 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 33-62649) of International Lease Finance Corporation and in the related Prospectus of our report dated February 20, 1996, with respect to the consolidated financial statements and schedule of International Lease Finance Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1995. ERNST & YOUNG LLP Century City, Los Angeles, California March 21, 1996 EX-27 11 ART. 5 FDS FOR 1995 10-K
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 87,097 0 423,799 0 0 0 12,015,308 1,252,438 12,298,379 0 8,892,634 0 400,000 3,582 0 12,298,379 1,373,098 1,422,488 0 542,714 0 0 541,428 338,346 141,909 196,437 0 0 0 196,437 0 0
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