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As filed with the Securities and Exchange Commission on January 14, 2011
Registration No. 333-      
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form S-1
 
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
 
 
AIR LEASE CORPORATION
(Exact name of registrant as specified in its charter)
 
         
Delaware
  7359   27-1840403
(State or other jurisdiction
of incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)
 
2000 Avenue of the Stars, Suite 600N
Los Angeles, CA 90067
(310) 553-0555
 
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
 
 
John L. Plueger
President & Chief Operating Officer
Air Lease Corporation
2000 Avenue of the Stars, Suite 600N
Los Angeles, CA 90067
(310) 553-0555
 
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
 
 
Copies to:
 
         
Grant A. Levy
Executive Vice President, General Counsel & Secretary
Air Lease Corporation
2000 Avenue of the Stars, Suite 600N
Los Angeles, CA 90067
(310) 553-0555
  Robert B. Knauss, Esq.
Mark H. Kim, Esq.
Munger, Tolles & Olson LLP
355 South Grand Avenue, 35th Floor
Los Angeles, CA 90071
(213) 683-9100
  Joseph A. Hall
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
 
 
 
 
Approximate date of commencement of proposed sale to the public:   As soon as practicable after this Registration Statement becomes effective.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  o
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer  o Accelerated filer  o Non-accelerated filer  þ Smaller reporting company  o
(Do not check if a smaller reporting company)
 
 
 
 
CALCULATION OF REGISTRATION FEE
 
             
      Proposed Maximum
     
Title of Each Class of
    Aggregate Offering
    Amount of
Securities to be Registered     Price(1)(2)     Registration Fee
Class A Common Stock, par value $0.01 per share
    $100,000,000     $11,610
             
(1)  Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
 
(2)  Includes shares of Class A Common Stock that the underwriters have the option to purchase from the registrant solely to cover over-allotments, if any.
 
 
 
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
Subject to Completion, dated January 14, 2011.
 
Prospectus
 
shares
 
(AIR LEASE LOGO)
 
Class A Common Stock
 
 
 
This is an initial public offering by Air Lease Corporation of shares of its Class A Common Stock. Air Lease Corporation is selling           shares of Class A Common Stock. The estimated initial public offering price is between $      and $      per share.
 
We have applied to list our Class A Common Stock on           under the symbol “          .”
 
                 
 
    Per share     Total  
 
 
                 
Initial public offering price
  $           $        
                 
Underwriting discounts and commissions
  $       $    
                 
Proceeds to Air Lease Corporation, before expenses
  $       $    
 
 
 
We have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to           additional shares of our Class A Common Stock from us at the initial public offering price, less underwriting discounts and commissions.
 
Investing in our Class A Common Stock involves a high degree of risk. See “Risk factors” beginning on page 12.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
 
The underwriters expect to deliver the shares of our Class A Common Stock to investors on or about               , 2011.
 
 
J.P. Morgan Credit Suisse FBR Capital Markets
 
          , 2011


 

 
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We have not authorized anyone to provide any information other than that contained or incorporated by reference in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, Class A Common Stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Class A Common Stock.
 
 
 
 
Dealer prospectus delivery obligation
 
Until          , 2011, all dealers that buy, sell or trade in our Class A Common Stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.


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Industry and market data
 
Market data and forecasts used in this prospectus have been obtained from independent industry sources and publications as well as from research reports prepared for other purposes, including, without limitation, data relating to the airline industry provided by AVITAS, Inc. (“AVITAS”), a full-service aviation consulting firm retained by us to provide aviation market and industry data for inclusion in this prospectus. We have not independently verified the data obtained from these sources, and we cannot assure you of the accuracy or completeness of the data. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements in this prospectus.


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Prospectus summary
 
This summary highlights information contained elsewhere in this prospectus. This summary sets forth the material terms of this offering but does not contain all of the information that you should consider before deciding to invest in our Class A Common Stock. You should read the entire prospectus carefully before making an investment decision, especially the risks of investing in our Class A Common Stock discussed in the section titled “Risk factors” and our financial statements and related notes appearing elsewhere in this prospectus. Unless the context otherwise requires, the terms “Company,” “ALC,” “we,” “our” and “us” refer to Air Lease Corporation and its subsidiaries.
 
Our company
 
Air Lease Corporation is an aircraft leasing company that was launched in February 2010 by aviation industry pioneer Steven F. Udvar-Házy. We are principally engaged in purchasing commercial aircraft which we, in turn, lease to airlines around the world to generate attractive returns on equity. We lease our aircraft to airlines pursuant to net operating leases that require the lessee to pay for maintenance, insurance, taxes and all other aircraft operating expenses during the lease term.
 
As of December 31, 2010, we owned 40 aircraft. Our fleet is comprised of fuel-efficient and newer technology aircraft, consisting of narrowbody (single-aisle) aircraft, such as the Airbus A319/320/321 and the Boeing 737-700/800, and select widebody (twin-aisle) aircraft, such as the Airbus A330-200 and the Boeing 777-300ER. We manage lease revenues and take advantage of changes in market conditions by acquiring a balanced mix of aircraft types, both new and used. Our used aircraft are generally less than five years old. All of the aircraft we own are leased or are subject to lease. Additionally, as of December 31, 2010, we have entered into purchase commitments to acquire an additional 144 new aircraft through 2017 and four used aircraft in 2011.
 
Through careful management and diversification of our leases and lessees by geography, lease term, and aircraft age and type, we mitigate the risks of owning and leasing aircraft. We believe that diversification of our leases and lessees reduces the risks associated with individual lessee defaults and adverse geopolitical and regional economic events. We manage lease expirations in our fleet portfolio over varying time periods in order to minimize periods of concentrated lease expirations and mitigate the risks associated with cyclical variations in the airline industry. Our leases typically have an average initial term of six years for narrowbody aircraft and nine years for widebody aircraft. As of December 31, 2010, the weighted average lease term remaining on our current leases was 5.6 years, and we leased the aircraft in our portfolio to 25 airlines in 15 countries.
 
We operate our business on a global basis, providing aircraft to airline customers in every major geographical region, including emerging and high-growth markets such as Asia, the Pacific Rim, Latin America, the Middle East and Eastern Europe. In general, many of these emerging markets are experiencing increased demand for passenger airline travel and have lower market saturation than more mature markets such as North America and Western Europe. In addition, airlines in some of these emerging markets have fewer financing alternatives, enabling us to command relatively higher lease rates compared to more mature markets. With our well-established industry contacts and access to capital, we believe we will be able to continue successfully implementing our business strategy worldwide. As of December 31, 2010, we have


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entered into leases and lease commitments with airlines in Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Ireland, Italy, Japan, Kazakhstan, Kenya, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Russia, South Africa, South Korea, Spain, Sri Lanka, Trinidad & Tobago, Turkey, United Arab Emirates, United States and Vietnam.
 
While our primary business is to own and lease aircraft, we also plan to provide fleet management and remarketing services to third parties for a fee. These services are similar to those we perform for our fleet, including leasing, re-leasing, lease management and sales services.
 
Air Lease Corporation is led by a highly experienced management team that includes Mr. Udvar-Házy, our Chairman and Chief Executive Officer, John L. Plueger, our President and Chief Operating Officer, Grant A. Levy, our Executive Vice President, General Counsel and Secretary, Marc H. Baer, our Executive Vice President, Marketing, Alex A. Khatibi, our Executive Vice President, Jie Chen, our Executive Vice President and Managing Director of Asia, James C. Clarke, our Senior Vice President and Chief Financial Officer, Gregory B. Willis, our Vice President, Finance, and Chief Accounting Officer, and John D. Poerschke, our Senior Vice President of Aircraft Specifications and Procurement. On average, our senior management team has over 23 years of experience in the aviation industry.
 
Operations to date
 
Current fleet
 
As of December 31, 2010, our aircraft fleet consisted of 36 narrowbody aircraft and four widebody aircraft, and the weighted average age of our aircraft was 3.8 years. We anticipate that our fleet will grow to approximately 100 aircraft by the end of 2011.
 
Aircraft purchase commitments
 
As of December 31, 2010, we had committed to acquire a total of 144 new aircraft and four used aircraft at an estimated aggregate purchase price (including adjustment for anticipated inflation) of approximately $6.2 billion for delivery as shown below.
 
                                                                 
 
Aircraft type   2011     2012     2013     2014     2015     2016     2017     Total  
 
 
Airbus A320/321-200
    10       9       13       12       7                       51  
Airbus A330-200/300
    2       4                                               6  
Boeing B737-800(1)
    5       3       12       12       12       12       9       65  
Boeing B777-300ER
    1                                                       1  
Embraer E190
    4       8       3                                       15  
ATR 72-600
    2       8                                               10  
     
     
Total
    24       32       28       24       19       12       9       148  
 
 
 
(1) Four of the five Boeing B737-800s that we will acquire in 2011 will be used aircraft.
 
Our new aircraft are being purchased pursuant to binding purchase agreements with each of Airbus S.A.S. (“Airbus”), The Boeing Company (“Boeing”), Embraer S.A. (“Embraer”) and Avions de Transport Régional (“ATR”). Under certain circumstances, we have the right to alter the mix of aircraft types that we ultimately acquire. We also have cancellation rights with respect to six of the Airbus aircraft and six of the Boeing aircraft.


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We have lease commitments (both binding and non-binding) for all 24 aircraft to be delivered in 2011 and for 16 out of 32 aircraft to be delivered in 2012. While we actively seek lease placements for the aircraft that are scheduled to be delivered through 2017, in making our lease placement decisions, we also take into consideration the anticipated growth in the aircraft leasing market and anticipated improvements in lease rates, which could lead us to determine that entering into particular lease arrangements at a later date would be more beneficial to us.
 
Our business and growth strategies
 
We believe that we entered the aircraft leasing industry at an opportune time, as both airlines’ use of net operating leases and the demand for air travel are expected to grow in the near future, consistent with a trend of growth in air travel over the last 40 years. Accordingly, we are pursuing the following business and growth strategies:
 
Capitalize on attractive market opportunities to grow our modern fleet of aircraft.  We plan to continue acquiring aircraft and expect that a significant portion of these acquisitions will be subject to existing or new leases that produce immediate positive cash flows. We seek aircraft that produce attractive returns on equity while maintaining diversified lease portfolio characteristics in terms of aircraft type, aircraft age, lease term and geographic location of our lessees. We intend to take advantage of the current economic environment to make opportunistic purchases of aircraft and aircraft portfolios. We also plan to expand our fleet with a mix of additional narrowbody and widebody commercial aircraft that we expect to have long useful lives and that are currently in widespread use by airlines, with a greater focus on acquiring narrowbody aircraft. We believe narrowbody and certain widebody aircraft will continue to experience strong global airline demand. We have also entered into commitments to purchase select fuel-efficient regional jets and turboprop aircraft, such as Embraer E190 and ATR 72-600 aircraft. We believe market demand for these types of aircraft will grow as they are well suited for direct service between smaller and medium-sized cities and between such cities and major hub cities.
 
Continue to develop and grow our long-standing relationships and cultivate new relationships.  We believe our management team’s experience in the aircraft leasing industry provides us immediate access to key decision makers at airframe and engine manufacturers and major airlines around the world, thereby enabling us to make prompt acquisitions of new aircraft, enter into new leases, and anticipate airlines’ longer-term needs so as to tailor our fleet and leases to their specific needs. Additionally, we believe our relationships with airframe and engine manufacturers allow us to influence their airframe and engine designs to better meet the needs of our airline customers. In our view, the aircraft leasing industry continues to be relationship-driven, and airframe and engine manufacturers and our airline customers will place a high value on the expertise and experience of our management team. This will help us develop new relationships, while we use our long-standing contacts to grow our business. We believe these relationships will help to establish us as a leader in the aircraft leasing industry over time.
 
Emphasize marketing in high-growth areas of the world.  As our portfolio grows, we anticipate that a growing percentage of our aircraft will be located in Asia, the Pacific Rim, Latin America, the Middle East and Eastern Europe, although we will continue to enter into select leasing transactions in North America and Western Europe. We expect aircraft demand to increase in emerging markets over the next decade as a result of both economic and population growth in such regions coupled with deregulation in air travel and improved infrastructure. We believe a developed infrastructure supporting direct air travel to more destinations within emerging market regions, combined with an expected increase in the number of low-cost carriers, the expansion of existing low-cost carriers


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in these regions and a significant increase in such areas’ middle class populations, will lead to growth in passenger air travel in these regions.
 
Enter into strategic ventures.  We may, on occasion, enter into strategic ventures with third parties in order to take advantage of favorable financing opportunities or tax benefits, to share capital and/or operating risk, and/or to earn fleet management fees. Given our broad experience in acquiring, leasing, financing and managing aircraft, we believe that third parties seeking to invest in the aircraft leasing industry will view us as an attractive partner.
 
Actively manage our lease portfolio to optimize returns and minimize risk through diversification.  In actively managing our aircraft portfolio, we seek to optimize returns and minimize risks by appropriately and prudently diversifying the types of aircraft we acquire, maintaining a low average fleet age, spreading out over a number of years the termination dates for our leases, achieving geographic diversification, and minimizing our exposure to customer concentration. Our acquisition of desirable aircraft types with a low average fleet age helps to maximize the mobility of our assets across global markets, which allows us to achieve a high rate of lease placements on attractive lease terms. Through the implementation of our diversification strategies, we believe that we are in a position to reduce our exposure to industry fluctuations over a particular period of time, economic fluctuations in a particular regional market, changes in customer preferences for particular aircraft, and the credit risk posed by a particular customer.
 
Our financing strategies
 
In addition to our business and growth strategies described above, the successful implementation of our financing strategies is critical to the success and growth of our business.
 
As we grow our business, we envision funding our aircraft purchases through multiple sources, including the $1.3 billion of cash we raised in our prior private placement of Class A Common Stock and Class B Non-Voting Common Stock (together, the “Common Stock”), expected proceeds from any exercise of outstanding warrants, cash raised in this offering and in potential future equity offerings, future earnings and cash flow from operations, existing debt facilities, potential future debt financing and government-sponsored export guaranty and lending programs. We intend to employ multiple debt and equity strategies to provide us with financial flexibility to fund our aircraft purchases on the best terms available.
 
In May 2010, we entered into a non-recourse revolving credit facility to finance the acquisition of aircraft (the “Warehouse Facility”). This credit facility provides us with secured financing of up to $1.5 billion from a syndicate of eight lenders. We are able to draw on this facility during an initial two-year availability period. The outstanding drawn balance at the end of the initial two-year period may be converted at our option to an amortizing, four-year term loan. As of December 31, 2010, we had borrowed $555.0 million under the Warehouse Facility. This facility provides us with ample liquidity to make opportunistic acquisitions of aircraft on short notice as we had an available balance of $945.0 million as of December 31, 2010.
 
In addition, we fund some aircraft purchases through secured bilateral term financings and unsecured term and revolving credit facilities. As of December 31, 2010, we had outstanding loan balances, other than under the Warehouse Facility, of $224.0 million in secured term debt and $133.0 million in unsecured financing, and had $120.0 million in available but undrawn revolving unsecured credit facilities. From time to time we will also use cash on hand to


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purchase aircraft and may use such acquired aircraft to secure new debt financing. Over time, we expect to access the public debt capital markets, subject to market conditions.
 
Furthermore, we are in the process of securing financing from government-sponsored export guaranty and lending programs offered by agencies such as the European Export Credit Agencies (“ECAs”), the Export-Import Bank of the United States (“Ex-Im Bank”) and Seguradora Brasileira Crédito à Exportação S.A. (“SBCE”) in conjunction with the Brazilian Development Bank (“BNDES”).
 
In an effort to sustain our long-term financial health and limit our exposure to unforeseen dislocations in the debt and financing markets, we intend to maintain a debt-to-equity ratio (excluding deferred tax liabilities for calculation purposes) generally within a range of 2-to-1 to 3-to-1. Due to the seasonality of aircraft deliveries, we expect this ratio to fluctuate within that range during the course of a typical fiscal year, although on occasion we may fall outside this range. In addition, we may from time to time enter into interest rate hedging arrangements to limit our exposure to increases in interest rates on our floating-rate debt.
 
We believe that the implementation of our financing strategies will help us maintain a prudent amount of leverage, while also maintaining financial flexibility to seize attractive market opportunities.
 
Our competitive strengths
 
We believe that the following strengths assist us in executing our business and growth strategies and provide us with an advantage over many of our competitors:
 
Highly experienced management team with diversified aviation and technical experience.  Our senior management team, with an average of over 23 years of experience in the aviation industry, has significant experience in all aspects of the aviation and aircraft leasing industries, including the implementation of innovative lease structures, strategic planning, risk diversification, fleet restructuring, aircraft purchasing and financing strategies, and general transactional capabilities. We have separate Sales, Marketing and Commercial Affairs; Finance and Accounting; Legal; Commercial Contracts; Aircraft Procurement and Specifications; and Technical Asset Management departments that are involved in our leasing, sales and purchasing business. Our Technical Asset Management department has in-depth knowledge of aircraft, engines, avionics and the various regulations governing the maintenance of aircraft. This department monitors the fleet while on lease to our airline customers, handles the transfer of the aircraft from one operator to the next and monitors operator compliance with its technical and maintenance obligations under our leases.
 
Available deployable capital to capture attractive market opportunities.  With the net proceeds from this offering, cash on hand, the financing available under the Warehouse Facility and multiple unsecured lines of credit, we have significant purchasing power that we can readily deploy to acquire additional aircraft quickly. In addition, we expect to supplement our access to capital with debt guaranteed by government agencies such as Ex-Im Bank and the ECAs and loans from BNDES for qualifying aircraft purchases and other debt financing arrangements. Our access to capital provides us with the flexibility to complete aircraft purchases at attractive times and values.
 
Strong aircraft delivery pipeline.  Through our strategic and opportunistic approach to acquiring aircraft and our strong relationship with airframe manufacturers, as of December 31, 2010, we


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have been able to enter into commitments to acquire 144 new aircraft over the next six years. We believe that our access to this strong aircraft delivery pipeline over this period of time gives us the ability to provide airline customers with a comprehensive multi-year solution to their aircraft leasing and fleet needs. This ability represents a significant competitive advantage in developing, renewing and expanding customer relationships as we have new aircraft available for delivery during periods far earlier than most of our airline customers can obtain directly from airframe and engine manufacturers.
 
Young, modern and efficient aircraft fleet.  Our aircraft portfolio primarily consists of modern, fuel-efficient, narrowbody aircraft. As of December 31, 2010, the weighted average age of the aircraft in our current portfolio was 3.8 years. We believe we have one of the world’s youngest operating lease portfolios. Younger aircraft are more desirable than older aircraft because of their fuel efficiency, lower maintenance costs, and longer remaining useful lives. Furthermore, younger aircraft are more likely to be in compliance with newer environmental standards or are more easily brought up to environmental compliance without costly modifications. We believe our aircraft, and the additional aircraft that we will acquire, are in high demand among our airline customers and are readily deployable to various markets throughout the world. We expect that our fleet of young, high-demand aircraft will enable us to provide stable and growing cash flows to our stockholders over the long term.
 
Long-standing relationships with a global, diversified customer base.  Our management team is well-known in the aviation industry and we are able to benefit from the long-standing relationships that Messrs. Udvar-Házy and Plueger and other key members of management have with more than 200 airlines in over 70 countries.
 
Strong manufacturer relationships.  The supply of transport aircraft is dominated by a few airframe manufacturers, including Boeing, Airbus, ATR, Embraer and Bombardier Inc. (“Bombardier”). Through our management team’s active and long-standing participation in the aviation industry, we have developed strategic relationships with many of the manufacturers and suppliers of aircraft and aircraft parts, which we leverage to obtain competitive acquisition and delivery terms and to influence new aircraft design.
 
Our management team’s and our board of directors’ significant investment in us aligns the interests of management and our board with those of our other stockholders.  Members of our management team (and their families or affiliates) and members of our board of directors invested an aggregate of approximately $90.5 million in our Company. We believe that our management team’s and our board of directors’ significant combined ownership stake in our Class A Common Stock, along with additional equity incentive grants, closely aligns our management team’s and our board of directors’ interests with those of our other stockholders.
 
Overview of the aircraft leasing industry
 
Over the last 40 years, demand for air travel has consistently grown both in terms of the number of aircraft and passenger traffic. Today, air travel has penetrated most world regions, and the highest growth is now coming from emerging markets and economies such as Asia, Latin America and the Middle East. The long-term outlook for growth in the airline industry remains robust due primarily to increased passenger traffic, driven by growth in demand from these emerging markets. After suffering a decrease in air traffic during the financial crisis of 2008/2009, air traffic in 2010 increased approximately 7% over 2009 levels. Moreover, AVITAS


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forecasts that there will be more than 24,000 aircraft in service by 2015, which represents an increase of approximately 5,000 aircraft (or over 25%) compared with today’s number of aircraft.
 
Due to the cost of aircraft acquisitions, aircraft financing complexities and the airlines’ need for fleet flexibility, the role of operating lessors has expanded significantly over the last 20 years. In the late 1960s and early 1970s, airlines generally owned all of their aircraft, which were financed through loans that were collateralized by the aircraft themselves. At that time, airline fleets were typically small in size and limited to a few aircraft types. As airline fleets expanded and fixed costs for maintenance and ownership rapidly increased, airlines began to outsource the ownership of many of their airplanes through the adoption of aircraft leases. Aircraft leasing has grown steadily since the 1970s and, as of November 2010, aircraft operating leases now comprises approximately 35% of the more than 19,000 commercial jet aircraft fleet in service.
 
Leasing is attractive to nearly all airlines and is particularly attractive to start-up and low-cost carriers. Airlines have turned to the leasing structure for an increasing share of their financing requirements as operating leases provide fleet planning flexibility, relatively low capital investment and the avoidance of balance sheet residual value risk. An operating lease allows an airline to preserve capital that can be invested in other aspects of its operations. Furthermore, since operating lessors can provide airlines with different aircraft types with different capabilities, operating leases assist airlines in diversifying their fleets, which provides economic and product flexibility and helps to promote growth in new markets in different geographic regions.
 
The growth of commercial aircraft operating leases is expected to continue. Forecasts for aircraft deliveries over the next five years suggest that aircraft on lease may grow by more than 25%. Leasing companies will play an increasingly larger role in providing aircraft capacity as airlines grow their fleets and replace their existing fleets with newer, more fuel-efficient aircraft. Lessors who are adequately capitalized and are both nimble and flexible in their approach will be able to take advantage of both current and long-term aircraft leasing market opportunities.
 
Risks affecting us
 
Investing in our Class A Common Stock involves a high degree of risk, including risks related to our liquidity plans, our ability to purchase, finance, lease and re-lease our aircraft profitably, interest rates, supply and demand cycles in the aviation industry, the financial strength of our lessees, macroeconomic conditions and emerging market conditions. You should carefully consider all of the information set forth in this prospectus and, in particular, the information in the section titled “Risk factors,” before deciding to invest in our Class A Common Stock.
 
Corporate information
 
Air Lease Corporation incorporated in Delaware and launched in February 2010. Our principal executive office is located at 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067. We expect to move into a larger office space in our current building in April 2011, at which time our principal executive office will be located at 2000 Avenue of the Stars, Suite 1000N, Los Angeles, California 90067. Our telephone number is (310) 553-0555 and our website is www.airleasecorp.com . Information included or referred to on, or otherwise accessible through, our website is not intended to form a part of or be incorporated by reference into this prospectus.
 


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The offering
 
Class A Common Stock offered by us           shares       
 
Class A Common Stock subject to over-allotment option           shares       
 
Class A Common Stock to be outstanding after this offering (assuming no exercise of the over-allotment option)           shares       
 
Class B Non-Voting Common Stock to be outstanding after this offering           shares       
 
Total Common Stock to be outstanding after this offering (assuming no exercise of the over-allotment option)           shares       
 
Use of proceeds We currently intend to use the net proceeds of this offering to fund the acquisition of commercial aircraft and for general corporate purposes. See “Use of proceeds.”
 
Dividend policy We have no current plans to declare or pay any dividends on our Common Stock. See “Dividend policy.”
 
Voting rights The holders of Class A Common Stock possess all voting power for the election of our directors and all other matters requiring stockholder action, except with respect to amendments to our restated certificate of incorporation that alter or change the powers, preferences, rights or other terms of any outstanding preferred stock if the holders of such affected series of preferred stock are entitled to vote on such an amendment. Holders of our Class A Common Stock are entitled to one vote for each share held and will not have cumulative voting rights in connection with the election of directors. Holders of Class B Non-Voting Common Stock are not entitled to any vote, other than with respect to amendments to the terms of the Class B Non-Voting Common Stock that would significantly and adversely affect the rights or preferences of the Class B Non-Voting Common Stock, including, without limitation, with respect to the convertibility thereof. See “Description of capital stock.”
 
Proposed symbol “          ”
 
Risk factors See “Risk factors” for a discussion of certain factors you should consider before deciding to invest in our Class A Common Stock.


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The number of shares of our Common Stock to be outstanding following this offering is based on 65,393,149 shares of our Common Stock outstanding as of December 31, 2010 and excludes:
 
•  482,625 shares of Common Stock issuable upon the exercise of warrants outstanding as of December 31, 2010 at an exercise price of $20.00 per share;
 
•  3,225,908 shares of Class A Common Stock issuable upon the exercise of options outstanding as of December 31, 2010 at an exercise price of $20.00 per share; and
 
•  3,225,907 shares of Class A Common Stock issuable upon the vesting of restricted stock units outstanding as of December 31, 2010.
 
Unless otherwise noted, the information in this prospectus assumes no exercise by the underwriters of their option to purchase up to           additional shares of our Class A Common Stock to cover over-allotments, if any.


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Summary financial information and data
 
The following tables set forth summary consolidated financial data for Air Lease Corporation. The historical results presented are not necessarily indicative of future results. The summary consolidated financial data set forth below should be read in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and the financial statements and related notes appearing elsewhere in this prospectus.
 
         
    For the period
    from inception to
(in thousands, except share data)   September 30, 2010
 
Operating data:
       
Rentals of flight equipment
  $ 20,345  
Interest and other
    1,116  
         
Total revenues
    21,461  
Expenses
    78,318  
         
Loss before tax
    (56,857 )
Tax benefit
    7,492  
         
Net loss
    (49,365 )
         
Loss per share:
       
Basic
  $ (1.64 )
Diluted
  $ (1.64 )
Weighted average shares outstanding:
       
Basic
    30,062,023  
Diluted
    30,062,023  
Other financial data (unaudited):
       
Adjusted net loss(1)
  $ (3,197 )
Adjusted EBITDA(2)
  $ 6,243  
Balance sheet data:
       
Flight equipment subject to operating leases, net
  $ 973,482  
Total assets
    1,491,955  
Total debt
    198,691  
Total liabilities
    275,193  
Shareholders’ equity
    1,216,762  
Other data:
       
Aircraft lease portfolio at period end:
       
Owned
    28  
 
 
 
(1) Adjusted net loss (defined as net loss attributable to Air Lease Corporation common shareholders before stock-based compensation expense and non-cash interest expense which includes the amortization of debt issuance costs and convertible debt discounts) is not a financial measure calculated in accordance with United States generally accepted accounting principles (“GAAP”) and should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Adjusted net loss is presented solely as a supplemental disclosure because management believes


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that it may be a useful performance measure. We believe adjusted net loss provides useful information on our earnings from ongoing operations, our ability to service our long-term debt and other fixed obligations, and our ability to fund our expected growth with internally generated funds. Adjusted net loss has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are as follows:
 
• Adjusted net loss does not reflect (i) our cash expenditures or future requirements for capital expenditures or contractual commitments, or (ii) changes in or cash requirements for our working capital needs; and
 
• our calculation of adjusted net loss may differ from the adjusted net loss or analogous calculations of other companies in our industry, limiting its usefulness as a comparative measure.
 
The following table shows the reconciliation of net loss to adjusted net loss for the period from inception to September 30, 2010:
 
         
 
Reconciliation of adjusted net loss:
       
Net loss attributable to Air Lease Corporation shareholders
  $ (49,365 )
Amortization of deferred debt issue costs
    2,810  
Amortization of convertible debt discounts
    35,798  
Stock-based compensation
    13,196  
Tax effect
    (5,636 )
         
Adjusted net loss
  $ (3,197 )
 
 
 
(2) Adjusted EBITDA (defined as net loss attributable to Air Lease Corporation common shareholders before net interest expense, stock-based compensation expense, income tax expense (benefit), and depreciation and amortization expense) is not a financial measure calculated in accordance with GAAP and should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Adjusted EBITDA is presented solely as a supplemental disclosure because management believes that it may be a useful performance measure that is used within our industry. We believe adjusted EBITDA provides useful information on our earnings from ongoing operations, our ability to service our long-term debt and other fixed obligations, and our ability to fund our expected growth with internally generated funds. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are as follows:
 
  •  Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
 
  •  Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
 
  •  Adjusted EBITDA does not reflect interest expense or cash requirements necessary to service interest or principal payments on our debt; and
 
  •  other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.
 
The following table shows the reconciliation of net loss to adjusted EBITDA for the period from inception to September 30, 2010:
 
         
Reconciliation of adjusted EBITDA:
       
Net loss attributable to Air Lease Corporation shareholders
  $ (49,365 )
Adjustments:
       
Net interest expense
    43,276  
Depreciation
    6,628  
Stock-based compensation
    13,196  
Income tax benefit
    (7,492 )
         
Adjusted EBITDA
  $ 6,243  
 
 


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Risk factors
 
An investment in our Class A Common Stock involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this prospectus, before making a decision to invest in our Class A Common Stock. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. As a result, the trading price of our Class A Common Stock could decline and you may lose a part or all of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section titled “Forward-looking statements.”
 
Risks relating to our business
 
We are a recently organized corporation with a brief operating history and, therefore, we have limited historical operating data from which to evaluate our future prospects.
 
Given our limited operating history, you have little historical information upon which to evaluate our prospects, including our ability to acquire aircraft on favorable terms or to enter into profitable aircraft leases. We cannot assure you that we will be able to implement our business objectives, that any of our objectives will be achieved or that we will be able to operate profitably. The results of our operations will depend on several factors, including the availability of opportunities for the acquisition, disposition and leasing of aircraft, our ability to capitalize on any such opportunities, the creditworthiness of our counterparties, the level of volatility of interest rates and commodities, the availability of adequate short- and long-term financing, conditions in the financial markets and other economic conditions, particularly as these conditions impact airlines and manufacturers of aircraft and aircraft parts. Our limited historical operations place us at a competitive disadvantage that our competitors may exploit.
 
We cannot assure you when, if ever, we will be able to fully invest the proceeds of this offering in the acquisition of aircraft.
 
While we have entered into aircraft acquisition agreements that will utilize a portion of the proceeds of this offering, we cannot assure you of the quantity of aircraft that will be available to us for future acquisitions following this offering or the success or timing of any such proposed or potential acquisitions. Further, we cannot assure you that we will be able to enter into profitable leases upon the acquisition of the aircraft we purchase following this offering. If we experience significant delays in the implementation of our business strategies, including delays in the acquisition and leasing of aircraft, our growth strategy and long-term results of operations could be adversely affected.
 
You will not have advance information as to the types, ages, manufacturers, model numbers or condition of the assets purchased in connection with other future acquisitions. You must rely upon our management team’s judgment and ability to select our investments, to evaluate the assets’ condition, to evaluate the ability of lessees and other counterparties to perform their obligations to us and to negotiate transaction documents. We cannot assure you that our management team will be able to perform such functions in a manner that will achieve our investment objectives.


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The success of our business will depend on our ability to identify high-quality commercial aircraft to acquire. If we experience abnormally high maintenance or obsolescence issues with any commercial aircraft that we acquire, our financial results and growth prospects could be materially and adversely affected.
 
The success of our business depends, in part, on our ability to identify high-quality commercial aircraft to acquire. There is currently high market demand for certain narrowbody aircraft, so competition may reduce our opportunities to complete the acquisition of aircraft we are seeking on favorable terms. An acquisition of one or more aircraft or other aviation assets may not be profitable to us after the acquisition and may not generate sufficient cash flow to justify our completion of those acquisitions. In addition, our acquisition strategy exposes us to risks that may harm our business, financial condition, results of operations and cash flows, including risks that we may:
 
•  impair our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition of aircraft;
 
•  significantly increase our interest expense and financial leverage to the extent we incur additional debt to finance the acquisition of aircraft; or
 
•  incur or assume unanticipated liabilities, losses or costs associated with the aircraft or other aviation assets that we acquire.
 
Unlike new aircraft, used aircraft typically do not carry warranties as to their condition. As a result, we may not be able to claim any warranty related expenses on used aircraft. Although we may inspect an existing aircraft and its documented maintenance, usage, lease and other records prior to acquisition, we may not discover all defects during an inspection. Repairs and maintenance costs for existing aircraft are difficult to predict and generally increase as aircraft age and can be adversely affected by prior use. These costs could decrease our cash flow and reduce our liquidity.
 
In addition, aircraft are long-lived assets, requiring long lead times to develop and manufacture, with particular types and models becoming obsolete and less in demand over time when newer, more advanced aircraft are manufactured. By acquiring existing aircraft, we have greater exposure to more rapid obsolescence of our fleet, particularly if there are unanticipated events shortening the life cycle of such aircraft, such as government regulation or changes in our airline customers’ preferences. This may result in a shorter life cycle for our fleet and, accordingly, declining lease rates, impairment charges, increased depreciation expense or losses related to aircraft asset value guarantees, if we were to provide such guarantees.
 
Further, variable expenses like fuel, crew size or aging aircraft corrosion control or modification programs and related airworthiness directives could make the operation of older aircraft more costly to our lessees and may result in increased lessee defaults. We may also incur some of these increased maintenance expenses and regulatory costs upon acquisition or re-leasing of our aircraft. Any of these expenses or costs will have a negative impact on our financial results.
 
Failure to close the aircraft acquisition commitments could negatively impact our share price and financial results.
 
As of December 31, 2010, we had commitments to acquire a total of 148 aircraft for delivery through 2017. If we are unable to maintain our financing sources or find new sources of financing or if the various conditions to our existing commitments are not satisfied, we may be


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unable to close the purchase of some or all of the aircraft which we have commitments to acquire. If our aircraft acquisition commitments are not closed for these or other reasons, we will be subject to several risks, including the following:
 
•  forfeiting deposits and progress payments and having to pay and expense certain significant costs relating to these commitments, such as actual damages, and legal, accounting and financial advisory expenses, and not realizing any of the benefits of completing the transactions;
 
•  defaulting on our lease commitments, which could result in monetary damages and damage to our reputation and relationships with lessees; and
 
•  failing to capitalize on other aircraft acquisition opportunities that were not pursued due to our management’s focus on these commitments.
 
If we determine that the capital we require to satisfy these commitments may not be available to us, either at all or on terms we deem attractive, we may eliminate or reduce any dividend that may be in place at that time in order to preserve capital to apply to these commitments. These risks could materially adversely affect our share price and financial results.
 
The death, incapacity or departure of key officers could harm our business and financial results.
 
We believe our senior management’s reputations and relationships with lessees, manufacturers, buyers and financiers of aircraft are a critical element to the success of our business. We depend on the diligence, skill and network of business contacts of our management team. We believe there are only a limited number of available qualified executives in the aircraft industry, and we therefore have encountered, and will likely continue to encounter, intense competition for qualified employees from other companies in our industry. Our future success will depend, to a significant extent, upon the continued service of our senior management personnel, particularly: Mr. Udvar-Házy, our founder, Chairman and Chief Executive Officer; Mr. Plueger, our President and Chief Operating Officer; and our other senior officers, including Messrs. Levy, Baer, Khatibi, Chen, Clarke, Willis and Poerschke, each of whose services are critical to the successful implementation of our business strategies. If we were to lose the services of any of these individuals, our business and financial results could be adversely affected.
 
Our business model depends on the continual re-leasing of our aircraft, and we may not be able to do so on favorable terms, if at all.
 
Our business model depends on the continual re-leasing of our aircraft in order to generate sufficient revenues to finance our growth and operations, pay our debt service obligations and generate positive cash flows from operations. Our ability to re-lease our aircraft will depend on general market and competitive conditions at the time the initial leases expire. If we are not able to re-lease an aircraft or to do so on favorable terms, we may be required to attempt to sell the aircraft to provide funds for our debt service obligations or operating expenses. Our ability to re-lease or sell the aircraft on favorable terms or without significant off-lease time and costs could be adversely affected by depressed conditions in the airline and aircraft industries, airline bankruptcies, the effects of terrorism and war, the sale of other aircraft by financial institutions, and various other general market and competitive conditions and factors which are outside of our control, including those discussed under “Risk factors—Risks relating to the aircraft leasing industry.”


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Our credit facilities may limit our operational flexibility, our ability to compete with our competitors and our ability to grow our business as currently planned.
 
Our credit facilities contain financial covenants, such as requirements that we comply with one or more of loan-to-value, debt service coverage, minimum net worth and interest coverage ratios, as well as other covenants, such as prohibitions against our disposing of our aircraft or other aviation assets without a lender’s prior consent. Complying with such covenants may at times necessitate that we forego other opportunities, such as using available cash to grow our aircraft fleet or promptly disposing of less profitable aircraft or other aviation assets. Moreover, our failure to comply with any of these covenants would likely constitute a default under such facilities and could give rise to an acceleration of some, if not all, of our then outstanding indebtedness, which would have a material adverse effect on our business and our ability to continue as a going concern.
 
In the future, we may have ECA and Ex-Im Bank supported credit facilities and credit facilities provided by BNDES. We expect the ECAs, Ex-Im Bank and BNDES will require certain structural and operational restrictions to be included in the terms of the operating leases, particularly with respect to subleasing, insurance and the possession, use and location of the aircraft financed under such facilities. The imposition of these mandatory provisions could significantly restrict a lessee’s business operations, which may cause such aircraft to be less desirable to potential lessees and make it more difficult for us to negotiate operating leases for such aircraft on favorable terms. In addition, the credit facilities supported by the ECAs and Ex-Im Bank may contain certain change of control provisions, which would require us to prepay the loans in the event that our ownership structure changes. Complying with such change of control provisions may also require us to forego other opportunities, which may adversely affect our financial condition.
 
In addition, we cannot assure you that our business will generate cash flow from operations in an amount sufficient to enable us to service our debt and grow our operations as planned. We cannot assure you that we will be able to refinance any of our debt on favorable terms, if at all. Any inability to generate sufficient cash flow or maintain our existing fleet and facilities could have a material adverse effect on our financial condition and results of operations.
 
We will need additional capital to finance our growth, and we may not be able to obtain it on terms acceptable to us, or at all, which may limit our ability to satisfy our commitments to acquire additional aircraft and to compete effectively in the commercial aircraft leasing market.
 
Meeting our anticipated growth strategy to acquire approximately 100 aircraft by the end of 2011 and to then further grow our fleet will require substantial additional capital. Our Warehouse Facility includes an initial revolving period of two years (subject to possible early termination of this period, or possible extension of this period, which will require the consent of the agent thereunder and lenders, including replacement lenders), following which all amounts outstanding under the facility may be converted to a term loan, and we will no longer have access to additional loans from this facility. In addition, the terms of the Warehouse Facility will then become more stringent, including, but not limited to, increasing interest rates and principal amortization. Accordingly, we will need to obtain additional financing, which may not be available to us on favorable terms or at all.


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Our access to additional sources of financing will depend upon a number of factors over which we have limited control, including:
 
•  general market conditions;
 
•  the market’s view of the quality of our assets;
 
•  the market’s perception of our growth potential;
 
•  interest rate fluctuations;
 
•  our current and potential future earnings and cash distributions; and
 
•  the market price of our Class A Common Stock.
 
Weakness in the capital and credit markets could adversely affect one or more private lenders and could cause one or more private lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing. In addition, if regulatory capital requirements imposed on our private lenders change, they may be required to limit, or increase the cost of, financing they provide to us. In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.
 
If we are unable to raise additional funds or obtain capital on terms acceptable to us, we may not be able to satisfy funding requirements should we have any aircraft acquisition commitments then in place. These risks may also be increased by the volatility and disruption in the capital and credit markets. Further, depending on market conditions at the relevant time, we may have to rely more heavily on additional equity issuances, which may be dilutive to our stockholders, or on less efficient forms of debt financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our operations, future business opportunities and other purposes. Moreover, if additional capital is raised through the issuance of additional equity securities, your interests as a stockholder could be diluted. Because our charter permits the issuance of preferred stock, if our board of directors approves the issuance of preferred stock in a future financing transaction, such preferred stockholders may have rights, preferences or privileges senior to yours and you will not have the ability to approve such a transaction.
 
We may not be able to obtain long-term debt refinancing on attractive terms, if at all, or qualify for guarantees from the ECAs, Ex-Im Bank or SBCE, either of which may adversely affect our growth strategy and results of operations.
 
Our business model contemplates our ability to enter into attractive and economical long-term financing transactions. Conditions in the capital markets or debt markets may prevent us from entering into long-term debt financing arrangements, if at all, on terms favorable to us, which, if available, could cause such financings to be more costly or otherwise less attractive to us. Obtaining credit support from the ECAs, Ex-Im Bank and SBCE could facilitate our access to long-term financing, but the ECAs, Ex-Im Bank and SBCE have in place certain pre-approval criteria that must be met in order to qualify for, and gain access to, the credit support from or financing from such agencies, and we cannot assure you that such agencies will continue to offer such credit support or financing. If in the future we are unable to meet the pre-approval criteria of these entities, whether due to changes in our financial condition or changes in the underlying criteria, or if the entities discontinue providing credit support, or otherwise, then we will no longer be able to access such favorable credit support, causing the terms of the debt


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financing that we are able to obtain, if any, to be less favorable. Accordingly, we cannot assure you that in the future we will be able to access long-term financing or credit support from the ECAs, Ex-Im Bank or SBCE on favorable terms, if at all, which would adversely affect our growth strategy and results of operations.
 
An unexpected increase in our borrowing costs may adversely affect our earnings.
 
We finance many of the aircraft in our fleet through a combination of short- and long-term debt financings. As these debt financings mature, we may have to refinance these existing commitments by entering into new financings, which could result in higher borrowing costs, or repay them by using cash on hand or cash from the sale of our assets. Moreover, an increase in interest rates under the various debt financing facilities we have in place would have an adverse effect on our earnings and could make our aircraft leasing contracts unprofitable. Our Warehouse Facility has incremental increases in the interest rate beginning after termination of the revolving period, which is initially the second anniversary of the facility’s closing date (absent an earlier termination of this period, or the extension of this period, which will require the consent of the agent thereunder and all of the lenders). In addition, the terms of the Warehouse Facility will then become more stringent, with, among others, increases in the interest rate and principal amortization, thereby adversely affecting our cash flows and profitability.
 
The Warehouse Facility and some of our other debt financings bear interest at a floating rate, such that our interest expense would vary with changes in the applicable reference rate. As a result, to the extent we have not sufficiently protected ourselves from increases in the reference rate or refinanced our debt to fixed rates, changes in interest rates may increase our interest costs and may reduce the spread between the revenues from our net operating leases and the cost of our borrowings.
 
Our substantial indebtedness incurred to acquire our aircraft requires significant debt service payments.
 
Due to the capital intensive nature of our business and our strategy of expanding our aircraft portfolio, we expect that we will incur and maintain substantial amounts of indebtedness in the future. As of December 31, 2010, we had $912.0 million in debt outstanding. As of December 31, 2010, we had committed to purchase $6.2 billion in aircraft, representing 144 new aircraft and four used aircraft. Our current and anticipated indebtedness may limit our cash flow available for capital expenditures, acquisitions and other general corporate purposes and may have a material adverse effect on our earnings and growth prospects.
 
Changes in interest rates may adversely affect our financial results.
 
Changes, both increases and decreases, in our cost of borrowing, as reflected in our composite interest rate, directly impact our net income. Our lease rental stream is generally fixed over the life of our leases, whereas we have used floating-rate debt to finance a significant portion of our aircraft acquisitions. As of December 31, 2010, we had $899.0 million in floating-rate debt. If interest rates increase, we would be obligated to make higher interest payments to our lenders. If we incur significant fixed-rate debt in the future, increased interest rates prevailing in the market at the time of the incurrence of such debt would also increase our interest expense. If our composite rate were to increase by 1.0% we would expect to incur additional interest


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expense on our existing indebtedness as of December 31, 2010, of approximately $9.0 million on an annualized basis, which would put downward pressure on our operating margins.
 
The interest rates that we obtain on our debt financings have several components, including credit spreads, swap spreads, duration, and new issue premiums. These are all incremental to the underlying risk-free rates, as applicable. Volatility in our perceived risk of default or in a market sector’s risk of default will negatively impact on our cost of funds.
 
We currently are not involved in any interest rate hedging activities, but we are contemplating engaging in hedging activities in the future. Any such hedging activities will require us to incur additional costs, and there can be no assurance that we will be able to successfully protect ourselves from any or all adverse interest rate fluctuations at a reasonable cost.
 
Under our Warehouse Facility and other of our financing arrangements, creditors of any subsidiaries we form for purposes of such facilities will have priority over you in the event of a distribution of such subsidiaries’ assets.
 
All of the aircraft and other assets we acquire with the Warehouse Facility are held in subsidiaries of ALC Warehouse Borrower, LLC, a special-purpose, bankruptcy-remote subsidiary of our Company. Liens on those assets will be held by a collateral agent for the benefit of the lenders under such facility. ALC Warehouse Borrower, LLC’s assets will be primarily composed of its investment in the stock or other equity interests of these subsidiaries, which stock or other equity interests will also be subject to liens held by the collateral agent for the benefit of the lenders under such facility. In addition, funds generated from the lease of aircraft in the Warehouse Facility generally are applied first to amounts due to lenders thereunder, with certain exceptions. As a result, the creditors in the Warehouse Facility will have priority over us and you in any distribution of ALC Warehouse Borrower, LLC’s subsidiaries’ assets in a liquidation, reorganization or otherwise. Similarly, creditors of other of our special-purpose, bankruptcy-remote subsidiaries that were established for some of our other financing arrangements will have priority over you in the event of a distribution of such subsidiaries’ assets.
 
We have a high airline customer concentration which makes us more vulnerable to the potential that defaults by one or more of our major airline customers would have a material adverse effect on our cash flow and earnings and our ability to meet our debt obligations.
 
As a newly organized company with a limited operating history, our revenues to date are principally derived from our initial customer base of lessees. The airline industry is cyclical, economically sensitive and highly competitive. Our lessees are affected by fuel prices and shortages, political or economic instability, terrorist activities, changes in national policy, competitive pressures, labor actions, pilot shortages, insurance costs, recessions, health concerns, and other political or economic events adversely affecting the world or regional trading markets. Our lessees’ abilities to react to and cope with the volatile competitive environment in which they operate, as well as our own competitive environment, will likely affect our revenues and income. The loss of one or more of our airline customers or their inability to make operating lease payments due to financial difficulties, bankruptcy or otherwise could have a material adverse effect on our cash flow and earnings. This, in turn, could result in a breach of the covenants contained in any of our long-term debt facilities, possibly resulting in accelerated amortization or defaults and materially adversely affecting our ability to meet our debt obligations.


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If we acquire a high concentration of a particular model of aircraft in our fleet, our business and financial results could be adversely affected by changes in market demand or problems specific to that aircraft model.
 
If we acquire a high concentration of a particular model of aircraft in our fleet, our business and financial results could be adversely affected if the market demand for that model of aircraft declines, if it is redesigned or replaced by its manufacturer or if this type of aircraft experiences design or technical problems. If we acquire a high concentration of a particular aircraft model in our fleet and such model encounters technical or other problems, the value and lease rates of such aircraft will likely decline, and we may be unable to lease such aircraft on favorable terms, if at all. A significant technical problem with a specific type of aircraft could result in the grounding of the aircraft. Any decrease in the value and lease rates of our aircraft may have a material adverse effect on our financial results and growth prospects.
 
The advent of superior aircraft technology or the introduction of a new line of aircraft could cause the aircraft that we acquire to become outdated or obsolete and therefore less desirable, which could adversely affect our financial results and growth prospects.
 
As manufacturers introduce technological innovations and new types of aircraft, some of the aircraft in our fleet could become less desirable to potential lessees. Such technological innovations may increase the obsolescence of existing aircraft at a rate faster than currently anticipated by our management or accounted for in our accounting procedures. New aircraft manufacturers, such as Mitsubishi Aircraft Corporation in Japan and Sukhoi Company (JSC) in Russia, could someday produce aircraft that compete with current offerings from Airbus, ATR, Boeing, Bombardier and Embraer.
 
•  Mitsubishi Aircraft Corporation in Japan, Sukhoi Company (JSC) in Russia and Aviation Industries of China and Commercial Aircraft Corporation of China Ltd. in China will most likely be producing regional jets in the future that compete with existing equipment from Bombardier and Embraer, and it is unclear as to how these offerings could adversely impact the demand and liquidity for the current offerings.
 
•  Additionally, manufacturers in China may develop a narrowbody aircraft that competes with mainstream offerings from Boeing and Airbus, and the new Chinese product could put downward price pressure on and decrease the liquidity for equipment from Boeing and Airbus.
 
•  New aircraft types that are introduced into the market could be more attractive for the target lessees of our aircraft.
 
In addition, the imposition of increased regulation regarding stringent noise or emissions restrictions may make some of our aircraft less desirable and less valuable in the marketplace. Any of these risks may adversely affect our ability to lease or sell our aircraft on favorable terms, if at all, which could have a material adverse effect on our financial results and growth prospects. The advent of new technologies or introduction of a new line of aircraft may materially adversely affect the value of the aircraft in our fleet.


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We may be indirectly subject to many of the economic and political risks associated with emerging markets, which could adversely affect our financial results and growth prospects.
 
Our business strategy emphasizes leasing aircraft to lessees outside of the United States, including to airlines in emerging market countries. Emerging market countries have less developed economies and infrastructure and are often more vulnerable to economic and geopolitical challenges and may experience significant fluctuations in gross domestic product, interest rates and currency exchange rates, as well as civil disturbances, government instability, nationalization and expropriation of private assets and the imposition of taxes or other charges by government authorities. The occurrence of any of these events in markets served by our lessees and the resulting economic instability that may arise, particularly if combined with high fuel prices, could adversely affect the value of our aircraft subject to lease in such countries, or the ability of our lessees, which operate in these markets, to meet their lease obligations. As a result, lessees that operate in emerging market countries may be more likely to default than lessees that operate in developed countries. In addition, legal systems in emerging market countries may be less developed, which could make it more difficult for us to enforce our legal rights in such countries.
 
Further, demand for aircraft is dependent on passenger and cargo traffic, which in turn is dependent on general business and economic conditions. As a result, weak or negative economic growth in emerging markets may have an indirect effect on the value of the assets that we acquire if airlines and other potential lessees are adversely affected. We cannot assure you that the recent global economic downturn will not continue or worsen or that any assets we purchase will not decline in value, which may have an adverse effect on our results of operations or our financial condition. For these and other reasons, our financial results and growth prospects may be negatively impacted by adverse economic and political developments in emerging market countries.
 
Our aircraft require routine maintenance, and if they are not properly maintained, their value may decline and we may not be able to lease or re-lease such aircraft at favorable rates, if at all, which would adversely affect our financial results and growth prospects.
 
We may be exposed to increased maintenance costs for our aircraft associated with a lessee’s failure to properly maintain the aircraft or pay supplemental maintenance rent. If an aircraft is not properly maintained, its market value may decline, which would result in lower revenues from its lease or sale. We enter into leases pursuant to which the lessees are primarily responsible for many obligations, which include maintaining the aircraft and complying with all governmental requirements applicable to the lessee and the aircraft, including operational, maintenance, government agency oversight, registration requirements and airworthiness directives. Failure of a lessee to perform required maintenance during the term of a lease could result in a decrease in value of an aircraft, an inability to re-lease an aircraft at favorable rates, if at all, or a potential grounding of an aircraft. Maintenance failures by a lessee would also likely require us to incur maintenance and modification costs upon the termination of the applicable lease, which could be substantial, to restore the aircraft to an acceptable condition prior to re-leasing or sale. Any failure by our lessees to meet their obligations to perform required scheduled maintenance or our inability to maintain our aircraft may materially adversely affect our financial results, asset values and growth prospects.


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Our aircraft may not at all times be adequately insured either as a result of lessees failing to maintain sufficient insurance during the course of a lease or insurers not willing to cover certain risks.
 
We do not directly control the operation of any aircraft we acquire. Nevertheless, because we hold title, directly or indirectly, to such aircraft, we could be sued or held strictly liable for losses resulting from the operation of such aircraft, or may be held liable for those losses on other legal theories, in certain jurisdictions around the world or claims may be made against us as the owner of an aircraft requiring us to expend resources in our defense. We require our lessees to obtain specified levels of insurance and indemnify us for, and insure against, liabilities arising out of their use and operation of the aircraft. Some lessees may fail to maintain adequate insurance coverage during a lease term, which, although in contravention of the lease terms, would necessitate our taking some corrective action such as terminating the lease or securing insurance for the aircraft, either of which could adversely affect our financial results.
 
In addition, there are certain risks or liabilities that our lessees may face, for which insurers may be unwilling to provide coverage or the cost to obtain such coverage may be prohibitively expensive. For example, following the terrorist attacks of September 11, 2001, non-government aviation insurers significantly reduced the amount of insurance coverage available for claims resulting from acts of terrorism, war, dirty bombs, bio-hazardous materials, electromagnetic pulsing or similar events. Accordingly, we anticipate that our lessees’ insurance or other coverage may not be sufficient to cover all claims that could or will be asserted against us arising from the operation of our aircraft by our lessees. Inadequate insurance coverage or default by lessees in fulfilling their indemnification or insurance obligations will reduce the proceeds that would be received by us in the event we are sued and are required to make payments to claimants, which could have a material adverse effect on our financial results and growth prospects.
 
Incurring significant costs resulting from lease defaults could adversely affect our financial results and growth prospects.
 
If we are required to repossess an aircraft after a lessee default, we may be required to incur significant costs. Those costs likely would include legal and other expenses of court or other governmental proceedings, including the cost of posting surety bonds or letters of credit necessary to effect repossession of an aircraft, particularly if the lessee is contesting the proceedings or is in bankruptcy. In addition, during these proceedings the relevant aircraft would likely not be generating revenue. We could also incur substantial maintenance, refurbishment or repair costs if a defaulting lessee fails to pay such costs and where such maintenance, refurbishment or repairs are necessary to put the aircraft in suitable condition for re-lease or sale. We may also incur storage costs associated with any aircraft that we repossess and are unable immediately to place with another lessee. It may also be necessary to pay off liens, taxes and other governmental charges on the aircraft to obtain clear possession and to remarket the aircraft effectively, including, in some cases, liens that the lessor might have incurred in connection with the operation of its other aircraft. We could also incur other costs in connection with the physical possession of the aircraft.
 
We may also suffer other adverse consequences as a result of a lessee default and the related termination of the lease and the repossession of the related aircraft. It is likely that our rights upon a lessee default will vary significantly depending upon the jurisdiction and the applicable law, including the need to obtain a court order for repossession of the aircraft and/or consents


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for deregistration or re-export of the aircraft. We anticipate that when a defaulting lessee is in bankruptcy, protective administration, insolvency or similar proceedings, additional limitations may apply. Certain jurisdictions give rights to the trustee in bankruptcy or a similar officer to assume or reject the lease or to assign it to a third party, or entitle the lessee or another third party to retain possession of the aircraft without paying lease rentals or performing all or some of the obligations under the relevant lease. In addition, certain of our lessees are owned in whole, or in part, by government-related entities, which could complicate our efforts to repossess our aircraft in that lessee’s domicile. Accordingly, we may be delayed in, or prevented from, enforcing certain of our rights under a lease and in re-leasing the affected aircraft.
 
If we repossess an aircraft, we may not necessarily be able to export or deregister and profitably redeploy the aircraft. For instance, where a lessee or other operator flies only domestic routes in the jurisdiction in which the aircraft is registered, repossession may be more difficult, especially if the jurisdiction permits the lessee or the other operator to resist deregistration. We may also incur significant costs in retrieving or recreating aircraft records required for registration of the aircraft, and in obtaining the Certificate of Airworthiness for an aircraft. If, upon a lessee default, we incur significant costs in connection with repossessing our aircraft, are delayed in repossessing our aircraft or are unable to obtain possession of our aircraft as a result of lessee defaults, our financial results and growth prospects may be materially adversely affected.
 
If our lessees fail to discharge aircraft liens, we may be obligated to pay the aircraft liens, which could adversely affect our financial results and growth prospects.
 
In the normal course of their business, our lessees are likely to incur aircraft liens that secure the payment of airport fees and taxes, customs duties, air navigation charges, including charges imposed by Eurocontrol, the European Organization for the Safety of Air Navigation, landing charges, salvage or other liens that may attach to our aircraft. These liens may secure substantial sums that may, in certain jurisdictions or for certain types of liens, particularly liens on entire fleets of aircraft, exceed the value of the particular aircraft to which the liens have attached. Aircraft may also be subject to mechanics’ liens as a result of routine maintenance performed by third parties on behalf of our lessees. Although we anticipate that the financial obligations relating to these liens will be the responsibility of our lessees, if they fail to fulfill such obligations, the liens may attach to our aircraft and ultimately become our responsibility. In some jurisdictions, aircraft liens may give the holder thereof the right to detain or, in limited cases, sell or cause the forfeiture of the aircraft.
 
Until they are discharged, these liens could impair our ability to repossess, re-lease or sell our aircraft. Our lessees may not comply with the anticipated obligations under their leases to discharge aircraft liens arising during the terms of the leases. If they do not, we may find it necessary to pay the claims secured by such aircraft liens in order to repossess the aircraft. Such payments could materially adversely affect our financial results and growth prospects.


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If our lessees fail to perform as expected and we decide to restructure or reschedule our leases, the restructuring and rescheduling would likely result in less favorable leases, which could have an adverse effect on our financial results and growth prospects.
 
A lessee’s ability to perform its obligations under its lease will depend primarily on the lessee’s financial condition and cash flow, which may be affected by factors outside our control, including:
 
•  competition;
 
•  fare levels;
 
•  passenger and air cargo rates;
 
•  passenger and air cargo demand;
 
•  geopolitical and other events, including war, acts of terrorism, outbreaks of epidemic diseases and natural disasters;
 
•  increases in operating costs, including the price and availability of jet fuel and labor costs;
 
•  labor difficulties;
 
•  economic conditions and currency fluctuations in the countries and regions in which the lessee operates; and
 
•  governmental regulation and associated fees affecting the air transportation business.
 
We anticipate that some lessees may experience a weakened financial condition or suffer liquidity problems, which may lead to lease payment difficulties or breaches of our operating leases. We expect that some of these lessees encountering financial difficulties may seek a reduction in their lease rates or other concessions, such as a decrease in their contribution toward maintenance obligations. Any future downturns in the airline industry could greatly exacerbate the weakened financial condition and liquidity problems of some of these lessees and further increase the risk of delayed, missed or reduced rental payments. We may not correctly assess the credit risk of a lessee, or may not charge lease rates which correctly reflect the related risks, and as a result, lessees may not be able to satisfy their financial and other obligations under their leases. A delayed, missed or reduced rental payment from a lessee would decrease our revenues and cash flow. If we, in the exercise of our remedies under a lease, repossess an aircraft, we may not be able to re-lease the aircraft promptly or at favorable rates.
 
You should expect that restructurings and/or repossessions with some of our lessees will occur in the future. The terms and conditions of possible lease restructurings or reschedulings may result in a significant reduction of lease revenue, which may adversely affect our financial results and growth prospects. If any request for payment restructuring or rescheduling is made and granted, reduced or deferred rental payments may be payable over all or some part of the remaining term of the lease, although the terms of any revised payment schedules may be unfavorable and such payments may not be made. Our default levels would likely increase over time if economic conditions deteriorate. If lessees of a significant number of our aircraft defaulted on their leases, our financial results and growth prospects would be adversely affected.


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Conflicts of interest may arise between us and clients who will utilize our fleet management services, which may adversely affect our business interests.
 
Conflicts of interest may arise between us and third-party aircraft owners, financiers and operating lessors who hire us to perform fleet management services such as leasing, re-leasing, lease management and sales services. These conflicts may arise because services we anticipate providing for these clients are also services we will provide for our own fleet, including the placement of aircraft with lessees. We expect our fleet management services agreements will provide that we will use our reasonable best efforts, but, to the extent that we are in competition with the client for leasing opportunities, we will give priority to our own fleet. Nevertheless, despite these contractual waivers, competing with our fleet management clients in practice may result in strained relationships with them, which may adversely affect our business interests.
 
We may on occasion enter into strategic ventures with the intent that we would serve as the manager of such strategic ventures; however, entering into strategic relationships poses risks in that we most likely would not have complete control over the enterprise, and our financial results and growth prospects could be adversely affected if we encounter disputes, deadlock or other conflicts of interest with our strategic partners.
 
We may on occasion enter into strategic ventures with third parties to take advantage of favorable financing opportunities or tax benefits, to share capital and/or operating risk, and/or to earn fleet management fees. Although we anticipate that we would serve as the manager of any such strategic ventures, it has been our management’s experience that most strategic venture agreements will provide the non-managing strategic partner certain veto rights over various significant actions, including the right to remove us as the manager under certain circumstances. If we were to be removed as the manager from a strategic venture that generates significant management fees, our financial results and growth prospects could be materially and adversely affected. In addition, if we were unable to resolve a dispute with a significant strategic partner that retains material managerial veto rights, we might reach an impasse that could require us to dissolve the strategic venture at a time and in a manner that could result in our losing some or all of our original investment in the strategic venture, which could have a material adverse effect on our financial results and growth prospects.
 
After a period of strong fleet growth, if the rate at which we add aircraft to our fleet decreases, we may be required to recognize deferred tax liabilities accumulated during the growth period, which could have a negative impact on our cash flow.
 
It is typical in the aircraft leasing industry for companies that are continuously acquiring additional aircraft to incur significant tax depreciation, which offsets taxable income but creates a deferred tax liability on the aircraft leasing company’s balance sheet. This deferred tax liability is attributable to the excess of the depreciation claimed for tax purposes over the depreciation claimed for financial statement purposes. While we are currently in a deferred tax asset position, if future growth results in a net deferred tax liability and we are unable to continue to acquire additional aircraft at a sufficient pace, then we will begin to recognize some or all of our deferred tax liability, which could have a negative impact on our cash flow.


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Our business and earnings are affected by general business, financial market and economic conditions throughout the world, which could have a material adverse effect on our cash flow and results of operations.
 
Our business and earnings are affected by general business, financial market and economic conditions throughout the world. As an aircraft leasing business focused on emerging markets, we are particularly exposed to downturns in these emerging markets. A recession or worsening of economic conditions, particularly if combined with high fuel prices, may have a material adverse effect on the ability of our lessees to meet their financial and other obligations under our operating leases, which, if our lessees default on their obligations to us, could have a material adverse effect on our cash flow and results of operations. General business and economic conditions that could affect us include the level and volatility of short-term and long-term interest rates, inflation, employment levels, bankruptcies, demand for passenger and cargo air travel, volatility in both debt and equity capital markets, liquidity of the global financial markets, the availability and cost of credit, investor confidence and the strength of the global economy and the local economies in which we operate.
 
To a large extent, our success also depends upon our ability to access financing on favorable terms, including accessing the public debt and equity markets and bank loans, to finance the purchase of aircraft and repay outstanding debt obligations as they mature. If disruptions in credit markets occur, we may not be able to obtain financing from third parties on favorable terms, if at all.
 
During the recent financial crisis, many companies experienced downward pressure on share prices and had limited or no access to the credit markets, often without regard to their underlying financial strength. If financial market disruption and volatility were to occur again, we cannot assure you that we will not experience an adverse effect, which may be material, on our ability to access capital, on our cost of capital or on our business, financial condition or results of operations.
 
We will be exposed to risk from volatility and disruption in the financial markets in various ways, including:
 
•  difficulty or inability to finance obligations for, or to finance a portion of, the acquisition of aircraft;
 
•  increased risk of default by our lessees resulting from financial market distress, lack of available credit or continuing effects of the global economic recession;
 
•  exposure to increased bank or counterparty risk in the current environment, including the risk that our counterparties will not be able to perform their obligations under contracts effectively locking in interest rates for our debt that has a floating interest rate feature and the risk that, if banks issue letters of credit to us in lieu of cash security deposits from our lessees, such banks may fail to pay when we seek to draw on these letters of credit; and
 
•  the risk that we will not be able to re-finance any of our debt financings, as they come due, on favorable terms or at all.


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Failure to obtain certain required licenses and approvals could negatively affect our ability to re-lease or sell aircraft, which would negatively affect our financial condition and results of operations.
 
Lessees are subject to extensive regulation under the laws of the jurisdictions in which they are registered and in which they operate. As a result, we expect that certain aspects of our leases will require licenses, consents or approvals, including consents from governmental or regulatory authorities for certain payments under our leases and for the import, export or deregistration of the aircraft. Subsequent changes in applicable law or administrative practice may increase such requirements and governmental consent, once given, could be withdrawn. Furthermore, consents needed in connection with the future re-leasing or sale of an aircraft may not be forthcoming. Any of these events could adversely affect our ability to re-lease or sell aircraft, which would negatively affect our financial condition and results of operations.
 
We may not be able to protect our intellectual property, which may adversely affect our business and operations.
 
On May 20, 2010, we filed a service mark application for our corporate logo with the United States Patent and Trademark Office (the “USPTO”). On September 9, 2010, the USPTO issued a non-substantive Office Action following examination of our service mark application and set a due date of March 9, 2011 for our response, and we intend to respond to such comments in due course. We have not otherwise sought registration of, and do not own or possess licenses or other rights to use, any patents, trade secrets or other proprietary know-how related to our intended business and operations. We have not sought registration of copyrights that may be necessary for us to conduct our business as described in this prospectus. There can be no assurances that our service mark application will be approved, or that infringement or other claims will not be asserted or prosecuted against us in the future, or that prosecutions will not materially and adversely affect our business, results of operations and financial condition. Any such claims, with or without merit, could be time consuming to management, resulting in costly litigation and diversion of resources and personnel. Moreover, it is not clear that we will be able to protect the use of our name by others because the name may be deemed generic and not subject to protection under applicable laws.
 
Certain of our subsidiaries may be restricted in their ability to make distributions to us.
 
The subsidiaries that hold our aircraft are legally distinct from us, and some of these subsidiaries are restricted from paying dividends or otherwise making funds available to us pursuant to agreements governing our indebtedness. All of our principal debt facilities have financial covenants. If we are unable to comply with these covenants, then the amounts outstanding under these facilities may become immediately due and payable, cash generated by our subsidiaries affected by these facilities may be unavailable to us and/or we may be unable to draw additional amounts under these facilities. The events that could cause some of our subsidiaries not to be in compliance with their loan agreements, such as a lessee default, may be beyond our control, but they nevertheless could have a substantial adverse impact on the amount of our cash flow available to fund working capital, make capital expenditures and satisfy other cash needs. For a description of the operating and financial restrictions in our debt facilities, see the section titled “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources.”


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Risks relating to the aircraft leasing industry
 
A significant discounting of prices on new aircraft by manufacturers or increase in the rate of new aircraft production may indirectly affect demand for used aircraft we purchase for leasing and our financial condition.
 
The recent financial crisis has had a significant impact on the values of new aircraft as some buyers lost some or all of the funding for orders they had placed. As a result, some orders for new aircraft were cancelled or deferred. Ex-Im Bank and the ECAs supported debt financing for many new deliveries during the recent financial crisis but equity was still needed for these financings, which limited buyers’ access to these agencies. Consequently, to secure sales of new aircraft and maintain revenues, manufacturers sold many of these aircraft at significant discounts. If there is another downturn in the financial markets or economy and manufacturers again drive down the price of new aircraft, this may have an adverse effect on the value of any aircraft we own and our ability to lease them at attractive rates. We intend for used aircraft to make up a part of our target assets and our ability to extend leases or create new leases may be adversely affected by a surplus in the availability of new aircraft. Further, if manufacturers discount the prices of new aircraft, it may require us to mark down the value of aircraft we carry on our balance sheet or depreciate our aircraft portfolio at a faster rate. Thus, a significant decrease in the prices of new aircraft could adversely affect our results of operations and financial condition.
 
Airbus has announced that it will have two new engine variants available for its A319/A320/A321 family of aircraft, which could decrease the value and lease rates of aircraft we acquire.
 
On December 1, 2010, Airbus announced the launch of the NEO program, which involves the offering of two new engine types—one from Pratt & Whitney, a division of United Technologies Corporation, and the other from CFM International, Inc.—on certain Airbus A319/A320/A321 aircraft delivering in 2016 and thereafter. Airbus proposes to charge a price premium for A319/A320/A321 aircraft equipped with these new engines. The availability of A319/A320/A321 aircraft with these new engine types may have an adverse effect on residual value and future lease rates on current A319/A320/A321 aircraft. The development of these new engine options could decrease the desirability of the current A319/A320/A321 aircraft that are not equipped with these new engines and thereby increase the supply of this type of aircraft in the marketplace. This increase in supply could, in turn, reduce both lease rates and future residual values for this type of aircraft. It is also possible that other airframe manufacturers could embark on similar programs, which could have similar effects on residual values and lease rates of the aircraft manufactured by these manufacturers.
 
From time to time, the aircraft industry has experienced periods of oversupply during which lease rates and aircraft values have declined, and any future oversupply could materially adversely affect our financial results and growth prospects.
 
Historically, the aircraft leasing business has experienced periods of aircraft oversupply. The oversupply of a specific type of aircraft is likely to depress the lease rates for and the value of that type of aircraft. The supply and demand for aircraft is affected by various cyclical and non-cyclical factors that are outside of our control, including:
 
•  passenger and air cargo demand;
 
•  fuel costs and general economic conditions;


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•  geopolitical events, including war, prolonged armed conflict and acts of terrorism;
 
•  outbreaks of communicable diseases and natural disasters;
 
•  governmental regulation;
 
•  interest rates;
 
•  the availability of credit;
 
•  airline restructurings and bankruptcies;
 
•  manufacturer production levels and technological innovation;
 
•  manufacturers merging or exiting the industry or ceasing to produce aircraft types;
 
•  retirement and obsolescence of aircraft models;
 
•  reintroduction into service of aircraft previously in storage; and
 
•  airport and air traffic control infrastructure constraints.
 
In addition, due to the recent economic downturn and increased financial pressures, a number of operating lessors may be sold or merged with other operating lessors. The sale of any of these operating lessors (which may include a reduction in their aircraft fleets) and, in particular, their aircraft portfolios, could increase supply levels of used and older aircraft in the market.
 
These factors may produce sharp and prolonged decreases in aircraft lease rates and values and have a material adverse effect on our ability to lease or re-lease the commercial aircraft that we ultimately acquire and on our ability to sell such aircraft and parts at acceptable prices. Any of these factors could materially and adversely affect our financial results and growth prospects.
 
The value of the aircraft we acquire and the market rates for leases could decline and this could have a material adverse effect on financial results and growth prospects of aircraft lessors.
 
Aircraft values and market rates for leases have from time to time experienced sharp decreases due to a number of factors including, but not limited to, decreases in passenger and air cargo demand, increases in fuel costs, government regulation and increases in interest rates. Operating leases place a greater risk of realizations of residual values on aircraft lessors, because only a portion of the equipment’s value is covered by contractual cash flows at lease inception. In addition to factors linked to the aviation industry generally, many other factors may affect the value of the aircraft that we acquire and market rates for leases, including:
 
•  the particular maintenance, operating history and documentary records of the aircraft;
 
•  the number of operators using that type of aircraft;
 
•  aircraft age;
 
•  the regulatory authority under which the aircraft is operated;
 
•  any renegotiation of an existing lease on less favorable terms;
 
•  the negotiability of clear title free from mechanics’ liens and encumbrances;


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•  any regulatory and legal requirements that must be satisfied before the aircraft can be purchased, sold or re-leased;
 
•  compatibility of aircraft configurations or specifications with other aircraft owned by operators of that type;
 
•  comparative value based on newly manufactured competitive aircraft; and
 
•  the availability of spare parts.
 
Any decrease in the value of aircraft that we acquire and market rates for leases, which may result from the above factors or other unanticipated factors, may have a material adverse effect on our financial results and growth prospects.
 
Competition from other aircraft lessors with greater resources or a lower cost of capital than ours could adversely affect our financial results and growth prospects.
 
The aircraft leasing industry is highly competitive, and although it is comprised of over 100 aircraft lessors, the top five lessors in terms of the number of aircraft owned control more than 50% of the total number of aircraft that are currently on lease. Initially, we believe most of our primary competitors—those top five aircraft lessors—will be significantly larger, have a longer operating history and may have greater resources or lower cost of capital than ours; accordingly, they may be able to compete more effectively in one or more of the markets we attempt to enter.
 
In addition, we may encounter competition from other entities in the acquisition of aircraft such as:
 
•  airlines;
 
•  financial institutions, including those seeking to dispose of re-possessed aircraft at distressed prices;
 
•  aircraft brokers;
 
•  public and private partnerships, investors and funds with more capital to invest in aircraft; and
 
•  other aircraft leasing companies that we do not currently consider our major competitors.
 
Competition for a leasing transaction is based principally upon lease rates, delivery dates, lease terms, reputation, management expertise, aircraft condition, specifications and configuration and the availability of the types of aircraft necessary to meet the needs of the customer. Some of our potential competitors may have significantly greater operating and financial resources and access to lower capital costs than we have. In addition, some competing aircraft lessors may have a lower overall cost of capital and may provide inducements to potential lessees that we cannot match. Competition in the purchase and sale of used aircraft is based principally on the availability of used aircraft, price, the terms of the lease to which an aircraft is subject and the creditworthiness of the lessee, if any. We likely will not always be able to compete successfully with our competitors and other entities, which could materially adversely affect our financial results and growth prospects.
 
Given the financial condition of the airline industry, many airlines have reduced their capacity by eliminating select types of aircraft from their fleets, affecting the prices both of the aircraft


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types they eliminate and the types they continue to use. This elimination of certain aircraft from their fleets has resulted in an increase in the availability of such aircraft in the market, a decrease in rental rates for such aircraft and a decrease in market values of such aircraft. We cannot assure you that airlines will continue to acquire the same types of aircraft, or that we will not acquire aircraft that cease to be in use by our potential lessees.
 
There are a limited number of airframe and engine manufacturers and the failure of any manufacturer to meet its delivery obligations to us could adversely affect our financial results and growth prospects.
 
The supply of commercial aircraft is dominated by a few airframe manufacturers, including Boeing, Airbus, Embraer, ATR and Bombardier, and a limited number of engine manufacturers, such as GE Aircraft Engines, Rolls-Royce plc, Pratt & Whitney, a division of United Technologies Corporation, IAE International Aero Engines AG and CFM International, Inc. As a result, we will be dependent on the success of these manufacturers in remaining financially stable, producing products and related components which meet the airlines’ demands and fulfilling any contractual obligations they may have to us.
 
Should the manufacturers fail to respond appropriately to changes in the market environment or fail to fulfill any contractual obligations they might have to us, we may experience:
 
•  missed or late delivery of aircraft and a potential inability to meet our contractual obligations owed to any of our then lessees, resulting in potential lost or delayed revenues, lower growth rates and strained customer relationships;
 
•  an inability to acquire aircraft and related components on terms which will allow us to lease those aircraft to airline customers at a profit, resulting in lower growth rates or a contraction in our aircraft fleet;
 
•  a market environment with too many aircraft available, potentially creating downward pressure on demand for the anticipated aircraft in our fleet and reduced market lease rates and sale prices; or
 
•  a reduction in our competitiveness due to deep discounting by the manufacturers, which may lead to reduced market lease rates and aircraft values and may affect our ability to remarket or sell some of the aircraft in our fleet at a profit or at all.
 
There have been recent well-publicized delays by Boeing and Airbus in meeting stated deadlines in bringing new aircraft to market. If there are manufacturing delays for aircraft for which we have made lease commitments, some or all of our affected lessees could elect to terminate their lease arrangements with respect to such delayed aircraft. Any such termination could strain our relations with those lessees going forward and adversely affect our financial results and growth prospects.
 
Additional terrorist attacks or the fear of such attacks, even if not made directly on the airline industry, could negatively affect lessees and the airline industry.
 
As a result of the September 11, 2001 terrorist attacks in the United States and subsequent terrorist attacks abroad, notably in the Middle East, Southeast Asia and Europe, increased security restrictions were implemented on air travel, costs for aircraft insurance and security measures increased, passenger and cargo demand for air travel decreased, and operators faced,


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and, to a certain extent, continue to face, increased difficulties in acquiring war risk and other insurance at reasonable costs. The September 11, 2001 terrorist attacks resulted in substantial flight disruption costs caused by FAA-imposed temporary grounding of the U.S. airline industry’s fleet, significantly increased security costs and associated passenger inconvenience, increased insurance costs, substantially higher ticket refunds and significantly decreased traffic.
 
Additional terrorist attacks, even if not made directly on the airline industry, or the fear of or any precautions taken in anticipation of such attacks (including elevated national threat warnings or selective cancellation or reduction of flights), could materially adversely affect lessees and the airline industry. The wars in Iraq and Afghanistan and additional international hostilities, including heightened terrorist activity, could also have a material adverse impact on our lessees’ financial condition, liquidity and results of operations. Lessees’ financial resources might not be sufficient to absorb the adverse effects of any further terrorist attacks or other international hostilities involving the United States or U.S. interests, which could result in significant decreases in aircraft leasing transactions thereby materially adversely affecting our results of operations.
 
Increases in fuel costs could materially adversely affect our lessees and by extension the demand for our aircraft.
 
Fuel costs represent a major expense to airlines, and fuel prices fluctuate widely depending primarily on international market conditions, geopolitical and environmental events, regulatory changes including those related to greenhouse gas emissions and currency exchange rates. If airlines are unable to increase ticket prices to offset fuel price increases, their cash flows will suffer. Natural disasters can significantly affect fuel availability and prices. Other events, such as decisions by the Organization of the Petroleum Exporting Countries regarding their members’ oil output, the increase in global demand from countries such as China and reports in 2008 that Russia’s oil production had peaked, have increased and may continue to increase the volatility of fuel prices.
 
The high cost of fuel in 2008 had, and fuel cost increases that could occur in the future may continue to have, a material adverse impact on airline profitability. Due to the competitive nature of the airline industry, airlines may not be able to pass on increases in fuel prices to their passengers by increasing fares. If airlines are successful in increasing fares, demand for air travel may be adversely affected. In addition, airlines may not be able to manage fuel cost risk by appropriately hedging their exposure to fuel price fluctuations. If fuel prices increase further, they are likely to cause our lessees to incur higher costs or experience reduced revenues. Consequently, these conditions may:
 
•  affect our lessees’ ability to make rental and other lease payments;
 
•  result in lease restructurings and aircraft and engine repossessions;
 
•  increase our costs of maintaining and marketing aircraft;
 
•  impair our ability to re-lease aircraft and other aviation assets or re-lease or otherwise sell our assets on a timely basis at favorable rates; or
 
•  reduce the sale proceeds received for aircraft or other aviation assets upon any disposition.
 
Such effects could materially adversely affect demand for our aircraft.


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A deterioration in the financial condition of the airline industry would have an adverse impact on our ability to lease our aircraft and sustain our revenues.
 
The financial condition of the airline industry is of particular importance to us because we plan to lease most of our aircraft to passenger airlines. Our ability to achieve our primary business objectives will depend on the financial condition and growth of the airline industry. The risks affecting airlines are generally out of our control, but because these risks have a significant impact on our intended airline customers, they will affect us as well. We may experience:
 
•  downward pressure on demand for our aircraft and reduced market lease rates and lease margins;
 
•  a higher incidence of lessee defaults, lease restructurings, repossessions and airline bankruptcies and restructurings, resulting in lower lease margins due to maintenance and legal costs associated with the repossession, as well as lost revenue for the time our aircraft are off lease and possibly lower lease rates from our new lessees; and
 
•  an inability to lease aircraft on commercially acceptable terms, resulting in lower lease margins due to aircraft not earning revenue and resulting in storage, insurance and maintenance costs.
 
SARS, H1N1 and other epidemic diseases may hinder airline travel.
 
The outbreak of severe acute respiratory syndrome (“SARS”) materially adversely affected passenger demand for air travel in 2003. In addition, since 2003, there have been several outbreaks of avian influenza, or the bird flu, beginning in Asia and, eventually, spreading to certain parts of Africa and Europe. More recently, there was a global outbreak of the H1N1 virus, or the swine flu, which depressed travel due to fears of a global pandemic. Additional outbreaks of SARS, bird flu, swine flu or other pandemic diseases, or the fear of such events, could provoke responses, including government-imposed travel restrictions, which could negatively affect passenger demand for air travel and the financial condition of the aviation industry.
 
Natural disasters and other natural phenomena may disrupt air travel.
 
Air travel can be disrupted, sometimes severely, by the occurrence of natural disasters and other natural phenomena. For example, in April 2010, the Eyjafjallajökull volcano in Iceland erupted, releasing a massive amount of ash and glass particles into the air. The volcanic ash traveled across Europe, causing the closure of airports and grounding of air traffic in, and canceling of flights through, affected areas. The airline industry incurred substantial losses from the disruption to air travel caused by this volcanic eruption, negatively affecting the financial condition of certain major airlines and the aviation industry as a whole.
 
The effects of various environmental regulations may negatively affect the airline industry. This may cause lessees to default on their lease payment obligations to us.
 
Governmental regulations regarding aircraft and engine noise and emissions levels apply based on where the relevant aircraft is registered and operated. For example, jurisdictions throughout the world have adopted noise regulations which require all aircraft to comply with noise level standards. In addition to the current requirements, the United States and the International Civil Aviation Organization (the “ICAO”), have adopted a new, more stringent set of standards for


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noise levels which applies to engines manufactured or certified on or after January 1, 2006. Currently, U.S. regulations would not require any phase-out of aircraft that qualify with the older standards applicable to engines manufactured or certified prior to January 1, 2006, but the European Union has established a framework for the imposition of operating limitations on aircraft that do not comply with the new standards and incorporated aviation-related emissions into the European Union’s Emission Trading Scheme beginning in 2012. These regulations could limit the economic life of the aircraft and engines, reduce their value, limit our ability to lease or sell the non-compliant aircraft and engines or, if engine modifications are permitted, require us to make significant additional investments in the aircraft and engines to make them compliant.
 
In addition to more stringent noise restrictions, the United States and other jurisdictions are beginning to impose more stringent limits on nitrogen oxide, carbon monoxide and carbon dioxide emissions from engines, consistent with current ICAO standards. These limits generally apply only to engines manufactured after 1999. Because aircraft engines are replaced from time to time in the usual course, it is likely that the number of such engines would increase over time. Concerns over global warming could result in more stringent limitations on the operation of aircraft powered by older, noncompliant engines, as well as newer engines.
 
European countries generally have relatively strict environmental regulations that can restrict operational flexibility and decrease aircraft productivity. The European Parliament has confirmed that aviation is to be included in the European Union’s Emissions Trading Scheme starting in 2012. This inclusion could possibly distort the European air transport market, leading to higher ticket prices and ultimately a reduction in the number of airline passengers. In response to these concerns, European airlines have established the Committee for Environmentally Friendly Aviation to promote the positive environmental performance of airlines. The United Kingdom has doubled its air passenger duties, effective February 1, 2007, in recognition of the environmental costs of air travel. Similar measures may be implemented in other jurisdictions as a result of environmental concerns.
 
Compliance with current or future regulations, taxes or duties imposed to deal with environmental concerns could cause lessees to incur higher costs and to generate lower net revenues, resulting in an adverse impact on their financial conditions. Consequently, such compliance may affect lessees’ ability to make rental and other lease payments and reduce the value we receive for the aircraft upon any disposition, which could have an adverse effect on our financial results and growth prospects.
 
Aircraft have limited economically useful lives and depreciate over time, which can adversely affect the financial condition and growth prospects of aircraft lessors.
 
As commercial aircraft age, they will depreciate and generally the aircraft will generate lower revenues and cash flows. We must be able to replace such older depreciated aircraft with newer aircraft, or our ability to maintain or increase our revenues and cash flows will decline. In addition, since we depreciate our aircraft for accounting purposes on a straight-line basis to the aircraft’s residual value over its estimated useful life, if we dispose of an aircraft for a price that is less than the depreciated book value of the aircraft on our balance sheet, we will recognize a loss on the sale.


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A new standard for lease accounting is expected to be announced in the future, but we are unable to predict the impact of such a standard at this time.
 
In August 2010 the Financial Accounting Standards Board (“FASB”) issued an Exposure Draft that proposes substantial changes to existing lease accounting, which will affect all lease arrangements. The FASB’s proposal requires that all leases be recorded on the statement of financial position of both the lessee and lessor.
 
Under the proposed accounting model, lessees will be required to record an asset representing the right-to-use the leased item for the lease term (the “Right-of-Use Asset”) and a liability to make lease payments. The Right-of-Use Asset and liability incorporate the rights, including renewal options, and obligations, including contingent payments and termination payments, arising under the lease and are based on the lessee’s assessment of expected payments to be made over the lease term. The proposed model requires measuring these amounts at the present value of the future expected payments.
 
Under the proposed accounting model, lessors will apply one of two approaches to each lease based on whether the lessor retains exposure to significant risks or benefits associated with the underlying asset, as defined. The performance obligation approach will be applied when the lessor has retained exposure to significant risks or benefits associated with the underlying lease, and the de-recognition approach will apply when the lessor does not retain significant risks or benefits associated with the underlying asset.
 
Under both the performance obligation and the de-recognition approaches, lessors will recognize an asset for their right to receive lease payments (a “Lease Receivable”). The Lease Receivable will be initially measured based on the present value of the lease payments expected to be received over the lease term. The expected lease payments include fixed and contingent rentals, residual value guarantees and lease termination penalties. The recognized lease term will be the longest possible lease term. Subsequently, the lessor will measure the Lease Receivable at amortized cost using the interest method. The lessor will recognize interest income over the lease term and the lease payments will reduce the Lease Receivable.
 
Under the performance obligation approach, the underlying leased asset is considered to remain the lessor’s economic resource, and the lessor is obligated to allow the lessee to use the underlying asset during the term of the lease. The lessor will initially recognize a Lease Receivable and a lease liability (a “Performance Obligation”) for its obligation to allow the lessee to use the leased asset. The Performance Obligation is initially the same amount as the measurement of the Lease Receivable. Under the performance obligation approach, income is recognized as the Performance Obligation is reduced in a systematic and rational manner based on the pattern of usage. No income is recognized at the beginning of a lease under this approach.
 
Under the de-recognition approach, some of the economic benefits associated with the leased asset are considered to transfer to the lessee in exchange for an unconditional right to receive lease payments. The lessor will recognize a Lease Receivable and de-recognize the portion of the underlying asset representing the economic benefits that were transferred to the lessee. Any remaining economic benefits not transferred to the lessee will be recognized by the lessor as a residual asset. Income or loss is recognized at the beginning of the lease under this approach.


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The comment period for this proposal ended in December 2010 and the FASB intends to issue a final standard in 2011. The proposal does not include a proposed effective date, rather it is expected to be considered as part of the evaluation of the effective dates for the major projects currently undertaken by the FASB. At present management is unable to assess the effects the adoption of the new standard will have on our financial statements. We believe the presentation of our financial statements, and those of our lessees, will change; however, we do not anticipate that the accounting pronouncement will change the fundamental economic reasons that airlines lease aircraft.
 
Risks relating to this offering
 
There is currently no public market for our Class A Common Stock, and a market for our Class A Common Stock may not develop or be sustained, which could adversely affect the liquidity and price of our Class A Common Stock.
 
Prior to this offering, there has been no public market for our Class A Common Stock. Although we have applied to list our Class A Common Stock on          , an active public market for our shares may not develop or be sustained after this offering. The initial public offering price for our Class A Common Stock will be determined through our negotiations with the underwriters and may not be indicative of the market price of our Class A Common Stock after this offering. If you purchase shares of our Class A Common Stock, you may not be able to resell those shares at or above the initial public offering price, or at all. We cannot predict the extent to which investor interest in our Company will lead to the development of an active trading market on           or otherwise or how liquid that market might become. An active public market for our Class A Common Stock may not develop or be sustained after this offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of Class A Common Stock at a price that is attractive to you, or at all.
 
The market price and trading volume of our Class A Common Stock may be volatile, which could result in rapid and substantial losses for our stockholders.
 
Even if an active trading market develops, the market price of our Class A Common Stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume of our Class A Common Stock may fluctuate and cause significant price variations to occur. If the market price of our Class A Common Stock declines significantly, you may be unable to resell your shares at or above the initial public offering price, if at all. We cannot assure you that the market price of our common shares will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our Class A Common Stock include:
 
•  announcements concerning our competitors, the airline industry or the economy in general;
 
•  announcements concerning the availability of the type of aircraft we own;
 
•  general and industry-specific economic conditions;
 
•  changes in the price of aircraft fuel;
 
•  changes in financial estimates or recommendations by securities analysts or failure to meet analysts’ performance expectations;
 
•  additions or departures of key members of management;


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•  any increased indebtedness we may incur in the future;
 
•  speculation or reports by the press or investment community with respect to us or our industry in general;
 
•  announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments;
 
•  changes or proposed changes in laws or regulations affecting the airline industry or enforcement of these laws and regulations, or announcements relating to these matters; and
 
•  general market, political and economic conditions, including any such conditions and local conditions in the markets in which our lessees are located.
 
These broad market and industry factors may decrease the market price of our Class A Common Stock, regardless of our actual operating performance. The stock market in general has from time to time experienced extreme price and volume fluctuations, including periods of sharp decline, as in late 2008 and early 2009. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
 
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
 
The trading market for our Class A Common Stock will depend in part on the research and reports that securities or industry analysts publish about us, our business and our industry. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our Company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
 
Future offerings of debt or equity securities by us may adversely affect the market price of our Class A Common Stock.
 
In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of Class A Common Stock or offering debt or additional equity securities, including commercial paper, medium-term notes, senior or subordinated notes or preferred shares. Issuing additional shares of Class A Common Stock or other additional equity offerings may dilute the economic and voting rights of our existing stockholders or reduce the market price of our Class A Common Stock, or both. Upon liquidation, holders of such debt securities and preferred shares, if issued, and lenders with respect to other borrowings, would receive a distribution of our available assets prior to the holders of our Class A Common Stock. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our Class A Common Stock. Because our decision to issue securities in any future


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offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our Class A Common Stock bear the risk of our future offerings reducing the market price of our Class A Common Stock and diluting their share holdings in us. See “Description of capital stock.”
 
Investors in this offering will suffer immediate and substantial dilution.
 
The initial public offering price of our Class A Common Stock will be substantially higher than the pro forma net tangible book value per share issued and outstanding immediately after this offering. Our net tangible book value per share as of December 31, 2010 was approximately $      and represents the amount of book value of our total tangible assets reduced by the book value of our total liabilities and divided by the number of shares of our Common Stock then issued and outstanding. Investors who purchase Class A Common Stock in this offering will pay a price per share that substantially exceeds the net tangible book value per share immediately after this offering. If you purchase Class A Common Stock in this offering, you will experience immediate and substantial dilution of $      in the net tangible book value per share, based upon the initial public offering price of $      per share, the mid-point of the estimated price range shown on the front cover of this prospectus. Investors who purchase Class A Common Stock in this offering will have purchased     % of the shares issued and outstanding immediately after the offering, but will have paid     % of the total consideration for those shares.
 
Since we have no current plans to declare or pay cash dividends on our Common Stock, you may not receive any return on investment unless you sell your Common Stock for a price greater than that which you paid for it.
 
We have no current plans to declare or pay any dividends to our stockholders. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on various factors, including our results of operations, our financial condition, our earnings, our cash requirements, legal restrictions, regulatory restrictions, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, you may have to sell some or all of your shares of our Common Stock in order to generate cash flow from your investment. You may not receive a gain on your investment when you sell our Common Stock and may lose some or all of the amount of your investment. Investors seeking cash dividends in the foreseeable future should not purchase our Class A Common Stock.
 
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
 
As a public company, we will incur significant legal, accounting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We will incur costs associated with the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules implemented or to be implemented by the Securities and Exchange Commission (the “SEC”) and the requirements of          . The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities


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more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees or as our executive officers and may divert management’s attention. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Common Stock, fines, sanctions and other regulatory action and potentially civil litigation.
 
If we do not timely satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, the trading price of our Class A Common Stock could be adversely affected.
 
As a company with publicly-traded securities, we will be subject to Section 404 of the Sarbanes-Oxley Act of 2002. This law requires us to document and test the effectiveness of our internal controls over financial reporting in accordance with an established internal control framework and to report on our conclusion as to the effectiveness of our internal controls over financial reporting. The cost to comply with this law will affect our net income adversely. Any delays or difficulty in satisfying the requirements of Section 404 could, among other things, cause investors to lose confidence in, or otherwise be unable to rely on, the accuracy of our reported financial information, which could adversely affect the trading price of our Class A Common Stock. In addition, if we fail to comply with Section 404, we could be subject to regulatory scrutiny and sanctions, which could include the delisting of our Class A Common Stock.
 
Provisions in Delaware law and our restated certificate of incorporation and amended and restated bylaws may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Common Stock and could entrench management.
 
Our restated certificate of incorporation and amended and restated bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests, including the ability of our board of directors to designate the terms of and issue new series of preferred stock, a prohibition on our stockholders from calling special meetings of the stockholders, and advance notice requirements for stockholder proposals and director nominations. In addition, Section 203 of the Delaware General Corporation Law, which we have not opted out of, prohibits a public Delaware corporation from engaging in certain business combinations with an “interested stockholder” (as defined in such section) for a period of three years following the time that such stockholder became an interested stockholder without the prior consent of our board of directors. The effect of Section 203 of the Delaware General Corporation Law, as well as these charter and bylaws provisions, may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. See “Description of capital stock—Certain anti-takeover provisions of Delaware law and our restated certificate of incorporation and amended and restated bylaws.”
 


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Forward-looking statements
 
Statements in this prospectus that are not historical facts are hereby identified as “forward-looking statements,” including any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance that are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described in the section titled “Risk factors” and elsewhere in this prospectus, including the exhibits hereto, including the following factors, among others:
 
•  our status as a recently organized corporation with a limited operating history;
 
•  our inability to make acquisitions of, or to lease, aircraft on favorable terms;
 
•  our inability to obtain additional financing on favorable terms, if required, to complete the acquisition of sufficient aircraft as currently contemplated or to fund the operations and growth of our business;
 
•  our inability to obtain refinancing prior to the time our debt matures;
 
•  impaired financial condition and liquidity of our lessees;
 
•  deterioration of economic conditions in the commercial aviation industry generally;
 
•  increased maintenance, operating or other expenses or changes in the timing thereof;
 
•  changes in the regulatory environment;
 
•  our inability to deploy effectively the net proceeds of this offering;
 
•  potential natural disasters and terrorist attacks and the amount of our insurance coverage, if any, relating thereto; and
 
•  the other risks identified in this offering memorandum including, without limitation, those under the sections titled “Risk factors,” “Business” and “Certain relationships and related party transactions.”
 
All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.


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Use of proceeds
 
We estimate that our gross proceeds from the sale of           shares of our Class A Common Stock in this offering will be approximately $      (approximately $      if the underwriters fully exercise their option to purchase additional shares of Class A Common Stock), assuming an initial public offering price of $      per common share, the mid-point of the range of prices indicated on the front cover of this prospectus. After deducting the underwriting discounts and commissions of this offering, we expect to receive net proceeds of approximately $      (approximately $      if the underwriters fully exercise their option to purchase additional shares of Class A Common Stock).
 
We currently intend to use the net proceeds of this offering to fund the acquisition of commercial aircraft and for general corporate purposes.
 
Pending the use of any proceeds, we intend to invest the net proceeds of this offering in short-term interest bearing bank deposits or short-term interest bearing securities issued or guaranteed as to principal or interest by the United States or a person controlled by the government of the United States.
 
We will have broad discretion over the timing and manner in which we apply the net proceeds that we receive from this offering. The amount and timing of what we actually spend for the intended uses of proceeds described above may vary significantly and will depend on a number of factors, including our future revenues and cash generated by our operations and the other factors described in this prospectus, including under the section titled “Risk factors.”


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Dividend policy
 
We have no current plans to declare or pay any cash or other dividends on our Common Stock. We intend to reinvest cash flow generated by operations to finance the future development and expansion of our business. In addition, in the future we may enter into credit agreements or other borrowing arrangements that impose restrictions on the declaration or payment of dividends. Our board of directors may consider the payment of a cash dividend in the future. Any determination to pay cash dividends in the future will be at the discretion of our board of directors and will depend on various factors, including our results of operations, our financial condition, our earnings, our cash requirements, legal restrictions, regulatory restrictions, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, you may need to sell your shares of our Common Stock to generate cash flow from your investment or to realize a return on your investment, and you may not be able to sell your shares at or above the initial public offering price, or at all. See “Risk factors—Since we have no current plans to declare or pay cash dividends on our Common Stock, you may not receive any return on investment unless you sell your Common Stock for a price greater than that which you paid for it.”


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Capitalization
 
The following table sets forth our capitalization as of December 31, 2010, on an actual basis and on a pro forma as adjusted basis to give effect to the issuance and sale by us of           shares of our Class A Common Stock at an assumed initial public offering price of $      per share, the mid-point of the estimated price range shown on the cover of this prospectus, after deducting the underwriting discount and estimated offering expenses payable by us.
 
The pro forma as adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based upon the initial public offering price for the offering of our Class A Common Stock and other terms of the offering of our Class A Common Stock determined at pricing. You should read the information set forth below in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and our financial statements and related notes appearing elsewhere in this prospectus.
 
                   
    As of December 31,
 
    2010  
            Pro forma
 
(dollars in millions, except share amounts)   Actual       as adjusted  
Cash and cash equivalents
  $               $        
     
     
Debt financing
                 
Shareholders’ equity
                 
Preferred Stock, $0.01 par value, 50,000,000 shares authorized, no shares issued or outstanding, actual and as adjusted
                 
Class A Common Stock, $0.01 par value, 63,563,810 shares issued and outstanding, actual;      shares issued and outstanding, as adjusted
                 
Class B Non-Voting Common Stock, $0.01 par value, 1,829,339 shares issued and outstanding, actual and as adjusted
                 
Paid-in capital
                 
Accumulated deficit
                 
     
     
Total shareholders’ equity
                 
     
     
Total capitalization
  $         $    
                   


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Dilution
 
If you invest in our Class A Common Stock, your interest will be diluted to the extent of the difference between the price per share you pay and our net tangible book value per share immediately after this offering. Our pro forma net tangible book value per share represents the amount of book value of our total tangible assets reduced by the book value of our total liabilities and divided by the pro forma number of shares of Common Stock outstanding after this offering. The pro forma financial information set forth below reflects adjustments to the net tangible book value of our Common Stock to give effect to this offering. For a description of these adjustments, see “Capitalization.”
 
Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of our Class A Common Stock in this offering and the pro forma net tangible book value per share of our Common Stock as adjusted for the expected sale of           shares of our Class A Common Stock by us in this offering at an assumed initial public offering price of $      per share, the mid-point of the estimated price range shown on the front cover of this prospectus, and for our receipt of the estimated net proceeds of that sale after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us.
 
Our net tangible book value as of December 31, 2010 was approximately $      million, or $      per share of our Common Stock. Based on the foregoing, our pro forma, as adjusted net tangible book value as of the completion of this offering would be approximately $      million, or $      per share of our Common Stock. This amount represents an immediate increase in net tangible book value of $      per share to our stockholders as of December 31, 2010, and an immediate dilution in net tangible book value of $      per share of our Class A Common Stock to purchasers in this offering. The following table illustrates this per share dilution:
 
         
Per share offering price in this offering before any transaction costs
  $        
Pro forma net tangible book value of each share of our Common Stock as of December 31, 2010
  $    
Increase in net tangible book value of each share of our Common Stock attributable to new investors
  $    
Pro forma, as adjusted net tangible book value of each share of our Common Stock assuming the completion of this offering
  $    
Dilution in pro forma net tangible book value of each share of our Class A Common Stock to new investors
  $    
 
 
 
If the underwriters exercise in full their overallotment option to purchase or place an additional           shares, dilution per share to new investors would be approximately $      based on the assumptions set forth above.


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The following table summarizes, as of December 31, 2010, on the pro forma basis, as adjusted, described above, the differences between existing stockholders and new investors with respect to the number of shares of our Common Stock purchased from us, the total consideration paid and the average price per share paid before deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us.
 
                                         
 
    Shares purchased     Total consideration     Average price
 
    Number     Percentage     Amount     Percentage     per share  
 
 
Existing stockholders
                %     $             %     $        
New investors in this offering
            %     $         %     $    
     
     
Total
            100.0%     $         100.0%     $    
 
 
 
The foregoing tables and calculations are based on 65,393,149 shares of our Common Stock outstanding as of December 31, 2010 and exclude:
 
•  482,625 shares of Common Stock issuable upon the exercise of warrants outstanding as of December 31, 2010 at an exercise price of $20.00 per share;
 
•  3,225,908 shares of Class A Common Stock issuable upon the exercise of options outstanding as of December 31, 2010 at an exercise price of $20.00 per share; and
 
•  3,225,907 shares of Class A Common Stock issuable upon the vesting of restricted stock units outstanding as of December 31, 2010.


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Selected financial data
 
The following table sets forth selected financial data for Air Lease Corporation. The historical results presented are not necessarily indicative of future results. Furthermore, the financial results for the period from inception to September 30, 2010 are not necessarily indicative of the financial results to be expected for the full year. You should read this information in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and our financial statements and related notes appearing elsewhere in this prospectus.
 
         
 
    For the period
 
   
from inception to
 
(in thousands, except share data)   September 30, 2010  
 
 
Operating data:
       
Rentals of flight equipment
  $ 20,345  
Interest and other
    1,116  
         
Total revenues
    21,461  
Expenses
    78,318  
         
Loss before tax
    (56,857 )
Tax benefit
    7,492  
         
Net loss
    (49,365 )
         
Loss per share:
       
Basic
  $ (1.64 )
Diluted
  $ (1.64 )
Weighted average shares outstanding:
       
Basic
    30,062,023  
Diluted
    30,062,023  
Other financial data (unaudited):
       
Adjusted net loss(1)
  $ (3,197 )
Adjusted EBITDA(2)
  $ 6,243  
Balance sheet data:
       
Flight equipment subject to operating leases, net
  $ 973,482  
Total assets
    1,491,955  
Total debt
    198,691  
Total liabilities
    275,193  
Shareholders’ equity
    1,216,762  
Other data:
       
Aircraft lease portfolio at period end:
       
Owned
    28  
 
 
 
(1) Adjusted net loss (defined as net loss attributable to Air Lease Corporation common shareholders before stock-based compensation expense and non-cash interest expense which includes the amortization of debt issue costs and convertible debt discounts) is not a financial measure calculated in accordance with GAAP and should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP or


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as an alternative to cash flows from operating activities as a measure of our liquidity. Adjusted net loss is presented solely as a supplemental disclosure because management believes that it may be a useful performance measure. We believe adjusted net loss provides useful information on our earnings from ongoing operations, our ability to service our long-term debt and other fixed obligations, and our ability to fund our expected growth with internally generated funds. Adjusted net loss limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are as follows:
 
• Adjusted net loss does not reflect (i) our cash expenditures or future requirements for capital expenditures or contractual commitments, or (ii) changes in or cash requirements for our working capital needs; and
 
• our calculation of adjusted net loss may differ from the adjusted net loss or analogous calculations of other companies in our industry, limiting its usefulness as a comparative measure.
 
The following table shows the reconciliation of net loss to adjusted net loss for the period from inception to September 30, 2010:
 
         
Reconciliation of adjusted net loss:
       
Net loss attributable to Air Lease Corporation shareholders
  $ (49,365 )
Amortization of deferred debt issue costs
    2,810  
Amortization of convertible debt discounts
    35,798  
Stock-based compensation
    13,196  
Tax effect
    (5,636 )
         
Adjusted net loss
  $ (3,197 )
 
 
 
(2) Adjusted EBITDA (defined as net loss attributable to Air Lease Corporation common shareholders before net interest expense, stock-based compensation expense, income tax expense (benefit), and depreciation and amortization expense) is not a financial measure calculated in accordance with GAAP and should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Adjusted EBITDA is presented solely as a supplemental disclosure because management believes that it may be a useful performance measure that is used within our industry. We believe adjusted EBITDA provides useful information on our earnings from ongoing operations, our ability to service our long-term debt and other fixed obligations, and our ability to fund our expected growth with internally generated funds. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are as follows:
 
  •  Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
 
  •  Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
 
  •  Adjusted EBITDA does not reflect interest expense or cash requirements necessary to service interest or principal payments on our debt; and
 
  •  other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.
 
The following table shows the reconciliation of net loss to adjusted EBITDA for the period from inception to September 30, 2010:
 
         
Reconciliation of adjusted EBITDA:
       
Net loss attributable to Air Lease Corporation shareholders
  $ (49,365 )
Adjustments:
       
Net interest expense
    43,276  
Depreciation
    6,628  
Stock-based compensation
    13,196  
Income tax benefit
    (7,492 )
         
Adjusted EBITDA
  $ 6,243  
 
 


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Management’s discussion and analysis of
financial condition and results of operations
 
Overview
 
Our primary business is to acquire new and used popular and fuel-efficient commercial aircraft from aircraft manufacturers and other parties and to lease those aircraft to airlines around the world. We plan to supplement our leasing revenues by providing management services to investors and/or owners of aircraft portfolios, for which we will receive fee-based revenue. These services are expected to include leasing, re-leasing, and lease management and sales services, with the goal of helping our clients maximize lease and sale revenues. In addition to our leasing activities, and depending on market conditions, we expect to sell aircraft from our fleet to other leasing companies, financial services companies and airlines.
 
Our fleet
 
We believe we have one of the world’s youngest, most fuel-efficient operating lease portfolios. Our weighted average fleet age as of December 31, 2010 was 3.8 years. We expect that our weighted average fleet age will decrease further as we begin taking delivery of new aircraft from our order book. As of September 30, 2010, we had acquired 28 aircraft. As of December 31, 2010, our fleet had grown to 40 aircraft, and we have contracted to buy 148 new and used aircraft for delivery through 2017 with an estimated aggregate purchase price of $6.2 billion. Of the 148 aircraft, 65 are Boeing 737-800s, one is a Boeing 777-300ER, 51 are Airbus A320/321s, six are Airbus A330-200/300s, 15 are Embraer E190s and ten are ATR 72-600s. We have cancellation rights with respect to six of the Airbus A320/321 aircraft and six of the Boeing 737-800 aircraft.
 
As we move forward, we continue to evaluate opportunities to acquire attractive aircraft from other leasing companies and our airline customers, as well as opportunistic transactions with the airframe manufacturers, to achieve our target of owning approximately 100 aircraft by the end of 2011.
 
Debt financing
 
We fund our aircraft purchases with our Warehouse Facility, secured bilateral term financings and unsecured term and revolving credit facilities. As of December 31, 2010, we borrowed $555.0 million under our Warehouse Facility, $224.0 million in secured term debt and $133.0 million in unsecured financing, and we had $945.0 million available but undrawn under our Warehouse Facility and $120.0 million in available but undrawn revolving unsecured credit facilities. See “Liquidity and capital resources” below.
 
Aircraft industry and sources of revenues
 
Our revenues are principally derived from operating leases with scheduled and charter airlines. As of December 31, 2010, we derived more than 90% of our revenues from airlines domiciled outside of the United States and we anticipate that most of our revenues in the future will be generated from foreign lessees. The airline industry is cyclical, economically sensitive, and highly competitive. Airlines and related companies are affected by fuel price volatility and fuel shortages, political and economic instability, natural disasters, terrorist activities, changes in


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national policy, competitive pressures, labor actions, pilot shortages, insurance costs, recessions, health concerns and other political or economic events adversely affecting world or regional trading markets. Our airline customers’ ability to react to and cope with the volatile competitive environment in which they operate, as well as our own competitive environment, will affect our revenues and income.
 
Throughout 2010, we saw a marked improvement in the outlook for the profitability of the airline industry. On December 14, 2010, the International Air Transport Association (“IATA”) issued its fourth upward revision of the forecast profitability for the world airline industry for 2010 to a forecasted profit of $15.1 billion as of December 2010.
 
We are optimistic about the long-term future of air transportation and, more specifically, the growing role that the leasing industry provides in facilitating the growth of commercial air transport. We have assembled a highly skilled management team and secured sufficient liquidity to position us well to benefit from a recovering market.
 
Liquidity and capital resources
 
Overview
 
As we grow our business, we envision funding our aircraft purchases through multiple sources, including cash raised in our prior equity offering, this offering and in any future equity offerings, cash flow from operations, the Warehouse Facility, additional unsecured debt financing through banks and the capital markets, bilateral credit facilities, and government-sponsored export guaranty and lending programs, including ECA-guaranteed aircraft financing on ATR and qualified Airbus aircraft, Ex-Im Bank-guaranteed financing on Boeing aircraft, and BNDES financing on Embraer aircraft. These government-sponsored financings have historically provided favorable funding levels at interest rates below those obtainable from normal commercial sources. We have commenced discussions with all of the ECAs, Ex-Im Bank, BNDES and SBCE for financing support of our new aircraft deliveries.
 
We have substantial cash requirements as we continue to expand our fleet through our purchase commitments. However, we believe that our current level of cash, availability under the Warehouse Facility and availability under our unsecured revolving credit facilities will be sufficient to meet our current liquidity needs.
 
Our liquidity plans are subject to a number of risks and uncertainties, including those described in the section of this prospectus titled “Risk factors,” some of which are outside of our control. Macro-economic conditions could hinder our business plans, which could, in turn, adversely affect our financing strategy.
 
Warehouse Facility
 
On May 26, 2010, ALC Warehouse Borrower, LLC, one of our wholly-owned subsidiaries, entered into the Warehouse Facility, which is a non-recourse, revolving credit facility to finance the acquisition of aircraft. This facility provides us with financing of up to $1.5 billion from a syndicate of eight lenders. We are able to draw on this facility during the initial two-year availability period. The Warehouse Facility accrues interest during the initial two-year period based on LIBOR plus 3.25% on drawn balances and at a fixed rate of 1.00% on undrawn balances. The outstanding drawn balance at the end of the initial two-year period may be


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converted at our option to an amortizing, four-year term loan with an increasing interest rate over the term period.
 
As of December 31, 2010, we had borrowed approximately $555.0 million under the Warehouse Facility and pledged a total of 23 aircraft as collateral with a net book value of $929.0 million. The pledged aircraft collateral amount includes $200.0 million of aircraft collateral that we pledged as a precondition to borrowing under this facility. We have also pledged cash collateral of $47.8 million. We draw at a rate of 85% of our net purchase price for each aircraft, subject to a 65% loan-to-value ratio for the entire portfolio. We intend to continue to utilize the Warehouse Facility to finance aircraft acquisitions through 2011, as this facility provides us with ample liquidity to make opportunistic acquisitions of aircraft on short notice.
 
Recent initiatives
 
During the fourth quarter 2010, we entered into seven unsecured two-year and three-year revolving credit facilities, with an aggregate borrowing capacity of $190.0 million and with terms similar to our existing revolving unsecured credit facilities. As of December 31, 2010, we had $120.0 million of undrawn borrowing capacity under our unsecured revolving credit facilities. All of our unsecured revolving credit facilities bear interest at LIBOR plus 2.00%. Additionally, we borrowed $182.2 million under four secured term facilities, with interest rates ranging from LIBOR plus 2.55% to LIBOR plus 2.97%, and pledged $268.9 million in aircraft collateral under these facilities. Finally, we entered into a $12.0 million, five-year term unsecured facility at a fixed rate of 3.90%.
 
Available liquidity
 
Available liquidity includes cash balances and undrawn balances under our unsecured revolving credit facilities. At December 31, 2010, available liquidity was $448.8 million.
 
Our debt financing was comprised of the following as of December 31, 2010:
 
         
 
(dollars in thousands)   2010  
 
 
Secured debt
  $ 778,896  
Unsecured debt
    133,085  
         
Total
  $ 911,981  
         
Composite interest rate*
    3.32%  
 
 
 
* This rate does not include the effect of upfront fees, undrawn fees or issuance cost amortization.


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Results of operations
 
                 
 
    For the three
    For the period
 
    months ended     from inception to  
(in thousands, except share data)   September 30, 2010        
          September 30, 2010  
 
 
Revenues
               
Rental of flight equipment
  $ 19,110     $ 20,345  
Interest and other
    642       1,116  
                 
Total revenues
    19,752       21,461  
                 
Expenses
               
Interest
    3,871       5,709  
Amortization of deferred debt issuance cost
    1,935       2,810  
Amortization of convertible debt discounts
          35,798  
                 
Interest expense
    5,806       44,317  
Depreciation of flight equipment
    6,301       6,628  
Selling, general and administrative
    7,941       14,177  
Stock-based compensation
    10,941       13,196  
                 
Total expenses
    30,989       78,318  
                 
Loss before taxes
    (11,237 )     (56,857 )
Income tax benefit
    3,490       7,492  
                 
Net loss
  $ (7,747 )   $ (49,365 )
                 
Amortization of debt issue costs
    1,935       2,810  
Amortization of convertible debt discounts
          35,798  
Stock-based compensation
    10,941       13,196  
Tax effect
    (4,534 )     (5,636 )
                 
Adjusted net income (loss)
  $ 595     $ (3,197 )
                 
                 
 
 
 
The following commentary should be read in conjunction with our financial statements and related notes appearing elsewhere in this prospectus.
 
Rental revenue
 
Our financial results for the three months ended September 30, 2010 reflect our first full quarter of operations since the completion of our prior $1.3 billion private placement of Common Stock and the closing of our $1.5 billion Warehouse Facility. Building on our base of eight aircraft at June 30, 2010, we acquired 20 aircraft during the period. As of September 30, 2010, we had acquired $980.1 million in aircraft. We recorded $19.1 million in rental revenue for the three months ended September 30, 2010 and $20.3 million in rental revenue from inception. As aircraft were added throughout the period, the full impact on rental revenue of these aircraft will be reflected in subsequent periods. All of the aircraft in our fleet were subject to signed leases as of September 30, 2010.


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Interest expense
 
Interest expense of $5.8 million for the three months ended September 30, 2010 principally consisted of $3.9 million in unutilized fees on our debt facilities and cash interest and an additional $1.9 million in amortization of our deferred debt issue costs. Interest expense of $44.3 million for the period from inception principally consisted of $35.8 million of amortization of convertible debt discounts, $5.7 million in unutilized fees on our debt facilities and cash interest and an additional $2.8 million in amortization of our deferred debt issue costs. The amortization of convertible debt discounts is a one-time equity neutral charge. This charge was a result of our issuance of $60.0 million of convertible notes at 6%, on May 7, 2010, to funds managed by Ares Management LLC and Leonard Green & Partners, L.P. and members of our management and board of directors (and their family members or affiliates) and simultaneously entering into a forward purchase arrangement with such funds managed by Ares Management LLC and Leonard Green & Partners, L.P. to purchase shares at a discounted price of $18.00 per share. We used the proceeds of the convertible notes to finance the acquisition of an aircraft and for general corporate purposes prior to the initial closing of our private placement of Common Stock in June 2010. The convertible notes all converted to equity at $18.00 per share on June 4, 2010, upon the initial closing of our private placement of Common Stock in June 2010.
 
Our overall composite interest rate has continued to improve since our inception. This is a result of our credit spreads on new debt issuances continuing to tighten, combined with a prevailing low interest rate environment.
 
Depreciation expense
 
We recorded $6.3 million in depreciation expense of flight equipment for the three months ended September 30, 2010. We recorded depreciation expense of flight equipment for the period from inception to September 30, 2010 of $6.6 million. As aircraft were added throughout the period, the full impact of depreciation of flight equipment acquired during the period will be reflected in subsequent periods.
 
Selling, general and administrative expenses
 
We recorded $7.9 million in selling, general and administrative expenses for the three months ended September 30, 2010. We recorded $14.2 million of selling, general and administrative expenses for the period from inception to September 30, 2010. Selling, general and administrative expense represented a disproportionate share of revenues during our launch phase. As we add new aircraft to our portfolio, we expect selling, general and administrative expense to reduce significantly as a share of our revenue.
 
Stock-based compensation expense
 
We recorded $10.9 million of stock-based compensation expense for the three months ended September 30, 2010. Stock-based compensation expense for the period from inception to September 30, 2010 was $13.2 million. We granted restricted stock units and stock options during the second and third quarters of 2010. We determined the fair value of our grants on the grant date and will recognize the value of the grants as expense over the vesting period, with an offsetting increase to equity. As a result, the stock-based compensation expense recorded to date is equity-neutral.


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Taxes
 
The effective tax rate for the period since inception was 13.2%. Our effective tax rate was reduced from the statutory rate of 35.0% primarily due to the amortization of the convertible debt discounts, which is non-deductible for tax purposes.
 
Net loss
 
We recorded a net loss of $7.7 million for the three months ended September 30, 2010. The net loss for the period is primarily due to the amortization of stock-based compensation expense, which as discussed above is an equity-neutral charge. We recorded a net loss of $49.4 million for the period from inception to September 30, 2010. The net loss from inception is primarily attributable to the one-time amortization of convertible debt discounts and stock-based compensation expense, which as discussed above are both equity-neutral items.
 
Adjusted net income (loss)
 
We recorded adjusted net income of $595,000 for the three-month period ended September 30, 2010. This is the first period since inception that we recorded positive adjusted net income. We recorded adjusted net (loss) of $3.2 million for the period since inception to September 30, 2010. The adjusted net (loss) since inception was due to selling, general and administrative expenses, which as noted above represents a disproportionate share of revenues during our launch phase.
 
Adjusted net income (loss) is a measure of financial and operational performance that is not defined by GAAP. See note 1 in the “Summary financial information and data” for a discussion of adjusted net income (loss) as a non-GAAP measure and a reconciliation of this measure to net loss included elsewhere in this prospectus.
 
Contractual Obligations
 
Our contractual obligations as of December 31, 2010 are as follows:
 
                                                         
 
(dollars in thousands)   Total     2011     2012     2013     2014     2015     Thereafter  
 
 
Long-term debt obligations
  $ 911,981     $ 29,605     $ 100,994     $ 219,507     $ 129,457     $ 145,435     $ 286,983  
Interest payments on debt outstanding(a)
    124,582       28,838       27,773       24,399       18,814       14,223       10,535  
Operating leases
    32,235       217       1,441       2,325       2,395       2,467       23,389  
Purchase commitments
    6,188,058       1,172,086       1,259,316       1,089,748       1,057,055       818,378       791,475  
     
     
Total
  $ 7,256,856     $ 1,230,746     $ 1,389,524     $ 1,335,979     $ 1,207,721     $ 980,503     $ 1,112,382  
 
 
 
(a) Future interest payments on floating-rate debt are estimated using floating interest rates in effect at December 31, 2010.
 
Off-balance-sheet arrangements
 
We have not established any unconsolidated entities for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. We have, however, from time to time established subsidiaries, created other partnership arrangements or trusts for the limited purpose of leasing aircraft or facilitating borrowing arrangements.


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Quantitative and qualitative disclosures about market risk
 
Market risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates. Changes in these factors could cause fluctuations in our results of operations and cash flows. We are exposed to the market risks described below.
 
Interest Rate Risk.  The nature of our business exposes us to market risk arising from changes in interest rates. Changes, both increases and decreases, in our cost of borrowing, as reflected in our composite interest rate, directly impact our net income. Our lease rental stream is generally fixed over the life of our leases, whereas we have used floating-rate debt to finance a significant portion of our aircraft acquisitions. As of December 31, 2010, we had $899.0 million in floating-rate debt. If interest rates increase, we would be obligated to make higher interest payments to our lenders. If we incur significant fixed-rate debt in the future, increased interest rates prevailing in the market at the time of the incurrence of such debt would also increase our interest expense. If our composite rate were to increase by 1.0%, we would expect to incur additional interest expense on our existing indebtedness as of December 31, 2010, of approximately $9.0 million on an annualized basis, which would put downward pressure on our operating margins.
 
Foreign Exchange Rate Risk.  The Company attempts to minimize currency and exchange risks by entering into aircraft purchase agreements and a majority of lease agreements and debt agreements with U.S. dollars as the designated payment currency. Thus, most of our revenue and expenses are denominated in U.S. dollars. As of December 31, 2010,     % of our lease revenues were denominated in Euros. As our principal currency is the U.S. dollar, a continuing weakness in the U.S. dollar as compared to other major currencies should not have a significant impact on our future operating results.
 
Recent accounting pronouncements
 
In July 2010, the FASB issued an accounting standard that requires enhanced disclosures about (i) the nature of credit risk inherent in a portfolio of financing receivables, (ii) how risk is analyzed and assessed in arriving at the allowance for credit losses, and (iii) the changes and reasons for those changes in the allowance for credit losses. These increased disclosures are required to be included in our December 31, 2010 financial statements. As this new standard only requires additional disclosures about receivables, it will not affect our consolidated financial position, results of operations or cash flows.
 
Critical accounting policies
 
We believe the following critical accounting policies, can have a significant impact on our results of operations, financial position and financial statement disclosures, and may require subjective and complex estimates and judgments.
 
Lease revenue
 
We lease flight equipment principally under operating leases and report rental income ratably over the life of each lease. Rentals received, but unearned, under the lease agreements are recorded in “Rentals received in advance” on our Consolidated Balance Sheet until earned. The difference between the rental income recorded and the cash received under the provisions of


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the lease is included in “Lease receivables,” as a component of “Other assets” on our Consolidated Balance Sheet. An allowance for doubtful accounts will be recognized for past-due rentals based on management’s assessment of collectability. Our management team monitors all lessees with past due lease payments (if any) and discusses relevant operational and financial issues facing those lessees with our marketing executives in order to determine an appropriate allowance for doubtful accounts. In addition, if collection is not reasonably assured, we will not recognize rental income for amounts due under our lease contracts and will recognize revenue for such lessees on a cash basis. Should a lessee’s credit quality deteriorate, we may be required to record an allowance for doubtful accounts and/or stop recognizing revenue until cash is received, both of which could have a material impact on our results of operations and financial condition.
 
We record as rental revenue the portion of supplemental maintenance rent that we are virtually certain will not be reimbursed to the lessee. Supplemental maintenance rental payments which we may be required to reimburse to the lessee are reflected in our overhaul reserve liability, as a component of “Security deposits and maintenance reserves on flight equipment leases” in our Consolidated Balance Sheet. Estimating when supplemental maintenance payments are virtually certain of not being reimbursed requires judgments to be made as to the timing and cost of future maintenance events. Should such estimates be inaccurate we may be required to reverse revenue previously recognized and, if such estimates can no longer be accurately made, stop recognizing any supplemental maintenance revenue until the end of the lease.
 
All of our lease agreements are triple net leases whereby the lessee is responsible for all taxes, insurance, and aircraft maintenance. In the future, we may incur repair and maintenance expenses for off-lease aircraft. We recognize overhaul expense in our Consolidated Statement of Operations for all such expenditures. In many operating lease contracts, the lessee is obligated to make periodic payments of supplemental maintenance rent, which is calculated with reference to the utilization of the airframe, engines and other major life-limited components during the lease. In these leases, we will make a payment to the lessee to compensate the lessee for the cost of the actual major maintenance incurred, up to the maximum of the amount of supplemental maintenance rental payments made by the lessee during the lease term. These payments are made upon the lessee’s presentation of invoices evidencing the completion of such qualifying major maintenance.
 
Lessee-specific modifications such as those related to modifications of the aircraft cabin are expected to be capitalized as initial direct costs and amortized over the term of the lease into rental revenue in our Consolidated Statement of Operations.
 
Flight equipment
 
Flight equipment under operating lease is stated at cost less accumulated depreciation. Purchases, major additions and modifications, and interest on deposits during the construction phase are capitalized. We generally depreciate passenger aircraft on a straight-line basis over a 25-year life from the date of manufacture to a 15% residual value. Changes in the assumption of useful lives or residual values for aircraft could have a significant impact on our results of operations and financial condition. At the time flight equipment are retired or sold, the cost and accumulated depreciation are removed from the related accounts and the difference, net of proceeds, is recorded as a gain or loss.


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Our management team evaluates on a quarterly basis the need to perform an impairment test whenever facts or circumstances indicate a potential impairment has occurred. An assessment is performed whenever events or changes in circumstances indicate that the carrying amount of an aircraft may not be recoverable. Recoverability of an aircraft’s carrying amount is measured by comparing the carrying amount of the aircraft to future undiscounted net cash flows expected to be generated by the aircraft. The undiscounted cash flows consist of cash flows from currently contracted leases, future projected lease rates and estimated residual or scrap values for each aircraft. We develop assumptions used in the recoverability analysis based on our knowledge of active lease contracts, current and future expectations of the global demand for a particular aircraft type, and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are affected by changes in future periods due to changes in contracted lease rates, economic conditions, technology and airline demand for a particular aircraft type. In the event that an aircraft does not meet the recoverability test, the aircraft will be recorded at fair value in accordance with our Fair Value Policy, resulting in an impairment charge. Deterioration of future lease rates and the residual values of our aircraft could result in impairment charges which could have a significant impact on our results of operations and financial condition. To date we have not recorded any impairment charges.
 
We record flight equipment at fair value if we determine the carrying value may not be recoverable. We principally use the income approach to measure the fair value of aircraft. The income approach is based on the present value of cash flows from contractual lease agreements and projected future lease payments, including contingent rentals, net of expenses, which extend to the end of the aircraft’s economic life in its highest and best use configuration, as well as a disposition value based on expectations of market participants. These valuations are considered Level 3 valuations, as the valuations contain significant non-observable inputs.
 
Share based payments
 
To compensate and incentivize our employees and directors, we grant share based compensation awards. To date, we have granted stock options and restricted stock units. All share based payment awards granted have been equity classified awards. We account for such awards by estimating the grant date fair value of the award and amortizing that value on a straight-line basis over the relevant service period less any anticipated forfeitures. The estimation of the fair value of share based awards requires considerable judgment, particularly since to date we have been a private company with a short history of operations. Key estimates we make in determining the fair value of an award include the fair value of our Common Stock, the expected term of the award and the volatility of our Common Stock. To date we have principally used transaction prices from sales of our Common Stock to determine the fair value of our Common Stock. As we have limited history, we have used the simplified averaging approach to estimating the expected term of the award. We have estimated the volatility of our Common Stock by using the average historic volatility of a peer group of companies. For future awards, we will be required to continue to make such subjective judgments, and while we intend to continue to use the approach discussed above to make key estimates, there can be no assurance that changes in such estimates will not have a significant impact to our results of operations in the future.


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Income taxes
 
We use the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in the tax rates is recognized in income in the period that includes the enactment date. We record a valuation allowance for deferred tax assets when the probability of realization of the full value of the asset is less than 50%. We are currently in a net deferred tax asset position. Based on the timing of reversal of deferred tax liabilities, future anticipated taxable income based on lease and debt arrangements in place at the balance sheet date and tax planning strategies available to us, our management considers the deferred tax asset recoverable. Should events occur in the future that make the likelihood of recovery of the net deferred tax asset less than 50%, a deferred tax valuation allowance will be required that could have a significant impact on our results of operations and financial condition.
 
We recognize the impact of a tax position, if that position has a probability of greater than 50% that it would be sustained on audit, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that has a probability of more than 50% of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. As our business develops and we file tax returns, we may take tax positions that have a probability of less than 50% of being sustained on audit which will require us to reserve for such positions. If these tax positions are audited by a taxing authority, there can be no assurance that the ultimate resolution of such tax positions will not result in further losses. Such losses could have a significant impact on our results of operations and financial condition.
 


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Overview of the aircraft leasing industry
 
We obtained the market and industry information, data and forecasts in this section from a report prepared for us by AVITAS, a full-service aviation consulting firm retained by us to provide such information, data and forecasts for inclusion in this prospectus. AVITAS has consented to being named as an expert with respect to such information, data and forecasts.
 
Nature of airline industry
 
Demand for air travel has consistently grown in terms of both the number of aircraft and passenger traffic over the last 40 years. The industry has remained resilient over time, while enduring the effects of both business cycle downturns and external events. Today, air travel has penetrated most world regions, with the highest growth now coming from emerging markets and economies. The long-term outlook for an increasing number of aircraft remains robust due primarily to increased passenger traffic. AVITAS forecasts that there will be more than 24,000 aircraft in service by 2015, an increase of approximately 5,000 over today’s level.
 
The airline industry is cyclical and generally grows along with the economy. Historically, there has been a strong positive correlation between changes in world Gross Domestic Product (“GDP”), measured in U.S. dollars, and changes in passenger traffic (as indicated by revenue passenger kilometers (“RPK”), an industry-standard measure of passengers flown where each RPK represents one kilometer traveled by a paying customer). Figure 1 illustrates that air travel can be forecast by using GDP as a predictor of passenger travel. The chart shows the actual levels of traffic versus the levels predicted by an AVITAS model based on world GDP.


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Figure 1
 
Annual world passenger air traffic, 1970-2010
(2010 estimated)
 
(BAR CHART)
 
source: ICAO
 
The industry has demonstrated robust growth in terms of both aircraft and passenger traffic. Figure 2 shows the growth profile of both aircraft and passenger traffic over the last 40 years. Growth in passenger traffic has led to the need for additional aircraft capacity. The business cycle effects are apparent in the chart as passenger traffic (depicted by the RPK line) declines or softens within recessionary periods. However, aircraft inventory has trended upward consistently, regardless of the economic cycle, as many aircraft are delivered during downturns despite reduced passenger travel.


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Figure 2
 
World passenger traffic and commercial jet aircraft year end
data 1970-2010 (2010 estimated)
 
(BAR CHART)
 
Source: Ascend fleet database (includes all commercial aircraft including regional jets with less than 100-seats)
 
Passenger and cargo traffic developments—current and future
 
Figure 3 shows monthly year-over-year percentage changes for passenger and cargo traffic between January 2009 and October 2010, the most recent period for which data is available. As depicted, traffic has been recovering over the last year with the most current data showing growth rates for passengers and cargo of 10% and 15%, respectively. This rebound has continued through 2010 (through October) and is forecast to follow the historical pattern, with cargo traffic growth preceding passenger traffic growth in the recovery.


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Figure 3
 
World monthly year-over-year passenger vs. cargo traffic growth,
Jan 09-Oct 10
 
(BAR CHART)
 
Source: IATA, statistics cover international scheduled air traffic; domestic traffic is not included.
 
Long-term passenger traffic growth is expected to be underpinned by projected growth in demand from emerging markets. Travel growth remains concentrated in the emerging markets in Asia, Latin America and the Middle East while the more mature markets in the United States and Europe have slower growth rates overall. The share of passenger traffic in emerging markets has continuously expanded. For example, in 1990, Asia represented about 17% of the world’s passenger traffic, and its share is estimated to be approximately 28% in 2009. Since 1990, China’s passenger traffic has grown 15% annually on average to 337 billion RPKs in 2009, although China’s passenger traffic is only 26% of that of the United States. Still, China is now number two in the world in terms of passenger traffic.
 
Figure 4 indicates AVITAS’ view for the next five years on the growth prospects for each of the major geographic regions. AVITAS forecasts considerably higher growth in 2009-2015 for Asia/Pacific, the Middle East and Latin America. These regions are forecast to have considerably higher growth than North America and Europe, as shown in the charts. AVITAS forecasts that by 2015 traffic in the Asia/Pacific region will surpass the North American region.


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Figure 4
 
Annual average passenger traffic growth by major regions
2009-2015
 
(BAR CHART)
 
Source: AVITAS forecast
 
Worldwide airline financial outlook
 
Strengthening fundamental metrics such as increased traffic, load factors, yield, cargo growth, and capacity reduction have led IATA to significantly upgrade its forecast outlook for the worldwide airline industry in 2010 and 2011.
 
Figure 5 represents the progression of IATA’s forecast estimates for 2010 worldwide airline profitability beginning in December 2009 through its most recent outlook revision issued in December 2010. Figure 6 represents the progression of IATA’s forecast estimates for 2011 worldwide airline profitability—first issued in September 2010 and updated in December 2010.


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Figure 5
 
IATA forecasted airline industry profitability 2010
($ billion)
 
(BAR CHART)
 
Source: IATA
 
Figure 6
 
IATA forecasted airline industry profitability 2011
($ billion)
 
(BAR CHART)
 
Source: IATA


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Aircraft production
 
Airlines order aircraft as a result of increased passenger demand as well as to replace older airplanes with newer, more fuel-efficient, and technologically enhanced aircraft. AVITAS projects the world fleet to increase by more than 25% from the end of 2010 to 24,000 aircraft by 2015. As shown in Figure 7, increased passenger demand is projected to account for approximately 80% of new aircraft deliveries and aircraft replacement is projected to comprise approximately 20% of new aircraft demand from 2010 to 2015.
 
A key driver of increased passenger demand is the growth of low cost carriers worldwide. Most of the major regions of the world have seen a proliferation of low cost carriers. Asia/Pacific alone has more than 50 low cost carriers currently, the Middle East and Latin America have at least a total of 20 and low cost carriers are also expanding in other regions, such as Russia. Many of these airlines have new aircraft on order for future delivery and are seeking aircraft that have reduced operational expenses and greater fuel efficiency with lower maintenance costs.
 
Figure 7
 
Demand for passenger aircraft from 2010 to 2015
 
(BAR CHART)
 
Source: BACK Aviation data; AVITAS forecast.
 
Aircraft are replaced as a result of the economic life cycle of the airplane. The average age of retirement varies by aircraft type and model but is generally between 25 and 30 years for most passenger aircraft. As an aircraft becomes older it tends to have higher maintenance costs, burns more fuel than younger, more modern aircraft, and fails to comply (without costly modifications in some cases) to newer environmental standards.
 
Airlines that seek to replace their aircraft are driven by numerous factors, some of which are fuel consumption, aircraft range performance, cabin amenities, and aircraft reliability. Airlines base their decision to replace aircraft on their specific operational economics and aircraft fleet strategies.


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There are well established patterns of orders and deliveries of commercial aircraft as thousands of aircraft have been ordered and delivered over the last 40 years. However, the lengthy production cycle of aircraft can create difficulties for airlines as new planes need to be ordered years in advance of delivery—often five years or more. Historically, airlines have tended to purchase aircraft when traffic is up but since aircraft production lead times can be so long, they often take delivery of the aircraft when the economic environment has changed and traffic has declined. These patterns occur in parallel with macro economic cycles.
 
Aircraft values
 
Aircraft values are determined by market demand and market supply. Market demand is predicted based on traffic forecasts, which is driven in turn by economic cycles, together with productivity, utilization assumptions and load factor analysis. Market supply is projected by a retirement forecast based on aircraft economic life assumptions and fluctuations in the parked aircraft fleet, and the delivery forecast driven by the order/delivery pattern. The change in aircraft values is the outcome of these movements in the demand and supply of aircraft.
 
Figure 8 is a depiction of AVITAS’ value index for world passenger jets. The index is derived by an econometric model that compares average aircraft values for all aircraft types and vintages over time to their trend line. The trend line indicates the intrinsic value of an aircraft in a balanced market where supply and demand are equal. The percentage scale on the chart reflects the forecast of values as a percent relative to the trend line value (which is indicated as 100%). This allows for a determination of when average aircraft values are forecast to be above or below the trend line over the short and medium term given forecast changes in the business cycle and the supply and demand for aircraft.
 
Figure 8
 
History and forecast value index, world passenger jet, 2008-2015
 
(BAR CHART)
 
Source: AVITAS forecast


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As indicated in the chart, AVITAS forecasts that values will be depressed until 2011 as AVITAS believes that aircraft supply will continue to exceed the market demand for aircraft. Both Boeing and Airbus are expanding production on several aircraft types in 2011 and 2012 which are expected to dampen aircraft values through 2011. After 2011, passenger traffic is forecasted to recover and is expected to better absorb the new aircraft deliveries, strengthening aircraft values in the process.
 
There are dozens of different jet aircraft types and models in commercial airline service today ranging from 30 to 500 seats. Each of these models generally has a production run of 15 to 25 years. Because an aircraft’s value generally declines with age, there are numerous value profiles for each aircraft type by its year of build.
 
An aircraft’s value and its associated lease rates are determined by market conditions and the overall supply and demand for aircraft. However, value and lease rates can vary by aircraft type and age and is also dependent on other determinants such as:
 
•  number of aircraft in service today;
 
•  number of airlines who operate the aircraft;
 
•  production status;
 
•  size, capacity, and capability;
 
•  number of aircraft that are currently parked or in storage (a result of either market conditions or an operator decision to park the aircraft, either temporarily or permanently); and
 
•  life cycle duration, i.e., potential of the aircraft type to be replaced by a newer model.
 
Performance against these criteria demonstrates market “liquidity” of the asset and thus the ease (or difficulty) in placing an aircraft with another operator.
 
Generally, newer, in production models with strong market penetration, good geographic dispersion, and a broad base of operators tend to hold their value better than older, out of production types. While all aircraft are expected to lose value during negative market conditions, aircraft with positive characteristics against the aforementioned criteria should maintain a higher value and higher lease rate over a longer period of time and with less price volatility.
 
Figure 9 shows aircraft types that AVITAS believes will perform relatively well from a value perspective over the next five to ten years. Note that the aircraft types shown here are based on AVITAS’ opinion on the desirability of having these types in a leased aircraft portfolio that is strong on liquidity. It is not an endorsement or a guarantee that an investment in these aircraft will be profitable. Also, while assets that have strong market liquidity can minimize value volatility, they can also result in low yield returns as compared to an investment in older aircraft which are more volatile in nature, but may produce higher yields.
 
All of the aircraft listed in Figure 9 have demonstrated significant market strength and represent a cross section of narrowbody, widebody, and turboprop aircraft. Many of these aircraft are favored by operating lessors given their high demand within the market and relative liquidity. While some compete with one another, many of these aircraft models and types do not have a comparable replacement in terms of range and size and none is expected over the next five years (or longer). Airbus has announced a new engine option (A320 “NEO”) scheduled


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to enter service in 2016. The A330-200 may be replaced by a version of the A350WXB and a version of the 787 which are scheduled for delivery between 2013 and 2015. However, both of those models will be heavier than the A330-200. Thus, the A330-200 appears to have a competitive niche against similar sized aircraft.
 
The Embraer 170/190 family of aircraft has gained significant prominence over the last decade as a result of the development of 70-100 seat regional jets. These popular aircraft are now used by both regional and major airlines to provide hub flow passenger traffic as well as point to point service on thinner city pair sectors. Similarly, the ATR 72-600, manufactured by French-Italian aircraft manufacturer ATR, provides large turboprop service at reduced operating economics including low fuel burn. The ATR 72-600 is a follow-on aircraft from the popular ATR 72-200/-500 models (87 airline operators) and will begin deliveries in 2011.
 
Figure 9
 
Selected aircraft statistics
 
                                                                             
                                                  No. of
           
                                                  aircraft
           
                                                  on
           
                        Aircraft
              % backlog
    No. of
  operating
          Production
    Aircraft
        Body
  Capacity
    in
  Stored or
          of in-
    airline
  lease
    Production
    years
Manuf   type     Model   type   (seats)     service   parked     Backlog     service     operators   (apprx)     status     (to date)
 
Boeing
    737NG     -700   single aisle     126     1138     20       501       44%     78     380       In Prod     14
            -800   single aisle     162     2037     15       1445       71%     130     957       In Prod     14
      777     300ER   twin aisle     365     247     0       198       80%     23     114       In Prod     8
Airbus
    A320     A319-100   single aisle     124     1217     49       254       21%     103     520       In Prod     16
            A320-200   single aisle     150     2302     92       1756       76%     210     1193       In Prod     23
            A321-200   single aisle     185     528     12       214       41%     64     214       In Prod     15
      A330     -200   twin aisle     253     377     0       256       68%     65     191       In Prod     13
ATR
    ATR72     -600   Turboprop     74     n/a     n/a       90       n/a     9 (customers)     10       Delivery in
2011
    2011-
Embraer
    EJET     170   Single aisle     70-75     184     0       12       7%     23     12       In Prod     8
            175   Single aisle     80-90     135     0       40       30%     12     40       In Prod     7
            190   Single aisle     90-100     405     0       170       42%     190     170       In Prod     6
 
 
 
Notes: statistics are from Nov. 2010; source: ACAS; no. of aircraft on operating lease are estimated; passenger aircraft only
 
Role of lessors
 
Due to the cost of aircraft acquisitions, aircraft financing complexities and the airlines’ need for fleet flexibility, the role of operating lessors has expanded significantly over the last 20 years. In the late 1960s and early 1970s, airlines generally owned all of their aircraft. Aircraft acquisitions were financed through loans that were collateralized by the aircraft themselves. Airline fleets at that time were generally small in size and limited to a few aircraft types. Further, the overall size of the airline industry was relatively small and geographically confined. As airline fleets expanded and fixed costs for maintenance and ownership grew rapidly, airlines outsourced ownership of many of their airplanes through the adoption of aircraft leases.
 
As illustrated in Figure 10, as of November 2010, aircraft operating leases comprised about 35% of the more than 19,000 commercial jet aircraft fleet in service. Of new aircraft that are on order, it is expected that operating lessors will take delivery of more than 1,300 aircraft, which represents approximately 19% of the total order backlog for new aircraft. This figure is consistent with the operating lessor’s involvement with new aircraft orders over the last five


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years. Of the 1,300 aircraft on order by operating lessors, 71% are narrowbody aircraft, 25% are widebodies, and 4% are regional jets.
 
Growth of aircraft operating leases is expected to continue as lessors acquire aircraft from manufacturers, as well as from airlines (e.g., sale and lease back transactions). Airlines have turned to the leasing structure for an increasing share of their financing requirements as operating leases provide fleet planning flexibility, relatively low capital investment and the avoidance of balance sheet residual value risk. An operating lease allows airlines to preserve capital that can be invested in the operational costs of the airline. Airlines are diversifying their fleets to secure growth in new markets in different geographic regions. Hence, operating lessors can provide airlines with diversified aircraft types and capacities, as well as economic flexibility.
 
Leasing is attractive to nearly all airlines and is particularly attractive to start-up carriers, especially those in the fast-growing, low cost carrier sectors in various geographic regions. During the recession of 2001, while many banks were reducing their involvement in aircraft financing in the capital markets, operating lessors continued to offer aircraft supply to the airlines.
 
Figure 10
 
Operating lessor % of total worldwide aircraft fleet
(all commercial jet aircraft)
 
(BAR CHART)
 
Source: Ascend Fleet Database
 
The operating leasing industry has shown steady growth as a percentage of in-service aircraft. This is due to continued reliance on leasing companies to fund aircraft expansion in growing


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markets for both outright growth and for aircraft replacements. Forecasts for aircraft deliveries over the next five years suggest that aircraft on lease may grow by more than 25% from today’s totals. As shown below, a simple extrapolation of today’s leasing trends indicates a total of approximately 8,400 aircraft that will be on operating lease in 2015 based on a forecast of more than 24,000 in service aircraft by the end of that year. This represents an increase of approximately 1,800 aircraft compared to approximately 6,600 aircraft that are on operating lease today as shown in Figure 11.
 
Figure 11
 
Operating lease vs. other ownership-history and extrapolation
 
(BAR CHART)
 
Source: History from ACAS
 
The current competitive landscape for operating lessors shows a large, but fragmented industry. There are over 100 aircraft lessors today but the top 50 lessors control the majority of the aircraft that are currently on lease, with the top five controlling more than 50% of the total number of aircraft on lease and more than 60% of current aircraft value. The two largest aircraft leasing companies are International Lease Finance Corporation and GE Capital Aviation Services.
 
The fragmented nature of the industry has created niches for lessors to focus within the aircraft leasing industry, including:
 
•  a focus on specific geographic regions;
•  a focus on a diversified fleet structure (narrowbody or widebody aircraft);
•  a focus on securitization of aircraft assets; and
•  different financial structures, i.e., private or public company funding.


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As a result of the recent global financial market challenges, several leasing companies have faced significant financial difficulty. Some large lessors have shed aircraft to provide needed funds. Moreover, the near future of the leasing market will also depend upon the strength and structure of the recovery of the overall airline market. Consequently, the current market situation may alter the competitor landscape and consolidation of existing players may be inevitable. With a disrupted landscape, new leasing companies may also arise as funding and the capital markets recover.
 
Despite the current issues, however, the leasing market is a fundamental component of the airline business. Leasing companies will play an increasingly larger role in providing aircraft capacity as airlines grow their fleets and re-fleet with newer, more fuel-efficient aircraft. New opportunities will arise and lessors who are adequately capitalized and are both nimble and flexible in their approach will be able to take advantage of today’s funding and market issues and be better equipped to pursue both current and long-term market opportunities.


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Business
 
Overview
 
Air Lease Corporation is an aircraft leasing company that was launched in February 2010 by aviation industry pioneer Steven F. Udvar-Házy. We are principally engaged in purchasing commercial aircraft which we, in turn, lease to airlines around the world to generate attractive returns on equity.
 
As of December 31, 2010, we owned 40 aircraft. Our fleet is comprised of fuel-efficient and newer technology aircraft, consisting of narrowbody (single-aisle) aircraft, such as the Airbus A319/320/321 and the Boeing 737-700/800, and select widebody (twin-aisle) aircraft, such as the Airbus A330-200 and the Boeing 777-300ER. We manage lease revenues and take advantage of changes in market conditions by acquiring a balanced mix of aircraft types, both new and used. Our used aircraft are generally less than five years old. All of the aircraft we own are leased or are subject to lease. Additionally, as of December 31, 2010, we have entered into purchase commitments to acquire an additional 144 new aircraft through 2017 and four used aircraft in 2011.
 
Through careful management and diversification of our leases and lessees by geography, lease term, and aircraft age and type, we mitigate the risks of owning and leasing aircraft. We believe that diversification of our leases and lessees reduces the risks associated with individual lessee defaults and adverse geopolitical and regional economic events. We manage lease expirations in our fleet portfolio over varying time periods in order to minimize periods of concentrated lease expirations and mitigate the risks associated with cyclical variations in the airline industry. Our leases typically have an average initial term of six years for narrowbody aircraft and nine years for widebody aircraft. As of December 31, 2010, the weighted average lease term remaining on our current leases was 5.6 years, and we leased the aircraft in our portfolio to 25 airlines in 15 countries.
 
We lease our aircraft to airlines pursuant to net operating leases that require the lessee to pay for maintenance, insurance, taxes and all other aircraft operating expenses during the lease term, which includes fuel, crews, airport and navigation charges, and insurance. The cost of an aircraft typically is not fully recovered over the term of the initial lease. Therefore, upon expiration or early termination of a lease, we retain the benefit and assume the risk of the rent at which we can re-lease the aircraft and its equipment or the price at which we can sell the aircraft and its equipment. We believe net operating leases offer airlines greater fleet and financial flexibility and ability to diversify as compared to outright ownership because of the relatively small initial capital outlay necessary to obtain use of the aircraft, the airlines’ ability to match aircraft use with their current and future operating requirements, financing leverage for the airline operator and the elimination of residual value risk. This allows the airline to preserve capital that it can invest in other aspects of its operations.
 
We believe we have entered the aircraft leasing industry at an opportune time, as we expect both airlines’ use of net operating leases and the demand for air travel to grow in the near future. We also believe that airlines’ desire to enjoy the operational and financial benefits that can be derived from net operating leases will drive growth in aircraft leasing. During the past 20 years, the world’s airlines have leased a growing share of their aircraft instead of owning them outright. According to AVITAS, as of November 2010, aircraft operating leases comprised approximately 35% of the more than 19,000 commercial jet aircraft fleet in service and are


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forecasted to grow by more than 25% over the next five years. Even as airlines’ reliance on leasing has grown, the demand for air travel has also increased, experiencing fairly consistent growth during the past 40 years. Air travel has penetrated most world regions, with the highest growth expected to take place in emerging markets and economies. AVITAS forecasts an annual growth rate of 5.9% in air passenger demand from 2011 to 2015 and projects the world fleet to increase by more than 25% during this same period.
 
We operate our business on a global basis, providing aircraft to airline customers in every major geographical region, including emerging and high-growth markets such as Asia, the Pacific Rim, Latin America, the Middle East and Eastern Europe. In general, many of these emerging markets are experiencing increased demand for passenger airline travel and have lower market saturation than more mature markets such as North America and Western Europe. In addition, airlines in some of these emerging markets have fewer financing alternatives, enabling us to command relatively higher lease rates compared to lease rates in more mature markets. With our well-established industry contacts and access to capital, we believe we will be able to continue successfully implementing our business strategy worldwide. As of December 31, 2010, we have entered into leases and lease commitments with airlines in Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Ireland, Italy, Japan, Kazakhstan, Kenya, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Russia, South Africa, South Korea, Spain, Sri Lanka, Trinidad & Tobago, Turkey, United Arab Emirates, United States and Vietnam.
 
While our primary business is to own and lease aircraft, we also plan to provide fleet management and remarketing services to third parties for a fee. These services are similar to those we perform for our fleet, including leasing, re-leasing, lease management and sales services.
 
We believe we have the infrastructure, expertise and resources to execute a large number of diverse aircraft transactions under a variety of market conditions. We are led by a highly experienced management team that includes Steven F. Udvar-Házy, our Chairman and Chief Executive Officer, John L. Plueger, our President and Chief Operating Officer, Grant A. Levy, our Executive Vice President, General Counsel and Secretary, Marc H. Baer, our Executive Vice President, Marketing, Alex A. Khatibi, our Executive Vice President, Jie Chen, our Executive Vice President and Managing Director of Asia, James C. Clarke, our Senior Vice President and Chief Financial Officer, Gregory B. Willis, our Vice President, Finance, and Chief Accounting Officer, and John D. Poerschke, our Senior Vice President of Aircraft Specifications and Procurement. On average, our senior management team has over 23 years of experience in the aviation industry.
 
Through their extensive industry experience, the members of our management team have built and maintained long-standing client relationships with more than 200 airlines in over 70 countries.
 
We believe that aircraft leasing is a relationship-driven business and that our management team’s relationships with and access to key decision makers at airlines around the world, combined with our experience, provide us with the ability to understand the needs of various airlines and tailor our fleet and leases to their needs. Also, we believe our relationships with airframe and engine manufacturers allow us to procure new aircraft on favorable terms and assist manufacturers with their airframe and engine designs to better meet the needs of our airline customers.


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Operations to date
 
Current fleet
 
As of December 31, 2010, our aircraft fleet consisted of 36 narrowbody aircraft and four widebody aircraft, and the weighted average age of our aircraft was 3.8 years. We anticipate that our fleet will grow to approximately 100 aircraft by the end of 2011.
 
The following table shows the scheduled lease terminations (for the minimum noncancelable period, which does not include contractual unexercised lease extension options) by aircraft type for our operating lease portfolio as of December 31, 2010:
 
                                                                                                         
 
Aircraft type   2011     2012     2013     2014     2015     2016     2017     2018     2019     2020     2021     2022     Total  
 
 
Airbus A319-100
    1               3               1       1       1                                               7  
Airbus A320-200
            2       2               1       1       1                               1               8  
Airbus A321-200
                                            1       1                                               2  
Airbus A330-200
                                            1                                               1       2  
Boeing B737-700
    1       1                               1                       1               1               5  
Boeing B737-800
    1       1       3       1       4       1       3                                               14  
Boeing B777-300ER
                                                            1                       1               2  
     
     
Total
    3       4       8       1       6       6       6       1       1       0       3       1       40  
 
 
 
A lease covering one of our three aircraft with lease expirations in 2011 is subject to a future lease with another airline customer.
 
Aircraft purchase commitments
 
As of December 31, 2010, we had committed to acquire a total of 144 new aircraft and four used aircraft at an estimated aggregate purchase price (including adjustment for anticipated inflation) of approximately $6.2 billion for delivery as shown below. The recorded basis of aircraft may be adjusted upon delivery to reflect credits given by the manufacturers in connection with the leasing of aircraft or changes in budgeted buyer furnished equipment required by a specific airline customer.
 
                                                                 
 
Aircraft type   2011     2012     2013     2014     2015     2016     2017     Total  
 
 
Airbus A320/321-200
    10       9       13       12       7                       51  
Airbus A330-200/300
    2       4                                               6  
Boeing B737-800(1)
    5       3       12       12       12       12       9       65  
Boeing B777-300ER
    1                                                       1  
Embraer E190
    4       8       3                                       15  
ATR 72-600
    2       8                                               10  
     
     
Total
    24       32       28       24       19       12       9       148  
 
 
 
(1) Four of the five Boeing B737-800s that we will acquire in 2011 will be used aircraft.
 
Our new aircraft are being purchased pursuant to binding purchase agreements with each of Airbus, Boeing, Embraer and ATR. 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, we have the right to


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alter the mix of aircraft types that we ultimately acquire. We also have cancellation rights with respect to six of the Airbus aircraft and six of the Boeing aircraft.
 
Lease placements
 
As of December 31, 2010, we had arranged lease commitments (both binding and non-binding) for all 24 aircraft to be delivered in 2011 and for 16 out of 32 aircraft to be delivered in 2012. While our management’s historical experience is that non-binding letters of intent for aircraft leases generally lead to binding contracts, we cannot assure you that we will ultimately execute binding agreements for all or any of the non-binding leases. While we actively seek lease placements for the aircraft that are scheduled to be delivered through 2017, in making our lease placement decisions, we also take into consideration the anticipated growth in the aircraft leasing market and anticipated improvements in lease rates, which could lead us to determine that entering into particular lease arrangements at a later date would be more beneficial to us.
 
Geographic diversification
 
As of December 31, 2010, we leased aircraft to airline customers in the following regions:
 
                   
 
    Number of
    % of
 
Region   customers(1)     total  
 
 
Europe
    16       40 .0%  
Asia/Pacific
    11       27 .5  
Central America, South America and Mexico
    5       12 .5  
U.S. and Canada
    5       12 .5  
The Middle East and Africa
    3       7 .5  
     
     
Total
    40       100 .0%  
 
 
 
(1) A customer is an airline with its own operating certificate.
 
The following table sets forth our existing lessees by region as of December 31, 2010:
 
     
Region   Existing lessees
 
Europe
  Aer Lingus, Air Berlin, Air France, KLM, Norwegian and Transavia
Asia/Pacific
  AirAsia, Air Macau, GoAir, Hainan, Kingfisher, Sichuan, SpiceJet and Virgin Blue
Central America, South America and Mexico
  Aeromexico, Interjet, TAM and Volaris
U.S. and Canada
  Air Canada, Southwest, Spirit and WestJet
The Middle East and Africa
  Air Arabia, Etihad and South African Airways
 
 


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The following table sets forth the dollar amount and percentage of our total revenues attributable to the indicated regions based on each airline’s principal place of business for the year ended December 31, 2010:
 
                 
 
    Amount of
       
    revenue
    % of
 
Region   (dollars in thousands)     total  
 
 
Europe
  $               %  
Asia/Pacific
               
Central America, South America and Mexico
               
U.S. and Canada
               
The Middle East and Africa
               
     
     
Total
  $         100.0%  
 
 
 
Over 90% of our aircraft are operated internationally based on net book value. The following table sets forth the percentage of the net book value of our aircraft portfolio operating in the indicated regions as of December 31, 2010:
 
           
 
    % of
 
    net book
 
Region   value  
 
 
Europe
    42 .3%  
Asia/Pacific
    26 .1  
Central America, South America and Mexico
    10 .0  
U.S. and Canada
    15 .6  
The Middle East and Africa
    6 .0  
           
Total
    100 .0%  
 
 
 
As our aircraft portfolio grows, we anticipate that a growing percentage of our aircraft will be located in the Asia/Pacific, the Central America, South America and Mexico, and the Middle East and Africa regions.
 
The following table sets forth the revenue attributable to individual countries representing at least 10% of our total revenue for the year ended December 31, 2010, based on each airline’s principal place of business.
 
                 
 
    Amount of
       
    revenue
    % of
 
Country   (dollars in thousands)     total  
 
 
Germany
  $               %  
France
  $         %  
China
  $         %  
 
 


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The following table sets forth the revenue attributable to individual airlines representing at least 10% of our total revenue for the year ended December 31, 2010, based on each airline’s principal place of business.
 
                 
 
    Amount of
       
    revenue
    % of
 
Customer(1)   (dollars in thousands)     total  
 
 
Air Berlin
  $               %  
Air France
  $         %  
 
 
 
(1) A customer is an airline with its own operating certificate.
 
Our business and growth strategies
 
We believe that we entered the aircraft leasing industry at an opportune time, as both airlines’ use of net operating leases and the demand for air travel are expected to grow in the near future, consistent with a trend of growth in air travel over the last 40 years. Accordingly, we are pursuing the following business and growth strategies:
 
•  Capitalize on attractive market opportunities to grow our modern fleet of aircraft.  We plan to continue acquiring aircraft and expect that a significant portion of these acquisitions will be subject to existing or new leases that produce immediate positive cash flows. We seek aircraft that produce attractive returns on equity while maintaining diversified lease portfolio characteristics in terms of aircraft type, aircraft age, lease term and geographic location of our lessees. We intend to take advantage of the current economic environment to make opportunistic purchases of aircraft and aircraft portfolios. We also plan to expand our fleet with a mix of additional narrowbody and widebody commercial aircraft that we expect to have long useful lives and that are currently in widespread use by airlines, with a greater focus on acquiring narrowbody aircraft. We believe narrowbody and certain widebody aircraft will continue to experience strong global airline demand. We have also entered into commitments to purchase select fuel-efficient regional jets and turboprop aircraft, such as Embraer E190 and ATR 72-600 aircraft. We believe market demand for these types of aircraft will grow as they are well suited for direct service between smaller and medium-sized cities and between such cities and major hub cities.
 
•  Continue to develop and grow our long-standing relationships and cultivate new relationships.  We believe our management team’s experience in the aircraft leasing industry provides us immediate access to key decision makers at airframe and engine manufacturers and major airlines around the world, thereby enabling us to make prompt acquisitions of new aircraft, enter into new leases, and anticipate airlines’ longer-term needs so as to tailor our fleet and leases to their specific needs. Additionally, we believe our relationships with airframe and engine manufacturers allow us to influence their airframe and engine designs to better meet the needs of our airline customers. In our view, the aircraft leasing industry continues to be relationship-driven, and airframe and engine manufacturers and our airline customers will place a high value on the expertise and experience of our management team. This will help us develop new relationships, while we use our long-standing contacts to grow our business. We believe these relationships will help to establish us as a leader in the aircraft leasing industry over time.


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•  Emphasize marketing in high-growth areas of the world.  As our portfolio grows, we anticipate that a growing percentage of our aircraft will be located in Asia, the Pacific Rim, Latin America, the Middle East and Eastern Europe, although we will continue to enter into select leasing transactions in North America and Western Europe. We expect aircraft demand to increase in emerging markets over the next decade as a result of both economic and population growth in such regions coupled with deregulation in air travel and improved infrastructure. We believe a developed infrastructure supporting direct air travel to more destinations within emerging market regions, combined with an expected increase in the number of low-cost carriers, growth of existing low-cost carriers and a significant increase in such areas’ middle class populations, will lead to growth in passenger air travel in these regions.
 
•  Enter into strategic ventures.  We may, on occasion, enter into strategic ventures with third parties in order to take advantage of favorable financing opportunities or tax benefits, to share capital and/or operating risk, and/or to earn fleet management fees. Given our broad experience in acquiring, leasing, financing and managing aircraft, we believe that third parties seeking to invest in the aircraft leasing industry will view us as an attractive partner.
 
•  Actively manage our lease portfolio to optimize returns and minimize risk through diversification.  In actively managing our aircraft portfolio, we seek to optimize returns and minimize risks by appropriately and prudently diversifying the types of aircraft we acquire, maintaining a low average fleet age, spreading out over a number of years the termination dates for our leases, achieving geographic diversification, and minimizing our exposure to customer concentration. Our acquisition of desirable aircraft types with a low average fleet age helps to maximize the mobility of our assets across global markets, which allows us to achieve a high rate of lease placements on attractive lease terms. Through the implementation of our diversification strategies, we believe that we are in a position to reduce our exposure to industry fluctuations over a particular period of time, economic fluctuations in a particular regional market, changes in customer preferences for particular aircraft, and the credit risk posed by a particular customer.
 
Our financing strategies
 
In addition to our business and growth strategies described above, the successful implementation of our financing strategies is critical to the success and growth of our business.
 
As we grow our business, we envision funding our aircraft purchases through multiple sources, including the $1.3 billion of cash we raised in our prior private placement of Common Stock, expected proceeds from any exercise of outstanding warrants, cash raised in this offering and in potential future equity offerings, future earnings and cash flow from operations, existing debt facilities, potential future debt financing and government-sponsored export guaranty and lending programs. We intend to employ multiple debt and equity strategies to attain financial flexibility to fund our aircraft purchases on the best terms available.
 
In May 2010, we entered into the Warehouse Facility to finance the acquisition of aircraft. This credit facility provides us with secured financing of up to $1.5 billion from a syndicate of eight lenders. We are able to draw on this facility during an initial two-year availability period. The Warehouse Facility accrues interest during the initial two-year period based on LIBOR plus 3.25% on drawn balances and at a fixed rate of 1.00% on undrawn balances. The outstanding


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drawn balance at the end of the initial two-year period may be converted at our option to an amortizing, four-year term loan with an increasing interest rate over the term period.
 
We have pledged $200.0 million in aircraft collateral as a precondition to borrowing under the Warehouse Facility. As of December 31, 2010, we had borrowed $555.0 million under the Warehouse Facility and pledged a total of 23 aircraft as collateral with a net book value of $929.0 million. As of December 31, 2010, we have also pledged $47.8 million in cash collateral and lessee deposits. We intend to continue to utilize the Warehouse Facility to finance aircraft acquisitions in 2011, as this facility provides us with ample liquidity to make opportunistic acquisitions of aircraft on short notice as we had an available balance of $945.0 million as of December 31, 2010.
 
In addition, we fund some aircraft purchases through secured bilateral term financings and unsecured term and revolving credit facilities. As of December 31, 2010, we had outstanding loan balances, other than under the Warehouse Facility, of $224.0 million in secured term debt and $133.0 million in unsecured financing, and had $120.0 million in available but undrawn revolving unsecured credit facilities. From time to time, we will also use cash on hand to purchase aircraft and may use such acquired aircraft to secure new debt financing. Over time, we expect to access the public debt capital markets, subject to market conditions.
 
Furthermore, we are in the process of securing financing from government-sponsored export guaranty and lending programs offered by agencies such as the ECAs, Ex-Im Bank, BNDES and SBCE. Government-sponsored financings are particularly attractive financing sources because they have historically provided favorable funding levels at interest rates below those obtainable from other commercial sources.
 
In an effort to sustain our long-term financial health and limit our exposure to unforeseen dislocations in the debt and financing markets, we intend to maintain a debt-to-equity ratio (excluding deferred tax liabilities for calculation purposes) generally within a range of 2-to-1 to 3-to-1. Due to the seasonality of aircraft deliveries, we expect this ratio to fluctuate within that range during the course of a typical fiscal year, although on occasion we may fall outside this range. In addition, we may from time to time enter into interest rate hedging arrangements to limit our exposure to increases in interest rates on our floating-rate debt.
 
We believe that the implementation of our financing strategies will help us maintain a prudent amount of leverage, while also maintaining financial flexibility to seize attractive market opportunities.
 
Our competitive strengths
 
We believe that the following strengths assist us in executing our business and growth strategies and provide us with an advantage over many of our competitors:
 
•  Highly experienced management team with diversified aviation and technical experience.  Our senior management team, with an average of over 23 years of experience in the aviation industry, has significant experience in all aspects of the aviation and aircraft leasing industries, including the implementation of innovative lease structures, strategic planning, risk diversification, fleet restructuring, aircraft purchasing and financing strategies, and general transactional capabilities. We have separate Sales, Marketing and Commercial Affairs; Finance and Accounting; Legal; Commercial Contracts; Aircraft Procurement and Specifications; and Technical Asset Management departments that are involved in our leasing, sales and


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purchasing business. Our Technical Asset Management department has in-depth knowledge of aircraft, engines, avionics and the various regulations governing the maintenance of aircraft. This department monitors the fleet while on lease to our airline customers, handles the transfer of the aircraft from one operator to the next and monitors operator compliance with its technical and maintenance obligations under our leases.
 
•  Available deployable capital to capture attractive market opportunities.  With the net proceeds from this offering, cash on hand, the financing available under the Warehouse Facility and multiple unsecured lines of credit, we have significant purchasing power that we can readily deploy to acquire additional aircraft quickly. In addition, we expect to supplement our access to capital with debt guaranteed by government agencies such as Ex-Im Bank and the ECAs and loans from BNDES for qualifying aircraft purchases and other debt financing arrangements. Our access to capital provides us with the flexibility to complete aircraft purchases at attractive times and values.
 
•  Strong aircraft delivery pipeline.  Through our strategic and opportunistic approach to acquiring aircraft and our strong relationship with airframe manufacturers, as of December 31, 2010, we have been able to enter into commitments to acquire 144 new aircraft over the next six years. We believe that our access to this strong aircraft delivery pipeline over this period of time gives us the ability to provide airline customers with a comprehensive multi-year solution to their aircraft leasing and fleet needs. This ability represents a significant competitive advantage in developing, renewing and expanding customer relationships as we have new aircraft available for delivery during periods far earlier than most of our airline customers can obtain directly from airframe and engine manufacturers.
 
•  Young, modern and efficient aircraft fleet.  Our aircraft portfolio primarily consists of modern, fuel-efficient narrowbody aircraft. As of December 31, 2010, the weighted average age of the aircraft in our current portfolio was 3.8 years. We believe we have one of the world’s youngest operating lease portfolios. Younger aircraft are more desirable than older aircraft because of their fuel efficiency, lower maintenance costs, and longer remaining useful lives. Furthermore, younger aircraft are more likely to be in compliance with newer environmental standards or are more easily brought up to environmental compliance without costly modifications. We believe our aircraft, and the additional aircraft that we will acquire, are in high demand among our airline customers and are readily deployable to various markets throughout the world. We expect that our fleet of young, high-demand aircraft will enable us to provide stable and growing cash flows to our stockholders over the long term.
 
•  Long-standing relationships with a global, diversified customer base.  Our management team is well-known in the aviation industry and we are able to benefit from the long-standing relationships that Messrs. Udvar-Házy and Plueger and other key members of management have with more than 200 airlines in over 70 countries.
 
•  Strong manufacturer relationships.  The supply of transport aircraft is dominated by a few airframe manufacturers, including Boeing, Airbus, ATR, Embraer and Bombardier. Through our management team’s active and long-standing participation in the aviation industry, we have developed strategic relationships with many of the manufacturers and suppliers of aircraft and aircraft parts, which we leverage to obtain competitive acquisition and delivery terms and to influence new aircraft design.
 
•  Our management team’s and our board of directors’ significant investment in us aligns the interests of management and our board with those of our other stockholders.  Members of


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our management team (and their families or affiliates) and members of our board of directors invested an aggregate of approximately $90.5 million in our Company. We believe that our management team’s and our board of directors’ significant combined ownership stake in our Class A Common Stock, along with additional equity incentive grants, closely aligns our management team’s and our board of directors’ interests with those of our other stockholders.
 
Despite these competitive strengths, we face a high degree of risk that could adversely affect our financial results and growth prospects, including risks related to our liquidity plans, our ability to purchase, finance, lease and re-lease our aircraft profitably, interest rates, supply and demand cycles in the aviation industry, the financial strength of our lessees, macroeconomic conditions and emerging market conditions. See the section titled “Risk factors.”
 
Business model
 
We use our management team’s extensive experience in the aircraft leasing industry and relationships with airline customers and manufacturers to maintain and further grow relationships with both suppliers of aircraft and current and potential lessees. Our Sales, Marketing and Commercial Affairs; Finance and Accounting; Legal; Commercial Contracts; Aircraft Procurement and Specifications; and Technical Asset Management departments source and manage our aircraft through close relationships with airline customers and manufacturers.
 
Our business model emphasizes a relationship-based approach to identify potential aircraft acquisitions, perform technical reviews of the relevant maintenance records, carefully pair aircraft with appropriate lessees, structure leases to address our airline customers’ needs, and monitor our aircraft and our lessees throughout the lease terms. We believe we can execute this business model at each critical juncture along the aircraft lifecycle of acquiring, inspecting, leasing, monitoring and re-leasing or disposing of an aircraft in a competitively advantageous manner that will enable us to execute our business strategy and drive profitability.
 
Aircraft acquisition strategy
 
After determining the needs of our lessees or prospective airline customers, we evaluate each potential acquisition to determine if it supports our primary objective of generating profits while maintaining desired fleet characteristics. Our rigorous due diligence process takes into account:
 
•  the needs of our airline customers at the time of acquisition and their anticipated needs at the end of typical leasing cycles;
 
•  an aircraft’s fit within our diversified fleet based on its type, price, age, market value, specifications and configuration, condition and maintenance history, operating efficiency and potential for future redeployment;
 
•  an aircraft model’s reliability, long-term utility for airline customers, and appeal to a large segment of the industry;
 
•  jurisdiction of the lessee or potential lessee; and
 
•  legal and tax implications.
 
For used aircraft, we perform detailed technical reviews of both the physical aircraft and its maintenance history to minimize our risk of acquiring an aircraft with defects or other service


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issues. In the case of new aircraft, we work directly with the manufacturers to outfit and configure the aircraft with our airline customers’ needs in mind. Our inspection of new aircraft is focused on ensuring that our customers’ required specifications and modifications have been met.
 
We pursue acquisitions of additional aircraft through our relationships with aircraft operators, manufacturers, financial institutions, private investors and third-party lessors. We may also acquire aircraft for lease directly from manufacturers in the secondary market or pursuant to sale-leaseback transactions with aircraft operators. For new aircraft deliveries, we will often separately source many components, including seats, safety equipment, avionics, galleys, cabin finishes, engines and other equipment, from the same providers used by aircraft manufacturers at a lower cost. Manufacturers such as Boeing and Airbus will install this buyer-furnished equipment in our aircraft during the final assembly process at their facilities. Through this use of our purchasing strategy, we are better able to modify the aircraft to meet our customer’s configuration requirements and enhance lease and residual values.
 
Leasing process
 
Our management team identifies all prospective lessees based upon industry knowledge and long-standing industry relationships. We seek to meet the specific needs of our airline customers by working closely with potential lessees and, where appropriate, developing innovative lease structures specifically tailored to address those needs. While we structure aircraft leases with our airline customers’ needs in mind, we, nevertheless, anticipate that most of our leases share some common characteristics, including the following:
 
•  most of our leases to be for fixed terms, although, where mutually beneficial, we may provide for purchase options or termination or extension rights;
 
•  most of our leases will require monthly payment in advance;
 
•  most of our leases will generally provide that the lessee’s payment obligations are absolute and unconditional;
 
•  our lessees will typically be required to make payment without deduction on account of any amounts that we may owe to the lessee or any claims that the lessee may have against us;
 
•  most of our leases will also require lessees to gross up lease payments to cover tax withholdings or other tax obligations, other than withholdings that arise out of transfers of the aircraft to or by us or due to our corporate structure; and
 
•  our leases will also generally require that our lessees indemnify us for certain other tax liabilities relating to the leases and the aircraft, including, in most cases, value-added tax and stamp duties.
 
We may, in connection with the lease of used aircraft, agree to contribute specific additional amounts to the cost of certain first major overhauls or modifications, which usually reflect the usage of the aircraft prior to the commencement of the lease, and which are covered by the prior operator’s usage fees. We may be obligated under the leases to make reimbursements to lessees for expenses incurred for certain planned major maintenance. We also, on occasion, may contribute towards aircraft modifications (e.g., winglets and new interiors).


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The lessee is responsible for compliance with applicable laws and regulations with respect to the aircraft. We require our lessees to comply with the standards of either the U.S. Federal Aviation Administration (“FAA”) or its equivalent in foreign jurisdictions. Generally, we receive a cash deposit as security for the lessee’s performance of obligations under the lease and the condition of the aircraft upon return. In addition, most leases contain extensive provisions regarding our remedies and rights in the event of a default by a lessee. The lessee generally is required to continue to make lease payments under all circumstances, including periods during which the aircraft is not in operation due to maintenance or grounding.
 
Some foreign countries have currency and exchange laws regulating the international transfer of currencies. When necessary, we require, as a condition to any foreign transaction, that the lessee or purchaser in a foreign country obtains the necessary approvals of the appropriate government agency, finance ministry or central bank for the remittance of all funds contractually owed in U.S. dollars. We attempt to minimize our currency and exchange risks by negotiating most of our aircraft leases in U.S. dollars, although, where appropriate, we may agree to leases denominated in other currencies. All guarantees obtained to support various lease agreements are denominated for payment in the same currency as the lease.
 
To meet the needs of certain of our airline customers, a relatively small number of our leases may be negotiated in Euros. As the Euro to U.S. dollar exchange rate fluctuates, airlines’ interest in entering into Euro-denominated lease agreements will change. After we agree to the rental payment currency with an airline, the negotiated currency typically remains for the term of the lease. We occasionally may enter into contracts to mitigate our foreign currency risk, and we expect that the economic risk arising from foreign currency denominated leases will be immaterial to us.
 
Management obtains and reviews relevant business materials from all prospective lessees and purchasers before entering into a lease or extending credit. Under certain circumstances, the lessee may be required to obtain guarantees or other financial support from an acceptable financial institution or other third parties. During the life of the lease, situations may lead us to restructure leases with our lessees. When we repossess an aircraft leased in a foreign country, we generally expect to export the aircraft from the lessee’s jurisdiction. In some very limited situations, the lessees may not fully cooperate in returning the aircraft. In those cases, we will take legal action in the appropriate jurisdictions, a process that we expect would ultimately delay the return and export of the aircraft. In addition, in connection with the repossession of an aircraft, we may be required to pay outstanding mechanics’ liens, airport charges, and navigation fees and other amounts secured by liens on the repossessed aircraft. These charges could relate to other aircraft that we do not own but were operated by the lessee.
 
Monitoring
 
During the term of a lease, we monitor both the maintenance of the aircraft and the operating performance and the financial health of the lessee. Our net operating leases generally require the lessee to pay for maintenance, insurance, taxes and all other aircraft operating expenses during the lease term. We closely monitor each leased aircraft to ensure all routine maintenance requirements are timely performed. Where an aircraft requires major, non-routine maintenance, we often are closely involved in overseeing the maintenance and partnering with the lessee while the work is performed to ensure all governmental and/or manufacturer standards are met.


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We also closely follow the operating and financial performance of our lessees so that we can identify early on those lessees that may be experiencing operating and financial difficulties. This assists us in assessing the lessee’s ability to fulfill its obligations under the lease for the remainder of the term and, where appropriate, restructure the lease prior to the lessee’s insolvency or the initiation of bankruptcy or similar proceedings, at which time we would have less control over, and would most likely incur greater costs in connection with, the restructuring of the lease or the repossession of the aircraft. To accomplish this objective, we maintain a high level of communication with the lessee and closely and frequently evaluate the state of the market in which the lessee operates, including the impact of changes in passenger air travel and preferences, new government regulations, regional catastrophes and other unforeseen shocks to the relevant market.
 
Re-leasing or disposition of aircraft
 
Our lease agreements are generally structured to require lessees to notify us nine to twelve months in advance of the lease’s expiration if a lessee desires to renew or extend the lease. Requiring lessees to provide us with such advance notice provides our management team with an extended period of time to consider a broad set of alternatives with respect to the aircraft, including assessing general market and competitive conditions and preparing to re-lease or sell the aircraft. If a lessee fails to provide us with notice, the lease will automatically expire at the end of the term, and the lessee will be required to return the aircraft pursuant to the conditions in the lease. Our leases contain detailed provisions regarding the required condition of the aircraft and its components upon redelivery at the end of the lease term.
 
Insurance
 
We require our lessees to carry those types of insurance that are customary in the air transportation industry, including comprehensive liability insurance, aircraft all-risk hull insurance and war-risk insurance covering risks such as hijacking, terrorism (but excluding coverage for weapons of mass destruction and nuclear events), confiscation, expropriation, seizure and nationalization. We generally require a certificate of insurance from the lessee’s insurance broker prior to delivery of an aircraft. Generally, all certificates of insurance contain a breach of warranty endorsement so that our interests are not prejudiced by any act or omission of the lessee. Lease agreements generally require hull and liability limits to be in U.S. dollars, which are shown on the certificate of insurance.
 
Insurance premiums are to be paid by the lessee, with coverage acknowledged by the broker or carrier. The territorial coverage, in each case, should be suitable for the lessee’s area of operations. We generally require that the certificates of insurance contain, among other provisions, a provision prohibiting cancellation or material change without at least 30 days’ advance written notice to the insurance broker (who would be obligated to give us prompt notice), except in the case of hull war insurance policies, which customarily only provide seven days’ advance written notice for cancellation and may be subject to shorter notice under certain market conditions. Furthermore, the insurance is primary and not contributory, and we require that all insurance carriers be required to waive rights of subrogation against us.
 
The stipulated loss value schedule under aircraft hull insurance policies is on an agreed-value basis acceptable to us and usually exceeds the book value of the aircraft. In cases where we believe that the agreed value stated in the lease is not sufficient, we make arrangements to


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cover such deficiency, which would include the purchase of additional “Total Loss Only” coverage for the deficiency.
 
Aircraft hull policies generally contain standard clauses covering aircraft engines. The lessee is required to pay all deductibles. Furthermore, the hull war policies generally contain full war risk endorsements, including, but not limited to, confiscation (where available), seizure, hijacking and similar forms of retention or terrorist acts.
 
The comprehensive liability insurance listed on certificates of insurance generally include provisions for bodily injury, property damage, passenger liability, cargo liability and such other provisions reasonably necessary in commercial passenger and cargo airline operations. We expect that such certificates of insurance list combined comprehensive single liability limits of not less than $500.0 million for Airbus and Boeing aircraft and $200.0 million for Embraer, ATR and Bombardier aircraft. As a result of the terrorist attacks on September 11, 2001, the insurance market unilaterally imposed a sublimit on each operator’s policy for third-party war risk liability in the amount of $50.0 million. We require each lessee to purchase higher limits of third-party war risk liability or obtain an indemnity from its respective government.
 
In late 2005, the international aviation insurance market unilaterally introduced exclusions for physical damage to aircraft hulls caused by dirty bombs, bio-hazardous materials and electromagnetic pulsing. Exclusions for the same type of perils could be introduced into liability policies.
 
Separately, we purchase contingent liability insurance and contingent hull insurance on all aircraft in our fleet and maintain other insurance covering the specific needs of our business operations. We believe our insurance is adequate both as to coverages and amounts.
 
We cannot assure stockholders that our lessees will be adequately insured against all risks, that lessees will at all times comply with their obligations to maintain insurance, that any particular claim will be paid, or that lessees will be able to obtain adequate insurance coverage at commercially reasonable rates in the future.
 
We maintain key man life insurance policies on Messrs. Udvar-Házy and Plueger. Each policy is in the amount of $2.0 million, with the proceeds payable to us and permitted to be used for general corporate purposes.
 
Competition
 
The leasing, remarketing and sale of aircraft is highly competitive. We face competition from aircraft manufacturers, banks, financial institutions, other leasing companies, aircraft brokers and airlines. Competition for leasing transactions is based on a number of factors, including delivery dates, lease rates, terms of lease, other lease provisions, aircraft condition and the availability in the marketplace of the types of aircraft required to meet the needs of airline customers. We believe we are a strong competitor in all of these areas.
 
Government regulation
 
The air transportation industry is highly regulated. We do not operate aircraft, and thus may not be directly subject to many industry laws and regulations, such as regulations of the U.S. Department of State (the “DOS”), the U.S. Department of Transportation, or their counterpart organizations in foreign countries regarding the operation of aircraft for public


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transportation of passengers and property. As discussed below, however, we are subject to government regulation in a number of respects. In addition, our lessees are subject to extensive regulation under the laws of the jurisdictions in which they are registered or operate. These laws govern, among other things, the registration, operation, maintenance and condition of the aircraft.
 
We are required to register the aircraft which we acquire and lease to U.S. carriers and to a number of foreign carriers where, by agreement, the aircraft are to be registered in the United States, with the FAA, or in other countries, with such countries’ aviation authorities as applicable. Each aircraft registered to fly must have a Certificate of Airworthiness, which is a certificate demonstrating the aircraft’s compliance with applicable government rules and regulations and that the aircraft is considered airworthy, or a ferry flight permit, which is an authorization to operate an aircraft on a specific route. Our lessees are obligated to maintain the Certificates of Airworthiness for the aircraft they lease. When an aircraft is not on lease, we maintain the certificate or obtain a certificate in a new jurisdiction.
 
Our involvement with the civil aviation authorities of foreign jurisdictions consists largely of requests to register and deregister our aircraft on those countries’ registries.
 
We are also subject to the regulatory authority of the DOS and the U.S. Department of Commerce (the “DOC”) to the extent such authority relates to the export of aircraft for lease and sale to foreign entities and the export of parts to be installed on our aircraft. In some cases, we are required to obtain export licenses for parts installed in aircraft exported to foreign countries.
 
The DOC and the U.S. Department of the Treasury (through its Office of Foreign Assets Control) impose restrictions on the operation of U.S.-made goods, such as aircraft and engines, in sanctioned countries, as well as on the ability of U.S. companies to conduct business with entities in those countries.
 
The U.S. Patriot Act of 2001 (the “Patriot Act”) prohibits financial transactions by U.S. persons, including U.S. individuals, entities and charitable organizations, with individuals and organizations designated as terrorists and terrorist supporters by the U.S. Secretary of State or the U.S. Secretary of the Treasury. We comply with the provisions of the Patriot Act and closely monitor our activities with foreign entities.
 
A bureau of the U.S. Department of Homeland Security, U.S. Customs and Border Protection, enforces regulations related to the import of aircraft into the United States for maintenance or lease and the importation of parts into the United States for installation. We monitor our imports for compliance with U.S. Customs and Border Protection regulations.
 
The U.S. Bureau of Export Enforcement enforces regulations related to the export of aircraft to other jurisdictions and the export of parts for installation in other jurisdictions. We monitor our exports for compliance with the U.S. Bureau of Export Enforcement regulations.
 
Jurisdictions in which aircraft are registered as well as jurisdictions in which they operate may impose regulations relating to noise and emission standards. In addition, most countries’ aviation laws require aircraft to be maintained under an approved maintenance program with defined procedures and intervals for inspection, maintenance and repair. To the extent that aircraft are not subject to a lease or a lessee is not in compliance, we are required to comply with such requirements, possibly at our own expense.


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Employees
 
As of December 31, 2010, we had 34 full-time employees. None of our employees are represented by a union or collective bargaining agreements. We believe our relationship with our employees to be positive, which is a key component of our operating strategy. We strive to maintain excellent employee relations. We provide certain employee benefits, including retirement, health, life, disability and accident insurance plans.
 
Facilities
 
We lease our principal executive office at 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067. We have exceeded our current office space and we have executed lease agreements to move into a larger office space in our current building in April 2011, at which time our principal executive office will be located at 2000 Avenue of the Stars, Suite 1000N, Los Angeles, California 90067. We do not own any real estate.
 
Legal proceedings
 
From time to time, we may be involved in litigation and claims incidental to the conduct of our business in the ordinary course. Our industry is also subject to scrutiny by government regulators, which could result in enforcement proceedings or litigation related to regulatory compliance matters. We are not presently a party to any enforcement proceedings, litigation related to regulatory compliance matters, or any other type of litigation matters. We maintain insurance policies in amounts and with the coverage and deductibles we believe are adequate, based on the nature and risks of our business, historical experience and industry standards.


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Management
 
Our executive officers and directors
 
Set forth below is information concerning our current executive officers and directors as of December 31, 2010. The business address of all of our executive officers and directors is 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067.
 
             
Name   Age   Position
 
Steven F. Udvar-Házy
    64     Chairman and Chief Executive Officer
John L. Plueger
    56     President, Chief Operating Officer and Director
Grant A. Levy
    48     Executive Vice President, General Counsel and Secretary
Marc H. Baer
    46     Executive Vice President, Marketing
Alex A. Khatibi
    50     Executive Vice President
Jie Chen
    47     Executive Vice President and Managing Director of Asia
James C. Clarke
    52     Senior Vice President and Chief Financial Officer
Gregory B. Willis
    32     Vice President, Finance, and Chief Accounting Officer
John D. Poerschke
    49     Senior Vice President of Aircraft Specifications and Procurement
John G. Danhakl
    54     Director
Matthew J. Hart
    58     Director
Robert A. Milton
    50     Director
Michel M.R.G. Péretié
    56     Director
Antony P. Ressler
    50     Director
Wilbur L. Ross, Jr. 
    73     Director
Ian M. Saines
    48     Director
Dr. Ronald D. Sugar
    62     Director
 
 
 
Backgrounds of our current executive officers and directors
 
Set forth below is information concerning our current executive officers and directors identified above.
 
Steven F. Udvar-Házy has served as our Chairman and Chief Executive Officer since our inception in February 2010. Mr. Udvar-Házy brings more than 40 years of aviation industry experience to us, the last 37 of which were with International Lease Finance Corporation (“ILFC”). In 1973, Mr. Udvar-Házy co-founded the aircraft leasing business that became ILFC. As Chairman and Chief Executive Officer, Mr. Udvar-Házy led ILFC from its inception in 1973, through its initial public offering in 1983 and subsequent sale to American International Group, Inc. for $1.3 billion in 1990, and ultimately to its becoming the largest aircraft leasing company (by fleet value) in the world, with a fleet of over 1,000 jet aircraft as of December 31, 2009. Under Mr. Udvar-Házy’s leadership as Chairman and Chief Executive Officer, ILFC was able to increase its profitability. Even during the recent challenging economic environment, ILFC’s income before tax increased from $1.1 billion in 2008 to $1.4 billion in 2009, the last year of his tenure as Chief Executive Officer. Mr. Udvar-Házy retired from ILFC in February 2010 with a view to exploring other opportunities in the aviation industry. For the past 24 years, Mr. Udvar-Házy has been a


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member of the board of directors of Skywest, Inc. and currently serves as that board’s lead independent director. Mr. Udvar-Házy is an FAA Airline Transport Pilot with type ratings on multiple jet aircraft and has over 30 years of experience flying jet aircraft. He received a Bachelor of Arts degree in economics from UCLA, and has been awarded several honorary doctorate degrees.
 
John L. Plueger has served as our President and Chief Operating Officer since March 2010 and as one of our directors since April 2010. Mr. Plueger brings more than 23 years of aviation industry and aircraft leasing experience to us, all of which were with ILFC. Mr. Plueger was elected to ILFC’s board of directors in January 2002 and most recently served as ILFC’s acting Chief Executive Officer from February 2010 to March 2010. As ILFC’s President and Chief Operating Officer since 2002, Mr. Plueger was responsible for organizing ILFC’s worldwide sales and marketing efforts, maintaining its relationships with the major airframe and engine manufacturers, and overseeing all corporate support for those activities. Mr. Plueger also had primary responsibility for implementation of ILFC’s leasing business in Asia. Mr. Plueger’s professional experience also includes testifying before the U.S. House of Representatives as an aircraft leasing industry expert witness as well as responding to European Commission formal inquiries concerning aerospace industry related mergers and acquisitions. Mr. Plueger is a Certified Public Accountant and is an FAA Airline Transport Pilot with type ratings on multiple jet aircraft and single-/multi-engine and instrument instructor ratings. He received a Bachelor of Arts degree from UCLA and is a Certified Director from the UCLA Anderson Graduate School of Management’s Corporate Director Certification Program. Mr. Plueger is a member of the board of directors of the Smithsonian National Air and Space Museum, and also serves on the board of directors of the Wings Club and several other charitable boards.
 
Grant A. Levy has served as our Executive Vice President, General Counsel and Secretary since April 2010. Mr. Levy brings more than 18 years of aviation industry experience to us, all of which were with us and at ILFC in various positions in the Legal and Marketing Departments. Mr. Levy most recently served as ILFC’s Senior Vice President in the Marketing Department from 2002 until his departure in April 2010. While in the Marketing Department at ILFC, Mr. Levy led its sales team, handled its lease relationships with over 30 airlines in Europe, North America and New Zealand and arranged for ILFC to provide residual value guaranties. Prior to joining the Marketing Department, Mr. Levy was a senior member of ILFC’s Legal Department where he led the negotiation of lease, sales, residual value guaranty, fleet management and other transactions. Mr. Levy received his Bachelor of Arts degree from Pomona College and his Juris Doctor (cum laude) from Boston College Law School.
 
Marc H. Baer has served as our Executive Vice President, Marketing since April 2010. Mr. Baer brings more than 13 years of aviation industry experience to us, all of which were with us and at ILFC in the Legal and Marketing Departments. Mr. Baer most recently served as a Senior Vice President of ILFC from April 2007 until his departure in April 2010. While in the Legal Department at ILFC, Mr. Baer led the legal negotiations in a wide range of transactions, including lease agreements, sales and residual value guarantees. Beginning in September 2002, Mr. Baer began working full time in ILFC’s Marketing Department, where he was responsible for developing relationships and negotiating transactions with over 25 airlines, including Virgin Atlantic Airways Ltd., Air Seychelles and Air France, ILFC’s largest customer with over 60 aircraft. While at ILFC, Mr. Baer managed a portfolio of more than 125 aircraft and was responsible for closing the industry’s first operating lease for the new 787 aircraft from Boeing. Mr. Baer is bilingual and has dual French-American citizenship. He holds a Bachelor of Arts degree from Stanford University and a Juris Doctor from Loyola Law School.


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Alex A. Khatibi has served as our Executive Vice President since April 2010. Mr. Khatibi brings more than 23 years of aviation industry experience to us, the last 14 of which were with ILFC. Mr. Khatibi was Managing Director of ILFC’s Middle East business and managed a portfolio of global lessees including the Middle East, Greece, Poland, Hungary, Brazil, Italy, Netherlands, Germany, United Kingdom and Russia/CIS. Within these regions, Mr. Khatibi was responsible for developing and evaluating emerging markets, leading lease negotiations and planning and executing aircraft placement strategies. Mr. Khatibi began his employment in ILFC’s Technical Department in September 1995 and was responsible for the technical aspects of operating/finance lease agreements. Prior to joining ILFC, Mr. Khatibi held Engineering and Technical management positions at Continental Airlines. Mr. Khatibi is a graduate of Embry-Riddle Aeronautical University where he received a Bachelor of Science degree in Engineering and completed Technical Management studies. Mr. Khatibi also holds an FAA Airframe & Powerplant license, certified to approve aircraft airworthiness and return to service.
 
Jie Chen has served as our Executive Vice President and Managing Director of Asia since August 2010. Mr. Chen brings more than 19 years of aviation industry experience to us, the last 18 of which were with ILFC in various positions in the Sales and Marketing Department. Mr. Chen joined ILFC in 1992 as a Director of Marketing, Asia and he most recently served as ILFC’s Senior Vice President and Managing Director, Asia from 2002 until his departure in July 2010. While in the Sales and Marketing Department at ILFC, Mr. Chen oversaw the expansion of ILFC’s leasing business in Asia from 5% to 30% of ILFC’s total worldwide revenue. Mr. Chen was also responsible for developing new leasing markets in China, Vietnam, Malaysia, Thailand, Taiwan, Japan and Macau. Under Mr. Chen’s leadership, ILFC’s leasing business in Asia grew to 30% of total profits for ILFC. Prior to joining ILFC, Mr. Chen was a project manager in the leasing division at China International Trust & Investment Corporation. He holds a Bachelor of Arts degree from the Renmin University of China and a Master Degree of Science in management from the State University of New York.
 
James C. Clarke has served as our Senior Vice President and Chief Financial Officer since April 2010. Mr. Clarke has more than 23 years of experience in asset finance and leasing, structured finance for the airline sector and airline operating experience as Chief Financial Officer. From 2008 to 2010, Mr. Clarke served as founding partner of Three Capital Partners, LLC, an aviation advisory and asset-management firm. Prior to that, Mr. Clarke served as managing director at SkyWorks Capital, LLC, a firm providing transaction and advisory services on asset-based financings, financial restructurings and debt and equity offerings to global aviation clients. He held Chief Financial Officer positions at both Aloha Airlines, Inc. and Air Wisconsin Airlines Corporation, with broad management responsibilities for financial accounting and external reporting and all financing activities. Mr. Clarke was a key member of restructuring efforts at Aloha Airlines, Inc. during its first Chapter 11 bankruptcy proceedings. He also led the structured-debt, enhanced equipment trust certificate effort at Merrill Lynch & Co., Inc. He was the Senior Vice President, Risk Management for GE Capital Aviation Services, and a Vice President at its predecessor company, GPA Group PLC, with transactional responsibility for U.S. and Japanese tax-structured financings. Mr. Clarke began his career in aviation in the treasury function at both American Airlines, Inc. and United Airlines, Inc., as a staff specialist in corporate finance. He received his Bachelor of Arts degree from Stanford University, Juris Doctor from IIT Chicago-Kent College of Law and Master of Business Administration from the University of Chicago Graduate School of Business.
 
Gregory B. Willis has served as our Vice President, Finance, and Chief Accounting Officer since March 2010. Mr. Willis brings more than three years of aviation industry experience to us.


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Mr. Willis spent two years at ILFC as the Director of Accounting Policy. Prior to ILFC, Mr. Willis served as the Vice President of Alternative Investments at Mellon Financial Corporation, where he was responsible for administering the accounting and tax functions for private equity and distressed debt funds. Mr. Willis began his career as an auditor for PricewaterhouseCoopers LLP, where he spent more than five years in various audit-related roles in their financial services practice, including as an audit manager. Mr. Willis is a Certified Public Accountant, licensed in the state of California, and is a member of the American Institute of Certified Public Accountants. Mr. Willis received a Bachelor of Arts degree from the University of California at Davis.
 
John D. Poerschke has served as our Senior Vice President of Aircraft Specifications and Procurement since March 2010. Mr. Poerschke brings more than 24 years of aviation industry experience to us, the last 15 years of which were at ILFC. While at ILFC, Mr. Poerschke managed both the development of the technical aircraft configurations and procurement of the buyer furnished equipment for many of ILFC’s Boeing and Airbus aircraft. Mr. Poerschke brings an extensive network of aviation supplier relationships with him to us. Prior to joining ILFC, Mr. Poerschke held jobs of increasing management responsibility in the engineering, fleet planning and procurement departments of Continental Airlines, Inc., US Airways Group Inc. and Boeing. Mr. Poerschke received a Bachelor of Science degree from USC and he is a FAA-rated pilot.
 
John G. Danhakl has served as one of our directors since May 2010. He is a Managing Partner at Leonard Green & Partners, L.P., which he joined in 1995. Prior to joining Leonard Green & Partners, L.P., Mr. Danhakl was a Managing Director in the Los Angeles office of Donaldson, Lufkin & Jenrette Securities Corporation (“DLJ”), which he joined in 1990, and where he worked extensively with Leonard Green & Partners, L.P. as its lead investment banker. Prior to joining DLJ, Mr. Danhakl was a Vice President in corporate finance at Drexel Burnham Lambert Incorporated from 1985 to 1990. Mr. Danhakl presently serves on the board of directors of Arden Group, Inc., HITS, Inc., IMS Health, Inc., Leslie’s Poolmart, Inc., The Neiman Marcus Group, Inc., Petco Animal Supplies, Inc. and The Tire Rack, Inc. He has previously served on the board of directors of AsianMedia Group, LLC, Big 5 Sporting Goods Corporation, Communications and Power Industries, Inc., Diamond Triumph Auto Glass, Inc., Liberty Group Publishing, Inc., MEMC Electronic Materials, Inc., Phoenix Scientific, Inc., Rite Aid Corporation, Sagittarius Brands, Inc. and VCA Antech, Inc. Mr. Danhakl graduated from the University of California at Berkeley in 1980 and received a Master of Business Administration from Harvard Business School in 1985.
 
Matthew J. Hart has served as one of our directors since May 2010. Mr. Hart served as President and Chief Operating Officer of Hilton Hotels Corporation from May 2004 until the buyout of Hilton by the Blackstone Group in October 2007. Mr. Hart also served as Executive Vice President and Chief Financial Officer of Hilton from 1996 to 2004. Prior to joining Hilton, Mr. Hart served as the Senior Vice President and Treasurer of The Walt Disney Company, Executive Vice President and Chief Financial Officer for Host Marriott Corp., Senior Vice President and Treasurer for Marriott Corporation and Vice President, Corporate Lending, for Bankers Trust Company. Mr. Hart received his Bachelor of Arts in Economics and Sociology from Vanderbilt University in 1974 and earned a Master of Business Administration in Finance and Marketing from Columbia University in 1976. Mr. Hart currently serves on the board of directors of US Airways and Great American Group, Inc. and is the Chairman of Heal the Bay, a non-profit organization.
 
Robert A. Milton has served as one of our directors since April 2010. Mr. Milton is our lead independent director. Mr. Milton is the Chairman, President and Chief Executive Officer of ACE


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Aviation Holdings, Inc. (“ACE”). ACE was the parent holding company under which the reorganized Air Canada and separate legal entities such as Aeroplan LP and Air Canada Jazz were held. Mr. Milton was also the Chairman of Air Canada until December 2007. He held the position of President and Chief Executive Officer of Air Canada from August 1999 until December 2004. From 2003 to 2004, Mr. Milton led Air Canada’s restructuring which has positioned the airline to compete effectively in the new airline environment. Prior to joining Air Canada, Mr. Milton was a founding partner in Air Eagle Holdings Inc. and an independent commercial aviation consultant to British Aerospace Limited. He started his career at Air Canada in 1992 on a consulting basis and assumed increasingly responsible positions in cargo operations, scheduling, product design, advertising, inflight service and marketing until his appointment as Executive Vice President and Chief Operating Officer in 1996. Mr. Milton served as Chair of the International Air Transport Association’s Board of Governors from 2005 to 2006. He is one of the past Chairmen of the Georgia Tech Advisory Board and currently serves as a Trustee of the Georgia Tech Foundation. Mr. Milton received his Bachelor of Science degree in Industrial Management from the Georgia Institute of Technology in 1983.
 
Michel M.R.G. Péretié has served as one of our directors since June 2010. Mr. Péretié was appointed Chief Executive Officer of Société Générale Corporate & Investment Banking in 2008. Mr. Péretié began his career at Banque Paribas in 1980 where he created and developed its derivatives group (equity, fixed income, foreign exchange). In 1996, he became Global Head of Equity Derivatives, Swaps, Credit Derivatives and FX based in London. In 1999, he was named Global Head of Fixed Income of the newly formed BNP-Paribas. He joined Bear Stearns in 2000 as Senior Managing Director and Head of Fixed Income and Derivatives for Europe and Asia. In 2004, he was appointed Chairman of Bear Stearns International and became CEO of Bear Stearns for Europe and Asia in 2006. He served as a member of the Board of Bear Stearns & Co. from January 2007 to June 2008. Mr. Péretié graduated from the Institute of Business Administration of Sorbonne University, Paris.
 
Antony P. Ressler has served as one of our directors since May 2010. Mr. Ressler co-founded Ares Management LLC in 1997, a global investment management firm with a focus on ‘‘alternative assets’’ (i.e., leveraged loans, high yield bonds, distressed debt, private/mezzanine debt and private equity) managed through a variety of funds and investment vehicles which, as of December 31, 2010, had approximately $39 billion of committed capital under management. Ares Management LLC has approximately 350 employees and is based in Los Angeles with offices across the United States, Europe and Asia. Mr. Ressler also co-founded Apollo Management, L.P. in 1990, a private investment firm based in New York. Prior to 1990, Mr. Ressler served as a Senior Vice President in the High Yield Bond Department of Drexel Burnham Lambert Incorporated, with responsibility for the New Issue/Syndicate Desk. Mr. Ressler also serves on the board of directors of Ares Capital Corporation, a publicly traded business development company and on the boards of private companies owned or controlled by Ares Management LLC or its affiliated funds. In the non-profit sector, Mr. Ressler serves as a member of the Board of Trustees of the Cedars-Sinai Medical Center, the Center for Early Education and the Los Angeles County Museum of Art and as the Chairman of the Alliance for College-Ready Public Schools, a high-performing group of 16 charter high schools and middle schools based in Los Angeles. Mr. Ressler is also one of the founding members of the board of the Painted Turtle Camp, a southern California based organization (affiliated with Paul Newman’s Hole in the Wall Association). Mr. Ressler received his Bachelor of Science degree in Foreign Service from Georgetown University’s School of Foreign Service and received his Master of Business Administration from Columbia University’s Graduate School of Business.


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Wilbur L. Ross, Jr. has served as one of our directors since November 2010. Mr. Ross is the Chairman and Chief Executive Officer of WL Ross & Co. LLC, a merchant banking firm, a position he has held since April 2000. Mr. Ross is also the managing member of the general partner of WL Ross Group, L.P., which in turn is the managing member of the general partner of WLR Recovery Fund L.P., WLR Recovery Fund II L.P., WLR Recovery Fund III L.P., WLR Recovery Fund IV L.P., Asia Recovery Fund L.P., Asia Recovery Co-Investment Fund L.P., Absolute Recovery Hedge Fund L.P., India Asset Recovery Fund and Japan Real Estate Recovery Fund, the Chairman of the Investment Committee of the Taiyo Fund and the Chairman of Invesco Private Capital, each of which is a private investment fund. Mr. Ross is also Chairman of International Coal Group, Inc., International Textile Group, Inc., a global, diversified textile provider that produces automotive safety, apparel, government uniform, technical and specialty textiles, Nano-Tex, Inc., a fabric innovations company located in the United States, IPE-Ross Management Ltd., an investment partnership investing in middle market European buyouts, and International Auto Components Group SL, a joint venture company with interests in automotive interior plastics. Mr. Ross is also an executive officer of Invesco Private Equity, American Home Mortgage Services, Inc. and Plascar Participacoes SA. Mr. Ross is a board member of ArcelorMittal N.V., Assured Guaranty Ltd., a provider of financial guaranty and credit enhancement products, Compagnie Européenne de Wagons SARL in Luxembourg, Insuratex, Ltd., an insurance company in Bermuda, Plascar Participacoes SA, Phoenix International Insurance Company, The Greenbrier Companies, a supplier of transportation equipment and services to the railroad industry, IAC Acquisition Corporation Limited, IAC Group SARL, and Masters Capital Nanotechnology Fund. Mr. Ross is also a member of the Business Roundtable. Previously, Mr. Ross served as the Executive Managing Director at Rothschild Inc., an investment banking firm, from October 1974 to March 2000. Mr. Ross was previously a director of Mittal Steel Co. N.V. from April 2005 to June 2006, a director of International Steel Group from February 2002 to April 2005, a director of Montpelier RE Holdings Ltd. from 2006 to March 2010, and a director of Syms Corp. from 2000 through 2007. Mr. Ross was also formerly Chairman of the Smithsonian Institution National Board and currently is a board member of Whitney Museum of American Art, the Japan Society, and the Yale University School of Management, the Harvard Business School Club of New York, the Palm Beach Civic Association, the Palm Beach Preservation Foundation and the Partnership for New York City. He holds an A.B. from Yale University and an M.B.A., with distinction, from Harvard University.
 
Ian M. Saines has served as one of our directors since June 2010. Mr. Saines is the Group Executive of the Institutional Banking and Markets division of Commonwealth Bank, which he joined in 2004. He is responsible for managing Commonwealth Bank’s relationships with major corporate, institutional and government clients and providing a full range of capital raising, transactional and risk management products and services. Prior to joining Commonwealth Bank, Mr. Saines was a Management Committee member of Zurich Capital Markets Asia, the investment banking arm of the Zurich Financial Services Group. Between 1985 and 1999, Mr. Saines held various leadership positions at Bankers Trust Australia Limited and headed the investment bank’s Global Metals and Mining Industry Group. Prior to joining Bankers Trust Australia Limited, Mr. Saines was employed by the Reserve Bank of Australia. Mr. Saines was formerly a board member of Father Chris Riley’s Youth Off The Streets, a not-for-profit organization providing support to chronically homeless and abused youth in Australian society. He is currently a director of the Australian Financial Markets Association. Mr. Saines is a Fellow of the Australian Institute of Company Directors, and a Certified Finance and Treasury Professional. Mr. Saines has a first class honours degree in economics from the University of New South Wales.
 
Dr. Ronald D. Sugar has served as one of our directors since April 2010. Dr. Sugar is Chairman Emeritus of Northrop Grumman Corporation. He served as Chairman of the Board and Chief


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Executive Officer from 2003 until his retirement in 2010. During Dr. Sugar’s tenure, Northrop Grumman grew to become the nation’s second largest defense contractor with 125,000 employees and $35 billion annual revenue. Prior to joining Northrop Grumman, Dr. Sugar held executive positions in the aerospace, defense, and automotive industries, including Chief Financial Officer of TRW Inc., Executive Vice President of TRW Automotive Electronics, President and Chief Operating Officer of TRW Aerospace, and President, Chief Operating Officer and Director of Litton Industries. In 2001, he became President and Chief Operating Officer of Northrop following its acquisition of Litton. He is a director of Amgen Inc., Apple Inc. and Chevron Corporation, a trustee of USC, a Director of the Los Angeles Philharmonic, a visitor of the UCLA Anderson School of Management, a Director of the World Affairs Council of Los Angeles, a National Trustee of the Boys and Girls Clubs of America, a past Chairman of the Aerospace Industries Association, and a member of the National Academy of Engineering. Dr. Sugar received a Bachelor of Science degree in Engineering (summa cum laude) from UCLA, where he also received the master’s and doctorate degrees in the same field, and was subsequently honored as UCLA Alumnus of the Year.
 
Board of directors
 
Our board of directors is composed of ten members. Our directors serve for one-year terms and until their successors are duly elected and qualified. There is no cumulative voting in the election of directors. Certain information regarding our directors upon completion of this offering is set forth below.
 
There are no family relationships among any of our directors or executive officers.
 
Director independence
 
Pursuant to the listing standards of the         , a director employed by us cannot be deemed to be an “independent director”, and each other director will qualify as “independent” only if our board of directors affirmatively determines that he has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. Ownership of a significant amount of our stock, by itself, does not constitute a material relationship. Accordingly, our board of directors has affirmatively determined that each of          is “independent” in accordance with         . Mr. Milton is our lead independent director.
 
Committees of the board
 
Our board of directors has three standing committees: an audit committee, a compensation committee and a nominating and governance committee. Each of these committees is comprised solely of independent directors under the           listing standards.
 
Audit committee
 
Our audit committee consists of Messrs. Hart, Milton and Ross. Mr. Hart is the Chairman of the audit committee.
 
Our audit committee’s duties include, but are not limited to, monitoring (1) the integrity of the financial statements of the Company, (2) the independent auditor’s qualifications and independence, (3) the performance of our internal audit function and independent auditors, (4) our compliance with legal and regulatory requirements and (5) our overall risk profile.


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Our audit committee must at all times be composed exclusively of “independent directors” who are “financially literate” as defined under the           listing standards. The audit committee must have at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting or other comparable experience or background that results in the individual’s financial sophistication and who qualifies as an “audit committee financial expert,” as defined under rules and regulations of the SEC.
 
Nominating and governance committee
 
Our nominating and governance committee consists of Mr. Milton and Dr. Sugar. Mr. Milton is the Chairman of the nominating and governance committee.
 
Our nominating and governance committee monitors the implementation of sound corporate governance principles and practices and will, among other things: (1) identify individuals believed to be qualified to become a member of our board of directors and select or recommend candidates for all directorships to be filled, (2) develop a set of corporate governance guidelines for us and (3) oversee the evaluation of our board of directors and management. Our nominating and governance committee also reviews and approves all related party transactions in accordance with our policies with respect to such matters.
 
Compensation committee
 
Our compensation committee consists of Dr. Sugar and Messrs. Danhakl and Ressler. Dr. Sugar is the Chairman of the compensation committee.
 
Our compensation committee has overall responsibility for approving and evaluating all of our compensation plans, policies and programs as they affect the executive officers, including the Chief Executive Officer.
 
Compensation committee interlocks and insider participation
 
None of the members of our compensation committee has at any time been one of our officers or employees. None of our executive officers serves, or in the past year has served, as a member of the board of directors or the compensation committee of any entity that has one or more executive officers who serve on our board of directors or compensation committee.
 
Corporate governance policies and code of conduct
 
Code of business conduct and ethics
 
Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all of our directors, employees and officers. Among other things, the Code of Business Conduct and Ethics is intended to ensure fair and accurate financial reporting, to promote ethical conduct and compliance with applicable laws and regulations, to provide guidance with respect to the handling of ethical issues, to foster a culture of honesty and accountability and to deter wrongdoing. It also requires disclosure to us of any situation, transaction or relationship that may give rise to any actual or potential conflict of interest. Such conflicts must be avoided unless approved by our nominating and governance committee. The Code of Business Conduct and Ethics prohibits our employees, officers and directors from taking, or directing a third party to take, a business opportunity that is discovered through the use of our property. A copy of


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our Code of Business Conduct and Ethics will be available upon the closing of this offering on our website at www.airleasecorp.com .
 
Audit and non-audit services pre-approval policy
 
Our audit committee has approved and adopted an Audit and Non-Audit Services Pre-Approval Policy which sets forth the procedures and conditions pursuant to which services to be performed by our independent auditor are to be pre-approved. The policy provides that the audit committee will annually consider for approval, and approve as it deems appropriate and consistent with the policy and applicable law, a schedule listing proposed engagements and specified audit and non-audit services expected to be provided by the independent auditor commencing during the upcoming year. As stated in the policy, in determining whether to pre-approve services, the audit committee may consider, among other factors: (i) whether the services are consistent with applicable rules on auditor independence; (ii) whether the independent auditor is best positioned to provide the services in an effective and efficient manner, taking into consideration its familiarity with our business, people, culture, accounting systems, risk profile and other factors; and (iii) whether the services might enhance our ability to manage or control risk or improve audit quality. Under the policy, the audit committee may delegate preapproval authority to one or more of its members. The policy contemplates that our Chief Financial Officer, or his designee, will provide a quarterly report to the audit committee listing services performed by and fees paid to the independent auditor during the current fiscal year and the previous quarter, including a reconciliation of the actual fees of the independent auditors compared to the budget for such services as approved by the audit committee.
 
Insider trading policy
 
Our board of directors has adopted an Insider Trading Policy that applies to all of our directors, officers and employees. The Insider Trading Policy prohibits a participant from buying or selling shares of capital stock when he or she has “material nonpublic information.” “Material nonpublic information” generally means information that is not generally known or available to the public and that a reasonable investor would consider important in making an investment decision to buy, hold, or sell securities. Anyone who fails to comply with the Insider Trading Policy will be subject to appropriate disciplinary action, up to and including termination of employment.
 
Whistleblower policy
 
Our board of directors has adopted a Whistleblower Policy. The Whistleblower Policy is intended to encourage our directors, officers and employees to further our goal of fostering a culture of legal and ethical compliance. The policy sets forth procedures for (i) raising questions and concerns about potential misconduct, including potential violations of law, regulation or our policies, questionable or unethical accounting, internal accounting controls or auditing matters and (ii) reporting potential misconduct, unless supplanted by other applicable law. The policy strictly prohibits anyone from taking or threatening disciplinary or other retaliatory action, including discharge, demotion, suspension, harassment or any other discrimination, against an individual for, in good faith, raising questions or concerns about, or reporting, potential misconduct, including a potential violation of the law, regulation, or our policies. The policy also includes procedures for maintaining the confidentiality of information communicated under the policy.


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Executive compensation
 
Compensation discussion and analysis
 
Executive summary
 
Our Company’s executive compensation program has been designed to attract the most talented executives in the aircraft leasing business to join us in our start-up venture, and to reward these individuals for the successful launch of our business. The compensation committee believes that the program has been very successful in accomplishing these objectives. The combination of a highly competitive base salary and bonus, equity incentive awards, and the potential for even greater rewards as a stockholder, has helped us assemble a formidable management team and focus them on growing the value of our Company over the long term. We believe having an experienced and motivated senior management team is essential to the success of our Company and provides us and our stockholders with an important competitive advantage.
 
The following section contains a discussion of the objectives and elements of our executive compensation program in 2010, as well as information regarding the compensation of our Named Executive Officers, who are our principal executive officer, Mr. Udvar-Házy, our three other most highly compensated executive officers who were serving as executive officers at the end of 2010, Mr. Plueger, Mr. Levy and Mr. Chen, and our principal financial officer, Mr. Clarke.
 
Compensation program overview and objectives
 
Our Company was launched in February 2010. Our executive compensation program is designed to address some of the unique challenges associated with being a young company that requires a small number of extraordinary and talented individuals with industry experience to manage and lead an asset-intensive business. The primary objective of our executive compensation program is to attract, retain and motivate the highest caliber executives in the aircraft leasing industry by offering a comprehensive compensation program that is attractive enough to entice successful senior executives to work for a company with a limited operating history. This compensation program includes fixed compensation elements that are very competitive in the marketplace, combined with performance-based elements that are designed to reward our Named Executive Officers for achieving results that derive value for our stockholders.
 
Our Company does not benchmark our compensation program against that of other companies because we operate within an industry with a small number of competitors and few that would be suitable as comparative companies. Most of our competitors are private or foreign companies or are captive subsidiaries of public companies, and are therefore unsuitable as benchmarks for compensation design for our Company. Rather, we utilize the collective knowledge and experience of our board members and our senior executives, some of whom are pioneers in our industry, as well as the advice of an independent compensation consultant, to make appropriate determinations regarding compensation. Furthermore, as a young company, we believe it is important to make compensation decisions based on our own short-term and long-term goals. Instead of making decisions based on how our Company’s compensation practices compare to those of our peers, we consider the amount and form of compensation that will best enable us to attract and retain the most talented executives and to focus them on the growth and long-term success of our business.


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This “Compensation discussion and analysis” should be read together with the compensation tables that follow, which disclose the compensation awarded to, earned by or paid to the Named Executive Officers in or with respect to 2010.
 
How we determine compensation
 
Role of the Compensation Committee.  The compensation committee, which is currently comprised of Dr. Ronald D. Sugar, who serves as Chair of the committee, and Messrs. John G. Danhakl and Antony P. Ressler, oversees the design, administration and evaluation of our overall executive compensation program. The compensation committee also approves the total compensation for each Named Executive Officer, including our Chairman and Chief Executive Officer. Each member of the compensation committee must be an independent, non-employee director, as those terms are defined in SEC,           and IRS rules. Among other things, the compensation committee will at least annually:
 
•  Review and adjust each Named Executive Officer’s compensation in order to ensure an appropriate mix of cash and equity, and an appropriate balance of fixed and at-risk compensation, in light of, among other factors, each individual’s particular role and responsibilities, personal motivations, stock ownership exposure and wealth accumulation.
 
•  Approve specific performance targets and individual goals for each Named Executive Officer with respect to the at-risk portions of his compensation.
 
•  Consult with the compensation committee’s independent consultant to help ensure that the total compensation paid to each Named Executive Officer is appropriate in light of our Company’s compensation objectives, tax and accounting considerations and compensation best practices.
 
•  Approve incentive award payouts based on performance actually achieved.
 
•  Approve bonus payments based on after-the-fact evaluations of Company and individual performance. We regard retrospective evaluation as appropriate for our current compensation program because, as a young company, we have a limited ability to forecast performance, we need to consider qualitative milestones as we grow, and we lack appropriate baselines to support performance benchmarking.
 
Role of Management.  The compensation committee determines the overall compensation of the Chairman and Chief Executive Officer without management input. The compensation committee seeks suggestions and recommendations from the Chairman and Chief Executive Officer and guidance from the President and Chief Operating Officer (except with respect to themselves) regarding the compensation of our other Named Executive Officers. None of our Named Executive Officers is present when his compensation is discussed by the compensation committee. Our management administers all compensation and benefits programs, subject to the oversight of the compensation committee. This delegation to management is strictly limited to implementation of the programs, and does not include any discretion to make material decisions regarding the overall executive compensation program.
 
Role of Independent Consultant.  The compensation committee has engaged Exequity as an independent consultant to provide advice with respect to compensation decisions for our Company’s executive officers. The independent consultant assists in evaluating our compensation objectives, obtaining market information, and designing various aspects of our compensation program. The independent consultant attends meetings of the compensation


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committee by invitation, and compensation committee members have direct access to the independent consultant without management involvement. The compensation committee has the sole authority to hire and fire the independent consultant. In order to help ensure impartiality and objectivity, the compensation committee prohibits the independent consultant from undertaking any separate work for our management or employees unless specifically approved by the compensation committee.
 
Risk Management.  We believe that the best way to ensure personal commitment to our Company’s long-term goals is to ensure that our Named Executive Officers and other employees’ financial rewards as stockholders will, over the long term, far outweigh any cash compensation they earn as employees. In this regard, the interests of our Named Executive Officers and our stockholders are strongly aligned. Our Named Executive Officers as a group beneficially own 7.53% of our Company’s Common Stock, and each Named Executive Officer has made a meaningful personal investment in our Company’s stock.
 
In addition, our executive compensation program has been designed to discourage executives from taking unnecessary risks that could threaten the long-term interests of our young company. As described in more detail below, a significant portion of our Company’s incentive-based compensation is tied to an increase in our Company’s book value, and not to metrics that may encourage risk-taking behavior focused on short-term results. Similarly, we have mitigated potential risk by subjecting all of our equity-based awards to time-based and, in the case of restricted stock units (“RSUs”), performance-based vesting conditions and capping incentive opportunities such as annual bonuses. We also believe that our executives’ significant equity ownership in our Company aligns their long-term interests with those of our stockholders.
 
Employment Agreements.  Due to the importance of their services to, and their leadership of, our Company, we have entered into employment agreements with our Chairman and Chief Executive Officer, Mr. Udvar-Házy, and our President and Chief Operating Officer, Mr. Plueger, which are described below under “Employment agreements and arrangements and potential payments upon termination or change in control.” We have no current plans to enter into employment agreements with any of our other Named Executive Officers.
 
Elements of the executive compensation program
 
Base Salary.  Base salary is the main “fixed” component of our executive compensation program, and it is aimed primarily at attracting and retaining the best possible executive talent. The relative levels of base salary for our Named Executive Officers are based on the particular responsibilities and expectations associated with each executive’s position. The base salaries of Messrs. Udvar-Házy and Plueger are determined in accordance with their employment agreements, and the base salaries of the other Named Executive Officers are determined by the compensation committee, with the input of Messrs. Udvar-Házy and Plueger and taking into consideration the objectives and philosophies of our overall executive compensation program.
 
Annual Bonus.  Our Company provides annual bonus opportunities in order to foster executive accountability and reward executives for achieving business goals. The compensation committee makes bonus determinations based primarily on several subjective factors, including (i) the particular executive’s specific roles, responsibilities and performance, (ii) the overall business environment, (iii) our Company’s performance and (iv) competitive considerations in the market for comparable opportunities. In addition, in determining the amounts of annual bonus awards


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for 2010, the compensation committee anticipates placing a heavy emphasis on a particular executive’s role in helping to launch our Company, including with respect to equity- and debt-raising activities and the purchase and leasing of our initial portfolio of aircraft.
 
Under his employment agreement, Mr. Udvar-Házy’s target annual bonus amount is equal to 100% of his base salary, with a maximum bonus equal to 200% of his base salary. The amount of Mr. Udvar-Házy’s annual bonus is determined on the basis of our Company’s attainment of objective financial performance metrics, or a combination of our Company’s attainment of such financial performance metrics and Mr. Udvar-Házy’s attainment of individual objectives, in each case as determined and approved by the compensation committee. In 2010, Mr. Udvar-Házy was entitled to a guaranteed bonus of no less than $1.6 million. Mr. Plueger’s target annual bonus amount under his employment agreement is equal to 80% of his base salary, with a maximum bonus equal to 120% of his base salary. Mr. Levy is eligible for an annual bonus based on a target opportunity of $700,000. Messrs. Chen and Clarke are eligible for annual bonuses based on target and maximum opportunities of 100% and 50%, respectively, of each executive’s respective base salary. In most cases, the compensation committee retains the discretion to reduce the amount of each executive’s annual bonus, even if his maximum opportunity has been achieved.
 
Retention Bonuses.  Most of our Named Executive Officers are eligible for retention incentives that vest upon completion of three years’ service with our Company and are forfeited if the executive’s employment is terminated prior to vesting. The purpose of these bonuses is to promote stability among our leadership team during our critical start-up period. Each of Messrs. Udvar-Házy, Plueger, and Chen is eligible for a retention bonus equal to 10% of his then current base salary. Mr. Levy is eligible for a retention bonus equal to $85,000.
 
Amended and Restated Deferred Bonus Plan.  The purpose of our Amended and Restated Deferred Bonus Plan is to provide retention incentives that are time-vested and based on amounts already earned, thereby providing a balance against our retention incentives that are tied to uncertain, future performance. Under the plan, our employees have an opportunity to receive a cash bonus in an amount equal to a percentage of the aggregate amount of base salary and cash bonus compensation earned with respect to a particular year. The deferred bonus will generally vest upon the second anniversary of the end of the year with respect to which the award was made, provided that the employee is still employed by us on a full-time basis on that date, and will be paid as soon as practicable thereafter. Once vested, the deferred bonus is not subject to reduction by our compensation committee. Messrs. Udvar-Házy and Plueger are each eligible to participate in our Amended and Restated Deferred Bonus Plan, and in accordance with their employment agreements, will receive a bonus equal to 9% of the aggregate amount of his base salary and bonus compensation with respect a particular calendar year. Bonuses for our other Named Executive Officers and employees will be determined annually by the Chairman and Chief Executive Officer and the President and Chief Operating Officer as administrators under the plan, in accordance with the terms of the plan and a schedule approved by the compensation committee or board of directors. Awards to the Chairman and Chief Executive Officer and the President and Chief Operating Officer are administered by our compensation committee or board of directors. Bonuses under our Amended and Restated Deferred Bonus Plan have not yet been awarded with respect to 2010.
 
Long-Term Incentive Awards.  Consistent with our executive compensation objectives, the compensation committee believes that an important aspect of attracting and retaining exceptionally talented executives and aligning their interests with those of our stockholders is


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to provide equity-based incentive compensation. In approving the initial grants of equity incentives to our employees, our board of directors and compensation committee considered an overall value for each executive officer, and sought to establish a mix of approximately 50% RSUs and 50% options to purchase shares of our Class A Common Stock. The compensation committee believes this mix creates a balanced incentive because the RSUs provide the executives with additional stock ownership, which aligns the long-term interests of our senior executives and stockholders, while the options provide them with an incentive to achieve performance that leads to appreciation in our stock price. All awards have been made under our Air Lease Corporation 2010 Equity Incentive Plan (the “2010 ALC Equity Incentive Plan”).
 
The RSUs are subject to time vesting and performance conditions. The RSUs generally vest in four equal installments over a four-year period, but only if there have been specified increases in our Company’s per share book value, as determined in accordance with GAAP. The cumulative required increase in value is 2.00% in the first year, 5.06% in the second year, 9.26% in the third year and 13.63% in the fourth year. If a specified cumulative increase is attained in years two, three or four, any unvested installments from prior years will also vest.
 
Messrs. Udvar-Házy, Plueger and Chen received equity awards as described below under “— Specific Purpose Awards .” Mr. Levy received 150,000 RSUs and 150,000 options to purchase shares of our Class A Common Stock, and Mr. Clarke received 15,000 RSUs and 15,000 options to purchase shares of our Class A Common Stock. The time-based vesting element of Mr. Chen’s RSUs are different from the other Named Executive Officers’ RSUs in that they vest in two equal installments over a two-year period, with the opportunity to vest in years three and four, under the same four-year performance requirements.
 
Our Company’s book value is considered to be an appropriate performance metric because it relates directly to our goal of encouraging long-term growth that benefits the stockholders’ equity in our Company. In addition, other typical performance measures like revenues and earnings were not appropriate at the time that we made our equity incentive grants, as it is difficult for a young company to provide meaningful forecasts of these measures to serve as baselines for measuring performance.
 
The options to purchase shares of Class A Common Stock are generally subject to ratable time vesting over three years, although Mr. Chen’s options vest 66 2 / 3 % on June 30, 2011 and 33 1 / 3 % on June 30, 2012. The exercise price of the options is determined by the compensation committee, but may never be less than the fair market value of our Class A Common Stock on the date of grant. The compensation committee believes that the options are inherently performance based because they have no intrinsic value on the date of grant and will only deliver meaningful value when stockholders also realize value.
 
Specific Purpose Awards.  In July 2010, the Company completed a $1.3 billion private placement of its Common Stock. In order to provide Messrs. Udvar-Házy and Plueger with an additional incentive to complete this transaction, our board of directors agreed to grant them RSUs and options to acquire additional shares of Class A Common Stock at an exercise price of $20 per share. The number of RSUs and the number of shares subject to the options were determined based on an escalating scale that incentivized Messrs. Udvar-Házy and Plueger to help raise the largest amount of capital possible from the offering. In accordance with the scale, Mr. Udvar-Házy was entitled to receive 1,812,402 RSUs and options to purchase 1,812,402 shares of Class A Common Stock, while Mr. Plueger was entitled to receive 735,586 RSUs and options to purchase 735,586 shares of Class A Common Stock. Mr. Udvar-Házy instead received an aggregate of 1,750,426 RSUs and options to purchase 1,751,352 shares of Class A Common


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Stock, while Mr. Plueger received an aggregate of 710,431 RSUs and options to purchase 710,806 shares of Class A Common Stock. Messrs. Udvar-Házy and Plueger waived the additional RSUs and options to which they were entitled in order to permit grants to Mr. Chen of 150,000 RSUs and options to purchase 150,000 shares of Class A Common Stock, as described below. As an additional incentive in connection with the equity offering described above, Mr. Udvar-Házy also earned a $500,000 success bonus.
 
Consistent with the philosophy of rewarding our executives for achieving specific business objectives, each of Messrs. Udvar-Házy, Plueger, Chen and Clarke is eligible for a cash bonus equal to 10% of his current annual base salary, and Mr. Levy is eligible for a cash bonus of $70,000, upon completion of our contemplated initial public offering.
 
We regard Mr. Chen as playing a key role in the potential expansion of our business in the Asian market. In recognition of the importance of the Asian market to our business and his role relative to that market, the compensation committee approved Mr. Chen’s eligibility for a cash signing bonus in the amount of $1.3 million, half of which will vest and be payable on July 15, 2011 and the other half of which will vest and be payable on July 15, 2012, as well as performance bonuses of $80,000, $250,000, $370,000 and $450,000, which will vest and be payable in July 2011, July 2012, July 2013 and July 2014, based upon the achievement of performance targets to be established by our Chief Executive Officer and approved by the compensation committee.
 
In addition, Mr. Chen was granted 150,000 RSUs and 150,000 options to purchase shares of Class A Common Stock, subject to the vesting conditions described above. Because of share capacity constraints under the 2010 ALC Equity Incentive Plan, Messrs. Udvar-Házy and Plueger agreed to waive a sufficient number of RSUs and options to which they were otherwise entitled to facilitate these grants to Mr. Chen. In addition, our compensation committee agreed that Mr. Chen is eligible for future grants of up to 150,000 RSUs and options to purchase 150,000 shares of Class A Common Stock if additional capacity becomes available.
 
Retirement Programs.  We maintain a 401(k) savings plan for our employees and, under the terms of the plan, will make matching contributions in amounts equal to 116% of up to 6% of the contributions made by each of Messrs. Udvar-Házy, Plueger, Levy and Chen and matching contributions in amounts equal to 33 1 / 3 % of up to 6% of the contributions made by Mr. Clarke. No matching contributions were made for the Named Executive Officers for 2010.
 
Benefits and Perquisites.  Our Named Executive Officers generally receive the same healthcare benefits as our other employees. Mr. Udvar-Házy has additional benefits under his employment agreement, including our payment of premiums for a $5.0 million term life insurance policy payable to his beneficiaries. Similarly, we pay Mr. Plueger’s premiums for a $2.0 million term life insurance policy payable to his beneficiaries. In addition, we pay the premiums for Messrs. Levy, Chen and Clarke under our group term life insurance program, in which all of our employees participate.
 
Severance and change in control provisions
 
Messrs. Udvar-Házy and Plueger are each entitled to certain payments and benefits if his employment is terminated in certain circumstances, as set forth in their employment agreements. The details of these provisions are discussed in the section titled “Employment agreements and arrangements and potential payments upon termination or change in control.” The compensation committee believes that providing our senior executive officers with income


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protection in the event of an involuntary termination is appropriate as it is an important aspect of attracting highly talented executives, avoids costly and potentially protracted separation negotiations and mitigates the risks our executives face in leaving their positions to join our Company. Each of Messrs. Udvar-Házy and Plueger is subject to noncompetition and nonsolicitation restrictions while employed by our Company and nonsolicitation restrictions for one year following his termination. Each of them is also subject to an ongoing confidentiality obligation.
 
As described below under “Air Lease Corporation 2010 Equity Incentive Plan— Change in control ,” under the terms of our plan, all outstanding options shall become fully exercisable and vested upon the occurrence of a change in control, as defined under the plan, and our compensation committee may determine the level of achievement with respect to any performance-based RSUs through the date of the change in control.
 
Tax considerations
 
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), generally disallows a federal income tax deduction for public companies for compensation in excess of $1.0 million paid for any fiscal year to the chief executive officer and the three other most highly compensated executive officers (other than the chief financial officer) unless the compensation qualifies as performance-based. Because we are a newly public company, however, the plans and agreements described in this prospectus are generally exempt from the application of Section 162(m) for three years. To the extent Section 162(m) does apply to any compensation paid by our Company, depending on the relevant circumstances at the time, the compensation committee may determine to award compensation that may not be deductible. In making this determination, the compensation committee balances the purposes and needs of our executive compensation program against potential tax cost.
 
Section 409A of the Code imposes an excise tax on the recipient of certain non-qualified deferred compensation. The compensation committee attempts to structure all executive compensation to comply with, or be exempt from, Section 409A.


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Executive compensation tables
 
Summary compensation table
 
The following table summarizes compensation paid to or earned by our Named Executive Officers during the fiscal year ended December 31, 2010. Our Named Executive Officers are our principal executive officer, Mr. Udvar-Házy; our three other most highly compensated executive officers, Messrs. Plueger, Levy and Chen, as determined by their total compensation set forth in the table below; and our principal financial officer, Mr. Clarke.
 
                                                         
 
                      Stock
    Option
    All other
       
Name and
        Salary
    Bonus
    awards*
    awards*
    compensation
    Total
 
principal position   Year     ($)     ($)(1)     ($)(2)     ($)(2)     ($)(3)     ($)  
 
 
Steven F. Udvar-Házy
    2010     $ 1,622,727     $ 500,000     $ 35,008,520     $ 18,807,128     $ 29,717     $ 55,968,092  
Chairman and Chief Executive Officer
                                                       
John L. Plueger
    2010     $ 1,125,000     $     $ 14,208,620     $ 7,600,283     $ 6,343     $ 22,940,246  
President and Chief Operating Officer
                                                       
Grant A. Levy
    2010     $ 506,439     $     $ 3,000,000     $ 1,236,530     $ 3,743     $ 4,746,712  
Executive Vice President, General Counsel and Secretary
                                                       
Jie Chen
    2010     $ 343,750     $     $ 3,000,000     $ 1,116,204     $ 2,298     $ 4,462,252  
Executive Vice President and Managing Director of Asia
                                                       
James C. Clarke
    2010     $ 149,352     $     $ 300,000     $ 123,653     $ 62,942     $ 635,947  
Senior Vice President and Chief Financial Officer
                                                       
 
 
 
Stock awards consist of RSUs relating to shares of our Class A Common Stock. Option awards are options to purchase our Class A Common Stock.
 
(1) Bonus : The amount for Mr. Udvar-Házy represents a $500,000 success bonus, described above under “Compensation discussion and analysis—Elements of the executive compensation program— Specific Purpose Awards .” Our compensation committee has not yet determined and awarded annual bonuses with respect to 2010.
 
(2) Stock Awards and Option Awards : These amounts represent the aggregate grant date fair value of awards of RSUs and options to purchase shares of our Class A Common Stock granted to our Named Executive Officers in 2010, computed in accordance with GAAP. Assumptions used in the calculations of these amounts, which do not correspond to the actual value that may be realized by the Named Executive Officer, are included in Note 12 “Equity based compensation” to the financial statements included in this prospectus.
 
(3) All Other Compensation:  The amounts shown in this column reflect the following items:
 
Premium Payments:  In 2010, we paid premiums on term life insurance policies for Messrs. Udvar-Házy, Plueger, Levy, Chen and Clarke, in the aggregate amounts of $29,717, $6,343, $3,743, $2,298, and $2,942, respectively.
 
Relocation Assistance:  In connection with Mr. Clarke’s hiring and relocation from Connecticut to Los Angeles, California, we paid Mr. Clarke an allowance of $60,000 for certain relocation and transitional costs.


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Grants of plan-based awards
 
The following table sets forth information concerning grants of plan-based awards made to our Named Executive Officers during the fiscal year ended December 31, 2010.
 
                                         
 
                            Grant date
 
                Estimated future
    Exercise or
    fair value
 
                payouts under
    base price
    of stock
 
                equity incentive
    of option
    and option
 
    Grant date(s)
          plan awards
    awards
    awards
 
Name   (1)     Type of award     (#)     ($/sh)(2)     ($)(3)  
 
 
Mr. Udvar-Házy
    6/4/2010       Options       1,750,000     $ 20.00     $ 18,795,960  
      6/4/2010       RSUs       1,750,000             $ 35,000,000  
      8/11/2010       Options       1,352     $ 20.00     $ 11,168  
      8/11/2010       RSUs       426             $ 8,520  
     
     
Mr. Plueger
    6/4/2010       Options       700,000     $ 20.00     $ 7,518,384  
      6/4/2010       RSUs       700,000             $ 14,000,000  
      8/11/2010       Options       10,806     $ 20.00     $ 81,899  
      8/11/2010       RSUs       10,431             $ 208,620  
     
     
Mr. Levy
    7/14/2010       Options       150,000     $ 20.00     $ 1,236,530  
      7/14/2010       RSUs       150,000             $ 3,000,000  
     
     
Mr. Chen
    8/11/2010       Options       150,000     $ 20.00     $ 1,116,204  
      8/11/2010       RSUs       150,000             $ 3,000,000  
     
     
Mr. Clarke
    7/14/2010       Options       15,000     $ 20.00     $ 123,653  
      7/14/2010       RSUs       15,000             $ 300,000  
 
 
 
(1) Grant Date:  The grant date for each award is the effective date of grant approved by the compensation committee of our board of directors.
 
(2) Exercise or base price of option awards:  The exercise price for each award is equal to the fair market value of our Class A Common Stock as of the date of grant, as determined by our board of directors and our compensation committee.
 
(3) Grant date fair value of stock and option awards:  The grant date fair value for each award is computed in accordance with GAAP. Assumptions used in the calculations of these amounts, which do not correspond to the actual value that may be realized by the Named Executive Officers, are included in Note 12 “Equity based compensation” to the financial statements included in this prospectus.


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Outstanding equity awards at fiscal year-end
 
The following table sets forth information concerning option awards and stock awards for our Named Executive Officers outstanding as of the end of the fiscal year ended December 31, 2010.
 
                                                 
 
          Option awards*     Stock awards*  
                                  Equity
 
                            Equity incentive
    incentive plan
 
          Equity incentive
                plan awards:
    awards:
 
          plan awards:
                number of
    market value
 
          number of
                unearned
    or payout value
 
          securities
                shares, units
    of unearned
 
          underlying
                or other
    shares, units or
 
          unexercised
    Option
          rights that
    other rights
 
          unearned
    exercise
    Option
    have not
    that have not
 
          options
    price
    expiration
    vested
    vested
 
Name   Grant date     (#)(1)     ($)     date     (#)(2)     ($)(3)  
 
 
Mr. Udvar-Házy
    6/4/2010       1,750,000     $ 20.00       6/4/2020                  
      6/4/2010                               1,750,000     $ 35,000,000  
      8/11/2010       1,352     $ 20.00       8/11/2020                  
      8/11/2010                               426     $ 8,520  
     
     
Mr. Plueger
    6/4/2010       700,000     $ 20.00       6/4/2020                  
      6/4/2010                               700,000     $ 14,000,000  
      8/11/2010       10,806     $ 20.00       8/11/2020                  
      8/11/2010                               10,431     $ 208,620  
     
     
Mr. Levy
    7/14/2010       150,000     $ 20.00       7/14/2020                  
      7/14/2010                               150,000     $ 3,000,000  
     
     
Mr. Chen
    8/11/2010       150,000     $ 20.00       8/11/2020                  
      8/11/2010                               150,000     $ 3,000,000  
     
     
Mr. Clarke
    7/14/2010       15,000     $ 20.00       7/14/2020                  
      7/14/2010                               15,000     $ 300,000  
 
 
 
* Shares underlying the Option Awards and Stock Awards are shares of Class A Common Stock.
 
(1) Number of securities underlying unexercised unearned options : Option Awards under our 2010 ALC Equity Incentive Plan generally vest in equal installments over a three-year period. The options granted to Messrs. Udvar-Házy and Plueger on June 4, 2010 vest in equal installments on each of June 4, 2011, June 4, 2012 and June 4, 2013. All of the options granted to Messrs. Levy and Clarke and the options granted to Messrs. Udvar-Házy and Plueger on August 11, 2010 vest in equal installments on June 30, 2011, June 30, 2012 and June 30, 2013. The options granted to Mr. Chen vest 66 2 / 3 % on June 30, 2011 and 33 1 / 3 % on June 30, 2012.
 
(2) Number of unearned shares, units or other rights that have not vested : The RSUs granted to Messrs. Udvar-Házy, Plueger, Levy and Clarke vest in cumulative installments as follows:
 
The first tranche of 25% will vest on June 30, 2011, provided that our Company has attained at least 2% growth in book value per share over the book value as of June 30, 2010, as determined in accordance with GAAP;
 
The second tranche of 25% will vest, and any unvested portion of the first tranche will vest, on June 30, 2012, provided that our Company has attained at least 5.06% growth in book value per share over the book value as of June 30, 2010;
 
The third tranche of 25% will vest, and any unvested portion of the first and second tranches will vest, on June 30, 2013, provided that our Company has attained at least 9.26% growth in book value per share over the book value as of June 30, 2010; and
 
The fourth tranche of 25% will vest, and any unvested portion of the first, second and third tranches will vest, on June 30, 2014, or on any date thereafter up to and including June 30, 2015, provided that our Company has attained at least 13.63% growth in book value per share over the book value as of June 30, 2010.
 
The RSUs granted to Mr. Chen vest as follows:
 
The first tranche of 50% will vest on June 30, 2011, provided that our Company has attained at least 2% growth in book value per share over the book value as of June 30, 2010, as determined in accordance with GAAP;


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The second tranche of 50% will vest, and any unvested portion of the first tranche will vest, on June 30, 2012, provided that our Company has attained at least 5.06% growth in book value per share over the book value as of June 30, 2010;
 
Any unvested portion of the first and second tranches will vest on June 30, 2013, provided that our Company has attained at least 9.26% growth in book value per share over book value as of June 30, 2010; and
 
Any unvested portion of the first and second tranches will vest on June 30, 2014, or any date thereafter up to and including June 30, 2015, provided that our Company has attained at least 13.63% growth in book value per share over the book value as of June 30, 2010.
 
(3) Market Value of Unearned Shares, Units or Other Rights That Have Not Vested : The market value shown is based on the price of our Class A Common Stock on the relevant date of grant, which was $20.00 per share.
 
Employment agreements and arrangements and potential payments upon termination or change in control
 
The discussion below summarizes the terms of employment for our Named Executive Officers. As described in the discussion and tables below, Messrs. Udvar-Házy’s and Plueger’s employment agreements and certain of our employee benefits plans, including our 2010 ALC Equity Incentive Plan and our Named Executive Officers’ award agreements under the plan, provide for payments and other benefits to our Named Executive Officers if their employment with us is terminated under certain circumstances or if we experience a change in control.
 
Employment agreements and arrangements
 
Employment Agreement with Mr. Udvar-Házy.  The employment agreement between our Company and Mr. Udvar-Házy is effective as of February 5, 2010 and was amended as of August 11, 2010. The agreement has a term through June 30, 2013. Mr. Udvar-Házy’s base salary is $1.8 million, subject to anticipated annual increases at the discretion of our compensation committee. As described above under “Compensation discussion and analysis—Elements of the executive compensation program,” he is eligible for annual and other bonuses, has additional benefits (including our payment of premiums for a $5.0 million term life insurance policy payable to his beneficiaries and employer matching contributions for our 401(k) savings plan), and was entitled to certain equity awards. Mr. Udvar-Házy is subject to noncompetition and nonsolicitation restrictions while employed by us and nonsolicitation restrictions for one year following a termination of his employment. He is also subject to an ongoing confidentiality obligation.
 
If Mr. Udvar-Házy’s employment is terminated by us without cause or by him for good reason, as defined in his employment agreement, he will be entitled to receive: (i) accrued but unpaid salary and benefits, expense reimbursement, and any earned but unpaid annual bonus with respect to the last calendar year completed during his employment, (ii) a prorated annual bonus and accelerated vesting and payment of a deferred bonus under our Amended and Restated Deferred Bonus Plan, with respect to the calendar year in which such termination occurs, (iii) salary continuation, continued payment of the target annual bonus amount, continued health coverage, and continued payment by us of the premiums for his term life insurance policy, until the later of June 30, 2013 and the second anniversary of the date of such termination, and (iv) accelerated vesting and payment of any unpaid deferred bonuses under our Amended and Restated Deferred Bonus Plan attributable to years prior to the year of such termination. In addition, upon such a termination, Mr. Udvar-Házy’s options shall fully vest and the time-vesting of his RSUs shall accelerate in full. However, the RSUs would remain subject to any performance-based vesting conditions to the extent not achieved prior to such termination, and, for this purpose, would remain outstanding until the end of the applicable performance period. The amounts and benefits described in clauses (ii), (iii) and (iv) of this paragraph will be


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subject to Mr. Udvar-Házy’s execution of a release of claims against our Company and certain related parties, and the amounts and benefits described in clauses (iii) and (iv) will be subject to his compliance with his confidentiality, noncompetition, and nonsolicitation covenants.
 
If Mr. Udvar-Házy’s employment is terminated due to disability or death, he, his estate or his beneficiaries will be entitled to receive the compensation described in clauses (i), (ii) and (iv) of the preceding paragraph. In addition, upon such a termination, Mr. Udvar-Házy’s options shall fully vest and the time-vesting of his RSUs shall accelerate in full. However, the RSUs would remain subject to any performance-based vesting conditions to the extent not achieved prior to such termination, and, for this purpose, would remain outstanding until the end of the applicable performance period.
 
If Mr. Udvar-Házy’s employment is terminated for cause, or he terminates his employment without good reason, he will receive accrued but unpaid salary and benefits, expense reimbursement, and any earned but unpaid annual bonus with respect to the last calendar year completed during his employment. Any options or RSUs not vested as of the date of termination will be forfeited.
 
Mr. Udvar-Házy will have no obligation to mitigate damages in the event of a termination of his employment, and no payments under his employment agreement will be subject to offset in the event that he does mitigate.
 
Employment Agreement with Mr. Plueger.  The employment agreement between our Company and Mr. Plueger was effective as of March 29, 2010 and was amended as of August 11, 2010. The agreement has a term through June 30, 2013. Mr. Plueger’s base salary is $1.5 million, subject to anticipated annual increases at the discretion of our compensation committee. As described above under “Compensation discussion and analysis—Elements of the executive compensation program,” he is eligible for annual and other bonuses, has additional benefits (including our payment of premiums for a $2.0 million term life insurance policy payable to his beneficiaries and employer matching contributions for our 401(k) savings plan), and was entitled to certain equity awards. Mr. Plueger is subject to noncompetition and nonsolicitation restrictions while employed by us and nonsolicitation restrictions for one year following a termination of his employment. He is also subject to an ongoing confidentiality obligation. The terms of Mr. Plueger’s employment agreement relating to a termination of his employment are substantially similar to the terms of the employment agreement with Mr. Udvar-Házy described above.
 
“Cause” is generally defined in each of Messrs. Udvar-Házy’s and Plueger’s employment agreements as (i) conviction of, or a plea of guilty or nolo contendere to, a felony, a crime of moral turpitude, dishonesty, breach of trust or unethical business conduct, or any crime involving our Company; (ii) engagement during the performance of his duties hereunder, or otherwise to the detriment of our Company, in willful misconduct, willful or gross neglect, fraud, misappropriation, or embezzlement; (iii) repeated failure to adhere to the directions of the board of directors, to adhere to our Company’s policies and practices or to devote substantially all of his business time and efforts to our Company; (iv) willful failure to substantially perform his duties properly assigned to him (other than any such failure resulting from his disability); (v) breach of any of the confidentiality, noncompetition, and nonsolicitation covenants in his employment agreement; and (vi) breach in any material respect of the terms and provisions of his employment agreement. Each of Messrs. Udvar-Házy’s and Plueger’s employment agreements provides him with notice and a 30-day cure period in the event of a termination of his employment pursuant to clause (iii), (iv), (v) or (vi), and if cured, the event or


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condition at issue will not constitute “cause.” “Good reason” under each employment agreement includes the material reduction of the executive’s authority, duties and responsibilities, or the assignment to him of duties materially inconsistent with his position or positions with our Company, a reduction in his annual salary, or the relocation of his office more than 35 miles from the principal offices of our Company. The executive must provide us with notice and a 30-day cure period, and if cured, the event or condition at issue will not constitute “good reason.”
 
Employment Terms for Mr. Levy.  Mr. Levy’s base salary is $700,000, subject to an anticipated increase of 5—10% for 2011 if approved by our compensation committee. As described above under “Compensation discussion and analysis—Elements of the executive compensation program,” Mr. Levy is eligible for annual and other bonuses, as well certain benefits.
 
Employment Terms for Mr. Chen.  Mr. Chen’s base salary is $750,000, subject to a 10% increase for 2011 and, in the discretion of our compensation committee, potential annual increases of up to 10% thereafter for satisfactory performance. As described above under “Compensation discussion and analysis—Elements of the executive compensation program,” Mr. Chen is eligible for annual and other bonuses, as well as certain benefits.
 
Employment Terms for Mr. Clarke.  Mr. Clarke’s base salary was at an annual rate of $210,000 from April 16, 2010 through October 16, 2010, is currently $240,000 from October 17, 2010 through April 16, 2011, and will be $270,000 from April 17, 2011 through October 17, 2011, and at rates thereafter in the discretion of our compensation committee. Mr. Clarke is eligible for a 2010 bonus equal to 50% of his base salary on December 31, 2010, payable upon the issuance of our audited financial statements for the period ending December 31, 2010. Thereafter, his annual bonuses are at the discretion of our compensation committee. As described above under “Compensation discussion and analysis—Elements of the executive compensation program,” Mr. Clarke is also eligible for other bonuses and certain benefits. We provided Mr. Clarke with an allowance of $60,000 in connection with his relocation to Los Angeles, California.
 
Employment Termination and Change in Control Provisions under Named Executive Officers’ Equity Award Agreements.  Under the terms of the equity award agreements, each of Messrs. Levy, Chen and Clarke will forfeit any unvested RSUs if his employment with our Company is terminated for any reason. Each will forfeit all of his options if his employment is terminated for cause, as defined under our 2010 ALC Equity Incentive Plan, and will forfeit any unvested options if his employment is terminated for any reason other than death, disability (as defined under our plan) or cause. In the event of a termination due to death or disability, each of Messrs. Levy’s, Chen’s and Clarke’s options will vest in full. Under the terms of our 2010 ALC Equity Incentive Plan and except as otherwise provided by our compensation committee, all outstanding options shall become fully exercisable and vested upon the occurrence of a change in control, as defined under the plan. With respect to performance-based RSUs, our compensation committee may exercise its discretion to provide that all incomplete performance periods in effect on the date of the change in control shall end on such date, determine the extent to which performance goals with respect to each such performance period have been met, and cause to be paid to each Named Executive Officer partial or full awards with respect to performance goals for each such performance period, based on the committee’s determination of the degree of attainment of such goals.


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Potential payments upon termination or change in control
 
The following tables describe and quantify payments and benefits to which our Named Executive Officers would have been entitled under various employment termination and change-in-control scenarios, assuming they occurred on December 31, 2010. Certain of the amounts identified below are only estimates. Some amounts in the tables and footnotes have been rounded up to the nearest whole number.
 
Regardless of the termination scenario, each of our Named Executive Officers will receive earned but unpaid base salary through the date of termination of his employment.
 
Post-employment and change in control payments—Mr. Udvar-Házy
 
                                 
 
    Voluntary
                   
    termination
                   
    without
    Involuntary
             
    good reason/
    termination
          Change in
 
    involuntary
    without
    Termination
    control without
 
Executive payments and
  termination
    cause/for
    due to death
    a termination of
 
benefits upon termination   for cause     good reason     or disability     employment  
 
 
Compensation severance
  $           $           $           $        
Amended and restated deferred bonus plan
  $           $           $           $        
Acceleration of equity awards
                               
RSUs
  $           $           $           $        
Options
  $           $           $           $        
Benefits and perquisites
                               
Term life insurance
  $           $           $           $        
Benefits
  $           $           $           $        
Total
  $           $           $           $        
 
 
 
Post-employment and change in control payments—Mr. Plueger
 
                                 
 
    Voluntary
                   
    termination
                   
    without
    Involuntary
             
    good reason/
    termination
          Change in
 
    involuntary
    without
    Termination
    control without
 
Executive payments and
  termination
    cause/for
    due to death
    a termination of
 
benefits upon termination   for cause     good reason     or disability     employment  
 
 
Compensation severance
  $           $           $           $        
Amended and restated deferred bonus plan
  $           $           $           $        
Acceleration of equity awards
                               
RSUs
  $           $           $           $        
Options
  $           $           $           $        
Benefits and perquisites
                               
Term life insurance
  $           $           $           $        
Benefits
  $           $           $           $        
Total
  $           $           $           $        
 
 


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Post-employment and change in control payments—Mr. Levy
 
                                 
 
    Voluntary
                   
    termination
                   
    without
    Involuntary
             
    good reason/
    termination
          Change in
 
    involuntary
    without
    Termination
    control without
 
Executive payments and
  termination
    cause/for
    due to death
    a termination of
 
benefits upon termination   for cause     good reason     or disability     employment  
 
 
Compensation severance
  $           $           $           $        
Amended and restated deferred bonus plan
  $           $           $           $        
Acceleration of vesting of equity awards
                               
RSUs
  $           $           $           $        
Options
  $           $           $           $        
Benefits and perquisites
                               
Benefits
  $           $           $           $        
Total
  $           $           $           $        
 
 
 
Post-employment and change in control payments—Mr. Chen
 
                                 
 
    Voluntary
                   
    termination
                   
    without
    Involuntary
             
    good reason/
    termination
          Change in
 
    involuntary
    without
    Termination
    control without
 
Executive payments and
  termination
    cause/for
    due to death
    a termination of
 
benefits upon termination   for cause     good reason     or disability     employment  
 
 
Compensation severance
  $           $           $           $        
Amended and restated deferred bonus plan
  $           $           $           $        
Acceleration of vesting of equity awards
                               
RSUs
  $           $           $           $        
Options
  $           $           $           $        
Benefits and perquisites
                               
Benefits
  $           $           $           $        
Total
  $           $           $           $        
 
 


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Post-employment and change in control payments—Mr. Clarke
 
                                 
 
    Voluntary
                   
    termination
                   
    without
    Involuntary
             
    good reason/
    termination
          Change in
 
    involuntary
    without
    Termination
    control without
 
Executive payments and
  termination
    cause/for
    due to death
    a termination of
 
benefits upon termination   for cause     good reason     or disability     employment  
 
 
Compensation severance
  $           $           $           $        
Amended and restated deferred bonus plan
  $           $           $           $        
Acceleration of vesting of equity awards
                               
RSUs
  $           $           $           $        
Options
  $           $           $           $        
Benefits and perquisites
                               
Benefits
  $           $           $           $        
Total
  $           $           $           $        
 
 
 
Director compensation
 
Our board of directors sets non-employee director compensation based on recommendations from the compensation committee. Messrs. Udvar-Házy and Plueger do not receive separate compensation for their service on our board of directors, nor will any of our other officers who may serve as directors in the future.
 
We provide the non-employee members of our board with an annual retainer in the amount of $100,000 payable in quarterly installments. In addition, the chairs of our compensation committee and nominating and corporate governance committee each receive an additional annual retainer of $10,000. The chair of our audit committee receives an additional annual retainer of $15,000. Each director also receives $1,500 per board or committee meeting attended in person and $750 per board or committee meeting attended telephonically. The differences between the various committee chair retainers reflect the board’s judgment of each committee’s respective workload. We reimburse directors for travel and lodging expenses incurred in connection with their attendance at meetings. As a matter of policy, each director can elect to have his or her retainer paid in cash or shares of our Common Stock, or a combination thereof. If a director elects to have all or a portion of the retainer paid in shares, the number of shares will be determined by dividing the relevant portion of the fee by the fair value of a share of our Common Stock on the payment date, based on a methodology to be determined by our board of directors. We expect that the fair value will be based on the price of our Class A Common Stock following the completion of our contemplated initial public offering. However, to date we have paid our directors in cash only, in part because of capacity constraints under our 2010 ALC Equity Incentive Plan.


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Director compensation
 
The following table sets forth compensation paid to or earned by the individuals who served as non-employee directors of our Company during the fiscal year ended December 31, 2010.
 
         
 
    Fees earned or
 
    paid in cash
 
Name   ($)(1)  
 
 
Mr. Danhakl
  $      82,500  
Mr. Hart
  $      94,500  
Mr. Milton
  $      99,833  
Mr. Péretié
  $      51,500  
Mr. Ressler
  $      82,500  
Mr. Ross
  $      25,750  
Mr. Saines
  $      78,750  
Dr. Sugar
  $      91,500  
 
(1) Fees Earned or Paid in Cash : The amount shown for each non-employee director is comprised of his annual retainer fees, committee and/or chairmanship fees, and meeting fees.
 
Air Lease Corporation 2010 Equity Incentive Plan
 
Introduction
 
Our board of directors has approved and adopted the 2010 ALC Equity Incentive Plan, contingent upon, and to become effective immediately prior to, the completion of this offering. The 2010 ALC Equity Incentive Plan will authorize the grant of nonqualified and incentive stock options, stock appreciation rights (“SARs”), restricted stock awards, RSUs and other awards that may be settled in or based upon our Class A Common Stock.
 
The purpose of the 2010 ALC Equity Incentive Plan is to give us a competitive advantage in attracting, retaining and motivating officers, employees, directors and consultants and to provide a means whereby officers, employees, directors and/or consultants can acquire and maintain ownership of our Class A Common Stock or be paid incentive compensation measured by reference to the value of our Class A Common Stock, thereby strengthening their commitment to our short-term and long-term goals and objectives and those of our affiliates and promoting an identity of interest between our stockholders and these persons.
 
Description
 
Set forth below is a summary of certain important features included in the 2010 ALC Equity Incentive Plan. This summary is qualified in its entirety by the actual 2010 ALC Equity Incentive Plan.
 
Plan term
 
The 2010 ALC Equity Incentive Plan became effective on June 4, 2010 and will expire on June 4, 2020.
 
Administration
 
The 2010 ALC Equity Incentive Plan will be administered by the compensation committee or such other committee of the board of directors as the board of directors may from time to time


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designate (the “Committee”). Among other things, the Committee will have the authority to select individuals to whom awards may be granted, to determine the type of award as well as the number of shares of Class A Common Stock to be covered by each award, and to determine the terms and conditions of any such awards, including the applicable vesting schedule, performance conditions and whether the award will be paid in cash or settled in shares. Subject to applicable law, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it.
 
Eligibility
 
Current directors, employees (including executive officers) and/or consultants to us and any of our subsidiaries and affiliates, or any prospective employee or consultant will be eligible to participate in the 2010 ALC Equity Incentive Plan.
 
Shares subject to the plan
 
We will reserve such number of shares of our Class A Common Stock under the 2010 ALC Equity Incentive Plan so that the number of shares of our Class A Common Stock available under the 2010 ALC Equity Incentive Plan is equal to the sum of (i) 10% of any class of common stock issued by us pursuant to an exemption under the Securities Act of 1933, as amended (the “Securities Act”), until we consummate an initial public offering of any class of our common stock, excluding any issuances to our management prior to the initial date of adoption of the 2010 ALC Equity Incentive Plan and (ii)  % of any class of common stock issued by us pursuant to an initial public offering of any class of our common stock. Of these reserved shares, no more than 50% may be issued pursuant to awards of restricted stock, RSUs, stock bonuses or incentive bonuses.
 
Section 162(m), described above under “Compensation discussion and analysis— Tax considerations ,” will generally not apply to our Company for three years following the completion of our contemplated initial public offering, and also does not apply to awards that constitute “qualified performance-based compensation.” However, once we are no longer exempt from Section 162(m), certain share and cash limits will apply to awards under the 2010 ALC Equity Incentive Plan. The 2010 ALC Equity Incentive Plan is structured to comply with the requirements of Section 162(m) as in effect on the date hereof so that, subject to satisfying the Section 162(m) stockholder approval requirement, awards that are intended to constitute “qualified performance-based compensation” should be treated as “qualified performance-based compensation” for purposes of Section 162(m).
 
The shares of Class A Common Stock subject to grant under the 2010 ALC Equity Incentive Plan are to be made available from authorized but unissued shares, from treasury shares, from shares purchased on the open market or by private purchase, or a combination of any of the foregoing. To the extent that any award is forfeited, or any option or SAR terminates, expires or lapses without being exercised, or any award is settled for cash, the shares of Class A Common Stock subject to such awards not delivered as a result thereof will again be available for awards under the 2010 ALC Equity Incentive Plan. If the exercise price of any option and/or the tax withholding obligations relating to any award are satisfied by delivering shares of Class A Common Stock (by either actual delivery or by attestation), only the number of shares of Class A Common Stock issued net of the shares of Class A Common Stock delivered or attested to will be deemed delivered for purposes of the limits in the 2010 ALC Equity Incentive Plan. To the


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extent any shares of Class A Common Stock subject to an award are withheld to satisfy the exercise price (in the case of an option) and/or the tax withholding obligations relating to such award, such shares of Class A Common Stock will not generally be deemed to have been delivered for purposes of the limits set forth in the 2010 ALC Equity Incentive Plan.
 
In the event of certain extraordinary corporate transactions or events affecting us, the Committee or the board of directors shall make such substitutions or adjustments as it deems appropriate and equitable to (1) the aggregate number and kind of shares or other securities reserved for issuance and delivery under the 2010 ALC Equity Incentive Plan, (2) the various maximum limitations set forth in the 2010 ALC Equity Incentive Plan, (3) the number and kind of shares or other securities subject to outstanding awards and (4) the exercise price of outstanding options and SARs. In the case of corporate transactions such as a merger or consolidation, such adjustments may include the cancellation of outstanding awards in exchange for cash or other property or the substitution of other property for the shares subject to outstanding awards.
 
Types of awards
 
As indicated above, several types of awards can be made under the 2010 ALC Equity Incentive Plan. A summary of these awards is set forth below.
 
Stock Options and Stock Appreciation Rights.  A stock option is a contractual right to purchase shares at a future date at a specified exercise price, while a SAR is a contractual right to receive, in cash or shares, an amount equal to the appreciation of one share of our Class A Common Stock following the grant date. Stock options granted under the 2010 ALC Equity Incentive Plan may either be incentive stock options, which are intended to qualify for favorable treatment to the recipient under U.S. federal tax law, or nonqualified stock options, which do not qualify for this favorable tax treatment. SARs granted under the 2010 ALC Equity Incentive Plan may either be “tandem SARs,” which are granted in conjunction with an option, or “free-standing SARs,” which are not granted in tandem with a stock option. A tandem SAR may be granted on the grant date of the related option, will be exercisable only to the extent that the related option is exercisable and will have the same exercise price as the related option. A tandem SAR will terminate or be forfeited upon the exercise or forfeiture of the related option and the related option will terminate or be forfeited upon the exercise or forfeiture of the tandem SAR.
 
Each grant of stock options or SARs under the 2010 ALC Equity Incentive Plan will be evidenced by an award agreement that specifies the exercise price, the duration of the award, the number of shares to which the award pertains, vesting schedule and such additional limitations, terms and conditions as the Committee may determine, including, in the case of stock options, whether the options are intended to be incentive stock options or nonqualified stock options. The 2010 ALC Equity Incentive Plan provides that the exercise price of options and SARs will be determined by the Committee, but may not be less than 100% of the fair market value of the stock underlying the options or SARs on the date of grant. Award holders may pay the exercise price in cash or, if approved by the Committee, in Class A Common Stock (valued at its fair market value on the date of exercise) or a combination thereof, or by “cashless exercise” through a broker or by withholding shares otherwise receivable on exercise. The term of options and SARs will be determined by the Committee, but may not exceed ten years from the date of grant. The Committee will determine the vesting and exercise schedule of options and SARs, and the extent to which they will be exercisable after the award holder’s services with the Company terminate.


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Restricted Stock.  Restricted stock is an award of shares of our Class A Common Stock that are subject to restrictions on transfer and a substantial risk of forfeiture. Restricted stock may be granted under the 2010 ALC Equity Incentive Plan with such restrictions as the Committee may designate. The Committee may provide at the time of grant that the vesting of restricted stock will be contingent upon the achievement of specified performance goals and/or continued service. The terms and conditions of restricted stock awards (including any applicable performance goals) need not be the same with respect to each participant. During the restriction period, the Committee may require that the stock certificates evidencing restricted shares be held by the Company. Except for these restrictions and any others imposed by the Committee, upon the grant of restricted stock under the 2010 ALC Equity Incentive Plan, the recipient will have the rights of a stockholder with respect to the restricted stock, including the right to vote the restricted stock; however, whether and to what extent the recipient will be entitled to receive cash or stock dividends paid or made with respect to the restricted shares of Class A Common Stock and whether any such dividends will be automatically deferred and/or reinvested in additional restricted stock and held subject to the vesting of the underlying restricted stock, will be set forth in the particular participant’s award agreement.
 
Restricted Stock Units.  RSUs represent a contractual right to receive the value of a share of our Class A Common Stock (in either cash or shares) at a future date, subject to specified vesting and other restrictions. The Committee may grant RSUs payable in cash or shares of Class A Common Stock, conditioned upon continued service and/or the attainment of performance goals determined by the Committee. The terms and conditions of RSU awards granted under the 2010 ALC Equity Incentive Plan (including any applicable performance goals) need not be the same with respect to each participant.
 
Stock-Bonus Awards.  The Committee may grant unrestricted shares of our Class A Common Stock, or other awards denominated in our Class A Common Stock, alone or in tandem with other awards, in such amounts and subject to such terms and conditions as the Committee determines from time to time in its sole discretion as, or in payment of, a bonus, or to provide incentives or recognize special achievements or contributions.
 
Performance Awards.  Under the 2010 ALC Equity Incentive Plan, the Committee may determine that the grant, vesting or settlement of an award granted under the plan may be subject to the attainment of one or more specified performance goals. In addition, the 2010 ALC Equity Incentive Plan authorizes the Committee to make awards of restricted stock or RSUs or stock bonus awards that are conditioned on the satisfaction of pre-established performance criteria.
 
Termination of employment
 
The impact of a termination of employment on an outstanding award granted under the 2010 ALC Equity Incentive Plan, if any, will be set forth in the applicable award agreement or an individual’s employment, consulting or similar agreement with the Company.
 
Change in control
 
The 2010 ALC Equity Incentive Plan provides that, unless otherwise set forth in an award agreement, in the event of a change in control (as defined in the 2010 ALC Equity Incentive Plan), any restricted stock that was forfeitable prior to such change in control will become nonforfeitable, RSUs will be considered earned and payable in full and any restrictions thereon will lapse, any unexercised option or SAR, whether or not exercisable on the date of such


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change in control, will become fully exercisable and may be exercised in whole or in part, and the Committee may determine the level of achievement with respect to any performance-based awards through the date of the change in control. The Committee may make additional adjustments and/or settlements of outstanding awards upon a change in control, including cancelling any awards for cash upon at least ten days’ advance notice to affected participants.
 
Under the terms of the plan, a change in control generally means the first to occur of the following: (i) an acquisition by any person or group of beneficial ownership of 35% or more, on a fully diluted basis, of the outstanding shares of common stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, excluding any acquisition that complies with clauses (A), (B), and (C) of this paragraph and certain other acquisitions; (ii) individuals who were members of our board of directors on June 4, 2010, and directors whose election or nomination for election was approved by a vote of at least two-thirds of such incumbent directors cease to constitute at least a majority of our board; (iii) a complete dissolution or liquidation of the Company; or (iv) the consummation of a merger, consolidation, statutory share exchange, a sale or other disposition of all or substantially all of the assets of the Company or similar form of corporate transaction that requires the approval of our stockholders, unless immediately following any such transaction, (A) the majority of the total voting power of the surviving company (or parent corporation with voting power to elect a majority of the directors of the surviving company) is represented by the outstanding voting securities of our Company that were outstanding before the transaction and held by the holders thereof in substantially the same proportion as before the transaction, (B) no person or group becomes the beneficial owner, directly or indirectly, of 35% or more of the total voting power of the parent company or, absent a parent company, the surviving company, and (C) at least two-thirds of the directors of the parent company (or surviving company) following such transaction were members of our board at the time of the board approval for such transaction.
 
Transferability
 
Awards under the 2010 ALC Equity Incentive Plan are generally not transferable except by will or the laws of descent and distribution or as otherwise expressly permitted by the Committee including, if so permitted, pursuant to a transfer to the participant’s family members or to a charitable organization, whether directly or indirectly or by means of a trust or partnership or otherwise.
 
Amendment and discontinuance
 
The 2010 ALC Equity Incentive Plan may be amended, altered, suspended, discontinued or terminated by the Board, but no amendment, alteration, suspension, discontinuation or termination may be made if it would materially impair the rights of a participant (or his or her beneficiary) without the participant’s (or beneficiary’s) consent, except for any such amendment made to comply with law. The 2010 ALC Equity Incentive Plan may not be amended, altered, suspended, discontinued or terminated without stockholder approval to the extent such approval is required to comply with any tax or regulatory requirement applicable to the 2010 ALC Equity Incentive Plan.


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Federal income tax consequences
 
The following discussion is intended only as a brief summary of the federal income tax rules that are generally relevant to awards that may be granted under the 2010 ALC Equity Incentive Plan, based upon the U.S. federal tax laws currently in effect. The laws governing the tax aspects of awards are highly technical and such laws are subject to change. The discussion is general in nature and does not take into account a number of considerations which may apply in light of the circumstances of a particular participant under the 2010 ALC Equity Incentive Plan. The income tax consequences under applicable foreign, state or local tax laws may not be the same as under U.S. federal income tax laws. Participants in the 2010 ALC Equity Incentive Plan are strongly urged to consult their own tax advisors regarding the federal, state, local, foreign and other tax consequences to them of participating in the 2010 ALC Equity Incentive Plan.
 
Nonqualified options and SARs
 
Upon the grant of a nonqualified option or SAR, assuming the exercise price is at least equal to the fair market value of a share of Class A Common Stock on the date of grant, the award holder will not recognize any taxable income and the Company will not be entitled to a deduction. Upon the exercise of an option or SAR, the excess of the fair market value of the shares acquired on the exercise of the option or SAR over the exercise price or the cash paid in settlement of the SAR (the “spread”) will constitute compensation taxable to the award holder as ordinary income. The Company, in computing its U.S. federal income tax, will generally be entitled to a deduction in an amount equal to the compensation taxable to the optionee, subject to the limitations of Section 162(m) of the Code to the extent applicable.
 
Incentive stock options
 
An optionee will not recognize taxable income on the grant or exercise of an incentive stock option. However, the spread at exercise will constitute an item includible in alternative minimum taxable income, and, thereby, may subject the optionee to the alternative minimum tax. Such alternative minimum tax may be payable even though the optionee receives no cash upon the exercise of the incentive stock option with which to pay such tax.
 
Upon the disposition of shares of stock acquired pursuant to the exercise of an incentive stock option, after the later of (i) two years from the date of grant of the incentive stock option or (ii) one year after the transfer of the shares to the optionee (the “ISO Holding Period”), the optionee will recognize long-term capital gain or loss, as the case may be, measured by the difference between the stock’s selling price and the exercise price. The Company is not entitled to any tax deduction by reason of the grant or exercise of an incentive stock option, or by reason of a disposition of stock received upon exercise of an incentive stock option if the ISO Holding Period is satisfied. Different rules apply if the optionee disposes of the shares of stock acquired pursuant to the exercise of an incentive stock option before the expiration of the ISO Holding Period.
 
Restricted stock
 
A grantee who is awarded restricted stock will not recognize any taxable income for federal income tax purposes in the year of the award, provided that the shares of Class A Common Stock are subject to restrictions (that is, the restricted stock is nontransferable and subject to a


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substantial risk of forfeiture). However, the grantee may elect under Section 83(b) of the Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the Class A Common Stock on the date of the award (less the purchase price, if any), determined without regard to the restrictions. If the grantee does not make such a Section 83(b) election, the fair market value of the Class A Common Stock on the date the restrictions lapse (less the purchase price, if any) will be treated as compensation income to the grantee and will be taxable in the year the restrictions lapse, and dividends paid while the Class A Common Stock is subject to restrictions will be subject to withholding taxes. If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Code, if applicable, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.
 
Restricted stock units
 
There are no immediate tax consequences of receiving an award of RSUs. A grantee who is awarded RSUs will be required to recognize ordinary income in an amount equal to the fair market value of shares issued to such grantee at the end of the restriction period or, if later, the payment date. If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Code, if applicable, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.
 
Unrestricted stock
 
Participants who are awarded unrestricted Class A Common Stock will be required to recognize ordinary income in an amount equal to the fair market value of the shares of Class A Common Stock on the date of the award, reduced by the amount, if any, paid for such shares. If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Code, if applicable, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.


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Principal stockholders
 
The following table sets forth information as of December 31, 2010 regarding the beneficial ownership of our Common Stock (i) immediately prior to this offering and (ii) as adjusted to give effect to this offering (assuming no exercise of the underwriters’ overallotment option), by:
 
•  each person known by us to beneficially own more than five percent of our Common Stock;
 
•  each of our named executive officers;
 
•  each of our directors; and
 
•  all of our executive officers and directors as a group.
 
Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if they have or share the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof, or have the right to acquire such powers within 60 days.
 
In computing the percentage ownership of a person, shares of our Common Stock subject to warrants held by that person are deemed to be outstanding because they are exercisable within 60 days of December 31, 2010. The shares subject to warrants are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. All percentages in the following table are based on a total of 63,563,810 shares of our Class A Common Stock and 1,829,339 shares of our Class B Non-Voting Common Stock outstanding as of December 31, 2010. The address of each person named in the table below, unless otherwise indicated, is c/o Air Lease Corporation, 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067.
 


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                            Warrants to
       
    Shares of common stock beneficially owned prior to this offering     purchase
       
    Class A Common Stock     Class B Non-Voting Common Stock     shares of
       
    Number of
          Number of
          common
       
Name of beneficial owner   shares     %     shares     %     stock     Total %  
 
 
Greater than 5% Stockholders
                                               
American Funds Insurance Series—Growth Fund(1)
    4,183,448       6.58%             0.00%             6.40%  
Ares Management LLC(2)
    6,944,444       10.93%             0.00%             10.62%  
Commonwealth Bank of Australia(3)
    6,250,000       9.83%             0.00%       268,125       9.89%  
Genefinance S.A.(4)
    3,170,661       4.99%       1,829,339       100.00%       214,500       7.92%  
Leonard Green & Partners, L.P.(5)
    6,944,444       10.93%             0.00%             10.62%  
Steven F. Udvar-Házy(6)
    4,560,606       7.17%             0.00%             6.97%  
WL Ross & Company LLC(7)
    4,250,000       6.69%             0.00%             6.50%  
Named Executive Officers and Directors
                                               
Steven F. Udvar-Házy(6)
    4,560,606       7.17%             0.00%             6.97%  
John L. Plueger(8)
    278,334       *             0.00%             *  
Grant A. Levy
    80,300       *             0.00%             *  
Jie Chen
    2,500       *             0.00%             *  
James C. Clarke(9)
    2,528       *             0.00%             *  
John G. Danhakl(5)
    6,944,444       10.93%             0.00%             10.62%  
Matthew J. Hart
    10,000       *             0.00%             *  
Robert A. Milton
    182,000       *             0.00%             *  
Michel M.R.G. Péretié(4)
    3,170,661       4.99%       1,829,339       100.00%       214,500       7.92%  
Antony P. Ressler(2)(10)
    6,944,444       10.93%             0.00%             10.62%  
Wilbur L. Ross, Jr.(7)
    4,250,000       6.69%             0.00%             6.50%  
Ian M. Saines(3)
    6,250,000       9.83%             0.00%       268,125       9.89%  
Dr. Ronald D. Sugar(11)
    50,000       *             0.00%             *  
All executive officers and directors as a group (17 persons)
    32,905,105       51.77%       1,829,339       100.00%       482,625       53.46%  
 
 
 
Represents beneficial ownership of less than 1%.
 
(1) American Funds Insurance Series—Growth Fund (“AFIS—Growth Fund”) is an investment company registered under the Investment Company Act of 1940, as amended. Capital Research and Management Company (“CRMC”), an investment adviser registered under the Investment Advisers Act of 1940, as amended, is the investment adviser to AFIS—Growth Fund. CMRC provides investment advisory services to AFIS—Growth Fund through its division Capital World Investors (“CWI”). In that capacity, CWI may be deemed to be the beneficial owner of the shares of Class A Common Stock held by AFIS—Growth Fund. CWI, however, disclaims such beneficial ownership of these shares of Class A Common Stock, except to the extent of its pecuniary interest therein. The address of each of AFIS—Growth Fund, CRMC and CWI is 333 South Hope Street, Los Angeles, California 90071.
 
(2) Consists of 5,555,556 shares of Class A Common Stock held by Ares Corporate Opportunities Fund III, L.P. (“ACOF III”), 724,947 shares of Class A Common Stock held by Ares Special Situations Fund, L.P. (“ASSF”) and 663,941 shares of Class A Common Stock held by Ares Special Situations Fund I-B, L.P. (“ASSF I-B”). The general partner of ACOF III is ACOF Management III, L.P. (“ACOF Management”) and the general partner of ACOF Management is ACOF Operating Manager III, LLC (“ACOF Operating Manager”). The general partner of ASSF and ASSF I-B is ASSF Management, L.P. (“ASSF Management”) and the general partner of ASSF Management is ASSF Operating Manager, LLC (“ASSF Operating Manager”). Each of ACOF Management, ACOF Operating Manager, ASSF Management and ASSF Operating Manager are directly or indirectly controlled by Ares Management LLC (“Ares Management”), which, in turn, is indirectly controlled by Ares Partners Management Company LLC (“Ares Parent,” and together with Ares Management, ACOF III, ACOF Management, ACOF Operating Manager, ASSF, ASSF I-B, ASSF Management and ASSF Operating Manager, the “Ares Entities”). Ares Partners is managed by an executive committee comprised of Mr. Ressler, Michael Arougheti, David Kaplan, Greg Margolies and Bennett Rosenthal. Each of the Ares Entities (other than ACOF III, ASSF and ASSF I-B, with respect to the shares held directly by ACOF III, ASSF and ASSF I-B, respectively) and the members of the executive committee and the partners, members and managers of the Ares Entities expressly disclaims beneficial ownership of these

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shares of Class A Common Stock. The address of each Ares Entity is 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.
 
(3) Mr. Saines, as the Group Executive of the Institutional Banking and Markets division of Commonwealth Bank of Australia, may be deemed to be the beneficial owner of the 6,250,000 shares of Class A Common Stock and one warrant to purchase 268,125 shares of Common Stock held by Commonwealth Bank of Australia. Mr. Saines disclaims beneficial ownership of these shares of Class A Common Stock and the warrant, except to the extent of his pecuniary interest therein. The address of Commonwealth Bank of Australia is Level 21, 201 Sussex Street, Sydney, Australia NSW 2000.
 
(4) Consists of 3,170,661 shares of Class A Common Stock, 1,829,339 of Class B Non-Voting Common Stock and one warrant to purchase 214,500 shares of Common Stock all held by Genefinance S.A. Genefinance S.A. is a wholly-owned subsidiary of Société Générale S.A. Société Générale S.A. may be deemed to have shared voting and investment power with respect to these shares of Common Stock and the warrant held by Genefinance. Mr. Péretié does not directly hold any shares or warrants in the Company. As a member of an executive committee of Société Générale S.A., Mr. Péretié may be deemed to be the beneficial owner of the shares of Common Stock and the warrant held by Genefinance S.A. Mr. Péretié disclaims beneficial ownership of these shares of Common Stock and the warrant, except to the extent of his pecuniary interest therein. The address for Genefinance S.A. and Société Générale S.A. is 29 Boulevard Haussmann, 75009 Paris, France.
 
(5) Consists of 5,341,979 shares of Class A Common Stock held by Green Equity Investors V, L.P. (“GEI V”) and 1,602,465 shares of Class A Common Stock held by Green Equity Investors Side V, L.P. (“GEI Side V”). GEI Capital V, LLC (the general partner of GEI V and GEI Side V), Green V Holdings, LLC (a limited partner of GEI V), Leonard Green & Partners, L.P. (an affiliate of GEI Capital V, LLC) and LGP Management, Inc. (the general partner of Leonard Green & Partners, L.P.) all may be deemed to have shared voting and investment power with respect to the shares of Class A Common Stock beneficially owned by GEI V and GEI Side V. As such they may have shared beneficial ownership of such shares of common stock. Each of Mr. Danhakl, the other managers of GEI Capital V, LLC, GEI Capital V, LLC, Green V Holdings, LLC, Leonard Green & Partners, L.P. and LGP Management, Inc. disclaims beneficial interest of the shares of Class A Common Stock reported herein, except to the extent of their pecuniary interest therein. The address for each of GEI V, GEI Side V, GEI Capital V, LLC, Green V Holdings, LLC, Leonard Green & Partners, L.P. and LGP Management, Inc. is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025.
 
(6) Consists of 278,889 shares of Class A Common Stock held directly by Air Intercontinental, Inc.; 101,667 shares of Class A Common Stock held directly by Ocean Equities, Inc.; 35,925 shares of Class A Common Stock held directly by Emerald Financial LLC; 2,700,000 and 1,043,125 shares of Class A Common Stock held directly by two trusts, respectively, of which Mr. Udvar-Házy is the trustee and has sole voting and investment power; 300,000 shares of Class A Common Stock held directly by AL Investors I, LLC; and 101,000 shares of Class A Common Stock held directly in the aggregate by Mr. Udvar-Házy’s wife and children. Mr. Udvar-Házy has sole voting and investment power with respect to the shares held by Air Intercontinental, Inc., of which he is the sole stockholder and one of three directors. The remaining directors, Christine L. Udvar-Házy, his wife, and Steven C. Udvar-Házy, his son, disclaim beneficial ownership of the shares held by Air Intercontinental, Inc., except to the extent of their respective pecuniary interests therein. Mr. Udvar-Házy has sole voting and investment power with respect to the shares held by Ocean Equities, Inc. A trust of which Mr. Udvar-Házy is the trustee is the sole stockholder of Ocean Equities, Inc., and Mr. Udvar-Házy is one of the three directors. The remaining directors, Mrs. Udvar-Házy and Mr. S. C. Udvar-Házy, disclaim beneficial ownership of the shares held by Ocean Equities, Inc., except to the extent of their respective pecuniary interests therein. Mr. Udvar-Házy shares voting and investment power with respect to the shares of Class A Common Stock held by Emerald Financial LLC. A trust of which he is trustee controls a majority of the membership interests in Emerald Financial LLC; in addition, Mr. Udvar-Házy is one of three managers of Emerald Financial LLC, together with Mrs. Udvar-Házy and Karissa K. Udvar-Házy. Mrs. Udvar-Házy and Ms. Udvar-Házy disclaim beneficial ownership of the shares held by Emerald Financial LLC, except to the extent of their respective pecuniary interests therein. Mr. Udvar-Házy has shared voting and investment power over the shares held by AL Investors I, LLC. The members of AL Investors I, LLC are AL 1 Management, LLC, AL Investment Group LLC, and Biscayne 4400 AL, LLC. AL 1 Management, LLC and AL Investment Group LLC each has the power to designate a co-manager of AL Investors 1, LLC, and has designated itself as such. Mr. Udvar-Házy is the sole member and manager of AL 1 Management, LLC. Mr. Udvar-Házy disclaims beneficial ownership of the shares held directly by his wife and children, except to the extent of his pecuniary interest therein.
 
(7) Consists of 4,233,000 shares of Class A Common Stock held by WLR Recovery Fund IV, L.P. and 17,000 shares of Class A Common Stock held by WLR IV Parallel ESC, L.P. Mr. Ross is the Chairman and CEO of WL Ross & Company LLC and the managing member of El Vedado LLC, the general partner of WL Ross Group, L.P., which is in turn the managing member of WLR Recovery Associates IV LLC, which is the general partner of WLR Recovery Fund IV, L.P. Invesco Private Capital, Inc. is the managing member of Invesco WLR IV Associates LLC, which is in turn the general partner of WLR IV Parallel ESC, L.P. Invesco WLR IV Associates LLC and WLR Recovery Associates IV LLC have agreed to make investments for WLR IV Parallel ESC, L.P. on a pro rata basis in parallel with WLR Recovery Fund IV, L.P. Invesco WLR IV Associates LLC, Invesco Private Capital, Inc., WLR Recovery Associates IV LLC, WL Ross Group, L.P., El Vedado, LLC and Mr. Ross may be deemed to share voting and dispositive power over the shares of Class A Common Stock held by WLR Recover Fund IV, L.P. and WLR IV Parallel ESC, L.P. Mr. Ross disclaims beneficial ownership over these shares of Class A Common Stock, except to the extent of his pecuniary interest therein. The address for WL Ross Group, L.P. is 1166 Avenue of the Americas, New York, New York 10036.
 
(8) Consists of 278,334 shares of Class A Common Stock held by a trust of which Mr. Plueger is a co-trustee.
 
(9) Consists of 278 shares of Class A Common Stock held by Mr. Clarke and 2,250 shares of Class A Common Stock held by RBC Capital Markets Corporation for the benefit of James C. Clarke, of which Mr. Clarke is the sole owner and beneficiary.
 
(10) Mr. Ressler is a Senior Partner in the Private Equity Group of Ares Management and member of Ares Partners, both of which indirectly control ACOF III, ASSF and ASSF I-B (collectively, the “Ares Funds”). Mr. Ressler expressly disclaims beneficial ownership of the shares of Class A Common Stock held by the Ares Funds. The address of Mr. Ressler is c/o Ares Management LLC, 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.
 
(11) Consists of 50,000 shares of Class A Common Stock held by a trust of which Dr. Sugar is a co-trustee.


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Certain relationships and related party transactions
 
Set forth below are certain transactions that have occurred since our inception in February 2010 to which we have been a party and the amount involved or exceeded $120,000, and in which our directors, executive officers, beneficial owners of more than five percent of our Common Stock, or persons or entities affiliated with them, had a direct or indirect material interest. While we did not have a formal review and approval policy for related party transactions at the time of any transaction described in this section, each transaction was reviewed and approved by our board of directors.
 
Loans from certain members of our management team, board of directors and beneficial holders
 
Convertible Notes.  The following members of our management and board of directors (or their respective families or affiliates) and funds managed by certain beneficial owners of more than five percent of our Common Stock made loans to us on May 7, 2010 totaling approximately $60.0 million:
 
         
 
Management/board member/beneficial holder   Amount of loan  
 
 
Ares Corporate Opportunities Fund III, L.P. 
  $ 20,000,000  
Ares Special Situations Fund, L.P. 
  $ 2,609,811  
Ares Special Situations Fund I-B, L.P. 
  $ 2,390,189  
Green Equity Investors V, L.P. 
  $ 19,231,125  
Green Equity Investors Side V, L.P. 
  $ 5,768,875  
Steven F. Udvar-Házy
  $ 8,976,258  
John L. Plueger
  $ 510,012  
Robert A. Milton
  $ 360,000  
Other Members of Management and the Board of Directors
  $ 153,738  
 
 
 
These loans were evidenced by unsecured senior convertible notes, which bore interest at the rate of 6.0% per annum, payable quarterly in cash (“Convertible Notes”). By their terms, the Convertible Notes were automatically cancelled concurrently with the completion of the private placement of Common Stock in June 2010 as consideration for the purchase of our Common Stock at a price equal to $18.00 per share.
 
Loan from Mr. Udvar-Házy.  We and Mr. Udvar-Házy entered into an unlimited revolving loan agreement, dated as of March 22, 2010 and amended on April 6, 2010 and April 19, 2010 (the “Loan Agreement”), under which Mr. Udvar-Házy agreed to loan funds to us on an ongoing basis. The principal amount of the loans accrued interest at an annual rate of three-month LIBOR plus 3.5%, compounding quarterly. Pursuant to the terms of the Loan Agreement, the loan matured upon the completion of our private placement of Common Stock in June 2010, and we repaid the outstanding balance of $50,336 on June 4, 2010.
 
Loans from Air Intercontinental, Inc.  Air Intercontinental, Inc., a California corporation (“AII”), is controlled by Mr. Udvar-Házy. In February 2010, AII paid a deposit of $250,000 to Airbus for two aircraft on our behalf. The outstanding principal amount accrued interest at an annual rate of 3.0%, compounding quarterly. Pursuant to the terms of the non-negotiable promissory note evidencing this indebtedness, all principal and accrued but unpaid interest was due upon the


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earlier of February 2011 and the completion of our private placement of Common Stock in June 2010. Accordingly, we repaid this loan on June 4, 2010.
 
On April 9, 2010, AII extended a loan of $2.0 million to us. The loan accrued interest at an annual rate equal to the three-month LIBOR, determined on a quarterly basis, plus 3.5%. Pursuant to the terms of the promissory note agreement, this $2.0 million loan was cancelled in exchange for the issuance of 100,000 shares of our Common Stock upon the completion of our private placement of Common Stock in June 2010.
 
Sale of Common Stock and warrants
 
On May 7, 2010, we entered into a stock purchase agreement with funds managed by each of Leonard Green & Partners, L.P. and Ares Management LLC whereby such fund agreed to invest an aggregate of $250 million in our Common Stock at the lesser of (i) $18.00 per share and (ii) 90% of the offering price per share upon the completion of our private placement of Common Stock on or before December 31, 2010. On June 4, 2010, funds managed by Leonard Green & Partners, L.P. and Ares Management LLC purchased $200 million of our Common Stock at $18.00 per share.
 
On June 4, 2010 we issued a warrant to purchase 214,500 shares of our Common Stock to Société Générale S.A. and a warrant to purchase 268,125 shares of our Common Stock and Commonwealth Bank of Australia as consideration for their commitments to purchase $100 million and $125 million, respectively, of our Common Stock in connection with a private placement of our Common Stock. The warrants have a seven-year term and an exercise price of $20.00 per share. Société Générale S.A. subsequently transferred its warrant to Genefinance S.A., a wholly-owned subsidiary of Société Générale S.A.
 
Policies and procedures for related party transactions
 
Pursuant to its charter, our nominating and governance committee reviews and approves all related party transactions. Our Code of Business Conduct and Ethics sets forth our formal policy regarding conflicts of interest. A copy of our Code of Business Conduct and Ethics will be available upon the closing of this offering on our website at www.airleasecorp.com .
 
Other relationships
 
Consulting arrangements
 
A member of our board of directors, Dr. Sugar, has entered into a part-time consulting engagement with Ares Management LLC, under which he receives a monthly retainer and has the potential to receive other compensation. Such compensation does not relate to any investment in our Common Stock made by funds managed by Ares Management LLC. None of the services being provided by Dr. Sugar to or on behalf of Ares Management LLC relate to us or the acquisition, sale, financing, leasing, management or marketing of aircraft or aircraft equipment.
 


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Description of capital stock
 
The following summary is a description of our capital stock and provisions of our restated certificate of incorporation and amended and restated bylaws. This information does not purport to be complete and is subject to, and qualified in its entirety by reference to, the terms of our restated certificate of incorporation and amended and restated bylaws, copies of which have been filed with the SEC as exhibits to our registration statement of which this prospectus forms a part, and the provisions of applicable Delaware law.
 
General
 
Our restated certificate of incorporation authorizes us to issue 500,000,000 shares of Class A Common Stock, $0.01 par value per share, 10,000,000 shares of Class B Non-Voting Common Stock, $0.01 par value per share, and 50,000,000 shares of preferred stock, $0.01 par value per share, the rights and preferences of which may be established from time to time by our board of directors. The 2010 ALC Equity Incentive Plan has reserved shares of our Class A Common Stock for issuance to our employees, which amount will be no more than the sum of (i) 10% of any class of common stock issued by us pursuant to an exemption under the Securities Act, until we consummate an initial public offering of any class of our common stock, excluding any issuances to our management prior to the initial date of adoption of the 2010 ALC Equity Incentive Plan and (ii)      % of any class of common stock issued by us pursuant to an initial public offering of any class of our common stock.
 
As of December 31, 2010, there were 63,563,810 shares of Class A Common Stock outstanding, held by approximately 160 stockholders of record, 1,829,339 shares of Class B Non-Voting Common Stock outstanding, held by one stockholder of record, and no shares of preferred stock outstanding.
 
Common Stock
 
Our restated certificate of incorporation provides that, except with respect to voting rights and conversion rights, the Class A Common Stock and Class B Non-Voting Common Stock shall be treated equally and identically.
 
Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of Class A Common Stock possess all voting power for the election of our directors and all other matters requiring stockholder action, except with respect to amendments to our restated certificate of incorporation that alter or change the powers, preferences, rights or other terms of any outstanding preferred stock if the holders of such affected series of preferred stock are entitled to vote on such an amendment. Holders of our Class A Common Stock are entitled to one vote for each share held and will not have cumulative voting rights in connection with the election of directors. Accordingly, holders of a majority of the shares of Class A Common Stock entitled to vote in any election of directors are able to elect all of the directors standing for election. Holders of Class B Non-Voting Common Stock are not entitled to any vote, other than with respect to amendments to the terms of the Class B Non-Voting Common Stock that would significantly and adversely affect the rights or preferences of the Class B Non-Voting Common Stock, including, without limitation with respect to the convertibility thereof.


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Except as otherwise provided by law, our restated certificate of incorporation or our amended and restated bylaws, all matters to be voted on by our stockholders require approval by a majority of the shares present in person or by proxy at a meeting of stockholders and entitled to vote on the subject matter. Any stockholder wishing to propose for election as director someone who is not an existing director or is not proposed by our board will be required to give notice of the intention to propose the person for election, in compliance with the advance notice provisions of our amended and restated bylaws. Our amended and restated bylaws provide that such stockholder nominees shall be elected by a plurality of the votes cast at any meeting of stockholders.
 
Under the United States Bank Holding Company Act of 1956, as amended, Société Générale S.A. may not hold 5.0% or more of the aggregate voting control of our capital stock and, accordingly, Société Générale S.A. and its affiliates hold 4.99% of our Class A Common Stock and the balance of their interests is held in Class B Non-Voting Common Stock.
 
Each share of Class B Non-Voting Common Stock is convertible into a share of Class A Common Stock at the option of the holder, provided , that each share of Class B Non-Voting Common Stock will only become convertible at the time it is transferred to a third party unaffiliated with Société Générale S.A.
 
Any amendment to the terms of the Class A Common Stock shall apply equally to the Class B Non-Voting Common Stock and the Class B Non-Voting Common Stock shall have all of the same rights as the Class A Common Stock, except as to voting and convertibility, and shall be treated equally in all respects with the Class A Common Stock, including, without limitation, with respect to dividends.
 
Subject to any preferential rights of any then outstanding preferred stock, holders of Common Stock are entitled to receive any dividends that may be declared by our board of directors out of legally available funds. We have no current plans to declare or pay any dividends to our stockholders.
 
In the event of our liquidation, dissolution or winding up, holders of Common Stock will be entitled to receive proportionately any of our assets remaining after the payment of liabilities and any preferential rights of the holders of our then outstanding preferred stock.
 
Except as described in this prospectus, holders of Common Stock will have no preemptive, subscription, redemption or conversion rights. The outstanding shares of Common Stock are, and the shares of Common Stock offered by us in this offering, when issued, will be, validly issued and fully paid. The rights, preferences and privileges of holders of Common Stock will be subject to those of the holders of any shares of our preferred stock we may issue in the future.
 
Preferred stock
 
Our restated certificate of incorporation authorizes our board of directors to issue and to designate the terms of one or more classes or series of preferred stock. The rights with respect to a class or series of preferred stock may be greater than the rights attached to our Common Stock. It is not possible to state the actual effect of the issuance of any shares of our preferred stock on the rights of holders of our Common Stock until our board of directors determines the specific rights attached to that class or series of preferred stock.


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Warrants
 
On June 4, 2010, we issued warrants to purchase up to 214,500 shares and up to 268,125 shares of our Common Stock to Société Générale S.A. and Commonwealth Bank of Australia, respectively. The warrants are exercisable at a price of $20.00 per share until June 4, 2017. The exercise price and the number of shares issuable upon exercise of the warrants are subject to adjustment from time to time to maintain the value of the warrants in the event of certain changes to our capital structure. The shares issuable upon exercise of the warrants have been granted registration rights. See “Registration rights” below. Société Générale S.A. subsequently transferred its warrant to Genefinance S.A., a wholly-owned subsidiary of Société Générale S.A.
 
Registration rights
 
Pursuant to the Registration Rights Agreement, dated June 4, 2010, by and between our Company and FBR Capital Markets & Co., the holders of 65,369,649 shares of Common Stock currently outstanding and 482,625 shares of Common Stock issuable upon exercise of the warrants held by Genefinance S.A. and Commonwealth Bank of Australia, have the following rights:
 
On or before April 30, 2011, we are required to file with the SEC, at our expense, a shelf registration statement providing for the resale of any registrable shares from time to time by the holders of such shares. If we have not filed the shelf registration statement by April 30, 2011, other than because the SEC was unable to accept such filing (a “Registration Default”), then Messrs. Udvar-Házy, Plueger and Clarke will each forfeit 50%, and will thereafter forfeit an additional 10% for each month the Registration Default continues, of any bonus that would otherwise be payable to him in respect of performance during 2011. In addition, in accordance with our amended and restated bylaws, we are required to call a special meeting of stockholders if the shelf registration statement has not been declared effective by the SEC, and none of the registrable shares have been listed for trading on a nationally recognized securities exchange, by the 180th day after (and not including the day of) the filing of such shelf registration statement. The purpose of the meeting is to consider and vote on the removal of our directors then in office and to elect the successors of any directors so removed unless the holders of two-thirds of the registrable shares waive such requirement.
 
We will use our commercially reasonable efforts to cause the shelf registration statement to become effective under the Securities Act as soon as practicable after filing and to remain effective until the earliest to occur of:
 
•  such time as all of the registrable shares covered by the shelf registration statement have been sold in accordance with such shelf registration statement;
 
•  such time as all registrable shares are eligible for sale without any volume or manner of sale restrictions or compliance by us with any current public information requirements pursuant to Rule 144 (or any successor or analogous rule) under the Securities Act and are listed for trading on a national securities exchange; and
 
•  the first anniversary of the effective date of the registration statement.


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Certain anti-takeover provisions of Delaware law and our restated certificate of incorporation and amended and restated bylaws
 
Special meeting of stockholders
 
Our restated certificate of incorporation and our amended and restated bylaws provide that special meetings of our stockholders may be called only by the Chairman of the board of directors, by our Chief Executive Officer or by a majority vote of our entire board of directors.
 
No stockholder action by written consent
 
Our restated certificate of incorporation and our amended and restated bylaws prohibit stockholder action by written consent.
 
Advance notice requirements for stockholder proposals and director nominations
 
Our amended and restated bylaws provide that stockholders seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election as directors at our annual meeting of stockholders, must provide timely notice of their intent in writing. To be timely, a stockholder’s notice must be delivered to our principal executive offices not less than 90 days nor more than 120 days prior to the meeting. For the first annual meeting of stockholders after the completion of this offering, a stockholder’s notice shall be timely if delivered to our principal executive offices not later than the 90th day prior to the scheduled date of the annual meeting of stockholders or the 10th day following the day on which a public announcement of the date of our annual meeting of stockholders is first made by us. Our amended and restated bylaws also specify certain requirements as to the form and content of a stockholder’s notice. These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders.
 
Stockholder-initiated bylaw amendments
 
Our amended and restated bylaws may be adopted, amended, altered or repealed by stockholders only upon approval of at least two-thirds of the voting power of all the then outstanding shares of the Common Stock. Additionally, our restated certificate of incorporation provides that our amended and restated bylaws may be adopted, amended or repealed by the board of directors by a majority vote.
 
Authorized but unissued shares
 
Our authorized but unissued shares of Common Stock are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Common Stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.


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Supermajority voting
 
The vote of the holders of not less than 66 2 / 3 % of the votes entitled to be cast is required to adopt any amendment to our restated certificate of incorporation or amended and restated bylaws as well as to remove a director from office; except that the affirmative vote of the holders of only a majority of the voting power of all issued and outstanding Common Stock shall be required to remove a director or directors if such vote occurs at a special meeting of the stockholders called specifically to consider the removal of members of the board of directors. The foregoing provisions may discourage attempts by others to acquire control of us without negotiation with our board of directors. This enhances our board of directors’ ability to attempt to promote the interests of all of our stockholders. However, to the extent that these provisions make us a less attractive takeover candidate, they may not always be in our best interests or in the best interests of our stockholders.
 
Section 203 of the Delaware General Corporation Law
 
We have not opted out of Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 of the Delaware General Corporation Law prohibits a public Delaware corporation from engaging in a business combination (as defined in such section) with an “interested stockholder” (defined generally as any person who beneficially owns 15% or more of the outstanding voting stock of such corporation or any person affiliated with such person) for a period of three years following the time that such stockholder became an interested stockholder, unless (i) prior to such time the board of directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation outstanding at the time the transaction commenced (excluding for purposes of determining the voting stock of such corporation outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (A) by persons who are directors and also officers of such corporation and (B) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer); or (iii) on or subsequent to such time the business combination is approved by the board of directors of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder.
 
Limitation on liability and indemnification of directors and officers
 
Our restated certificate of incorporation and amended and restated bylaws provide that our directors and officers will be indemnified by us to the fullest extent authorized by Delaware law as it currently exists or may in the future be amended, against all expenses and liabilities reasonably incurred in connection with their service for or on our behalf. In addition, our restated certificate of incorporation provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors.
 
In addition to the indemnification provided by our restated certificate of incorporation and amended and restated bylaws, we have entered and are currently entering into agreements to indemnify our directors and executive officers. These agreements, among other things and subject to certain standards to be met, require us to indemnify these directors and officers for


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certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in our right, arising out of that person’s services as a director or officer of us or any of our subsidiaries or any other company or enterprise to which the person provides services at our request. These agreements also require us to advance expenses to these officers and directors for defending any such action or proceeding, subject to an undertaking to repay such amounts if it is ultimately determined that such director or officer was not entitled to be indemnified for such expenses.
 
Stock exchange listing symbol
 
We have applied to list our Class A Common Stock on      under the symbol “     .”
 
Transfer agent and registrar
 
We have appointed American Stock Transfer and Trust Company as the transfer agent and registrar for the Common Stock.
 


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Shares eligible for future sale
 
Prior to this offering, there was no public market for our Class A Common Stock. Future sales of substantial amounts of our Class A Common Stock in the public market, or the perception that such sales may occur, could adversely affect the prevailing market price of our Class A Common Stock.
 
Sale of restricted securities
 
Upon completion of this offering, we will have      shares of our Class A Common Stock outstanding on a fully diluted basis. Of these shares, all of the shares sold in this offering will be freely tradable without restriction under the Securities Act, unless purchased by our “affiliates” as that term is defined in Rule 144 under the Securities Act. The remaining shares of Common Stock that will be outstanding after this offering will be “restricted securities” within the meaning of Rule 144. Restricted securities may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration such as Rule 144, which is summarized below.
 
Rule 144
 
In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the 90 days preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without restriction.
 
In general, under Rule 144 as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up agreements described below, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:
 
•  1% of the total number of shares of our Common Stock then outstanding, which will equal      shares immediately after this offering; or
 
•  the average weekly trading volume of our Common Stock on the   during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC.
 
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
 
Lock-up agreements
 
Our directors, executive officers, and certain of our significant stockholders have agreed, subject to limited exceptions, not (1) to offer, pledge, sell, contract to sell, sell any option or contract to


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purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or publicly disclose the intention to make any such offer, sale, pledge or disposition, (2) to enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of shares of Common Stock or such other securities, or (3) to make any demand for or exercise any right with respect to the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock for a period of 180 days after the date of this prospectus, without the prior written consent of J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC on behalf of the underwriters. See “Underwriting.”
 
Certain of our directors, in their capacities as directors, and certain of our executive officers agreed with FBR Capital Markets & Co. (“FBR”) that they will not, without the prior written consent of FBR and subject to limited exceptions, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise dispose of or transfer, directly or indirectly, any of our equity securities or any securities convertible into or exercisable or exchangeable for our equity securities, or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of any of our equity securities, during the period beginning on June 1, 2010 and ending on the earlier of (a) the second anniversary of the completion of our private placement of Common Stock for which FBR acted as initial purchaser and placement agent and (b) the date that is not less than 180 days after the earlier to occur of the effective date of the registration statement of our initial public offering or the effective date of the shelf registration statement that we will file under the terms of the registration rights agreement we entered into with FBR in connection with such private placement. See “Description of capital stock — Registration rights.”
 
Certain of our officers entered into lock-up agreements with us on substantially similar terms as the terms of the lock-up agreements with FBR described above.
 
Stockholders who own registrable shares under the Registration Rights Agreement, dated June 4, 2010, by and between our Company and FBR and who do not exercise their right to participate in our initial public offering have agreed that they will not, directly or indirectly, sell, offer to sell (including engage in a short sale), grant any option or otherwise transfer or dispose of any registrable shares or other shares of our Common Stock or any securities convertible into or exchangeable or exercisable for shares of our Common Stock then owned by them for 60 days following the effective date of this offering, subject to certain conditions and limitations. See “Description of capital stock — Registration rights.”
 
Rule 701
 
In general, under Rule 701 of the Securities Act, certain of our employees, consultants or advisors who may be eligible to purchase shares from us in connection with a qualified compensatory share plan or other written agreement will be eligible to resell those shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with the holding period or certain other restrictions contained in Rule 144.


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Form S-8 registration statements
 
Following the completion of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register the shares of our Class A Common Stock that are issuable pursuant to our 2010 ALC Equity Incentive Plan. See the section titled ‘‘Executive compensation — Compensation discussion and analysis.” Subject to the lock-up agreements described above and any applicable vesting restrictions, shares registered under these registration statements will be available for resale in the public market immediately upon the effectiveness of these registration statements, except with respect to Rule 144 volume limitations that apply to our affiliates.
 


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Certain U.S. federal income tax considerations
for non-U.S. holders
 
The following is a general discussion of certain U.S. federal income tax considerations with respect to the ownership and disposition of shares of our Common Stock applicable to non-U.S. holders who acquire such shares in this offering and hold such shares as a capital asset (generally, property held for investment). For purposes of this discussion, a “non-U.S. holder” means a beneficial owner of our Common Stock (other than an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes) that is not, for U.S. federal income tax purposes, any of the following:
 
•  a citizen or resident of the United States;
 
•  a corporation created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia;
 
•  an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
 
•  a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) such trust has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes.
 
A non-U.S. holder generally does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition (even if that individual is not otherwise a resident of the United States for U.S. federal income tax purposes). Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of common stock.
 
This discussion is based on current provisions of the Code, Treasury regulations promulgated thereunder, judicial opinions, published positions of the Internal Revenue Service, and other applicable authorities, all of which are subject to change (possibly with retroactive effect). This discussion does not address all aspects of U.S. federal income taxation that may be important to a particular non-U.S. holder in light of that non-U.S. holder’s individual circumstances, nor does it address any aspects of U.S. federal estate and gift, state, local or non-U.S. taxes. This discussion may not apply, in whole or in part, to particular non-U.S. holders in light of their individual circumstances or to holders subject to special treatment under the U.S. federal income tax laws (such as insurance companies, tax-exempt organizations, financial institutions, brokers or dealers in securities, “controlled foreign corporations,” “passive foreign investment companies,” non-U.S. holders that hold our Common Stock as part of a straddle, hedge, conversion transaction or other integrated investment, and certain U.S. expatriates).
 
If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our Common Stock, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partners of a partnership holding our Common Stock should consult their tax advisor as to the particular U.S. federal income tax consequences applicable to them.
 
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES FOR NON-U.S. HOLDERS RELATING TO THE OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK. PROSPECTIVE HOLDERS OF OUR COMMON STOCK SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL,


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FOREIGN INCOME AND OTHER TAX LAWS) OF THE OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.
 
Dividends
 
As discussed in the section titled “Dividend policy,” we have no current plans to declare or pay any dividends to our stockholders. In general, any distributions that we do make to a non-U.S. holder with respect to its shares of our Common Stock will be subject to U.S. withholding tax at a rate of 30% of the gross amount, unless the non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable tax treaty and the non-U.S. holder provides proper certification of its eligibility for such reduced rate. A distribution will constitute a dividend for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. Any distribution not constituting a dividend will be treated first as reducing the adjusted basis in the non-U.S. holder’s shares of our Common Stock and, to the extent it exceeds the adjusted basis in the non-U.S. holder’s shares of our Common Stock, as gain from the sale or exchange of such stock. If the tax withheld from a non-U.S. holder exceeds the holder’s U.S. federal income tax liability, the non-U.S. holder may be entitled to obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for such refund or credit with the Internal Revenue Service (“IRS”).
 
Distributions we pay to a non-U.S. holder that are effectively connected with its conduct of a trade or business within the United States (and, if a tax treaty applies, are attributable to a U.S. permanent establishment) will not be subject to U.S. withholding tax, as described above, if the non-U.S. holder complies with applicable certification and disclosure requirements. Instead, the amount of any distribution constituting a dividend generally will be subject to U.S. federal income tax on a net income basis, in the same manner as if the non-U.S. holder were a resident of the United States. Certain certification and disclosure requirements must be complied with in order for income effectively connected with a trade or business within the United States to be exempt from withholding. Dividends received by a foreign corporation that are effectively connected with its conduct of trade or business within the United States may be subject to an additional branch profits tax at a rate of 30% (or such lower rate as may be specified by an applicable tax treaty).
 
Gain on sale or other disposition of Common Stock
 
In general, a non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of the non-U.S. holder’s shares of our Common Stock unless:
 
•  the gain is effectively connected with a trade or business carried on by the non-U.S. holder within the United States (and, if required by an applicable tax treaty, is attributable to a U.S. permanent establishment of such non-U.S. holder); or
 
•  we are or have been a U.S. real property holding corporation, which we refer to as an “USRPHC,” for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding such disposition or such non-U.S. holder’s holding period of our Common Stock and either (a) our Common Stock was not regularly traded on an established securities market at any time during the calendar year in which the disposition occurs, or (b) the non-U.S. holder owns or owned (actually or constructively) more than five percent of the total fair market value of shares of our Common Stock at any time during the five-year period preceding the date of disposition. We are not, and do not anticipate that we will become, a USRPHC for United States federal income tax purposes.
 
Gain that is effectively connected with the conduct of a trade or business in the United States (or so treated) generally will be subject to U.S. federal income tax, net of certain deductions, at


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regular U.S. federal income tax rates, subject to a treaty providing otherwise. If the non-U.S. holder is a foreign corporation, the branch profits tax described above also may apply to such effectively connected gain.
 
Backup withholding, information reporting and other reporting requirements
 
We must report annually to the Internal Revenue Service and to each non-U.S. holder the amount of dividends paid to, and the tax withheld with respect to, each non-U.S. holder. These reporting requirements apply regardless of whether withholding was reduced or eliminated by an applicable tax treaty. Copies of this information reporting may also be made available under the provisions of a specific tax treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established.
 
A non-U.S. holder will generally be subject to backup withholding for dividends on our Common Stock paid to such holder unless such holder certifies under penalties of perjury (usually on an IRS Form W-8BEN) that, among other things, it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a U.S. person as defined under the Code).
 
Information reporting and backup withholding generally are not required with respect to the amount of any proceeds from the sale or other disposition of our Common Stock by a non-U.S. holder outside the United States through a foreign office of a foreign broker that does not have certain specified connections to the United States. However, if a non-U.S. holder sells or otherwise disposes of its shares of our Common Stock through a U.S. broker or the U.S. offices of a foreign broker, the broker will generally be required to report to the IRS the amount of proceeds paid to the non-U.S. holder and also backup withhold on that amount unless such non-U.S. holder provides appropriate certification (usually on an IRS W-8BEN) to the broker of its status as a non-U.S. person or otherwise establishes an exemption (and the payor does not have actual knowledge or reason to know that such holder is a U.S. person as defined under the Code).
 
Backup withholding is not an additional income tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder generally can be credited against the non-U.S. holder’s U.S. federal income tax liability, if any, or refunded, provided that the required information is furnished to the IRS in a timely manner. Non-U.S. holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them.
 
New legislation relating to foreign accounts
 
Newly enacted legislation may impose withholding taxes on certain types of payments made to “foreign financial institutions” and certain other non-U.S. entities after December 31, 2012. The legislation imposes a 30% withholding tax on dividends on, or gross proceeds from the sale or other disposition of, our Common Stock paid to a foreign financial institution unless the foreign financial institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements. In addition, the legislation imposes a 30% withholding tax on the same types of payments to a foreign non-financial entity unless the entity certifies that it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner. Prospective investors should consult their tax advisors regarding this legislation.


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Underwriting
 
We are offering the shares of Class A Common Stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC and FBR Capital Markets & Co. are acting as joint book-running managers of the offering and as representatives of the underwriters. We have entered into an underwriting agreement dated as of          , 2011 with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of Common Stock listed next to its name in the following table:
 
     
    Number of
Name   shares
 
J.P. Morgan Securities LLC
   
Credit Suisse Securities (USA) LLC.     
FBR Capital Markets & Co. 
   
Total
   
 
 
 
The underwriters are committed to purchase all of the shares of Class A Common Stock offered by us if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.
 
The underwriters propose to offer the shares of Class A Common Stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $      per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $      per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters. The representatives have advised us that the underwriters do not intend to confirm discretionary sales in excess of 5% of the common shares offered in this offering.
 
The underwriters have an option to buy up to      additional shares of Class A Common Stock from us to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC, on behalf of the underwriters, have 30 days from the date of this prospectus to exercise this over-allotment option. If any shares are purchased with this over-allotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of Class A Common Stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.


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The underwriting fee is equal to the public offering price per share of Class A Common Stock less the amount paid by the underwriters to us per share of Class A Common Stock. The underwriting fee is $      per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.
 
                 
 
    Without
    With full
 
    over-allotment
    over-allotment
 
    exercise     exercise  
 
 
Per share
  $           $        
Total
  $       $    
 
 
 
We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $     .
 
A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.
 
We have agreed that we will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Common Stock or any such other securities, in each case, without the prior written consent of J. P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC for a period of 180 days after the date of this prospectus, other than the shares to be sold in this offering and any shares of Class A Common Stock of the Company issued upon the exercise of options granted under the 2010 ALC Equity Incentive Plan. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our Company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.
 
Our directors, executive officers, and certain of our significant stockholders have agreed, subject to limited exceptions, not (1) to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or publicly disclose the intention to make any such offer, sale, pledge or disposition, (2) to enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of shares of Common Stock or such other securities, or (3) to make any demand


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for or exercise any right with respect to the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock for a period of 180 days after the date of this prospectus, without the prior written consent of J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC on behalf of the underwriters. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our Company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.
 
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.
 
We have applied to list our Class A Common Stock on      under the symbol ‘‘  .”
 
In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of Class A Common Stock in the open market for the purpose of preventing or retarding a decline in the market price of the Class A Common Stock while this offering is in progress. These stabilizing transactions may include making short sales of the Class A Common Stock, which involves the sale by the underwriters of a greater number of shares of Class A Common Stock than they are required to purchase in this offering, and purchasing shares of Class A Common Stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ over-allotment option referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Common Stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.
 
The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), they may also engage in other activities that stabilize, maintain or otherwise affect the price of the Common Stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase Common Stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.
 
These activities may have the effect of raising or maintaining the market price of the Class A Common Stock or preventing or retarding a decline in the market price of the Class A Common Stock, and, as a result, the price of the Class A Common Stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the          , in the over-the-counter market or otherwise.


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Prior to this offering, there has been no public market for our Class A Common Stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:
 
•  the information set forth in this prospectus and otherwise available to the representatives;
 
•  our prospects and the history and prospects for the industry in which we compete;
 
•  an assessment of our management;
 
•  our prospects for future earnings;
 
•  the general condition of the securities markets at the time of this offering;
 
•  the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and
 
•  other factors deemed relevant by the underwriters and us.
 
Neither we nor the underwriters can assure investors that an active trading market will develop for our Class A Common Stock, or that the shares will trade in the public market at or above the initial public offering price.
 
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful. See the section titled “Selling restrictions.”
 
Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In May 2010, we entered into the Warehouse Facility with a syndicate of financial institutions, including affiliates of Credit Suisse Securities (USA) LLC, as agent and lender. In November 2010, we also entered into an unsecured revolving loan facility with an affiliate of Credit Suisse Securities (USA) LLC as lender. In July 2010, we entered into a bilateral revolving credit agreement with affiliates of J.P. Morgan Securities LLC, as lender and letter of credit issuer. In December 2010, we also entered into a fixed-rate term loan agreement with affiliates of J.P. Morgan Securities LLC, as lender and letter of credit issuer. The Warehouse Facility, unsecured revolving loan facility, bilateral revolving credit agreement and fixed-rate term loan were negotiated on an arms-length basis and contain customary terms pursuant to which the agent and lender receive customary fees. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of


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customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. FBR Capital Markets & Co. acted as initial purchaser and placement agent in our prior private placement of Common Stock and affiliates of J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC and FBR Capital Markets & Co. participated as purchasers in our prior private placement of our Class A Common Stock for their own account.


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Selling restrictions
 
Australia
 
This document has not been lodged with the Australian Securities & Investments Commission and is only directed to certain categories of exempt persons. Accordingly, if you receive this document in Australia:
 
(a) you confirm and warrant that you are either:
 
(i) “sophisticated investor” under section 708(8)(a) or (b) of the Corporations Act 2001 (Cth) of Australia (Corporations Act);
 
(ii) “sophisticated investor” under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant’s certificate to the Company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made; or
 
(iii) “professional investor” within the meaning of section 708(11)(a) or (b) of the Corporations Act,
 
and to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor or professional investor under the Corporations Act any offer made to you under this document is void and incapable of acceptance.
 
(b) you warrant and agree that you will not offer any of the shares issued to you pursuant to this document for resale in Australia within 12 months of those shares being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.
 
Austria
 
This document serves marketing purposes and constitutes neither an offer to sell nor a solicitation to buy any securities. There is no intention to make a public offer in Austria. Should a public offer be made in Austria, a prospectus prepared in accordance with the Austrian Capital Market Act (Capital Market Act) will be published.
 
The shares may only be offered in the Republic of Austria in compliance with the provisions of the Capital Market Act and any other laws applicable in the Republic of Austria governing the offer and sale of the shares in the Republic of Austria. The shares are not registered or otherwise authorized for public offer under the Capital Market Act or any other relevant securities legislation in Austria. The recipients of this prospectus and other selling materials in respect to the shares have been individually selected and identified before the offer being made and are targeted exclusively on the basis of a private placement. Accordingly, the shares may not be, and are not being, offered or advertised publicly or offered similarly under either the Capital Market Act or any other relevant securities legislation Austria. This offer may not be made to any other persons than the recipients to whom this document is personally addressed. This prospectus and other selling materials in respect to the shares may not be issued, circulated or passed on in Austria to any person except under circumstances neither constituting a public offer of, nor a public invitation to subscribe for, the shares. This prospectus has been issued to each prospective investor for its personal use only. Accordingly, recipients of this prospectus are


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advised that this prospectus and any other selling materials in respect to the shares shall not be passed on by them to any other person in Austria.
 
Bahrain
 
THIS OFFER IS A PRIVATE PLACEMENT. IT IS NOT SUBJECT TO REGULATIONS OF THE CENTRAL BANK OF BAHRAIN THAT APPLY TO PUBLIC OFFERINGS OF SECURITIES, AND THE EXTENSIVE DISCLOSURE REQUIREMENTS AND OTHER PROTECTIONS THAT SUCH REGULATIONS CONTAIN. THIS PROSPECTUS IS THEREFORE INTENDED ONLY FOR “ACCREDITED INVESTORS.”
 
THE STOCK OF AIR LEASE CORPORATION OFFERED BY WAY OF THIS PRIVATE PLACEMENT MAY ONLY BE OFFERED IN MINIMUM SUBSCRIPTIONS OF US$100,000 (OR THE EQUIVALENT IN OTHER CURRENCIES).
 
THE CENTRAL BANK OF BAHRAIN ASSUMES NO RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE STATEMENTS AND INFORMATION CONTAINED IN THIS PROSPECTUS AND EXPRESSLY DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS OR DAMAGE HOWSOEVER ARISING FROM RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS PROSPECTUS.
 
THE BOARD OF DIRECTORS AND THE MANAGEMENT OF AIR LEASE CORPORATION ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS PROSPECTUS, TO THE BEST OF THE KNOWLEDGE AND BELIEF OF THE BOARD OF DIRECTORS AND THE MANAGEMENT, WHO HAVE TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE, THE INFORMATION CONTAINED IN THIS PROSPECTUS IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE RELIABILITY OF SUCH INFORMATION.
 
Barbados
 
The shares may not be offered or sold to the public in Barbados.
 
Belgium
 
No action has been taken in Belgium to permit a public offer of the shares in accordance with the Belgian act of 16 June 2006 on the public offer of securities and admission of securities to trading on a regulated market (Belgian Prospectus Act) and no securities may be offered or sold to persons in Belgium which are not qualified investors within the meaning of article 10 of the Belgian Prospectus Act or pursuant to another exemption available pursuant to article 3 of the Belgian Prospectus Act.
 
Bermuda
 
NOTICE TO RESIDENTS OF BERMUDA
 
This prospectus and the securities offered hereby have not been, and will not be, registered under the laws and regulations of Bermuda, nor has any regulatory authority in Bermuda passed comment upon or approved the accuracy or adequacy of this prospectus.


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Brazil
 
For purposes of Brazilian law, this offer of securities is addressed to you personally, upon your request and for your sole benefit, and is not to be transmitted to anyone else, to be relied upon elsewhere or for any other purpose either quoted or referred to in any other public or private document or to be filed with anyone without our prior, express and written consent.
 
Therefore, as this prospectus does not constitute or form part of any public offering to sell or solicitation of a public offering to buy any shares or assets, the offering and THE SHARES OFFERED HEREBY HAVE NOT BEEN, AND WILL NOT BE, AND MAY NOT BE OFFERED FOR SALE OR SOLD IN BRAZIL EXCEPT IN CIRCUMSTANCES WHICH DO NOT CONSTITUTE A PUBLIC OFFERING OR DISTRIBUTION UNDER BRAZILIAN LAWS AND REGULATIONS. DOCUMENTS RELATING TO THE SHARES, AS WELL AS THE INFORMATION CONTAINED THEREIN, MAY NOT BE SUPPLIED TO THE PUBLIC, AS A PUBLIC OFFERING IN BRAZIL OR BE USED IN CONNECTION WITH ANY OFFER FOR SUBSCRIPTION OR SALE OF THE SHARES TO THE PUBLIC IN BRAZIL.
 
Brunei
 
Notice to Residents of Brunei Darussalam
 
This document and the shares described herein is not an offer to sell or a solicitation of an offer to buy and/or to subscribe for any shares to the public or any member of the public in Brunei Darussalam but for information purposes only and directed solely to such persons as the law in Brunei Darussalam would regard as a person whose ordinary business or part thereof it is to buy or sell shares, whether as principal or agent. As such, this document and any other document, circular, notice or other material issued in connection therewith may not be distributed or redistributed to and may not be relied upon or used by the public or any member of the public in Brunei Darussalam. All offers, acceptances subscription, sales, and allotments of the shares or any part thereof shall be made outside Brunei Darussalam. This document has not been registered as a prospectus with the Registrar of Companies under the Companies Act, Cap. 39 of Brunei Darussalam and the shares have not been approved by Registrar of Companies or by any other government agency in Brunei Darussalam.
 
Cayman Islands
 
THIS IS NOT AN OFFER TO THE MEMBERS OF THE PUBLIC IN THE CAYMAN ISLANDS TO SUBSCRIBE FOR SHARES, AND APPLICATIONS ORIGINATING FROM THE CAYMAN ISLANDS WILL ONLY BE ACCEPTED FROM SOPHISTICATED PERSONS OR HIGH NET WORTH PERSONS, IN EACH CASE WITHIN THE MEANING OF THE CAYMAN ISLANDS SECURITIES INVESTMENT BUSINESS LAW (AS AMENDED).
 
Chile
 
The shares are not registered in the Securities Registry ( Registro de Valores ) or subject to the control of the Chilean Securities and Exchange Commission ( Superintendencia de Valores y Seguros de Chile ). This prospectus and other offering materials relating to the offer of the shares do not constitute a public offer of, or an invitation to subscribe for or purchase, the shares in the Republic of Chile, other than to individually identified purchasers pursuant to a private offering within the meaning of Article 4 of the Chilean Securities Market Act ( Ley de


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Mercado de Valores ) (an offer that is not “addressed to the public at large or to a certain sector or specific group of the public”).
 
China
 
This prospectus may not be circulated or distributed in the People’s Republic of China (China) and the shares may not be offered or sold, and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of China except pursuant to applicable laws and regulations of China. For the purpose of this paragraph, China does not include Taiwan and the special administrative regions of Hong Kong and Macau.
 
Colombia
 
Notice to Prospective Investors in Colombia
 
The shares of Air Lease Corporation have not been and will not be registered on the Colombian National Registry of Securities and Issuers or in the Colombian Stock Exchange. Therefore, these shares may not be publicly offered in Colombia. This material is for your sole and exclusive use as a determined entity, including any of your shareholders, administrators or employees, as applicable. You acknowledge the Colombian laws and regulations (specifically foreign exchange and tax regulations) applicable to any transaction or investment consummated pursuant hereto and represent that you are the sole liable party for full compliance with any such laws and regulations.
 
European economic area
 
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “ Relevant Member State ”) an offer to the public of any shares which are the subject of the offering contemplated by this Prospectus may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
 
(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;
 
(b) to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the joint book-running managers for any such offer; or
 
(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares shall result in a requirement for the publication by Air Lease Corporation or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.
 
For the purposes of this provision, the expression an “offer to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase any shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression


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Prospectus Directive ” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression “ 2010 PD Amending Directive ” means Directive 2010/73/EU.
 
Finland
 
This prospectus does not constitute a public offer or an advertisement of securities to the public in the Republic of Finland. The shares will not and may not be offered, sold, advertised or otherwise marketed in Finland under circumstances which would constitute a public offering of securities under Finnish law. Any offer or sale of the shares in Finland shall be made pursuant to a private placement exemption as defined under European Council Directive 2003/71/EC, Article 3(2) and the Finnish Securities Market Act (1989/495, as amended) and any regulation thereunder. This prospectus has not been approved by or notified to the Finnish Financial Supervisory Authority.
 
France
 
This offering document has not been prepared in the context of a public offering of securities in France ( offre au public ) within the meaning of Article L.411-1 of the French Code monétaire et financier and Articles 211-1 and seq. of the Autorité des marchés financiers (AMF) regulations and has therefore not been submitted to the AMF for prior approval or otherwise.
 
The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France and neither this offering document nor any other offering material relating to the securities has been distributed or caused to be distributed or will be distributed or caused to be distributed to the public in France, except only to persons licensed to provide the investment service of portfolio management for the account of third parties and/or to “qualified investors” (as defined in Article L.411-2, D.411-1 and D.411-2 of the French Code monétaire et financier ) and/or to a limited circle of investors (as defined in Article L.411-2, D.411-4 of the French Code monétaire et financier ) on the condition that no such offering document nor any other offering material relating to the securities shall be delivered by them to any person nor reproduced (in whole or in part). Such “qualified investors” are notified that they must act in that connection for their own account in accordance with the terms set out by Article L.411-2 of the French Code monétaire et financier and by Article 211-4 of the AMF Regulations and may not re-transfer, directly or indirectly, the securities in France, other than in compliance with applicable laws and regulations and in particular those relating to a public offering (which are, in particular, embodied in Articles L.411-1, L.412-1 and L.621-8 and seq. of the French Code monétaire et financier ).
 
You are hereby notified that in connection with the purchase of these securities, you must act for your own account in accordance with the terms set out by Article L.411-2 of the French Code monétaire et financier and by Article 211-4 of the AMF Regulations and may not re-transfer, directly or indirectly, the securities in France, other than in compliance with applicable laws and regulations and in particular those relating to a public offering (which are, in particular, embodied in Articles L.411-1, L.411-2, L.412-1 and L.621-8 and seq. of the French Code monétaire et financier ).


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Germany
 
Any offer or solicitation of shares within Germany must be in full compliance with the German Securities Prospectus Act ( Wertpapierprospektgesetz—WpPG ). The offer and solicitation of securities to the public in German requires the approval of the prospectus by the German Federal Financial Services Supervisory Authority ( Bundesanstalt für Finanzdienstleistungsaufsicht—BaFin ). This prospectus has not been and will not be submitted for approval to the BaFin. This prospectus does not constitute a public offer under the WpPG. This prospectus and any other document relating to the shares, as well as any information contained therein, must not be supplied to the public in Germany or used in connection with any offer for subscription of the shares to the public in Germany, any public marketing of the shares or any public solicitation for offers to subscribe for or otherwise acquire the shares. The prospectus and other offering materials relating to the offer of shares are strictly confidential and may not be distributed to any person or entity other than the designated recipients hereof.
 
Hong Kong
 
The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance.
 
No advertisement, invitation or document, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) has been issued or will be issued in Hong Kong or elsewhere other than with respect to the shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance and any rules made under that Ordinance.
 
Warning
 
The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.
 
Hungary
 
PURSUANT TO SECTION 18 OF ACT CXX OF 2001 ON THE CAPITAL MARKETS, THIS DOCUMENT WAS PREPARED IN CONNECTION WITH A PRIVATE PLACEMENT IN HUNGARY.
 
Israel
 
This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, and has not been filed with or approved by the Israel Securities Authority. In Israel, this prospectus is being distributed only to, and is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds,


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provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters purchasing for their own account, venture capital funds, and entities with shareholders’ equity in excess of NIS 250 million, each as defined in the Addendum (as it may be amended from time to time, collectively referred to as institutional investors). Institutional investors may be required to submit written confirmation that they fall within the scope of the Addendum. In addition, we may distribute and direct this document in Israel, at our sole discretion, to certain other exempt investors or to investors who do not qualify as institutional or exempt investors, provided that the number of such non-qualified investors in Israel shall be no greater than 35 in any 12-month period.
 
Italy
 
The offering of the shares has not been registered with the Commissione Nazionale per le Società e la Borsa (CONSOB), in accordance with Italian securities legislation. Accordingly, the shares may not be offered or sold, and copies of this offering document or any other document relating to the shares may not be distributed in Italy except to Qualified Investors, as defined in Article 34- ter , subsection 1, paragraph b) of CONSOB Regulation no. 11971 of May 14, 1999, as amended (the Issuers’ Regulation), or in any other circumstance where an express exemption to comply with public offering restrictions provided by Legislative Decree no. 58 of February 24, 1998 (the Consolidated Financial Act) or Issuers’ Regulation applies, including those provided for under Article 100 of the Finance Law and Article 34- ter of the Issuers’ Regulation, and provided, however, that any such offer or sale of the shares or distribution of copies of this offering document or any other document relating to the shares in Italy must (i) be made in accordance with all applicable Italian laws and regulations, (ii) be conducted in accordance with any relevant limitations or procedural requirements that CONSOB may impose upon the offer or sale of the shares, and (iii) be made only by (a) banks, investment firms or financial companies enrolled in the special register provided for in Article 107 of Legislative Decree no. 385 of September 1, 1993, to the extent duly authorized to engage in the placement and/or underwriting of financial instruments in Italy in accordance with the Consolidated Financial Act and the relevant implementing regulations; or (b) foreign banks or financial institutions (the controlling shareholding of which is owned by one or more banks located in the same EU Member State) authorised to place and distribute securities in the Republic of Italy pursuant to Articles 15, 16 and 18 of the Banking Act, in each case acting in compliance with all applicable laws and regulations.
 
India
 
This document has not been and will not be registered as a prospectus or a statement in lieu of prospectus with any registrar of companies in India. This document has not been and will not be reviewed or approved by any regulatory authority in India, including the Securities and Exchange Board of India, any registrar of companies in India or any stock exchange in India. This document and this offering of shares are not and should not be construed as an invitation, offer or sale of any securities to the public in India. Other than in compliance with the private placement exemptions under applicable laws and regulations in India, including the Companies Act, 1956, as amended, the shares have not been, and will not be, offered or sold to the public or any member of the public in India. This document is strictly personal to the recipient and neither this document nor the offering of the shares is calculated to result, directly or indirectly, in the shares becoming available for subscription or purchase by persons other than those receiving the invitation or offer.


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Ireland
 
Notice to prospective investors in Ireland
 
This document does not comprise a prospectus for the purposes of the Investment Funds, Companies and Miscellaneous Provisions Act 2005 of Ireland, the Prospectus (Directive 2003\71\EC) Regulations 2005 of Ireland or the Prospectus Rules issued by the Financial Regulator of Ireland in March 2006. This document is only being made available to certain prospective investors in Ireland (Prospective Irish Investors) on the understanding that any written or oral information contained herein or otherwise made available to them will be kept strictly confidential. The opportunity described in this document is personal to the addressees in Ireland. This document must not be copied, reproduced, distributed or passed by any Prospective Irish Investor to any other person without the consent of underwriters. By accepting this document, Prospective Irish Investors are deemed to undertake and warrant to the underwriters and Air Lease Corporation that they will keep this prospectus confidential.
 
Prospective Irish Investors are recommended to seek their own independent financial advice in relation to the opportunity described in this document from their stockbroker, bank manager, solicitor, accountant or other independent financial adviser who is duly authorized or exempted under the Investments Intermediaries Act 1995 of Ireland or the European Communities (Markets in Financial Instruments) Regulations 2007 of Ireland.
 
Japan
 
The shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law). Accordingly, no resident of Japan may participate in the offering of the shares and each underwriter has agreed that it will not offer or sell any shares, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
 
Kuwait
 
The shares have not been licensed for offering in Kuwait by the Ministry of Commerce and Industry or the Central Bank of Kuwait or any other relevant Kuwaiti government agency. The offering of the shares in Kuwait on the basis a private placement or public offering is, therefore, restricted in accordance with Decree Law No. 31 of 1990, as amended, and Ministerial Order No. 113 of 1992, as amended. No private or public offering of the shares are being made in Kuwait, and no agreement relating to the sale of the shares will be concluded in Kuwait. No marketing or solicitation or inducement activities are being used to offer or market the shares in Kuwait.
 
Luxembourg
 
The shares may not be offered or sold in the Grand Duchy of Luxembourg, except for shares which are offered in circumstances that do not require the approval of a prospectus by the


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Luxembourg financial regulatory authority and the publication of such prospectus pursuant to the law of July 10, 2005 on prospectuses for securities. The shares are offered to a limited number of high net worth individual investors or to institutional investors, in all cases under circumstances designed to preclude a distribution that would be other than a private placement. This document may not be reproduced or used for any purposes, or furnished to any persons other than those to whom copies have been sent.
 
Mexico
 
No actions, applications nor filings have been undertaken in Mexico, whether before the National Banking and Securities Commission ( Comisión Nacional Bancaria y de Valores, or CNBV ) nor the Mexican Stock Exchange ( Bolsa Mexicana de Valores, or BMV ), in order to make a public offering in said territory, with or without price, through mass media and to indeterminate subjects to subscribe, acquire, sell or otherwise assign the shares, in any form or manner.
 
This document is not intended to be distributed through mass media to indeterminate subjects, nor to serve as an application for the registration of the shares before any securities registry or exchange in Mexico, nor as a prospectus for their public offering in said jurisdiction. No financial authority nor securities exchange in Mexico have reviewed or assessed the particulars of the shares or their offering, and in no case will they assert the goodness of the shares, the solvency of the issuer, nor the exactitude or veracity of the information contained herein, and will not validate acts.
 
You are solely responsible if you have procured this copy of this document yourself or came by it through your own means out of your own accord, regardless of the source. If you have received one such copy from either the issuer or the underwriter the shares are being offered to you under the private offering exceptions in the Securities Market Law (SML), for which you must be in one of the following situations:
 
(a) You are either an institutional investor within the meaning of Article 2, Roman numeral XVII, of the SML and regarded as such pursuant to the laws of Mexico, or a qualified investor because pursuant to Article 2, Roman numeral XVI, of said statute you have the income, assets or qualitative characteristics provided for under Article 1, Roman numeral XIII of the General Provisions Applicable to Issuers of Securities and other Participants in the Securities Market, which require that you have maintained, in average over the past year, investments in securities (within the meaning of the SML) for an amount equal or greater than 1,500,000 Investment Units ( Unidades de Inversión, or UDIs ), or in each of the last 2 years had a gross annual income equal to or greater than 500,000 such Investment Units;
 
(b) You are a member of a group of less than 100 individually identified people to whom the shares are being offered directly and personally; or
 
(c) You are an employee of the issuer and a beneficiary of a generally-applicable employee benefit plan or program of said issuer.
 
You may be further required to expressly reiterate that you fall into either of said exceptions, that you further understand that the private offering of shares has less documentary and information requirements than public offerings do, and to waive the right to claim on any lacking thereof.


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Netherlands
 
The shares may not, directly or indirectly, be offered or acquired in the Netherlands and this offering memorandum may not be circulated in the Netherlands, as part of an initial distribution or any time thereafter, other than to individuals or (legal) entities who or which qualify as qualified investors within the meaning of Article 1:1 of the Financial Supervision Act ( Wet op het financieel toezicht ) as amended from time to time.
 
Norway
 
This offering document has not been approved or disapproved by, or registered with, the Norwegian Financial Supervisory Authority ( Finanstilsynet ) nor the Norwegian Registry of Business Enterprises, and the shares are marketed and sold in Norway on a private placement basis and under other applicable exceptions from the offering prospectus requirements as provided for pursuant to the Norwegian Securities Trading Act and the Norwegian Securities Trading Regulation.
 
Oman
 
The information contained in this prospectus neither constitutes a public offer of securities in the Sultanate of Oman as contemplated by the Commercial Companies Law of Oman (Royal Decree 4/74) or the Capital Market Law of Oman (Royal Decree 80/98), nor does it constitute an offer to sell, or the solicitation of any offer to buy Non-Omani securities in the Sultanate of Oman as contemplated by Article 139 of the Executive Regulations of the Capital Market Law (issued by Decision No. 1/2009). Additionally, this prospectus is not intended to lead to the conclusion of a contract for the sale or purchase of securities in Oman.
 
The recipient of this prospectus in Oman represents that it is a financial institution and is a sophisticated investor (as described in Article 139 of the Executive Regulations of the Capital Market Law) and that its officers/employees have such experience in business and financial matters that they are capable of evaluating the merits and risks of investments.
 
This prospectus has been sent at the request of the investor in Oman, and by receiving this prospectus, the person or entity to whom it has been issued and sent understands, acknowledges and agrees that this prospectus has not been approved by the CMA or any other regulatory body or authority in Oman, nor has any authorization, license or approval been received from the CMA or any other regulatory authority in Oman, to market, offer, sell, or distribute the shares within Oman.
 
No marketing, offering, selling or distribution of any financial or investment products or services has been or will be made from within Oman and no subscription to any securities, products or financial services may or will be consummated within Oman. The distributor of the prospectus is neither a company licensed by the CMA to provide investment advisory, brokerage, or portfolio management services in Oman, nor a bank licensed by the Central Bank of Oman to provide investment banking services in Oman. The distributor of the prospectus does not advise persons or entities resident or based in Oman as to the appropriateness of investing in or purchasing or selling securities or other financial products.
 
Nothing contained in this prospectus is intended to constitute Omani investment, legal, tax, accounting or other professional advice. This prospectus is for your information only, and nothing herein is intended to endorse or recommend a particular course of action. You should


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consult with an appropriate professional for specific advice on the basis of your situation. Any recipient of this prospectus and any purchaser of the shares pursuant to this prospectus shall not market, distribute, resell, or offer to resell the shares within Oman without complying with the requirements of applicable Omani law, nor copy or otherwise distribute this prospectus to others.
 
Portugal
 
This document does not constitute an offer or an invitation by or on behalf of Air Lease Corporation to subscribe or purchase any shares. It may not be used for or in connection with any offer to, or solicitation by, anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation. The distribution of this presentation/marketing material and the marketing of the shares in certain jurisdictions may be restricted by law. Persons into whose possession this presentation/marketing material comes are required to inform themselves about and to observe any such restrictions.
 
No action has been taken or will be taken by Air Lease Corporation that would permit a public offering of shares or the circulation or distribution of this presentation/marketing material or any material in relation to the Company or the shares, in any country or jurisdiction where action for that purpose is required.
 
Prospective investors should understand the risks of investing in the shares before they make their investment decision. They should make their own independent decision to invest in the shares and as to whether an investment in such shares are appropriate or proper for them based upon their own judgment and upon advice from such advisors as they consider necessary.
 
Russia
 
Not for release, distribution or publication, directly or indirectly, into or in the Russian Federation. Information contained herein is not an offer, or an invitation to make offers, sell, purchase, exchange or transfer any securities in Russia or to or for the benefit of any Russian person or any person in the Russian Federation, and does not constitute an advertisement or offering of any securities in Russia within the meaning of Russian securities laws to any person other than a “qualified investor” (as defined in Russian securities laws). This information must not be passed on to third parties or otherwise be made publicly available in Russia. The shares have not been and will not be registered in Russia or admitted to public placement and/or public circulation in Russia. The shares are not intended for “offering”, “placement” or “circulation” in Russia, except as permitted by Russian law (each as defined in Russian securities laws).
 
Saudi Arabia
 
This document may not be distributed in the Kingdom except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority.
 
The Capital Market Authority does not make any representation as to the accuracy or completeness of this document, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the


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information relating to the securities. If you do not understand the contents of this document you should consult an authorized financial adviser.
 
Singapore
 
The offer or invitation which is the subject of this document is only allowed to be made to the persons set out herein. Moreover, this document is not a prospectus as defined in the Securities and Futures Act (Chapter 289) of Singapore (SFA) and accordingly, statutory liability under the SFA in relation to the content of the document will not apply.
 
As this document has not been and will not be lodged with or registered as a document by the Monetary Authority of Singapore, this document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than: (i) to an institutional investor under Section 274 of the SFA; (ii) to a relevant person, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
 
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person who is:
 
(a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
 
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 of the SFA except:
 
(1) to an institutional investor under Section 274 of the SFA or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets;
 
(2) where no consideration is given for the transfer; or
 
(3) by operation of law.
 
By accepting this document, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth above and agrees to be bound by the limitations contained herein. Any failure to comply with these limitations may constitute a violation of law.


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South Korea
 
The shares may not be offered, sold and delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in South Korea or to any resident of South Korea except pursuant to the applicable laws and regulations of South Korea, including the Financial Investment Services and Capital Markets Act and the Foreign Exchange Transaction Law and the decrees and regulations thereunder. The shares have not been registered with the Financial Services Commission of South Korea for public offering in South Korea. Furthermore, the shares may not be re-sold to South Korean residents unless the purchaser of the shares complies with all applicable regulatory requirements (including but not limited to government approval requirements under the Foreign Exchange Transaction Law and its subordinate decrees and regulations) in connection with their purchase.
 
Spain
 
This offer of shares of Air Lease Corporation has not been and will not be registered with the Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores or CNMV ) and, therefore, no shares of Air Lease Corporation may be offered, sold or distributed in any manner, nor may any resale of the shares be carried out in Spain except in circumstances which do not constitute a public offer of securities in Spain or are exempted from the obligation to publish a prospectus, as set forth in Spanish Securities Market Act ( Ley 24/1988, de 28 de julio, del Mercado de Valores ) and Royal Decree 1310/2005, of 4 November, and other applicable regulations, as amended from time to time, or otherwise without complying with all legal and regulatory requirements in relation thereto. Neither the prospectus nor any offering or advertising materials relating to the shares of Air Lease Corporation have been or will be registered with the CNMV and therefore they are not intended for the public offer of the shares of Air Lease Corporation in Spain.
 
Sweden
 
THIS OFFERING DOCUMENT IS NOT A PROSPECTUS AND HAS NOT BEEN PREPARED IN ACCORDANCE WITH THE PROSPECTUS REQUIREMENTS LAID DOWN IN THE SWEDISH FINANCIAL INSTRUMENTS TRADING ACT ( LAG (1991:980) OM HANDEL MED FINANSIELLA INSTRUMENT ) NOR ANY OTHER SWEDISH ENACTMENT. NEITHER THE SWEDISH FINANCIAL SUPERVISORY AUTHORITY NOR ANY OTHER SWEDISH REGULATORY BODY HAS EXAMINED, APPROVED OR REGISTERED THIS OFFERING DOCUMENT.
 
NO SHARES WILL BE OFFERED OR SOLD TO ANY INVESTOR IN SWEDEN EXCEPT IN CIRCUMSTANCES THAT WILL NOT RESULT IN A REQUIREMENT TO PREPARE A PROSPECTUS PURSUANT TO THE PROVISIONS OF THE SWEDISH FINANCIAL INSTRUMENTS TRADING ACT.
 
Switzerland
 
This document does not constitute a prospectus within the meaning of Article 652a of the Swiss Code of Obligations. The shares of Air Lease Corporation may not be sold directly or indirectly in or into Switzerland except in a manner which will not result in a public offering within the meaning of the Swiss Code of Obligations. Neither this document nor any other offering materials relating to the shares may be disturbed, published or otherwise made available in Switzerland except in a manner which will not constitute a public offer of the shares of Air Lease Corporation in Switzerland.


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Turkey
 
Each underwriter has acknowledged that the shares have not been, and will not be, registered with the Turkish Capital Markets Board (“CMB”) under the provisions of Law no. 2499 of the Republic of Turkey relating to capital markets. Each underwriter has represented and agreed that neither this document nor any other offering material related to the offering will be utilized in connection with any general offering to the public within the Republic of Turkey for the purpose of the sale of the shares (or beneficial interest therein) without the prior approval of the CMB.
 
In addition, each underwriter has represented and agreed that it has not sold or caused to be sold and will not sell or cause to be sold outside Turkey the shares (or beneficial interests therein) to residents of Turkey unless such sale is authorized pursuant to Article 15(d)(ii) of Decree 32 (as amended from time to time) and the CMB regulations.
 
Qatar
 
The global initial public offering of shares of common stock of Air Lease Corporation (the “Securities”) does not constitute a public offer of Securities in the State of Qatar under Law No. 5 of 2002 (the “Commercial Companies Law”).
 
The Securities are only being offered to a limited number of investors who are willing and able to conduct an independent investigation of the risks involved in an investment in such shares of common stock, or have sufficient knowledge of the risks involved in an investment in such shares of common stock or are benefiting from preferential terms under a directed share program for directors, officers and employees.
 
No transaction will be concluded in the jurisdiction of the State of Qatar.
 
United Arab Emirates
 
The Global Offering has not been approved or licensed by the Central Bank of the United Arab Emirates (UAE), Securities and Commodities Authority of the UAE and/or any other relevant licensing authority in the UAE including any licensing authority incorporated under the laws and regulations of any of the free zones established and operating in the territory of the UAE, in particular the Dubai Financial Services Authority (DFSA), a regulatory authority of the Dubai International Financial Centre (DIFC). The Global Offering does not constitute a public offer of securities in the UAE, DIFC and/or any other free zone in accordance with the Commercial Companies Law, Federal Law No 8 of 1984 (as amended), DFSA Offered Securities Rules and NASDAQ Dubai Listing Rules, accordingly, or otherwise. The shares may not be offered to the public in the UAE and/or any of the free zones.
 
The shares may be offered and issued only to a limited number of investors in the UAE or any of its free zones who qualify as sophisticated investors under the relevant laws and regulations of the UAE or the free zone concerned.


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United Kingdom
 
Each underwriter has represented and agreed that:
 
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to Air Lease Corporation; and
 
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.


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Legal matters
 
The validity of the Class A Common Stock offered hereby will be passed upon for us by Munger, Tolles & Olson LLP, Los Angeles, California. Certain legal matters in connection with this offering will be passed upon for the underwriters by Davis Polk & Wardwell LLP, New York, New York.
 
Experts
 
The consolidated financial statements of Air Lease Corporation and its subsidiaries as of September 30, 2010, and for the period from inception to September 30, 2010, have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
 
We have obtained statistical and other information about the airline industry and the airline leasing industry set forth in this prospectus, including all information under the section titled “Overview of the aircraft leasing industry” and all estimates about future airline industry and airline leasing industry growth appearing elsewhere in this prospectus, from AVITAS, and we have included such information in reliance upon the authority of AVITAS as an expert in statistical and other analysis of the airline industry.
 
Where you can find additional information
 
We have filed a registration statement, of which this prospectus is a part and which includes exhibits, schedules and amendments filed with this registration statement, on Form S-1 with the SEC relating to this offering of our Class A Common Stock. This prospectus does not contain all of the information in the registration statement and the exhibits included with the registration statement. References in this prospectus to any of our contracts, agreements or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contracts, agreements or documents. You may read and copy the registration statement, the related exhibits and other material we file with the SEC at the SEC’s public reference room in Washington, D.C. at 100 F Street, Room 1580, N.E., Washington, D.C. 20549. You can also request copies of those documents, upon payment of prescribed fees, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings are also available to the public from the SEC’s website at www.sec.gov .
 
Upon the effectiveness of the registration statement, we will be subject to the informational requirements of the Exchange Act, and, in accordance with the Exchange Act, will file reports, proxy and information statements, and other information with the SEC. Such annual, quarterly and current reports, proxy and information statements and other information, can be inspected and copied at the locations set forth above. We intend to make this information available free of charge on our website at www.airleasecorp.com .
 


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Air Lease Corporation and Subsidiaries
 
Index to Financial Statements
 
         
    F-2  
    F-3  
    F-4  
    F-5  
    F-6  
    F-7  


F-1


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Report of Independent Registered Public Accounting Firm
 
The Board of Directors and Shareholders
Air Lease Corporation:
 
We have audited the accompanying consolidated balance sheet of Air Lease Corporation and subsidiaries as of September 30, 2010, and the related consolidated statements of operations, shareholders’ equity and cash flows for the period from inception to September 30, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Air Lease Corporation and subsidiaries as of September 30, 2010, and the results of their operations and their cash flows for the period from inception to September 30, 2010, in conformity with U.S. generally accepted accounting principles.
 
/s/  KPMG LLP
 
San Francisco, California
January 13, 2011


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Air Lease Corporation and Subsidiaries
Consolidated Balance Sheet
 
         
 
(in thousands, except share data)   September 30, 2010  
 
 
Assets
       
Cash and cash equivalents
  $ 331,824  
Restricted cash
    43,921  
Flight equipment subject to operating leases
    980,110  
Less accumulated depreciation
    (6,628 )
         
      973,482  
Deposits on flight equipment purchases
    75,386  
Deferred debt issue costs—less accumulated amortization of $2,810
    45,150  
Deferred taxes
    7,492  
Other assets
    14,700  
         
Total assets
  $ 1,491,955  
         
Liabilities and Shareholders’ Equity
       
Accrued interest and other payables
  $ 8,486  
Debt financing
    198,691  
Security deposits and maintenance reserves on flight equipment leases
    62,915  
Rentals received in advance
    5,101  
         
Total liabilities
    275,193  
         
Shareholders’ Equity
       
Preferred Stock, $0.01 par value; 50,000,000 shares authorized no shares issued or outstanding
     
Class A Common Stock, $0.01 par value; 500,000,000 shares authorized 63,563,810 shares issued and outstanding
    636  
Class B Non-Voting Common Stock, $0.01 par value; 10,000,000 shares authorized 1,829,339 shares issued and outstanding
    18  
Paid-in capital
    1,265,473  
Accumulated deficit
    (49,365 )
         
Total shareholders’ equity
    1,216,762  
         
Total liabilities and shareholders’ equity
  $ 1,491,955  
         
         
 
 
 
See notes to consolidated financial statements


F-3


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Air Lease Corporation And Subsidiaries
Consolidated Statement of Operations
 
         
 
    For the period
 
    from Inception to  
(in thousands, except share data)   September 30, 2010  
 
 
Revenues
       
Rental of flight equipment
  $ 20,345  
Interest and other
    1,116  
         
Total revenues
    21,461  
         
Expenses
       
Interest
    5,709  
Amortization of deferred debt issuance cost
    2,810  
Amortization of convertible debt discounts
    35,798  
         
Interest expense
    44,317  
Depreciation of flight equipment
    6,628  
Selling, general and administrative
    14,177  
Stock-based compensation
    13,196  
         
Total expenses
    78,318  
         
Loss before taxes
    (56,857 )
Income tax benefit
    7,492  
         
Net loss
  $ (49,365 )
         
         
 
 
Net loss attributable to common shareholders per share
       
Net loss
       
Basic
  $ (1.64 )
Diluted
  $ (1.64 )
Weighted-average shares outstanding
       
Basic
    30,062,023  
Diluted
    30,062,023  
 
 
 
See notes to consolidated financial statements


F-4


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Air Lease Corporation and Subsidiaries
Consolidated Statement of Shareholders’ Equity
For the period from Inception to September 30, 2010
 
                                                                         
 
    Preferred stock     Class A Common Stock     Class B Non-Voting Common Stock     Paid-in
    Accumulated
       
(in thousands, except share data)   Shares     Amount     Shares     Amount     Shares     Amount     capital     deficit     Total  
 
 
Balance at inception
        $           $           $     $     $     $  
Class A Common Stock issuance
                55,750,972       558                   1,026,082             1,026,640  
Class B Non-Voting Common Stock issuance
                            6,308,844       63       124,852             124,915  
Class B conversion to Class A
                4,479,505       45       (4,479,505 )     (45 )                  
Issuance of warrants
                                        5,578             5,578  
Conversion of convertible notes
                3,333,333       33                   59,967             60,000  
Convertible debt discounts
                                        35,798             35,798  
Stock based compensation
                                        13,196             13,196  
Net (loss)
                                              (49,365 )     (49,365 )
                                                                         
Balance at September 30, 2010
        $       63,563,810     $ 636       1,829,339     $ 18     $ 1,265,473     $ (49,365 )   $ 1,216,762  
                                                                         
                                                                         
 
 
 
 
See notes to consolidated financial statements


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Air Lease Corporation and Subsidiaries
Consolidated Statement of Cash Flows
 
         
 
    For the period
 
    from Inception to  
(dollars in thousands)   September 30, 2010  
 
 
Operating Activities
       
Net loss
  $ (49,365 )
Adjustments to reconcile net loss to net cash provided by operating activities:
       
Depreciation of flight equipment
    6,628  
Stock-based compensation
    13,196  
Deferred taxes
    (7,492 )
Amortization of deferred debt issue costs
    2,810  
Amortization of convertible debt discounts
    35,798  
Changes in operating assets and liabilities:
       
Other assets
    (14,700 )
Accrued interest and other payables
    8,486  
Rentals received in advance
    5,101  
         
Net cash provided by operating activities
    462  
         
Investing Activities
       
Acquisition of flight equipment under operating lease
    (980,110 )
Payments for deposits on flight equipment purchases
    (75,386 )
         
Net cash used in investing activities
    (1,055,496 )
         
Financing Activities
       
Issuance of common stock and warrants
    1,157,133  
Issuance of convertible notes
    60,000  
Proceeds from debt financings
    203,632  
Payments in reduction of debt financings
    (4,941 )
Restricted cash
    (43,921 )
Debt issue costs
    (47,960 )
Changes in security deposits and maintenance reserves on flight equipment leases
    62,915  
         
Net cash provided by financing activities
    1,386,858  
         
Net increase in cash
    331,824  
Cash at inception
     
         
Cash at end of period
  $ 331,824  
         
         
 
 
Supplemental Disclosure of Cash Flow Information
       
Cash paid during the period for interest, excluding
capitalized interest of $363
  $ 4,696  
 
 
Supplemental Disclosure of Noncash Activities
       
Conversion of convertible notes to Class A Common Stock
  $ 60,000  
 
 
 
See Notes to consolidated financial statements


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Air Lease Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2010
 
1.  Summary of significant accounting policies
 
a.  Organization
 
Air Lease Corporation (the “Company”, “ALC”, “we”, “our” or “us”) was incorporated in the State of Delaware and licensed to operate in the State of California. We commenced operations in February 2010. The Company is principally engaged in the leasing of commercial jet transport aircraft to airlines throughout the world. We plan to supplement our leasing revenues by providing fleet management and remarketing services to third parties. We will typically provide many of the same services that we perform for our fleet, including leasing, re-leasing, lease management and sales services for which we will charge a fee, with the objective of assisting our clients to maximize lease or sale revenues.
 
b.  Rental of flight equipment
 
The Company leases flight equipment principally under operating leases and reports rental income ratably over the life of each lease. Rentals received, but unearned, under the lease agreements are recorded in Rentals received in advance on the Company’s Consolidated Balance Sheet until earned. The difference between the rental income recorded and the cash received under the provisions of the lease is included in Lease receivables, as a component of Other assets on the Company’s Consolidated Balance Sheet. An allowance for doubtful accounts will be recognized for past-due rentals based on management’s assessment of collectability. Management will monitor all lessees with past due lease payments and discuss relevant operational and financial issues facing those lessees with its marketing executives in order to determine an appropriate allowance for doubtful accounts. In addition, if collection is not reasonably assured, the Company will not recognize rental income for amounts due under the Company’s lease contracts and will recognize revenue for such lessees on a cash basis. As of September 30, 2010, the Company had no such allowance, and no leases were on a cash basis.
 
All of the Company’s lease agreements are triple net leases whereby the lessee is responsible for all taxes, insurance, and aircraft maintenance. In the future, we may incur repair and maintenance expenses for off-lease aircraft. We recognize overhaul expense in our Consolidated Statement of Operations for all such expenditures. In many operating lease contracts, the lessee is obligated to make periodic payments of supplemental maintenance rent, which is calculated with reference to the utilization of the airframe, engines and other major life-limited components during the lease. In these leases, we will make a payment to the lessee to compensate the lessee for the cost of the actual major maintenance incurred, up to the maximum of the amount of supplemental maintenance rental payments made by the lessee during the lease term. These payments are made upon the lessee’s presentation of invoices evidencing the completion of such qualifying major maintenance. The Company records as rental revenue, the portion of supplemental maintenance rent that is virtually certain will not be reimbursed to the lessee. Supplemental maintenance rental payments which we may be required to reimburse to the lessee are reflected in our overhaul reserve liability, as a component of Security deposits and overhaul reserves on flight equipment leases in our Consolidated Balance Sheet.


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Lessee-specific modifications such as those related to modifications of the aircraft cabin are expected to be capitalized as initial direct costs and amortized over the term of the lease into rental revenue in our Consolidated Statement of Operations.
 
c.  Initial direct costs
 
The Company records as period costs those internal and other costs incurred in connection with identifying, negotiating and delivering aircraft to the Company’s lessees. Amounts paid by us to lessees, or other parties, in connection with the lease transactions are capitalized and amortized as a reduction to lease revenue over the lease term.
 
d.  Cash and cash equivalents
 
The Company considers cash and cash equivalents to be cash on hand and highly liquid investments with original maturity dates of 90 days or less.
 
e.  Restricted cash
 
Restricted cash consists of segregated security deposits, maintenance reserves, and rental payments related to secured aircraft financing arrangements.
 
f.  Flight equipment
 
Flight equipment under operating lease is stated at cost less accumulated depreciation. Purchases, major additions and modifications, and interest on deposits during the construction phase are capitalized. The Company generally depreciates passenger aircraft on a straight-line basis over a 25-year life from the date of manufacture to a 15% residual value. Changes in the assumption of useful lives or residual values for aircraft could have a significant impact on the Company’s results of operations and financial condition.
 
At the time flight equipment are retired or sold, the cost and accumulated depreciation are removed from the related accounts and the difference, net of proceeds, is recorded as a gain or loss.
 
Management evaluates on a quarterly basis the need to perform an impairment test whenever facts or circumstances indicate a potential impairment has occurred. An assessment is performed whenever events or changes in circumstances indicate that the carrying amount of an aircraft may not be recoverable. Recoverability of an aircraft’s carrying amount is measured by comparing the carrying amount of the aircraft to future undiscounted net cash flows expected to be generated by the aircraft. The undiscounted cash flows consist of cash flows from currently contracted leases, future projected lease rates and estimated residual or scrap values for each aircraft. We develop assumptions used in the recoverability analysis based on our knowledge of active lease contracts, current and future expectations of the global demand for a particular aircraft type, and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are affected by changes in future periods due to changes in contracted lease rates, economic conditions, technology and airline demand for a particular aircraft type. In the event that an aircraft does not meet the recoverability test, the aircraft will be recorded at fair value in accordance with the Company’s Fair Value Policy,


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resulting in an impairment charge. Our Fair Value Policy is described below under “Fair Value Measurements”. As of September 30, 2010, no impairment charges have been incurred to date.
 
g.  Capitalized interest
 
The Company may borrow funds to finance deposits on flight equipment purchases. The Company capitalizes interest expense on such borrowings. The capitalized amount is calculated using our composite borrowing rate and is recorded as an increase to the cost of the flight equipment on our Consolidated Balance Sheet.
 
h.  Fair value measurements
 
Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company measures the fair value of certain assets on a non-recurring basis, principally our flight equipment, when Generally Accepted Accounting Principles (“GAAP”) requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable.
 
The Company records flight equipment at fair value when we determine the carrying value may not be recoverable. The Company principally uses the income approach to measure the fair value of flight equipment. The income approach is based on the present value of cash flows from contractual lease agreements and projected future lease payments, including contingent rentals, net of expenses, which extend to the end of the aircraft’s economic life in its highest and best use configuration, as well as a disposition value based on expectations of market participants. These valuations are considered Level 3 valuations, as the valuations contain significant non-observable inputs.
 
i.  Income taxes
 
The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in the tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance for deferred tax assets when the probability of realization of the full value of the asset is less than 50%. The Company recognizes the impact of a tax position, if that position is more than 50% likely to be sustained on audit, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely to be realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
 
The Company recognizes interest and penalties for uncertain tax positions in income tax expense.
 
j.  Deferred costs
 
The Company incurs debt issue costs in connection with debt financings. Those costs are deferred and amortized over the life of the specific loan using the effective interest method and


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charged to interest expense. The Company also incurs costs in connection with equity offerings. Such costs are deferred until the equity offering is completed and either netted against the equity raised, or expensed if the equity offering is abandoned.
 
k.  Stock-based compensation
 
Stock-based compensation cost is measured at the grant date based on the fair value of the award. The Company recognizes compensation costs for shares that are expected to vest, on a straight-line basis, over the requisite service period of the award.
 
l.  Use of estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
 
2.  Recent accounting pronouncements
 
In July 2010, the FASB issued an accounting standard that requires enhanced disclosures about (i) the nature of credit risk inherent in a portfolio of financing receivables, (ii) how risk is analyzed and assessed in arriving at the allowance for credit losses, and (iii) the changes and reasons for those changes in the allowance for credit losses. These increased disclosures are required to be included in our December 31, 2010 financial statements. As this new standard only requires additional disclosures about receivables, it will not affect our consolidated financial position, results of operations or cash flows.
 
3.  Debt financing
 
The Company’s consolidated debt as of September 30, 2010 is summarized below:
 
         
 
(dollars in thousands)   September 30, 2010  
 
 
Warehouse credit facility
  $ 154,020  
Secured financing
    43,369  
Seller financing
    1,302  
         
Total
  $ 198,691  
 
 
 
a.  Warehouse facility
 
On May 26, 2010, a wholly-owned subsidiary of the Company entered into a revolving credit facility to finance the acquisition of aircraft. This facility provides the Company with access to $1.5 billion from a bank syndicate (the “Warehouse Facility”). The Company is able to draw on this facility during the initial two-year availability period. The Warehouse Facility accrues interest during the initial two-year period based on LIBOR plus 3.25% on drawn balances and at a fixed rate of 1.00% on un-drawn balances. The outstanding drawn balance at the end of the initial two-year period may be converted at the Company’s option to an amortizing, four-year term loan with an increasing interest rate.


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Based on the terms of the Warehouse Facility Agreement, the Company has pledged $200.0 million in aircraft collateral as a precondition to borrowing under the Warehouse Facility. As of September 30, 2010, the Company has borrowed $154.0 million under the Warehouse Facility and pledged ten aircraft as collateral with a net book value of $390.6 million. In addition, the Company was required to pledge cash collateral, which accretes to $75.0 million over the revolving period of the Warehouse Facility. As of September 30, 2010, the Company had pledged $11.7 million in cash collateral and $4.8 million in lessee deposits.
 
Additionally, as of September 30, 2010 loan proceeds of $23.1 million were temporarily restricted while certain document filing requirements were being processed in a foreign jurisdiction. On October 29, 2010, these conditions were met and the proceeds were released as unrestricted funds of the Company.
 
b.  Secured financing
 
On May 19, 2010, a wholly-owned subsidiary of the Company borrowed $25.0 million through a secured bank facility to purchase an aircraft. The aircraft was leased by the wholly-owned subsidiary to an airline. The Company has guaranteed the obligations of this subsidiary under the loan agreements. The loan is secured by a pledge of the shares of the subsidiary, the aircraft and the lease receivables. The secured bank facility accrues interest based on LIBOR plus 2.95%. The loan partially amortizes over the lease term and matures in 2017. At September 30, 2010, the outstanding loan balance under the secured facility was $24.4 million, and the net book value of the aircraft was $38.1 million.
 
On September 29, 2010, a wholly-owned subsidiary of the Company borrowed $19.0 million through a secured bank facility to purchase an aircraft. The aircraft was leased by the wholly-owned subsidiary to an airline. The loan is secured by a pledge of the shares of the subsidiary, the aircraft, the lease receivables, security deposits and maintenance reserves. The secured bank facility accrues interest based on LIBOR plus 3.00%. The loan partially amortizes over the lease term and matures in 2015. At September 30, 2010, the outstanding loan balance under the secured facility was $19.0 million, and the net book value of the aircraft was $30.6 million.
 
c.  Seller financing
 
On July 9, 2010, a wholly-owned subsidiary of the Company borrowed $1.3 million of seller-financing through a sale-leaseback transaction to purchase an aircraft. The aircraft was leased by the wholly-owned subsidiary to the seller. The loan accrues interest based on a rate of 3.00%. The loan partially amortizes over the lease term and matures in 2012. At September 30, 2010, the outstanding loan balance was $1.3 million.
 
d.  Unsecured credit facilities
 
On July 16, 2010, the Company entered into a three-year, $25.0 million unsecured revolving credit facility agreement. The facility accrues interest during the term based on the election of the Company at each individual funding date. The Company is permitted to elect a LIBOR based loan plus 2.00% or the higher of the following base rates plus 1.00%: (i) Prime, (ii) the federal funds rate plus 0.50% or (iii) LIBOR plus 1.00%. The Company is obligated to pay 0.50% on the unused portion of the facility. The credit facility was not drawn upon as of September 30, 2010.


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On September 8, 2010, the Company entered into a two-year, $25.0 million unsecured revolving credit facility agreement. The facility accrues interest during the term based on the election of the Company at each individual funding date. The Company is permitted to elect a LIBOR based loan plus 2.00% or the higher of (i) Prime or (ii) 2.00%. The Company is obligated to pay 0.25% on the unused portion of the facility. The credit facility was not drawn upon as of September 30, 2010.
 
e.  Shareholder promissory note
 
In February 2010, the Company borrowed $250,000 under a promissory note agreement with an entity controlled by the Company’s Chairman and CEO. Interest due under the promissory note was at an annual rate of 3.00%, compounded quarterly. This note matured on June 4, 2010, upon the successful offering of the Company’s common stock pursuant to Rule 144A, Regulation S, and Regulation D of the Securities Act of 1933, as amended.
 
f.  Shareholder revolving loan
 
In March 2010, the Company’s Chairman and CEO entered into an unlimited revolving credit agreement with the Company. Interest due under the revolving loan was based on LIBOR plus 3.50%, compounded quarterly, on the outstanding balance of the loan. There were no fees for any un-drawn balance. The Shareholder Revolving Loan matured on June 4, 2010, upon the successful offering of the Company’s common stock pursuant to Rule 144A, Regulation S, and Regulation D of the Securities Act of 1933, as amended. At maturity the outstanding loan balance was $50,336.
 
g.  Underwriter promissory note
 
In April 2010, the Company borrowed $2.0 million under a promissory note agreement with the Company’s underwriter for our June 2010 equity offering. Interest due under the promissory note was based on LIBOR plus 3.50%, compounded annually. This note matured on June 4, 2010, upon the successful offering of the Company’s common stock pursuant to Rule 144A, Regulation S, and Regulation D of the Securities Act of 1933, as amended.
 
h.  Shareholder promissory note
 
In April 2010, the Company borrowed $2.0 million under a promissory note agreement with an entity controlled by the Company’s Chairman and CEO. Interest due under the promissory note was based on LIBOR plus 3.50%, compounded annually. This note matured on June 4, 2010, upon the successful offering of the Company’s common stock pursuant to Rule 144A, Regulation S, and Regulation D of the Securities Act of 1933, as amended.
 
i.  Convertible notes
 
On May 7, 2010, two investors (the “Early Investors”) agreed to lend the Company $50.0 million, and certain members of the Company’s management and Board of Directors and their families or affiliates agreed to lend the Company $10.0 million, pursuant to convertible promissory note agreements. Interest accrued under the notes at an annual rate of 6.00% and was payable quarterly in cash. The notes were automatically converted on June 4, 2010, in satisfaction of the lenders’ obligations to purchase shares of the Company’s common stock at a price equal to $18.00 per share, in connection with the successful offering of the Company’s common stock


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pursuant to Rule 144A, Regulation S, and Regulation D of the Securities Act of 1933, as amended.
 
On May 7, 2010, the Early Investors contingently committed to purchase $200.0 million of the Company’s common stock at the lesser of (i) $18.00 per share and (ii) 90% of the offering price per share upon the completion of the Company’s common stock offering pursuant to Rule 144A, Regulation S, and Regulation D of the Securities Act of 1933, as amended, prior to December 31, 2010. On June 4, 2010, the Early Investors purchased $200.0 million of the Company’s common stock at a price equal to $18.00 per share upon the completion of the Company’s common stock offering.
 
The Early Investors simultaneously entered into a convertible note agreement and a contingent stock purchase agreement. The Company allocated the proceeds received between the convertible note and the stock purchase agreement based on their relative fair value at issuance. An independent appraiser determined that the relative aggregate fair value of the convertible notes and stock purchase agreement was $35.4 million and $14.6 million, respectively. Consequently the Company recorded a $14.6 million discount at the issuance of the convertible notes, with an offsetting increase to Paid-in capital on the Company’s Consolidated Balance Sheet. The Company fully amortized this debt discount into Interest expense on the Consolidated Statement of Operations upon the conversion of the notes.
 
The Company evaluated the conversion option within the convertible notes to determine whether the conversion price was beneficial to the note holders. For the convertible notes issued to the Early Investors management measured the intrinsic value in the conversion option based on the proceeds allocated to the convertible debt after proceeds were allocated to the contingent stock purchase agreement. As a result, the Company determined that the beneficial conversion features within the convertible notes was $21.2 million. The Company recorded the beneficial conversion feature as a discount at the issuance of the convertible notes, with an offsetting increase to Paid-in capital on the Company’s Consolidated Balance Sheet. The Company fully amortized this debt discount into Interest expense on the Consolidated Statement of Operations upon the conversion of the notes.
 
j.  Maturities
 
Maturities of debt outstanding at September 30, 2010 are as follows:
 
         
 
(dollars in thousands)      
 
 
Years ending December 31,
       
2010
  $ 1,569  
2011
    6,451  
2012
    18,848  
2013
    32,100  
2014
    33,397  
Thereafter
    106,326  
         
Total
  $ 198,691 (1)
 
 
 
(1) As of September 30, 2010 the Company had $154.0 million of debt outstanding under the Warehouse Credit Facility which will come due beginning in May 2012. The outstanding drawn balance at the end of the initial two-year period of the Warehouse Facility may be converted at the Company’s option to an amortizing, four-year term loan with an increasing interest rate.


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As of September 30, 2010 the Company was restricted from making dividend payments under the most restrictive provisions of our debt agreements, as we are in a net loss position for the period from Inception to September 30, 2010. In addition, the Company had no plans to make dividend payments as of September 30, 2010.
 
4.  Shareholders’ equity
 
As of September 30, 2010, the Company had authorized 500,000,000 shares of Class A Common Stock, $0.01 par value per share, of which 63,563,810 shares were issued and outstanding. As of September 30, 2010, the Company had authorized 10,000,000 shares of Class B Non-Voting Common Stock, $0.01 par value per share, of which 1,829,339 shares were issued and outstanding. The rights and obligations of the holders of Class A and Class B Non-Voting Common Stock are identical, except with respect to voting rights and conversion rights. The holders of Class A Common Stock possess all voting power, and are not convertible into Class B Non-Voting Common Stock.
 
Each share of Class B Non-Voting Common Stock is convertible into one share of Class A Common Stock at the option of the holder, and is automatically converted at the time it is transferred to a third party unaffiliated with such initial holder, subject to the transfer restrictions.
 
As of September 30, 2010 the Company authorized 50,000,000 shares of preferred stock, $0.01 par value per share, of which no shares were issued or outstanding.
 
On June 4, 2010, the Company issued 482,625 warrants to two institutional investors (the “Committed Investors”). The warrants have a seven-year term and an exercise price of $20 per share. The Company uses the Black-Scholes option pricing model to determine the fair value of warrants. The fair value of warrants was calculated on the date of grant by an option-pricing model using a number of complex and subjective variables. These variables include expected stock price volatility over the term of the warrant, projected exercise behavior, a risk-free interest rate and expected dividends. The warrants have a fair value at the grant date of $5.6 million. The warrants are classified as an equity instrument and the proceeds from the issuance of common stock to the Committed Investors was split between the warrants and the stock based on fair value of the warrants and recorded as an increase to Paid-in capital on the Consolidated Balance Sheet.


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5.  Rental income
 
At September 30, 2010 minimum future rentals on non-cancelable operating leases of flight equipment, which have been delivered as of September 30, 2010, are as follows:
 
         
 
(dollars in thousands)      
 
 
Years ending December 31,
       
2010
  $ 28,275  
2011
    108,496  
2012
    89,281  
2013
    67,771  
2014
    63,140  
Thereafter
    165,632  
         
Total
  $ 522,595  
 
 
 
Through September 30, 2010, the Company earned $1.8 million in contingent rentals based on our lessees’ operation of the aircraft.
 
The following table shows the scheduled lease terminations (for the minimum non-cancelable period which does not include lease extension options contractually available to our lessees) by aircraft type for our operating lease portfolio at September 30, 2010:
 
                                                                                                                 
 
Aircraft Type   2010     2011     2012     2013     2014     2015     2016     2017     2018     2019     2020     2021     2022     Total  
 
 
Airbus A319-100
            1               3                       1       1                                               6  
Airbus A320-200
    1               2       1               1               1                                               6  
Airbus A321-200
                                                    1       1                                               2  
Airbus A330-200
                                                    1                                               1       2  
Boeing B737-700
    1       1       1                               1                       1                               5  
Boeing B737-800
            1       1       2               1       1       1                                               7  
     
     
Total
    2       3       4       6             2       5       4             1                   1       28  
 
 
 
6.  Concentration of risk
 
a.  Geographical and credit risks
 
As of September 30, 2010, all of the Company’s revenues were generated by leasing flight equipment to foreign and domestic airlines, and currently the Company leases aircraft to nineteen lessees.
 
As of September 30, 2010, we have entered into aircraft acquisition and lease commitments with airlines in Australia, Brazil, Canada, China, France, Germany, India, Ireland, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Spain, Sri Lanka, South Africa, the United Arab Emirates, the United States and Vietnam.


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During the period from inception to September 30, 2010 the Company had two customers that accounted for greater than 10% of rental of flight equipment revenues as follows:
 
         
 
    September 30, 2010  
 
 
Air Berlin
    37.0%  
Air France
    19.3%  
 
 
 
As of September 30, 2010, accounts receivable balances from Air Berlin and Air France were insignificant.
 
As our portfolio grows, we anticipate that a growing percentage of our aircraft will be located in the Asia/Pacific, Central America and South America and Middle East regions. The table below illustrates in terms of net book value the regions where our aircraft are operated as of the end of the third quarter and illustrates that most of our aircraft are operated internationally.
 
             
    September 30, 2010
 
Europe
    48.0 %    
Asia/Pacific
    26.8      
U.S. and Canada
    9.0      
Central America, South America and Mexico
    9.1      
Middle East
    7.1      
     
     
Total
    100.0 %    
 
 
 
b.  Currency risk
 
The Company attempts to minimize currency and exchange risks by entering into aircraft purchase agreements and a majority of lease agreements and debt agreements with U.S. dollars as the designated payment currency.
 
7.  Income taxes
 
The provision for income taxes consists of the following:
 
         
 
    For the period
 
    from Inception to  
(dollars in thousands)   September 30, 2010  
 
 
Current:
       
Federal
  $  
State
     
         
       
Deferred:
       
Federal
    (7,215 )
State
    (277 )
         
Income tax benefit
  $ (7,492 )
 
 


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Differences between the provision for income taxes and income taxes at the statutory federal income tax rate are as follows:
 
                     
    For the period
    from Inception to
    September 30, 2010
(dollars in thousands)   Amount     Percent
 
Income taxes at statutory federal rate
  $ (19,899 )     (35.0 )%    
State income taxes, net of federal income tax effect
    (181 )     (0.3 )    
Nondeductible interest—convertible note
    12,529       22.0      
Other
    59       0.1      
     
     
    $ (7,492 )     (13.2 )%    
 
 
 
The Company’s net deferred tax assets are as follows:
 
         
 
(dollars in thousands)   September 30, 2010  
 
 
ASSETS (LIABILITIES)
       
Equity compensation
  $ 4,738  
Net operating losses
    3,735  
Rents received in advance
    1,853  
Accrued bonus
    1,623  
Other
    115  
Aircraft depreciation
    (4,572 )
         
Total assets
  $ 7,492  
 
 
 
At September 30, 2010, the Company has net operating loss carry-forwards (NOLs) for federal and state income tax purposes of $10.3 million, which are available to offset future taxable income in future periods.
 
The Company has not recorded a deferred tax valuation allowance as of September 30, 2010 as realization of the deferred tax asset is considered more likely than not. There was no change in the valuation allowance during the period from inception to September 30, 2010. In assessing the realizability of the deferred tax assets management considered whether future taxable income will be sufficient during the periods in which those temporary differences are deductible or before NOLs expire. Management considers the scheduled reversal of deferred tax liabilities, projected taxable income and tax planning strategies in making this assessment. Management anticipates the timing differences on aircraft depreciation will reverse and be available for offsetting the reversal of deferred tax assets. The Company was formed in February 2010 and has incurred losses before tax during the period from Inception to September 30, 2010 of $56.9 million. This loss included a charge of $35.8 million for the amortization of convertible debt discounts which is not deductible for tax purposes. In addition to budgets and long range forecasts which are dependent on future events, management considered projected taxable income from aircraft leases in place at September 30, 2010. By projecting out future revenue and related costs from existing, executed contracts, management concluded there was sufficient


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future income not subject to the risks of future aircraft purchases, related financing and new leases that deferred tax assets will more likely than not be realized.
 
As of September 30, 2010, the Company has not recorded any liability for unrecognized tax benefits.
 
The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to examinations by the major tax jurisdictions for the 2010 tax year.
 
8.  Commitments and contingencies
 
a.  Aircraft acquisition
 
As of September 30, 2010, we have commitments to acquire a total of 157 new and used aircraft through 2017 at an estimated aggregate purchase price (including adjustments for inflation) of approximately $6.8 billion for delivery as follows:
 
                                                         
 
Aircraft type   2010     2011     2012     2013     2014     Thereafter     Total  
 
 
Boeing B737-800(1)
    8       1       3       12       12       33       69  
Boeing B777-300 ER(1)
    2       1       1                               4  
Airbus A319-100
    1                                               1  
Airbus A320/A321
    2       8       12       14       12       7       55  
Airbus A330-200
            2       1                               3  
ATR 72-600(1)
            2       8                               10  
Embraer E190(1)
            4       8       3                       15  
     
     
Total
    13       18       33       29       24       40       157  
 
 
 
(1) As of September 30, 2010 the Company had commitments to purchase 31 new and used aircraft subject to Memorandums of Understanding (“MOUs”). These commitments are comprised of orders of six aircraft in 2010, six aircraft in 2011, 16 aircraft in 2012 and three aircraft in 2013.
 
As of September 30, 2010, we had made non-refundable deposits of $75.4 million on the aircraft which we have committed to purchase.
 
b.  Office lease
 
As of September 30, 2010, the Company modified its existing operating lease for office space and office equipment extending through 2024. The lease provides for step rentals over the term, and those rentals are considered in the evaluation of recording rent expense on a straight-line basis over the term of the lease. Tenant improvement allowances received from the lessor are deferred and amortized in selling, general and administrative expenses against rent


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expense. Commitments for minimum rentals under the non-cancelable lease term at September 30, 2010 are as follows:
 
         
 
(dollars in thousands)      
 
 
Years ending December 31,
       
2010
  $ 134  
2011
    107  
2012
    1,441  
2013
    2,325  
2014
    2,395  
Thereafter
    25,856  
         
Total
  $ 32,258  
 
 
 
9.  Net loss per share
 
Basic net loss per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock; however, potential common equivalent shares are excluded if their effect is anti-dilutive. The Company’s two classes of common stock, Class A and Class B Non-Voting, have equal rights to dividends and income and thus basic and diluted earnings per share are the same for each class.
 
Diluted net loss per share takes into account the potential conversion of the convertible notes using the “if-converted” method and the treasury stock method for stock options, restricted stock units and warrants. For the period from Inception to September 30, 2010, 277,873 shares related to these potentially dilutive securities were excluded from the computation of diluted earnings per share because they were anti-dilutive.
 
The following table sets forth the reconciliation of basic and diluted net loss per share for the period from Inception to September 30, 2010:
 
         
 
    For the period
 
    from Inception to  
(in thousands, except share data)   September 30, 2010  
 
 
Numerator:
       
Net loss available to common shareholders—basic and diluted EPS
  $ (49,365 )
Denominator:
       
Weighted average common shares outstanding—basic and diluted EPS
    30,062,023  
Net loss per share:
       
Basic
  $ (1.64 )
Diluted
  $ (1.64 )
 
 


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10.  Fair value measurements
 
a.  Assets and liabilities measured at fair value on a recurring basis
 
The Company has no assets or liabilities which are measured at fair value on a recurring basis as of September 30, 2010.
 
b.  Assets and liabilities measured at fair value on a non-recurring basis
 
The Company measures the fair value of flight equipment on a non-recurring basis, when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. The Company principally uses the income approach to measure the fair value of these assets and liabilities when appropriate, as described below:
 
Flight equipment
 
The Company records flight equipment at fair value when we determine the carrying value may not be recoverable. The fair value is measured using an income approach based on the present value of cash flows from contractual lease agreements and projected future lease payments, including contingent rentals, net of expenses, which extend to the end of the flight equipment’s economic life in its highest and best use configuration, as well as a disposition value, based on expectations of market participants.
 
The Company has no assets or liabilities that were measured at fair value on a non-recurring basis as of September 30, 2010.
 
11.  Fair value of financial instruments
 
The carrying value reported on the balance sheet for cash and cash equivalents, restricted cash and other payables approximates their fair value.
 
The fair value of debt financing is estimated based on the quoted market prices for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities. The estimated fair value of debt financing as of September 30, 2010 was $187,623 compared to a book value of $198,691.
 
12.  Equity based compensation
 
In accordance with the Company’s 2010 Equity Incentive Plan (“Plan”), the amount of Stock Options (“Stock Options”) and Restricted Stock Units (“RSUs”) authorized under the Plan is dependent on the total number of shares sold in the offering of the Company’s common stock pursuant to Rule 144A of the Securities Act of 1933, as amended. As of September 30, 2010, under the Plan, the Company was authorized to grant 3,225,908 Stock Options and 3,225,907 RSUs. As of September 30, 2010, the Company granted 3,225,908 Stock Options and 3,225,907 RSUs.
 
a.  Incentive stock options
 
The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The fair value of stock-based payment awards on the date of grant is determined by an


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option-pricing model using a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, a risk-free interest rate and expected dividends. The Stock Options vest ratably over a three-year period and have a 10-year term. The options are exercisable at $20.00 per share.
 
Estimated volatility of the Company’s common stock for new grants is determined by using historical volatility of the Company’s peer group. Due to our limited operating history, there is no historical exercise data to provide a reasonable basis which the Company can use to estimate expected terms. Accordingly, the Company uses the “simplified method” as permitted under Staff Accounting Bulletin No. 110. The risk-free interest rate used in the option valuation model is derived from U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an assumed dividend yield of zero in the option valuation model. In accordance with ASC Topic 718, Compensation—Stock Compensation, the Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The average assumptions used to value stock-based payments are as follows:
 
         
Dividend yield
    0.0%  
Expected term
    6 years  
Risk-free interest rate
    2.4%  
Volatility
    52.1%  
Forfeiture rate
    0.4%  
 
 
 
Activity under the Company’s stock option plan is as follows:
 
                                 
 
                Remaining
    Aggregate
 
          Exercise
    contractual term
    intrinsic value
 
    Shares     price     (in years)     (in thousands)  
 
 
Options outstanding at Inception
                             
Granted
    3,225,908     $ 20.00                  
Exercised
                             
Cancelled
                             
     
     
Options outstanding as of September 30, 2010
    3,225,908     $ 20.00       9.7     $  
Options exercisable at September 30, 2010
                             
 
 
 
b.  Restricted stock unit plan
 
The Company determines the fair value of its restricted stock awards is equal to the value of the underlying shares at the date of grant. The Company granted 3,225,907 RSUs as of September 30, 2010. The RSUs vest ratably on a four-year schedule subject to a performance measure.


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The grant date fair value of stock-based awards was as follows:
 
                                         
 
    June 4,
    July 14,
    August 4,
    August 11,
       
(dollars in thousands)   2010     2010     2010     2010     Total  
 
 
Options
  $ 26,314     $ 4,998     $ 61     $ 1,209     $ 32,582  
RSU
    49,000       11,847       150       3,217       64,214  
     
     
Total
  $ 75,314     $ 16,845     $ 211     $ 4,426     $ 96,796  
 
 
 
As of September 30, 2010, there was $83.6 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock-based payments granted to employees. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures and is expected to be recognized over a weighted average period of 3.5 years. The Company recorded $13.2 million, in stock compensation expense from continuing operations for the period from Inception through September 30, 2010.
 
As of September 30, 2010, no stock options were exercisable.
 
13.  Subsequent events
 
During the fourth quarter 2010, we entered into seven unsecured two-year and three-year revolving credit facilities, aggregating $190.0 million, with terms similar to our existing revolving unsecured credit facilities. As of December 31, 2010, we had drawn $120 million across all our unsecured revolving credit facility agreements. All of our unsecured revolving credit facilities bear interest at LIBOR plus 2.00%. Additionally, we entered into four secured term facilities yielding $182.2 million, with interest rates ranging from LIBOR plus 2.55% to LIBOR plus 2.97%, and pledged $268.9 million in aircraft collateral under these facilities. Finally, we entered into a $12.0 million, five-year term unsecured facility at a fixed rate of 3.90%.


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shares
 
 
(AIR LEASE LOGO)
 
 
Class A Common Stock
 
 
Prospectus
 
 
J.P. Morgan Credit Suisse FBR Capital Markets
 
          , 2011
 
 
 
We have not authorized anyone to provide any information other than that contained or incorporated by reference in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, Class A Common Stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Class A Common Stock.
 
No action is being taken in any jurisdiction outside the United States to permit a public offering of our Class A Common Stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.
 
Until          , 2011, all dealers that buy, sell or trade in our Class A Common Stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.


Table of Contents

Part II
Information not required in prospectus
 
Item 13.  Other expenses of issuance and distribution
 
The following table sets forth the costs and expenses, other than underwriting discounts and commission, paid or to be paid by the registrant in connection with the sale of the Class A Common Stock being registered hereby:
 
         
 
    Amount  
 
 
SEC registration fee
  $             
FINRA filing fee
       
     listing fee
       
Printing expenses
       
Legal fees and expenses
       
Accounting fees and expenses
       
Transfer agent and registrar fees and expenses
       
Miscellaneous
       
         
Total
  $    
 
 
 
Item 14.  Indemnification of directors and officers
 
Section 102(b)(7) of the Delaware General Corporation Law (“DGCL”) allows a corporation to provide in its certificate of incorporation that a director of the corporation will not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except where the director breached the duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit.
 
Our restated certificate of incorporation provides for this limitation of liability.
 
Section 145 of the DGCL provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation


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or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.
 
Our amended and restated bylaws provide for the indemnification of officers and directors of the corporation consistent with Section 145 of the DGCL.
 
The indemnification rights set forth above are not exclusive of any other right which an indemnified person may have or hereafter acquire under any statute, provision of our restated certificate of incorporation, our amended and restated bylaws, agreement, vote of stockholders or directors or otherwise. We also entered into indemnification agreements with our directors that generally provide for mandatory indemnification to the fullest extent permitted by law.
 
The proposed form of underwriting agreement to be filed as Exhibit 1.1 to the Registration Statement is expected to provide that the underwriters are obligated, under certain circumstances, to indemnify directors, officers and controlling persons of our Company against certain liabilities, including liabilities under the Securities Act of 1933.
 
Delaware law also provides that a corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or other entity, against any liability asserted against and incurred by such person, whether or not the corporation would have the power to indemnify such person against such liability. We maintain, at our expense, an insurance policy that insures our officers and directors, subject to customary exclusions and deductions, against specified liabilities that may be incurred in those capacities.
 
Item 15.  Recent sales of unregistered securities
 
Since February 5, 2010, the registrant has sold the following securities without registration under the Securities Act of 1933, as amended (the “Act”):
 
1. From February 5, 2010 through April 20, 2010, the registrant issued and sold to certain employees an aggregate of 875,000 shares of Class A Common Stock for an aggregate purchase price of $1.75 million in cash.
 
2. On June 4, 2010, the registrant issued and sold to funds managed by each of Leonard Green & Partners, L.P. and Ares Management LLC an aggregate of 13,888,888 shares of Class A Common Stock for an aggregate purchase price of $250 million, $200 million of which was paid in cash and $50 million of which was represented by cancellation of indebtedness in connection with the conversion by such funds of senior convertible notes issued by the registrant on May 7, 2010.


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3. On June 4, 2010, the registrant issued and sold to certain members of its management (and their family members and affiliates) and members of its board of directors an aggregate of 555,556 shares of Class A Common Stock for an aggregate purchase price of $10 million, which was represented by cancellation of indebtedness in connection with the conversion by such persons of senior convertible notes issued by the registrant on May 7, 2010.
 
4. From June 4, 2010 through July 13, 2010, the registrant issued and sold to institutional and individual investors an aggregate of 50,050,205 shares of Common Stock for an aggregate purchase price of $1 billion in cash.
 
5. On June 4, 2010, the registrant issued a warrant to purchase 214,500 shares of Common Stock and a warrant to purchase 268,125 shares of Common Stock to Société Générale S.A. and Commonwealth Bank of Australia, respectively, at an exercise price of $20.00 per share.
 
6. From June 4, 2010 through August 11, 2010, the registrant granted to certain employees options to purchase an aggregate of 3,223,658 shares of Class A Common Stock at an exercise price of $20.00 per share and restricted stock units with respect to an aggregate of 3,222,357 shares of Class A Common Stock under its Air Lease Corporation 2010 Equity Incentive Plan.
 
7. On June 17, 2010, the registrant issued to Commonwealth Bank of Australia 3,779,442 shares of Class A Common Stock in exchange for the surrender by Commonwealth Bank of Australia of the same number of shares of Class B Non-Voting Common Stock.
 
8. On July 14, 2010, the registrant granted to certain employees options to purchase an aggregate of 2,250 shares of Class A Common Stock at an exercise price of $20.00 per share and restricted stock units with respect to an aggregate of 3,550 shares of Class A Common Stock under its Air Lease Corporation 2010 Equity Incentive Plan.
 
9. From July 16, 2010 through July 26, 2010, the registrant issued and sold to certain employees an aggregate of 23,500 shares of Class A Common Stock for an aggregate purchase price of $470,000 in cash.
 
The transactions described above in Items 1—3, 6 and 9 were effected without registration under the Act in reliance on the exemptions from registration provided pursuant to Section 4(2) of the Act and Rule 506 of Regulation D thereunder relating to transactions not involving any public offering. The recipients of the securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for offer or sale in connection with any distribution thereof, and also represented that they were “accredited investors” within the meaning of Rule 501 of Regulation D promulgated under the Act. Appropriate legends were affixed to share certificates, and/or investors were informed of the limitations on resale of the Class A Common Stock through the use of appropriate disclosure and contractual representations.
 
The transactions described in Items 4 and 5 were effected without registration under the Act in reliance on the exemptions from registration pursuant to Rule 144A, Rule 506 of Regulation D, and Regulation S promulgated under the Act, with FBR Capital Markets & Co. (formerly Friedman Billings Ramsey & Co., Inc.) acting as initial purchaser and placement agent. A portion of the securities were sold directly by the registrant to accredited investors and non-U.S. persons in transactions exempt from registration under Section 4(2) of the Act and Rule 506 of Regulation D thereunder relating to sales not involving any public offering and Regulation S


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relating to offshore sales. The remainder of the securities were sold to the initial purchaser who resold the shares to persons it reasonably believed were “qualified institutional buyers” (as defined by Rule 144A under the Act) or to non-U.S. persons (as defined under Regulation S of the Act). The securities were sold only to investors that the registrant believed were qualified institutional buyers, accredited investors and/or non-U.S. persons. Additionally, none of these sales were made by any form of general solicitation or general advertising. Finally, the registrant took reasonable precautions to ensure that all of the purchasers were purchasing shares for their own account and were informed of the limitations on resale of the securities through the use of appropriate disclosure and contractual representations that were obtained from the purchasers. For its role as initial purchaser and placement agent, FBR Capital Markets & Co., generally received an initial purchaser’s discount or placement fee equal to $1.05 per share (or 5.25% of the per share consideration), except with respect to 10 million shares for which it received an initial purchaser’s discount or placement fee of $0.20 per share (or 1.00% of the per share consideration) and 3,912,500 shares with respect to which it did not receive an initial purchaser’s discount or fee. Following the closing of the transactions described in Items 4 and 5, FBR Capital Markets & Co. reimbursed to the registrant an amount equal to 1.15% of the gross proceeds received from such offering.
 
The transaction described in Item 7 was effected without registration under the Act in reliance on either Section 3(a)(9) of the Act as an exchange by the registrant with an existing security holder where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange, or the exemption from registration provided under Section 4(2) of the Act as a transaction not involving a public offering.
 
The transactions described above in Item 8 were effected without registration under the Act in reliance on the exemption from registration provided pursuant to either or both of Section 4(2) of the Act or Rule 701 thereunder, as transactions pursuant to compensatory benefit plans and contracts relating to compensation.
 
Item 16.  Exhibits and financial statement schedules
 
A. Exhibits
 
         
Exhibit
   
No.   Description
 
  1 .1*   Form of Underwriting Agreement
  3 .1   Restated Certificate of Incorporation of Air Lease Corporation
  3 .2   Amended and Restated Bylaws of Air Lease Corporation
  4 .1*   Form of Specimen Stock Certificate
  4 .2   Registration Rights Agreement, dated as of June 4, 2010, between Air Lease Corporation and FBR Capital Markets & Co., as the initial purchaser/placement agent
  5 .1*   Opinion of Munger, Tolles & Olson LLP
  10 .1   Warehouse Loan Agreement, dated as of May 26, 2010, among ALC Warehouse Borrower, LLC, as Borrower, the Lenders from time to time party hereto, and Credit Suisse AG, New York Branch, as Agent


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Exhibit
   
No.   Description
 
  10 .2   Pledge and Security Agreement, dated as of May 26, 2010, among Air Lease Corporation, as Parent, ALC Warehouse Borrower, LLC, as Borrower, the subsidiaries of the Borrower from time to time party hereto, Deutsche Bank Trust Company Americas, as Collateral Agent, and Credit Suisse AG, New York Branch, as Agent
  10 .3*   Air Lease Corporation 2010 Equity Incentive Plan
  10 .4*   Form of Restricted Stock Unit Award Agreement
  10 .5*   Form of Option Award Agreement
  10 .6   Warrant No. 1 to purchase 214,500 shares of Common Stock, dated June 4, 2010
  10 .7   Warrant No. 2 to purchase 268,125 shares of Common Stock, dated June 4, 2010
  10 .8   Employment Agreement, dated as of February 5, 2010, by and between Air Lease Corporation and Steven F. Udvar-Házy
  10 .9   Amendment to Employment Agreement, dated as of August 11, 2010, by and between Air Lease Corporation and Steven F. Udvar-Házy
  10 .10   Employment Agreement, dated as of March 29, 2010, by and between Air Lease Corporation and John L. Plueger
  10 .11   Amendment to Employment Agreement, dated as of August 11, 2010, by and between Air Lease Corporation and John L. Plueger
  10 .12*   Form of Indemnification Agreement with directors and officers
  21 .1   List of Subsidiaries of Air Lease Corporation
  23 .1   Consent of KPMG LLP
  23 .2*   Consent of Munger, Tolles & Olson LLP (included in Exhibit 5.1)
  23 .3   Consent of AVITAS, Inc.
  24 .1   Power of Attorney (included on signature page to Registration Statement)
 
 
 
* To be filed by amendment.
 
B. Financial Statement Schedules
 
All financial statement schedules are omitted because they are not applicable or the information is included in the financial statements or related notes.
 
Item 17.  Undertakings
 
The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
 
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director,


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officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
 
The undersigned registrant hereby undertakes that:
 
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
 
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.


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Signatures
 
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Los Angeles, state of California, on January 14, 2011.
 
AIR LEASE CORPORATION
 
  By: 
/s/  John L. Plueger
Name:     John L. Plueger
  Title:  President & Chief Operating Officer
 
Power of attorney
 
Each person whose signature appears below hereby constitutes and appoints Steven F. Udvar-Házy, John L. Plueger and Grant A. Levy, and each of them acting individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in any and all capacities, any and all amendments (including post-effective amendments) to this registration statement and any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462 promulgated under the Securities Act of 1933, as amended, as the attorney-in-fact and to file the same, with all exhibits thereto and any other documents required in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and their substitutes, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes may lawfully do or cause to be done by virtue hereof.
 
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
 
             
Signature   Title   Date
 
         
/s/  Steven F. Udvar-Házy

Steven F. Udvar-Házy
  Principal Executive Officer   January 14, 2011
         
/s/  James C. Clarke

James C. Clarke
  Principal Financial Officer   January 14, 2011
         
/s/  Gregory B. Willis

Gregory B. Willis
  Principal Accounting Officer   January 14, 2011
         
/s/  Steven F. Udvar-Házy

Steven F. Udvar-Házy
  Director   January 14, 2011


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Signature   Title   Date
 
         
/s/  John L. Plueger

John L. Plueger
  Director   January 14, 2011
         
/s/  John G. Danhakl

John G. Danhakl
  Director   January 14, 2011
         
/s/  Matthew J. Hart

Matthew J. Hart
  Director   January 14, 2011
         
/s/  Robert A. Milton

Robert A. Milton
  Director   January 14, 2011
         
/s/  Michel M.R.G. Péretié

Michel M.R.G. Péretié
  Director   January 14, 2011
         
/s/  Antony P. Ressler

Antony P. Ressler
  Director   January 14, 2011
         
/s/  Wilbur L. Ross, Jr.

Wilbur L. Ross, Jr.
  Director   January 14, 2011
         
/s/  Ian M. Saines

Ian M. Saines
  Director   January 14, 2011
         
/s/  Dr. Ronald D. Sugar

Dr. Ronald D. Sugar
  Director   January 14, 2011


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EXHIBIT INDEX
 
         
Exhibit
   
No.   Description
 
  1 .1*   Form of Underwriting Agreement
  3 .1   Restated Certificate of Incorporation of Air Lease Corporation
  3 .2   Amended and Restated Bylaws of Air Lease Corporation
  4 .1*   Form of Specimen Stock Certificate
  4 .2   Registration Rights Agreement, dated as of June 4, 2010, between Air Lease Corporation and FBR Capital Markets & Co., as the initial purchaser/placement agent
  5 .1*   Opinion of Munger, Tolles & Olson LLP
  10 .1   Warehouse Loan Agreement, dated as of May 26, 2010, among ALC Warehouse Borrower, LLC, as Borrower, the Lenders from time to time party hereto, and Credit Suisse AG, New York Branch, as Agent
  10 .2   Pledge and Security Agreement, dated as of May 26, 2010, among Air Lease Corporation, as Parent, ALC Warehouse Borrower, LLC, as Borrower, the subsidiaries of the Borrower from time to time party hereto, Deutsche Bank Trust Company Americas, as Collateral Agent, and Credit Suisse AG, New York Branch, as Agent
  10 .3*   Air Lease Corporation 2010 Equity Incentive Plan
  10 .4*   Form of Restricted Stock Unit Award Agreement
  10 .5*   Form of Option Award Agreement
  10 .6   Warrant No. 1 to purchase 214,500 shares of Common Stock, dated June 4, 2010
  10 .7   Warrant No. 2 to purchase 268,125 shares of Common Stock, dated June 4, 2010
  10 .8   Employment Agreement, dated as of February 5, 2010, by and between Air Lease Corporation and Steven F. Udvar-Házy
  10 .9   Amendment to Employment Agreement, dated as of August 11, 2010, by and between Air Lease Corporation and Steven F. Udvar-Házy
  10 .10   Employment Agreement, dated as of March 29, 2010, by and between Air Lease Corporation and John L. Plueger
  10 .11   Amendment to Employment Agreement, dated as of August 11, 2010, by and between Air Lease Corporation and John L. Plueger
  10 .12*   Form of Indemnification Agreement with directors and officers
  21 .1   List of Subsidiaries of Air Lease Corporation
  23 .1   Consent of KPMG LLP
  23 .2*   Consent of Munger, Tolles & Olson LLP (included in Exhibit 5.1)
  23 .3   Consent of AVITAS, Inc.
  24 .1   Power of Attorney (included on signature page to Registration Statement)
 
 
 
* To be filed by amendment.


II-9

Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
AIR LEASE CORPORATION
(a Delaware corporation)
     The undersigned, for the purpose of amending and restating the Certificate of Incorporation of Air Lease Corporation, a Delaware corporation (the “Corporation”), does hereby certify that:
     1. The date of filing of the Corporation’s original Certificate of Incorporation with the Secretary of State of the State of Delaware was January 22, 2010.
     2. This Restated Certificate of Incorporation has been duly adopted and approved by the Board of Directors of the Corporation in accordance with the provisions of Sections 242 and 245 of the Delaware General Corporation Law.
     3. This Restated Certificate of Incorporation has been duly approved by the written consent of the stockholders of the Corporation in accordance with the provisions of Sections 228 and 245 of the Delaware General Corporation Law.
     4. The Restated Certificate of Incorporation of the Corporation is hereby amended, and restated in its entirety as follows:
ARTICLE I
NAME
     The name of the Corporation is Air Lease Corporation.
ARTICLE II
AGENT
     The address of the Corporation’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808. The name of its registered agent at such address is Corporation Service Company.
ARTICLE III
PURPOSE
     The purposes for which the Corporation is formed are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL” ).

 


 

ARTICLE IV
STOCK
     Section 4.1 Authorized Stock .
          (a) The Corporation shall be authorized to issue 560,000,000 shares of capital stock of which (i) 500,000,000 shall be shares of Class A Common Stock, $0.01 par value (the “Class A Common Stock” ), (ii) 10,000,000 shall be shares of Class B Non-Voting Common Stock, $0.01 par value (the “Class B Non-Voting Common Stock” and, together with the Class A Common Stock, the “Common Stock” ), and (iii) 50,000,000 shall be shares of Preferred Stock, $0.01 par value (the “Preferred Stock” ).
          (b) Effective upon the effectiveness of this Restated Certificate of Incorporation under the DGCL, each share of common stock outstanding immediately prior thereto shall be reclassified automatically and without further action on the part of any holder thereof or otherwise, as one share of Class A Common Stock.
     Section 4.2 No Class Vote on Changes in Authorized Number of Shares of Stock . Subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, the number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote generally in the election of directors irrespective of the provisions of Section 242(b)(2) of the DGCL.
     Section 4.3 Common Stock .
          (a) Voting .
               (i) Except as otherwise provided by law, Section 4.3(a)(ii) or by the resolution or resolutions adopted by the board of directors of the Corporation (the “Board” ) designating the rights, powers and preferences of any series of Preferred Stock, the Class A Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes. Each share of Class A Common Stock shall have one vote, and the Class A Common Stock shall vote together as a single class.
               (ii) The Class B Non-Voting Common Stock shall be entitled to vote on matters involving amendments to the terms of the Class B Non-Voting Common Stock that would significantly and adversely affect the rights or preferences of the Class B Non-Voting Common Stock, including, without limitation, with respect to the convertibility thereof, any such amendments to which shall require the affirmative vote of a majority of the outstanding shares of the Class B Non-Voting Common Stock, voting as a separate class.
          (b) Dividends . The holders of the Common Stock shall be entitled to receive such dividends if, as and when declared from time to time by the Board.
          (c) Liquidation . In the event of the voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, the holders of the Common Stock shall be

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entitled to receive, ratably in proportion to the number of shares of Common Stock held by them, all the assets of the Corporation of whatever kind available for distribution to stockholders of the Corporation, after the rights of the holders of the Preferred Stock have been satisfied.
          (d) Conversion . Each share of Class B Non-Voting Common Stock will be convertible into a share of Class A Common Stock at the option of the holder, provided, however , that each share of Class B Non-Voting Common Stock will not be convertible in the hands of the initial holder and will only become convertible at the time it is transferred to a third party unaffiliated with such initial holder, subject to the transfer restrictions described below. Shares of Class B Non-Voting Common Stock may only be transferred by the initial holder through one or more of the following alternatives: (i) to an affiliate of the initial holder or to the Corporation, (ii) in a widely dispersed public distribution, (iii) in a private sale in which no purchaser would acquire Class A Common Stock and/or Class B Non-Voting Common Stock in an amount that, after the conversion of such Class B Non-Voting Common Stock into Class A Common Stock, is (or represents) 2% or more of a class of the Corporation’s voting securities or (iv) to a purchaser acquiring majority control of the Corporation notwithstanding such transfer.
               (i) The conversion right provided in this paragraph (d) shall be exercised by the delivery of a written notice (the “Conversion Notice” ) of the election by the holder (the “Converting Holder” ) of shares of Class B Non-Voting Common Stock to be converted to the office of the transfer agent of the Corporation (the “Transfer Agent” ) during normal business hours and (if so required by the Corporation or the Transfer Agent) an instrument of transfer, in form satisfactory to the Corporation and to the Transfer Agent, duly executed by such Converting Holder or his duly authorized attorney, and funds in the amount of any applicable transfer tax (unless provision satisfactory to the Corporation is otherwise made therefor), if required pursuant to subparagraph (iii).
               (ii) As promptly as practicable after the delivery of a Conversion Notice and the payment in cash of any amount required by the provisions of subparagraphs (i) and (iii), the Corporation will deliver or cause to be delivered at the office of the Transfer Agent to or upon the written order of the Converting Holder, a confirmation of book-entry transfer of shares representing the number of fully paid and non-assessable shares of Class A Common Stock issuable upon such conversion, issued in such name or names as the Converting Holder may direct in the Conversion Notice. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of the delivery of the Conversion Notice, and all rights of the Converting Holder shall cease with respect to such shares of Class B Non-Voting Common Stock at such time and the person or persons in whose name or names the shares of Class A Common Stock issued upon conversion shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock at such time; provided, however, that any delivery of a Conversion Notice and payment on any date when the stock transfer books of the Corporation shall be closed shall constitute the person or persons in whose name or names the shares of Class A Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer books are open.

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               (iii) The issuance of shares of Class A Common Stock upon conversion of shares of Class B Non-Voting Common Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such shares to be issued upon conversion are to be issued in a name other than that of the Converting Holder, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax that may be payable in respect of any transfer involved in such issuance, or shall establish to the satisfaction of the Corporation that such tax has been paid.
               (iv) When shares of Class B Non-Voting Common Stock have been converted, they shall be cancelled and become authorized but unissued shares of Class B Non-Voting Common Stock.
     Section 4.4 Preferred Stock . Subject to limitations prescribed by law and the provisions of this Article IV, the Board is hereby authorized to provide by resolution for the issuance of the shares of Preferred Stock in one or more series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions thereof.
     The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
               (i) the number of shares constituting such series, including any increase or decrease in the number of shares of any such series (but not below the number of shares in any such series then outstanding), and the distinctive designation of such series;
               (ii) the dividend rate on the shares of such series, if any, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of such series;
               (iii) whether the shares of such series shall have voting rights (including multiple or fractional votes per share) in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
               (iv) whether the shares of such series shall have conversion privileges, and, if so, the terms and conditions of such privileges, including provision for adjustment of the conversion rate in such events as the Board shall determine;
               (v) whether or not the shares of such series shall be redeemable or subject to repurchase, and if so, the terms and conditions of such redemption or repurchase, including the date or dates upon or after which they shall be redeemable or subject to repurchase, and the amount per share payable in case of redemption or repurchase, which amount may vary under different conditions and at different redemption or repurchase rates;

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               (vi) whether a sinking fund shall be provided for the redemption or purchase of shares of such series, and, if so, the terms and the amount of such sinking fund;
               (vii) the rights of the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of such series; and
               (viii) any other relative rights, preferences and limitations of such series.
ARTICLE V
BOARD OF DIRECTORS
     Section 5.1 Number . Except as otherwise provided for, or fixed pursuant to Section 5.2(c) or the provisions of Article IV of this Certificate of Incorporation relating to the rights of holders of any series of Preferred Stock to elect additional directors in certain circumstances, the Board shall consist of such number of directors as fixed from time to time pursuant to the Bylaws of the Corporation.
     Section 5.2 Vacancies; Removal .
          (a) Subject to the rights of the holders of any one or more series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise provided by law, be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board. Any director so chosen shall hold office until the next election of directors and until his successor shall be elected and qualified, subject to his earlier death, disqualification, resignation or removal. No decrease in the authorized number of directors shall shorten the term of any incumbent director.
          (b) Unless otherwise restricted by law, any director or the entire Board may be removed, with or without cause, by the holders of 66⅔% of the voting power of all issued and outstanding stock entitled to vote at an election of directors; except that the affirmative vote of the holders of only a majority of the voting power of all issued and outstanding Common Stock shall be required to remove a director or directors if such vote occurs at a special meeting of the stockholders called specifically to consider the removal of members of the board of directors in connection with the express remedies provided under that certain Registration Rights Agreement, to be dated on or about June 4, 2010, between FBR Capital Markets & Co. and the Corporation.
          (c) During any period when the holders of any series of Preferred Stock have the right to elect additional directors as provided for or fixed pursuant to the provisions of Article IV hereof, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of directors of the Corporation shall automatically be increased by such specified number

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of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions and (ii) each such additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his earlier death, disqualification, resignation or removal. Except as otherwise provided by the Board in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total authorized number of directors of the Corporation shall be reduced accordingly.
     Section 5.3 Powers . Except as otherwise expressly provided by the DGCL or this Certificate of Incorporation, the management of the business and the conduct of the affairs of the Corporation shall be vested in its Board.
     Section 5.4 Election .
          (a) Ballot Not Required . The directors of the Corporation need not be elected by written ballot unless the Bylaws of the Corporation so provide.
          (b) Notice . Advance notice of stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation.
ARTICLE VI
STOCKHOLDER ACTION
     Except as otherwise provided for or fixed pursuant to the provisions of Article IV of this Certificate of Incorporation relating to the rights of holders of any series of Preferred Stock, no action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting of stockholders.
ARTICLE VII
SPECIAL MEETINGS OF STOCKHOLDERS
     Except as otherwise provided for or fixed pursuant to the provisions of Article IV of this Certificate of Incorporation relating to the rights of holders of any series of Preferred Stock, a special meeting of the stockholders of the Corporation may be called at any time only by the Chairman of the Board, the Chief Executive Officer or by action of the Board. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting.

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ARTICLE VIII
EXISTENCE
     The Corporation shall have perpetual existence.
ARTICLE IX
AMENDMENT
     Section 9.1 Amendment of Certificate of Incorporation . The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights conferred herein are granted subject to this reservation; provided , however , that in addition to any requirements of law and any other provision of this Certificate of Incorporation, and notwithstanding any other provision of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of the holders of at least 66⅔% in voting power of the issued and outstanding stock entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, any provision of this Certificate of Incorporation.
     Section 9.2 Amendment of Bylaws . In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Bylaws of the Corporation may be adopted, amended or repealed by action of a majority of the Board. In addition to any requirements of law and any other provision of this Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding any other provision of this Certificate of Incorporation, the Bylaws of the Corporation or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of the holders of at least 66⅔% in voting power of the issued and outstanding stock entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to amend or repeal, or adopt any provision inconsistent with, any Bylaw of the Corporation.
ARTICLE X
LIABILITY OF DIRECTORS AND INDEMNIFICATION
     Section 10.1 No Personal Liability . To the fullest extent permitted by the DGCL as the same exists or as may hereafter be amended, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
     Section 10.2 Amendment or Repeal . Any amendment, alteration or repeal of this Article X that adversely affects any right of a director shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.
     Section 10.3 Right to Indemnification . Each person who was or is a party or is threatened to be made a party to, or was or is otherwise involved in, any action, suit,

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arbitration, alternative dispute mechanism, inquiry, judicial, administrative or legislative hearing, investigation or any other threatened, pending or completed proceeding, whether brought by or in the right of the Corporation or otherwise, including any and all appeals, whether of a civil, criminal, administrative, legislative, investigative or other nature, by reason of the fact that he or she is or was a director of the Corporation, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against all expense, liability and loss actually and reasonably incurred by such indemnitee in connection therewith.
     Section 10.4 Non-Exclusivity of Rights . The rights to indemnification conferred in this Article X shall not be exclusive of any other right which any person may have or hereafter acquire under any law, agreement, vote of stockholders or directors, provisions of the Bylaws of the Corporation, this Certificate of Incorporation or otherwise.

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     IN WITNESS WHEREOF, the undersigned corporation has caused this Restated Certificate of Incorporation to be signed by Steven F. Udvar-Házy, its Chief Executive Officer
Dated: June 3, 2010
         
  AIR LEASE CORPORATION
 
 
  By:   /s/ Steven F. Udvar-Házy    
    Name:   Steven F. Udvar-Házy    
    Title:   Chief Executive Officer   
 

Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
AIR LEASE CORPORATION
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
     Section 1.1 Registered Office . The registered office of the Corporation shall be fixed in the Restated Certificate of Incorporation of the Corporation.
     Section 1.2 Other Offices . The Corporation may also have an office or offices, and keep the books and records of the Corporation, except as may otherwise be required by law, at such other place or places, either within or without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
     Section 2.1 Annual Meeting . The annual meeting of stockholders, for the election of directors and for the transaction of such other business as may properly come before the meeting, shall be held at such place, if any, on such date, and at such time as may be determined by the Board of Directors.
     Section 2.2 Special Meeting . Subject to the rights of the holders of any series of Preferred Stock, a special meeting of the stockholders may be called at any time only by the Chairman of the Board of Directors, the Chief Executive Officer or by action of the Board of Directors.
     Section 2.3 Notice of Stockholders’ Meetings .
          (a) Notice of the place, if any, date, and time of all meetings of the stockholders, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for determining the stockholders entitled to notice of the meeting) and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given, not less than 10 nor more than 60 days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting, except as otherwise provided herein or required by law. In the case of a special meeting, the purpose or purposes for which the meeting is called also shall be set forth in the notice. Notice may be given personally, by mail or by electronic transmission in accordance with Section 232 of the General Corporation Law of the State of Delaware (the “ DGCL ”). If mailed, such

 


 

notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to each stockholder at such stockholder’s address appearing on the books of the Corporation or given by the stockholder for such purpose. Notice by electronic transmission shall be deemed given as provided in Section 232 of the DGCL. An affidavit of the mailing or other means of giving any notice of any stockholders’ meeting, executed by the Secretary, Assistant Secretary or any transfer agent of the Corporation giving the notice, shall be prima facie evidence of the giving of such notice or report. Notice shall be deemed to have been given to all stockholders of record who share an address if notice is given in accordance with the “householding” rules set forth in Rule 14a-3(e) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and Section 233 of the DGCL.
          (b) When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the place, if any, date and time thereof, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided , however , that if the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally called, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board of Directors shall fix a new record date for notice of such adjourned meeting in accordance with Section 7.7(a) of these Bylaws, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date for notice of such adjourned meeting.
          (c) Notice of any meeting of stockholders may be waived in writing, either before or after the meeting, and to the extent permitted by law, will be waived by any stockholder by attendance thereat, in person or by proxy, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.
     Section 2.4 Organization .
          (a) Meetings of stockholders shall be presided over by the Chairman of the Board of Directors, if any, or in his or her absence by a person designated by the Board of Directors, or in the absence of a person so designated by the Board of Directors, by a Chairman chosen at the meeting by the holders of a majority in voting power of the stock entitled to vote thereat, present in person or represented by proxy. The Secretary, or in his or her absence, an Assistant Secretary, or in the absence of the Secretary and all Assistant Secretaries, a person whom the Chairman of the meeting shall appoint, shall act as Secretary of the meeting and keep a record of the proceedings thereof.
          (b) The Board of Directors shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the Chairman of the meeting shall have the right and authority to prescribe such

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rules, regulations and procedures and to do all such acts as, in the judgment of such Chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies and such other persons as the Chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting and matters which are to be voted on by ballot.
     Section 2.5 List of Stockholders . The officer who has charge of the stock ledger shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, provided , however , that if the record date for determining the stockholders entitled to vote is less than 10 days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the 10th day before the meeting date. Such list shall be arranged in alphabetical order and shall show the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting at least 10 days prior to the meeting (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of meeting or (b) during ordinary business hours at the principal place of business of the Corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 2.5 or to vote in person or by proxy at any meeting of stockholders.
     Section 2.6 Quorum . At any meeting of stockholders, the holders of a majority in voting power of all issued and outstanding stock entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business; provided that where a separate vote by a class or series is required, the holders of a majority in voting power of all issued and outstanding stock of such class or series entitled to vote on such matter, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to such matter. If a quorum is not present or represented at any meeting of stockholders, then the Chairman of the meeting or the holders of a majority in voting power of the stock entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time in accordance with Section 2.7, without notice other than announcement at the meeting and except as provided in Section 2.3(b), until a quorum is present or represented. If a quorum initially is present at any meeting of stockholders, the stockholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough

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stockholders to leave less than a quorum, but if a quorum is not present at least initially, no business other than adjournment may be transacted.
     Section 2.7 Adjourned Meeting . Any annual or special meeting of stockholders, whether or not a quorum is present, may be adjourned for any reason from time to time by either the Chairman of the meeting or the holders of a majority in voting power of the stock entitled to vote thereat, present in person or represented by proxy. At any such adjourned meeting at which a quorum may be present, any business may be transacted that might have been transacted at the meeting as originally called.
     Section 2.8 Voting .
          (a) Except as otherwise provided by law or the Certificate of Incorporation, each holder of stock of the Corporation entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of such stock held of record by such holder on all matters submitted to a vote of stockholders of the Corporation.
          (b) Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders at which a quorum is present, all corporate actions to be taken by vote of the stockholders shall be authorized by the affirmative vote of the holders of a majority in voting power of the stock entitled to vote thereat, present in person or represented by proxy, and where a separate vote by class or series is required, if a quorum of such class or series is present, such act shall be authorized by the affirmative vote of the holders of a majority in voting power of the stock of such class or series entitled to vote thereat, present in person or represented by proxy.
     Section 2.9 Proxies . Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy, which may be in the form of a telegram, cablegram or other means of electronic transmission, signed by the person and filed with the Secretary of the Corporation, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy by the stockholder or the stockholder’s attorney-in-fact. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the Secretary of the Corporation. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the Corporation.
     Section 2.10 Notice of Stockholder Business and Nominations .
          (a) Annual Meeting .
          (i) Nominations of persons for election to the Board of Directors and the proposal of business other than nominations to be considered by

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the stockholders may be made at an annual meeting of stockholders only (A) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (B) by or at the direction of the Board of Directors (or any committee thereof) or (C) by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 2.10(a) is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.10(a).
          (ii) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of the foregoing paragraph, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such business must be a proper subject for stockholder action. To be timely, a stockholder’s notice must be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the date on which public announcement (as defined below) of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth:
          (A) as to each person whom the stockholder proposes to nominate for election or re-election as a director (1) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Exchange Act and (2) such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected;
          (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any substantial interest (within the meaning of Item 5 of Schedule 14A under the Exchange Act) in such business of such stockholder and the beneficial owner (within the meaning of Section 13(d) of the Exchange Act), if any, on whose behalf the proposal is made;

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          (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made or the business is proposed:
          (1) the name and address of such stockholder, as they appear on the Corporation’s books, and the name and address of such beneficial owner,
          (2) the class and number of shares of capital stock of the Corporation which are owned of record by such stockholder and such beneficial owner as of the date of the notice, and a representation that the stockholder will notify the Corporation in writing, within five business days after the record date for such meeting, of the class and number of shares of capital stock of the Corporation owned of record by the stockholder and such beneficial owner as of the record date for the meeting (except as otherwise provided in Section 2.10(a)(iii) below), and
          (3) a representation that the stockholder intends to appear in person or by proxy at the meeting to propose such nomination or business;
          (D) as to the stockholder giving the notice or, if the notice is given on behalf of a beneficial owner on whose behalf the nomination is made or the business is proposed, as to such beneficial owner:
          (1) the class and number of shares of capital stock of the Corporation which are beneficially owned (as defined below) by such stockholder or beneficial owner as of the date of the notice, and a representation that the stockholder will notify the Corporation in writing, within five business days after the record date for such meeting, of the class and number of shares of capital stock of the Corporation beneficially owned by such stockholder or beneficial owner as of the record date for the meeting (except as otherwise provided in Section 2.10(a)(iii) below),
          (2) a description of any agreement, arrangement or understanding with respect to the nomination or other business between or among such stockholder or beneficial owner and any other person, including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of Exchange Act Schedule 13D (regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder or beneficial owner) and a representation that the stockholder will notify the Corporation in writing, within five business days after the record date for such meeting, of any such agreement, arrangement or

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understanding in effect as of the record date for the meeting (except as otherwise provided in Section 2.10(a)(iii) below),
          (3) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder’s notice by, or on behalf of, such stockholder or beneficial owner, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class of the Corporation’s capital stock, or maintain, increase or decrease the voting power of the stockholder or beneficial owner with respect to shares of stock of the Corporation, and a representation that the stockholder will notify the Corporation in writing within five business days after the record date for such meeting of any such agreement, arrangement or understanding in effect as of the record date for the meeting (except as otherwise provided in Section 2.10(a)(iii) below), and
          (4) a representation whether the stockholder or the beneficial owner, if any, will engage in a solicitation with respect to the nomination or business and, if so, the name of each participant (as defined in Item 4 of Schedule 14A under the Exchange Act) in such solicitation and whether such person intends or is part of a group which intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the business to be proposed (in person or by proxy) by the stockholder.
          (iii) The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation, including information relevant to a determination whether such proposed nominee can be considered an independent director. Notwithstanding anything in Section 2.10(a)(ii) above to the contrary, if the record date for determining the stockholders entitled to vote at any meeting of stockholders is different from the record date for determining the stockholders entitled to notice of the meeting, a stockholder’s notice required by this Section 2.10(a) shall set forth a representation that the stockholder will notify the Corporation in writing within five business days after the record date for determining the stockholders entitled to vote at the meeting, or by the opening of business on the date of the meeting (whichever is earlier), of the information required under clauses (a)(ii)(C)(2) and (a)(ii)(D)(1)-(3) of this Section 2.10, and such information when provided to the Corporation shall be current as of the record date for determining the stockholders entitled to vote at the meeting.

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          (iv) This Section 2.10(a) shall not apply to a proposal or nomination proposed to be made by a stockholder if the stockholder has notified the Corporation of his or her intention to present the proposal or nomination at an annual or special meeting only pursuant to and in compliance with Rule 14a-8 under the Exchange Act or any other rule promulgated under Section 14 of the Exchange Act and such proposal or nominee has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such meeting.
          (v) Notwithstanding anything in this Section 2.10(a) to the contrary, in the event that the number of directors to be elected to the Board of Directors at an annual meeting is increased and there is no public announcement naming all of the nominees for directors or specifying the size of the increased Board of Directors made by the Corporation at least 90 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 2.10(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.
          (b) Special Meeting . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board of Directors (or any committee thereof) or (ii) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 2.10(b) is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 2.10. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the notice required by paragraph (a)(ii) of this Section 2.10 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

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          (c) General .
          (i) Except as otherwise provided by law, only such persons who are nominated in accordance with the procedures set forth in this Section 2.10 shall be eligible to be elected at any meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.10. The Chairman of the Board of Directors shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 2.10 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in compliance with such stockholder’s representation as required by clause (a)(ii)(D)(4) of this Section 2.10). If any proposed nomination or business was not made or proposed in compliance with this Section 2.10, then except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.10, unless otherwise required by law, if the stockholder does not provide the information required under clauses (a)(ii)(C)(2) and (a)(ii)(D)(1)-(3) of this Section 2.10 to the Corporation within the times frames specified herein, or if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.10, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or authorized by a writing executed by such stockholder (or a reliable reproduction or electronic transmission of the writing) delivered to the Corporation prior to the making of such nomination or proposal at such meeting by such stockholder stating that such person is authorized to act for such stockholder as proxy at the meeting of stockholders.
          (ii) For purposes of this Section 2.10, a “ public announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act. For purposes of clause (a)(ii)(D)(1) of this Section 2.10, shares shall be treated as “ beneficially owned ” by a person if the person beneficially owns such shares, directly or indirectly, for purposes of Section 13(d) of the Exchange Act and Regulations 13D and 13G thereunder or has or shares pursuant to any agreement, arrangement or understanding (whether or not in writing): (A) the right to acquire such shares (whether such right is exercisable immediately or only after the passage of time or the fulfillment of a condition or both), (B) the right to vote such shares, alone or in concert with others and/or

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(C) investment power with respect to such shares, including the power to dispose of, or to direct the disposition of, such shares.
          (iii) Nothing in this Section 2.10 shall be deemed to affect any rights of the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.
     Section 2.11 No Action by Written Consent . Subject to the rights of the holders of any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly held meeting of stockholders of the Corporation at which a quorum is present or represented, and may not be effected by any consent in writing by such stockholders.
     Section 2.12 Inspectors of Election . Before any meeting of stockholders, the Board of Directors shall appoint one or more inspectors of election to act at the meeting or its adjournment. If any person appointed as inspector fails to appear or fails or refuses to act, then the Chairman of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy. Inspectors need not be stockholders. No director or nominee for the office of director shall be appointed such an inspector.
     Such inspectors shall:
          (a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
          (b) receive votes, ballots or consents;
          (c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
          (d) count and tabulate all votes or consents;
          (e) determine when the polls shall close;
          (f) determine the result; and
          (g) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.
     The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. Any report or certificate made by the inspectors of election shall be prima facie evidence of the facts stated therein.
     Section 2.13 Meetings by Remote Communications . The Board of Directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication in accordance

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with Section 211(a)(2) of the DGCL. If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication (a) participate in a meeting of stockholders and (b) be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder; (ii) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings; and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.
ARTICLE III
DIRECTORS
     Section 3.1 Powers . Subject to the provisions of the DGCL and to any limitations in the Certificate of Incorporation or these Bylaws relating to action required to be approved by the stockholders, the business and affairs of the Corporation shall be managed and shall be exercised by or under the direction of the Board of Directors. In addition to the powers and authorities these Bylaws expressly confer upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these Bylaws required to be exercised or done by the stockholders.
     Section 3.2 Number, Term of Office and Election .
          (a) The Board of Directors shall consist of such number of directors as determined from time to time by resolution of the Board of Directors. With the exception of the first Board of Directors, which shall be elected by the incorporator, and except as provided in Section 3.2(b) and Section 3.3, directors shall be elected by a majority of the shares present and entitled to vote at the stockholders’ annual meeting in each year. Directors need not be stockholders unless so required by the Certificate of Incorporation or these Bylaws, wherein other qualifications for directors may be prescribed.
          (b) A nominee for directors shall be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election; provided , however , that directors shall be elected by a plurality of the votes cast at any meeting of stockholders for which (i) the Secretary of the Corporation receives notices that a stockholder has nominated a person for election to the Board of Directors in compliance with the advance notice requirements for stockholder nominees set forth in Section 2.10(a)(ii) of these Bylaws and (ii) such nomination has not been withdrawn by such stockholder on or prior to the day next preceding the date the Corporation first mails

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its notice of meeting for such meeting to the stockholders. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against a nominee.
     Section 3.3 Vacancies . Subject to the rights of the holders of any one or more series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise provided by law or by resolution of the Board of Directors, be filled solely by the affirmative vote of a majority of the remaining directors then in office, though less than a quorum, and directors so chosen shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor shall be elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.
     Section 3.4 Resignations and Removal . Any director may resign at any time upon notice given in writing or by electronic transmission to the Board of Directors, the Chairman of the Board of Directors or the Secretary. Such resignation shall take effect at the time specified in such notice or, if the time be not specified, upon receipt thereof by the Board of Directors, the Chairman of the Board of Directors or the Secretary, as the case may be. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Unless otherwise restricted by law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of 66 2 / 3 % of the voting power of all issued and outstanding stock entitled to vote at an election of directors; except that the affirmative vote of the holders of only a majority of the voting power of all issued and outstanding Common Stock shall be required to remove a director or directors if such vote occurs at a special meeting of the stockholders called specifically to consider the removal of members of the board of directors in connection with the express remedies provided under that certain Registration Rights Agreement, dated on or about June 4, 2010, between FBR Capital Markets & Co. and the Corporation.
     Section 3.5 Regular Meetings . Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates and at such time or times, as shall have been established by the Board of Directors and publicized among all directors; provided that no fewer than one regular meeting per year shall be held. A notice of each regular meeting shall not be required.
     Section 3.6 Special Meetings . Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the Chairman of the Board of Directors, the Chief Executive Officer or a majority of the Board of Directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of such meetings. Notice of each such meeting shall be given to each director, if by mail, addressed to such director as his or her residence or usual place of business, at least five days before the day on which such meeting is to be held, or shall be sent to such director at such place by telecopy, telegraph, electronic transmission or other form of recorded communication, or be delivered personally or by telephone, in each case at least 24 hours prior to the time set for such meeting. Notice of any meeting need not be given to director who shall, either before or after the meeting, submit a waiver of

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such notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to such director. A notice of special meeting need not state the purpose of such meeting, and, unless indicated in the notice thereof, any and all business may be transacted at a special meeting.
     Section 3.7 Participation in Meetings by Conference Telephone . Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board of Directors or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting.
     Section 3.8 Quorum . Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, a majority of the authorized number of directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, and the vote of a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the Board of Directors. The Chairman of the meeting or a majority of the directors present may adjourn the meeting to another time and place whether or not a quorum is present. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. If a quorum initially is present at any meeting of directors, the directors may continue to transact business, notwithstanding the withdrawal of enough directors to leave less than a quorum, upon resolution of at least a majority of the required quorum for that meeting prior to the loss of such quorum.
     Section 3.9 Board of Directors Action by Written Consent Without a Meeting . Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, provided that all members of the Board of Directors consent in writing or by electronic transmission to such action, and the writing or writings or electronic transmission or transmissions are filed with the minutes or proceedings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Such action by written consent shall have the same force and effect as a unanimous vote of the Board of Directors.
     Section 3.10 Chairman of the Board . The Chairman of the Board shall preside at meetings of stockholders and directors and shall perform such other duties as the Board of Directors may from time to time determine. If the Chairman of the Board is not present at a meeting of the Board of Directors, another director chosen by the Board of Directors shall preside.
     Section 3.11 Rules and Regulations . The Board of Directors shall adopt such rules and regulations not inconsistent with the provisions of law, the Certificate of Incorporation or these Bylaws for the conduct of its meetings and management of the affairs of the Corporation as the Board of Directors shall deem proper.
     Section 3.12 Fees and Compensation of Directors . Directors and members of committees may receive such compensation, if any, for their services and such

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reimbursement of expenses as may be fixed or determined by resolution of the Board of Directors.
     Section 3.13 Emergency Bylaws . In the event of any emergency, disaster or catastrophe, as referred to in Section 110 of the DGCL, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a standing committee of the Board of Directors cannot readily be convened for action, then the director or directors in attendance at the meeting shall constitute a quorum. Such director or directors in attendance may further take action to appoint one or more of themselves or other directors to membership on any standing or temporary committees of the Board of Directors as they shall deem necessary and appropriate.
ARTICLE IV
COMMITTEES
     Section 4.1 Committees of the Board of Directors . The Board of Directors may, by resolution, designate one or more committees, including but not limited to an Executive Committee and an Audit Committee, each such committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee to replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation. All committees of the Board of Directors shall keep minutes of their meetings and shall report their proceedings to the Board of Directors when requested or required by the Board of Directors.
     Section 4.2 Meetings and Action of Committees . Any committee of the Board of Directors may adopt such rules and regulations not inconsistent with the provisions of law, the Certificate of Incorporation or these Bylaws for the conduct of its meetings as such committee may deem proper.
ARTICLE V
OFFICERS
     Section 5.1 Officers . The officers of the Corporation shall consist of a Chief Executive Officer, a Chief Financial Officer, a President, one or more Executive Vice Presidents, Senior Vice Presents, or Vice Presidents, a Secretary, a Treasurer and such

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other officers as the Board of Directors may from time to time determine, each of whom shall be elected by the Board of Directors, each to have such authority, functions or duties as set forth in these Bylaws or as determined by the Board of Directors. Each officer shall be chosen by the Board of Directors and shall hold office for such term as may be prescribed by the Board of Directors and until such person’s successor shall have been duly chosen and qualified, or until such person’s earlier death, disqualification, resignation or removal. Any two of such offices may be held by the same person; provided , however , that no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law, the Certificate of Incorporation or these Bylaws to be executed, acknowledged or verified by two or more officers.
     Section 5.2 Compensation . The salaries of the officers of the Corporation and the manner and time of the payment of such salaries shall be fixed and determined by the Board of Directors and may be altered by the Board of Directors from time to time as it deems appropriate, subject to the rights, if any, of such officers under any contract of employment.
     Section 5.3 Removal, Resignation and Vacancies . Any officer of the Corporation may be removed, with or without cause, by the Board of Directors, without prejudice to the rights, if any, of such officer under any contract to which it is a party. Any officer may resign at any time upon written notice to the Corporation, without prejudice to the rights, if any, of the Corporation under any contract to which such officer is a party. If any vacancy occurs in any office of the Corporation, the Board of Directors may elect a successor to fill such vacancy for the remainder of the unexpired term and until a successor shall have been duly chosen and qualified.
     Section 5.4 Chief Executive Officer . The Chief Executive Officer shall have general supervision and direction of the business and affairs of the Corporation, shall be responsible for corporate policy and strategy, and shall report directly to the Board of Directors. Unless otherwise provided in these Bylaws, all other officers of the Corporation shall report directly to the Chief Executive Officer or as otherwise determined by the Chief Executive Officer. The Chief Executive Officer shall, if present and in the absence of the Chairman of the Board of Directors, preside at meetings of the stockholders and of the Board of Directors.
     Section 5.5 President . The President shall be the Chief Operating Officer of the Corporation, with general responsibility for the management and control of the operations of the Corporation. The President shall have the power to affix the signature of the Corporation to all contracts that have been authorized by the Board of Directors. The President shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Board of Directors.
     Section 5.6 Chief Financial Officer . The Chief Financial Officer shall exercise all the powers and perform the duties of the office of the chief financial officer and in general have overall supervision of the financial operations of the Corporation. The Chief Financial Officer shall, when requested, counsel with and advise the other officers of the

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Corporation and shall perform such other duties as the Board of Directors may from time to time determine.
     Section 5.7 Executive Vice Presidents, Senior Vice Presidents and Vice Presidents . The Executive Vice President, Senior Vice President and/or the Vice President shall have such powers and duties as shall be prescribed by his or her superior officer or the Chief Executive Officer. The Executive Vice President, Senior Vice President and/or the Vice President shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer or as the Board of Directors may from time to time determine.
     Section 5.8 Treasurer . The Treasurer shall supervise and be responsible for all the funds and securities of the Corporation, the deposit of all moneys and other valuables to the credit of the Corporation in depositories of the Corporation, borrowings and compliance with the provisions of all indentures, agreements and instruments governing such borrowings to which the Corporation is a party, the disbursement of funds of the Corporation and the investment of its funds, and in general shall perform all of the duties incident to the office of the Treasurer. The Treasurer shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer or as the Board of Directors may from time to time determine.
     Section 5.9 Controller . The Controller shall be the Chief Accounting Officer of the Corporation. The Controller shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer, or the President, or as the Board of Directors may from time to time determine.
     Section 5.10 Secretary . The powers and duties of the Secretary are: (i) to act as Secretary at all meetings of the Board of Directors, of the committees of the Board of Directors and of the stockholders and to record the proceedings of such meetings in a book or books to be kept for that purpose; (ii) to see that all notices required to be given by the Corporation are duly given and served; (iii) to act as custodian of the seal of the Corporation and affix the seal or cause it to be affixed to all certificates of stock of the Corporation and to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these Bylaws; (iv) to have charge of the books, records and papers of the Corporation and see that the reports, statements and other documents required by law to be kept and filed are properly kept and filed; and (v) to perform all of the duties incident to the office of Secretary. The Secretary shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer or as the Board of Directors may from time to time determine.
     Section 5.11 Additional Matters . The Chief Executive Officer and the President of the Corporation shall have the authority to designate employees of the Corporation to have the title of Executive Vice President, Senior Vice President, Vice President, Assistant Vice President, Assistant Treasurer or Assistant Secretary. Any employee so designated

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shall have the powers and duties determined by the officer making such designation. The persons upon whom such titles are conferred shall not be deemed officers of the Corporation unless elected by the Board of Directors.
     Section 5.12 Checks; Drafts; Evidences of Indebtedness . From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes, bonds, debentures or other evidences of indebtedness that are issued in the name of or payable by the Corporation, and only the persons so authorized shall sign or endorse such instruments.
     Section 5.13 Corporate Contracts and Instruments; How Executed . Except as otherwise provided in these Bylaws, the Board of Directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
     Section 5.14 Action with Respect to Securities of Other Corporations . The Chief Executive Officer or any other officer of the Corporation authorized by the Board of Directors or the Chief Executive Officer is authorized to vote, represent, and exercise on behalf of the Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the Corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by the person having such authority.
ARTICLE VI
INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
     Section 6.1 Right to Indemnification . Each person who was or is a party or is threatened to be made a party to, or was or is otherwise involved in, any action, suit, arbitration, alternative dispute mechanism, inquiry, judicial, administrative or legislative hearing, investigation or any other threatened, pending or completed proceeding, whether brought by or in the right of the Corporation or otherwise, including any and all appeals, whether of a civil, criminal, administrative, legislative, investigative or other nature (hereinafter a “ proceeding ”), by reason of the fact that he or she is or was a director or an officer of the Corporation or, while a director, officer, employee, agent, or trustee of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “ indemnitee ”), or by reason of anything done or not done by him or her in any such capacity, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys’ fees, judgments, fines, Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”) excise taxes or penalties and amounts paid in settlement by or on behalf of the indemnitee) actually and reasonably

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incurred by such indemnitee in connection therewith; provided , however , that, except as otherwise required by law or provided in Section 6.3 with respect to proceedings to enforce rights under this Article VI, the Corporation shall indemnify any such indemnitee in connection with a proceeding, or part thereof, initiated by such indemnitee (including claims and counterclaims, whether such counterclaims are asserted by (i) such indemnitee, or (ii) the Corporation in a proceeding initiated by such indemnitee) only if such proceeding, or part thereof, was authorized or ratified by the Board of Directors.
     Section 6.2 Right to Advancement of Expenses . In addition to the right to indemnification conferred in Section 6.1, an indemnitee shall, to the fullest extent not prohibited by law, also have the right to be paid by the Corporation the expenses (including attorneys’ fees) incurred in defending any proceeding with respect to which indemnification is required under Section 6.1 in advance of its final disposition (hereinafter an “ advancement of expenses ”); provided, , however , that an advancement of expenses shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “ undertaking ”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision of a court of competent jurisdiction from which there is no further right to appeal (hereinafter a “ final adjudication ”) that such indemnitee is not entitled to be indemnified for such expenses under this Section 6.2 or otherwise.
     Section 6.3 Right of Indemnitee to Bring Suit . If a request for indemnification under Section 6.1 is not paid in full by the Corporation within 60 days, or if a request for an advancement of expenses under Section 6.2 is not paid in full by the Corporation within 20 days, after a written request has been received by the Corporation, the indemnitee may at any time thereafter bring suit against the Corporation in a court of competent jurisdiction in the State of Delaware seeking an adjudication of entitlement to such indemnification or advancement of expenses. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit to the fullest extent permitted by law. In any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the indemnitee has not met any applicable standard of conduct for indemnification set forth in the DGCL. Further, in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met any applicable standard of conduct for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a

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suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI or otherwise shall be on the Corporation.
     Section 6.4 Non-Exclusivity of Rights . The rights to indemnification and to the advancement of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any law, agreement, vote of stockholders or directors, provisions of the Certificate of Incorporation or these Bylaws or otherwise.
     Section 6.5 Insurance . The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.
     Section 6.6 Indemnification of Employees and Agents of the Corporation . The Corporation may, to the extent authorized from time to time, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VI with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.
     Section 6.7 Nature of Rights . The rights conferred upon indemnitees in this Article VI shall be contract rights that shall vest at the time an individual becomes a director or officer of the Corporation and such rights shall continue as to an indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the indemnitee’s heirs, executors and administrators. Any amendment, alteration or repeal of this Article VI that adversely affects any right of an indemnitee or its successors shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment, alteration or repeal.
     Section 6.8 Settlement of Claims . The Corporation shall not be liable to indemnify any indemnitee under this Article VI for any amounts paid in settlement of any proceeding effected without the Corporation’s written consent, which consent shall not be unreasonably withheld, or for any judicial award if the Corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such proceeding.
     Section 6.9 Subrogation . In the event of payment under this Article VI, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation effectively to bring suit to enforce such rights.

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     Section 6.10 Severability . If any provision or provisions of this Article VI shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Article VI (including, without limitation, all portions of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable, that are not by themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Article VI (including, without limitation, all portions of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent of the parties that the Corporation provide protection to the indemnitee to the fullest enforceable extent.
ARTICLE VII
CAPITAL STOCK
     Section 7.1 Certificates of Stock . The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation certifying the number of shares owned by such holder in the Corporation. Any or all such signatures may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
     Section 7.2 Special Designation on Certificates . If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided , however , that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this Section 7.2 or Section 156, 202(a) or 218(a) of the DGCL or with respect to this Section 7.2 a statement that the Corporation

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will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
     Section 7.3 Transfers of Stock . Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation upon authorization by the registered holder thereof or by such holder’s attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary or a transfer agent for such stock, and if such shares are represented by a certificate, upon surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of any taxes thereon; provided , however , that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer.
     Section 7.4 Lost Certificates . The Corporation may issue a new share certificate or new certificate for any other security in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate or the owner’s legal representative to give the Corporation a bond (or other adequate security) sufficient to indemnify it against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. The Board of Directors may adopt such other provisions and restrictions with reference to lost certificates, not inconsistent with applicable law, as it shall in its discretion deem appropriate.
     Section 7.5 Addresses of Stockholders . Each stockholder shall designate to the Secretary an address at which notices of meetings and all other corporate notices may be served or mailed to such stockholder and, if any stockholder shall fail to so designate such an address, corporate notices may be served upon such stockholder by mail directed to the mailing address, if any, as the same appears in the stock ledger of the Corporation or at the last known mailing address of such stockholder.
     Section 7.6 Registered Stockholders . The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.
     Section 7.7 Record Date for Determining Stockholders .
          (a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record

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date shall, unless otherwise required by law, not be more than 60 nor less than 10 days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
          (b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than 60 days prior to such other action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
     Section 7.8 Regulations . The Board of Directors may make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of shares of stock of the Corporation.
ARTICLE VIII
GENERAL MATTERS
     Section 8.1 Fiscal Year . The fiscal year of the Corporation shall begin on the first day of January of each year and end on the last day of December of the same year, or such other 12 consecutive months as the Board of Directors may designate.
     Section 8.2 Corporate Seal . The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.
     Section 8.3 Maintenance and Inspection of Records . The Corporation shall, either at its principal executive office or at such place or places as designated by the Board of Directors, keep a record of its stockholders listing their names and addresses and the

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number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books and other records.
     Section 8.4 Reliance Upon Books, Reports and Records . Each director and each member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
     Section 8.5 Subject to Law and Certificate of Incorporation . All powers, duties and responsibilities provided for in these Bylaws, whether or not explicitly so qualified, are qualified by the Certificate of Incorporation and applicable law.
ARTICLE IX
AMENDMENTS
     Section 9.1 Amendments . In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to adopt, amend or repeal these Bylaws. In addition to any requirements of law and any other provision of these Bylaws or the Certificate of Incorporation, and notwithstanding any other provision of these Bylaws, the Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of the holders of at least 66 2 / 3 % in voting power of the issued and outstanding stock entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to amend or repeal, or adopt any provision inconsistent with, any provision of these Bylaws.
     The foregoing Bylaws were adopted by the Board of Directors on April 29, 2010, and are effective as of June 4, 2010.

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CERTIFICATE OF SECRETARY
I, the undersigned, hereby certify:
1.   That I am the duly elected, qualified and acting Secretary of Air Lease Corporation.
 
2.   That the foregoing Bylaws of said corporation were duly adopted as the Bylaws thereof by action of the Board of Directors of said corporation on April 29, 2010, and are effective as of June 4, 2010, and that the same do now constitute the Bylaws of said corporation.
Executed this 4 th day of June, 2010.
         
     
  /s/ Grant Levy    
  Grant Levy   
  Secretary   
 

 

Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “ Agreement ”) is made and entered into as of June 4, 2010, between AIR LEASE CORPORATION , a Delaware corporation (together with any successor entity thereto, the “ Company ”), and FBR CAPITAL MARKETS & CO. , a Delaware corporation, as the initial purchaser/placement agent (“ FBR ”), for the benefit of FBR, the holders of the Company’s Class A Common Stock, $0.01 par value per share, and Class B Non-Voting Common Stock, par value $0.01 per share (“ Common Stock ”), as participants (“ Participants ”) in private placements by the Company of shares of its Common Stock (or debt obligations of the Company convertible into the Company’s Common Stock) consummated on or prior to the date hereof, pursuant to the Purchase/Placement Agreement (as defined below), pursuant to the Warrants (as defined below), pursuant to the Subscription Agreements (as defined below) or pursuant to the Convertible Notes (as defined below), and the direct and indirect transferees of FBR and each of the Participants.
This Agreement is made pursuant to the Purchase/Placement Agreement (the “ Purchase/Placement Agreement ”), dated as of June 1, 2010, between the Company and FBR in connection with the purchase and sale or placement of an aggregate of 40,500,000 shares of Common Stock (plus an additional 10,000,000 shares to cover additional allotments, if any). In order to induce FBR to enter into the Purchase/Placement Agreement, the Company has agreed to provide the registration rights provided for in this Agreement to FBR, the Participants, and their respective direct and indirect transferees. The execution of this Agreement is a condition to the closing of the transactions contemplated by the Purchase/Placement Agreement.
The parties hereby agree as follows:
1.   Definitions
As used in this Agreement, the following terms shall have the following meanings:
Accredited Investor Shares : Shares initially sold by the Company to “accredited investors” (within the meaning of Rule 501(a) promulgated under the Securities Act) as Participants.
Affiliate : As to any specified Person, (i) any other Person directly or indirectly owning, controlling or holding, with power to vote, ten percent or more of the outstanding voting securities of such specified Person, (ii) any other Person, ten percent or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with power to vote, by such specified Person, (iii) any other Person directly or indirectly controlling, controlled by or under common control with such specified Person, (iv) any executive officer, director, trustee or general partner of such Person and (v) any legal entity for which such specified Person acts as an executive officer, director, trustee or general partner. A Person’s indirect relationship with such specified Person shall include circumstances in which such Person’s spouse, children, parents, siblings or mother, father, sister- or brother-in-law is or has the described relationship with such specified Person.
Agreement : As defined in the preamble.
Board of Directors : As defined in Section 3(b) hereof.

 


 

Business Day : With respect to any act to be performed hereunder, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York or other applicable places where such act is to occur are authorized or obligated by applicable law, regulation or executive order to close.
Closing Date : June 4, 2010 or such other time or such other date as FBR and the Company may agree.
Commission : The Securities and Exchange Commission.
Common Stock : As defined in the preamble.
Company : As defined in the preamble.
Controlling Person : As defined in Section 7(a) hereof.
Convertible Notes : The convertible notes (and other debt obligations) issued by the Company on or prior to the date hereof that are convertible into Common Stock of the Company.
CUSIP : Committee on Uniform Securities Identification Procedures.
End of Suspension Notice : As defined in Section 6(b) hereof.
Exchange Act : The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission pursuant thereto.
FBR : As defined in the preamble.
FINRA : The Financial Industry Regulatory Authority, Inc., formerly the National Association of Securities Dealers, Inc.
Holder : Each record owner of any Registrable Shares from time to time, including FBR and its Affiliates to the extent FBR or any such Affiliate holds any Registrable Shares.
Indemnified Party : As defined in Section 7(c) hereof.
Indemnifying Party : As defined in Section 7(c) hereof.
IPO Registration Statement : As defined in Section 2(b) hereof.
Issuer Free Writing Prospectus : As defined in Section 2(c) hereof.
Liabilities : As defined in Section 7(a) hereof.
No Objections Letter : As defined in Section 5(t) hereof.
Nominee : As defined in Section 3(c) hereof.

 


 

Other Placement Shares : Any shares of Common Stock issued by the Company on or prior to the date hereof (including shares of Common Stock issuable upon the conversion of the Convertible Notes) in a transaction exempt from registration under the Securities Act other than shares offered and sold pursuant to the Purchase/Placement Agreement.
Participants : As defined in the preamble.
Person : An individual, partnership, limited liability company, corporation, trust, unincorporated organization, government or agency or political subdivision thereof, or any other legal entity.
Proceeding : An action (including a class action), claim, suit, demand, arbitration or proceeding (including without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or, to the knowledge of the Person subject thereto, threatened.
Prospectus : The prospectus included in any Registration Statement, including any preliminary prospectus at the “time of sale” within the meaning of Rule 159 under the Securities Act and all other amendments and supplements to any such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference, if any, in such prospectus.
Purchase/Placement Agreement : As defined in the preamble.
Purchaser Indemnitee : As defined in Section 7(a) hereof.
Registrable Shares : The Rule 144A Shares, the Accredited Investor Shares, the Regulation S Shares, the Warrant Shares and the Other Placement Shares, upon original issuance thereof, and at all times subsequent thereto, including upon the transfer thereof by the original holder or any subsequent holder and any shares or other securities issued in respect of such Registrable Shares by reason of or in connection with any stock dividend, stock distribution, stock split, purchase in any rights offering or in connection with any exchange for or replacement of such Registrable Shares or any combination of shares, recapitalization, merger or consolidation, or any other equity securities issued pursuant to any other pro rata distribution with respect to the Common Stock, until, in the case of any such Rule 144A Share, Accredited Investor Share, Regulation S Share, Warrant Share or Other Placement Share, the earliest to occur of (i) the date on which the resale of such share has been registered pursuant to the Securities Act and it has been disposed of in accordance with the Registration Statement relating to it, (ii) in the event the Company is subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, the date on which it has been transferred pursuant to Rule 144 (or any similar provision then in effect) or is freely saleable by its Holder pursuant to Rule 144 without any restrictions (such as volume or manner of sale restrictions and current public information requirements) under Rule 144 and are listed or included on the New York Stock Exchange or The Nasdaq Global Market or on an alternative trading system and qualified under the applicable state securities or “blue sky” laws of all 50 states or (iii) the date on which it is sold to the Company.
Registration Default : As defined in Section 2(f) hereof.
Registration Expenses : Any and all expenses incident to the performance of or compliance with this Agreement, including, without limitation: (i) all Commission, securities exchange, and

 


 

FINRA registration, listing, inclusion and filing fees; (ii) all fees and expenses incurred in connection with compliance with international, federal or state securities or blue sky laws (including, without limitation, any registration, listing and filing fees and fees and disbursements of counsel in connection with blue sky qualification of any of the Registrable Shares and the preparation of a blue sky memorandum and compliance with the rules of FINRA); (iii) all expenses in preparing or assisting in preparing, word processing, duplicating, printing, delivering and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, agreements among underwriters, securities sales agreements, certificates and any other documents relating to the performance under and compliance with this Agreement; (iv) all fees and expenses incurred in connection with the listing or inclusion of any of the Registrable Shares on any securities exchange pursuant to Section 5(n) of this Agreement; (v) the fees and disbursements of counsel for the Company and of the independent registered public accounting firm of the Company (including, without limitation, the expenses of any special audit and “cold comfort” letters required by or incident to the performance of this Agreement); (vi) reasonable fees and disbursements of one counsel, reasonably acceptable to the Company, for the Holders, selected by the Holders holding a majority of the Registrable Shares to be included in the Registration Statement (such counsel, “ Selling Holders’ Counsel ”); and (vii) any fees and disbursements customarily paid in issues and sales of securities (including the fees and expenses of any experts retained by the Company in connection with any Registration Statement); provided , however , that Registration Expenses shall exclude brokers’ or underwriters’ discounts and commissions, fees and expenses of counsel to underwriters or brokers, transfer taxes and transfer fees, if any, relating to the sale or disposition of Registrable Shares by a Holder.
Registration Statement : Any registration statement of the Company that covers the resale of Registrable Shares pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement.
Regulation S : Regulation S (Rules 901-905) promulgated by the Commission under the Securities Act, as such rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such regulation.
Regulation S Shares : Shares initially resold by FBR pursuant to the Purchase/Placement Agreement to “non-U.S. persons” (in accordance with Regulation S) in an “ offshore transaction ” (in accordance with Regulation S).
Rule 144 : Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.
Rule 144A : Rule 144A promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

 


 

Rule 144A Shares : Shares initially resold by FBR pursuant to the Purchase/Placement Agreement to “qualified institutional buyers” (as such term is defined in Rule 144A).
Rule 158 : Rule 158 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.
Rule 159 : Rule 159 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.
Rule 405 : Rule 405 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.
Rule 415 : Rule 415 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.
Rule 424 : Rule 424 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.
Rule 429 : Rule 429 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.
Rule 433 : Rule 433 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.
Securities Act : The Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission thereunder.
Selling Holders’ Counsel : As defined in clause (vi) of the definition for Registration Expenses.
Shelf Registration Statement : As defined in Section 2(a) hereof.
Special Election Meeting : As defined in Section 3(a) hereof.
Subscription Agreements : The subscription agreements entered into by the Company on or prior to the date hereof, including with Ares Management LLC (and/or its affiliates) and Green Equity Investors V, L.P. (and/or its affiliates).
Suspension Event : As defined in Section 6(b) hereof.
Suspension Notice : As defined in Section 6(b) hereof.

 


 

Trigger Date : As defined in Section 3(a) hereof.
Underwritten Offering : A sale of securities of the Company to an underwriter or underwriters for re-offering to the public.
Warrants : Warrants to acquire shares of Common Stock issued on or about the date hereof to an affiliate of Société Générale and to the Commonwealth Bank of Australia.
Warrant Shares : Shares of Common Stock issuable upon the exercise of the Warrants.
2.   Registration Rights
  (a)   Mandatory Shelf Registration . As set forth in Section 5 hereof, the Company agrees to file with the Commission as soon as reasonably practicable following completion of the audited financial statements for the fiscal year ended December 31, 2010 (but in no event later than April 30, 2011) a shelf Registration Statement on Form S-1 or such other form under the Securities Act then available to the Company providing for the resale of any Registrable Shares pursuant to Rule 415 from time to time by the Holders (a “ Shelf Registration Statement ”). The Company shall (i) use its commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission as soon as practicable after the initial filing thereof and (ii) use its commercially reasonable efforts to arrange for the Registrable Shares to be listed for trading on a nationally recognized securities exchange on or prior to the date the Commission declares such Shelf Registration Statement effective. Any Shelf Registration Statement shall provide for the resale from time to time, and pursuant to any method or combination of methods legally available (including, without limitation, an Underwritten Offering, a direct sale to purchasers or a sale through brokers or agents, which may include sales over the internet), by the Holders of any and all Registrable Shares, as reasonably requested by such Holders. In the case of an Underwritten Offering (other than an Underwritten Offering conducted pursuant to Section 2(b) below), the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Shares included in such offering; provided , however , that such investment banker or investment bankers and manager or managers must be reasonably acceptable to the Company.
 
  (b)   IPO Registration . If the Company proposes to file with the Commission a registration statement on Form S-1 or such other form under the Securities Act providing for the initial public offering of shares of Common Stock (for the avoidance of doubt, excluding any Shelf Registration Statement) (the “ IPO Registration Statement ”), the Company will notify in writing each Holder of the filing within five Business Days after the initial filing and afford each Holder an opportunity to include in the IPO Registration Statement all or any part of the Registrable Shares then held by such Holder. Each Holder desiring to include in the IPO Registration Statement all or part of the Registrable Shares held by such Holder shall, within 20 days after receipt of the above-described notice from the

 


 

      Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Shares such Holder wishes to include in the IPO Registration Statement. Any election by any Holder to include any Registrable Shares in the IPO Registration Statement will not affect the inclusion of such Registrable Shares in the Shelf Registration Statement until such Registrable Shares have been sold under the IPO Registration Statement.
  (i)   Right to Terminate IPO Registration . The Company shall have the right to terminate or withdraw the IPO Registration Statement initiated by it and referred to in this Section 2(b) prior to the effectiveness of such registration whether or not any Holder has elected to include Registrable Shares in such registration; provided , however , the Company must provide each Holder that elected to include any Registrable Shares in such IPO Registration Statement prompt written notice of such termination or withdrawal. Furthermore, in the event the IPO Registration Statement is not declared effective within 180 days following the initial filing of the IPO Registration Statement, unless a road show for the Underwritten Offering pursuant to the IPO Registration Statement is actually in progress at such time or has already been completed, the Company shall promptly provide a new written notice to all Holders giving them another opportunity to elect to include Registrable Shares in the pending IPO Registration Statement. Each Holder receiving such notice shall have the same election rights afforded such Holder as described in clause (b) above.
 
  (ii)   Selection of Underwriter . The Company shall have the sole right to select the managing underwriter(s) for its initial public offering, regardless of whether any Registrable Shares are included in the IPO Registration Statement or otherwise.
 
  (iii)   Shelf Registration not Impacted by IPO Registration Statement . The Company’s obligation to file the Shelf Registration Statement pursuant to Section 2(a) hereof shall not be affected by the filing or effectiveness of the IPO Registration Statement. In addition, the Company’s obligation to use its commercially reasonable efforts to cause to become and keep effective the Shelf Registration Statement pursuant to Section 2(a) hereof shall not be affected by the filing or effectiveness of an IPO Registration Statement; provided , however , if the Company files an IPO Registration Statement before the effective date of the Shelf Registration Statement, the Company shall have the right to defer causing the Commission to declare such Shelf Registration Statement effective until up to 60 days after the closing date of its initial public offering pursuant to the IPO Registration Statement.
  (c)   Issuer Free Writing Prospectus . The Company represents and agrees that, unless it obtains the prior consent of Holders of a majority of the Registrable Shares that are registered under a Registration Statement at such time or the consent of the managing underwriter in connection with any Underwritten

 


 

      Offering of Registrable Shares, and each Holder represents and agrees that, unless it obtains the prior consent of the Company and any such underwriter, it will not make any offer relating to the Shares that would constitute an “issuer free writing prospectus,” as defined in Rule 433 (an “ Issuer Free Writing Prospectus ”), or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405, required to be filed with the Commission. The Company represents that any Issuer Free Writing Prospectus will not include any information that conflicts with the information contained in any Registration Statement or the related Prospectus, and any Issuer Free Writing Prospectus, when taken together with the information in such Registration Statement and the related Prospectus, will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
 
  (d)   Underwriting . The Company shall advise all Holders of the identity of the lead managing underwriter for any Underwritten Offering proposed under an IPO Registration Statement. The right of any such Holder to include its Registrable Shares in an IPO Registration Statement pursuant to Section 2(b) shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Shares in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Shares through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter(s) selected by the Company for such underwriting and complete and execute any questionnaires, powers of attorney, indemnities, custody agreements, securities escrow agreements and other documents, including opinions of counsel, reasonably required under the terms of such underwriting, and furnish to the Company such information as the Company may reasonably request in writing for inclusion in the Registration Statement; provided , however , that no Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder and such Holder’s intended method of distribution and any other representation required by law or reasonably requested by the underwriters. Notwithstanding any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation on the number of shares to be included in the Underwritten Offering, then the managing underwriter(s) may exclude shares (including Registrable Shares) from the IPO Registration Statement and Underwritten Offering, and any shares included in such IPO Registration Statement and Underwritten Offering shall be allocated first , to the Company, and second , to each of the Holders requesting inclusion of their Registrable Shares in such IPO Registration Statement (on a pro rata basis based on the total number of Registrable Shares then held by each such Holder who is requesting inclusion); provided , however , that the number of Registrable Shares to be included in the IPO Registration Statement shall not be reduced unless all other securities of the Company held by (i) officers, directors, other employees of the Company and consultants and (ii) other holders of the Company’s capital stock with registration rights that are

 


 

      inferior (with respect to such reduction) to the registration rights of the Holders set forth herein, are first entirely excluded from the underwriting and registration; provided , further , however , that Holders of Registrable Shares shall be permitted to include Registrable Shares comprising at least 25% of the total securities included in the Underwritten Offering proposed under the IPO Registration Statement.
By electing to include the Registrable Shares in the IPO Registration Statement, the Holder of such Registrable Shares shall be deemed to have agreed not to effect any public sale or distribution of securities of the Company of the same or similar class or classes of the securities included in the IPO Registration Statement or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act, during such periods as reasonably requested (but in no event for a period longer than 30 days prior to and 180 days following the effective date of the IPO Registration Statement, and subject to the provisos of Section 8 of this Agreement) by the representatives of the underwriters, if an Underwritten Offering, or by the Company in any other registration.
If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter(s), delivered at least ten Business Days prior to the effective date of the IPO Registration Statement. Any Registrable Shares excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.
  (e)   Expenses . The Company shall pay all Registration Expenses in connection with the registration of the Registrable Shares pursuant to this Agreement. Each Holder participating in a registration pursuant to this Section 2 shall bear such Holder’s proportionate share (based on the total number of Registrable Shares sold in such registration) of all discounts and commissions payable to underwriters or brokers and all transfer taxes and transfer fees in connection with a registration of Registrable Shares pursuant to this Agreement.
 
  (f)   Penalty Provisions . If the Company does not file a Registration Statement registering the resale of the Registrable Shares by April 30, 2011, other than as a result of the Commission being unable to accept such filings (a “ Registration Default ”), then each of Steven F. Udvar-Hazy, John L. Plueger and James C. Clarke, if employed by the Company and owed a bonus, shall immediately forfeit 50%, and shall thereafter forfeit an additional 10% for each month the Registration Default continues, of any bonus that would otherwise be payable to him as a result of performance during that fiscal year, whether under an employment agreement with the Company, a bonus plan or any other bonus arrangement, including any bonus compensation for which payment would otherwise be deferred until after that fiscal year, from and after the applicable date by which the Company was required to file the Shelf Registration Statement until the Shelf Registration Statement is filed. No bonuses, compensation, awards, equity compensation or other amounts shall be payable or granted in lieu of or to make Messrs. Udvar-Hazy, Plueger and Clarke whole for any such forfeited

 


 

      bonuses. This Section 2(f) provides the exclusive remedy in respect of a Registration Default.
3.   Special Election Meeting .
  (a)   If (i) a Registration Statement registering the resale of the Registrable Shares has been declared effective by the Commission on or after April 30, 2011 and such Registration Statement ceases to be effective and is not declared effective by the Commission again by the 30th day after such Registration Statement ceases to be effective (the “ Re-Declaration Deadline ”) or (ii) a Registration Statement registering the resale of the Registrable Shares has not been declared effective by the Commission, and the Registrable Shares have not been listed for trading on a nationally recognized securities exchange, by the 180th day after (and not including the day of) the filing of such Registration Statement (the “ Declaration Deadline ” and each of the Re-Declaration Deadline and the Declaration Deadline is a “ Trigger Date ”), a special meeting of stockholders (the “ Special Election Meeting ”) shall be called in accordance with the bylaws of the Company. The Special Election Meeting shall occur as soon as possible following a Trigger Date but in no event more than 45 days after a Trigger Date. Notwithstanding the foregoing, the Special Election Meeting need not be called or held if the Holders of at least two-thirds of the outstanding Registrable Shares waive (at a duly called meeting or by written consent) such requirement; provided , however , Registrable Shares that are owned, directly or indirectly, by an “executive officer” (as defined in Rule 405 of the Securities Act) of the Company shall not be deemed to be outstanding.
 
  (b)   Purposes of Meeting . The Special Election Meeting shall be called solely for the purposes of: (i) considering and voting upon proposals to remove each then-serving director of the Company; and (ii) electing such number of directors as there are then vacancies on the Board of Directors of the Company (the “ Board of Directors ”) (including any vacancies created by the removal of any director pursuant to this Section 3(b)). The removal of any director pursuant to Section 3(b)(i) hereof shall require the affirmative vote of holders of a majority of all outstanding shares of Common Stock and, if such affirmative vote is obtained, shall be effective immediately upon the receipt of the final report of the inspector of elections for the Special Election Meeting of the result of such vote.
 
  (c)   Nominations . Nominations of individuals for election to the Board of Directors of the Company at the Special Election Meeting may only be made (i) by or at the direction of the Board of Directors or (ii) upon receipt by the Company of written notice of Holders entitled to cast, or direct the casting of, not less than 20% of all the votes entitled to be cast at the Special Election Meeting and containing the information specified by Section 3(d) hereof. Each individual whose nomination is made in accordance with this Section 3(c) is hereinafter referred to as a “ Nominee .” Nominees may include directors whose removal from the Board of Directors is being sought pursuant to Section 3(b) hereof.

 


 

  (d)   Procedure for Stockholder Nominations . For nominations of individuals for election to the Board of Directors to be properly brought before the Special Election Meeting by Holders pursuant to Section 3(c) hereof, the Holders must have given notice thereof in writing to the Secretary of the Company not later than 5:00 p.m., Eastern Time, on the tenth day after a Trigger Date. Such notice shall include each such proposed Nominee’s written consent to serve as a director, if elected, and shall specify:
  (i)   as to each proposed Nominee, the name, age, business address and residence address of such proposed Nominee and all other information relating to such proposed Nominee that would be required, pursuant to Regulation 14A promulgated under the Exchange Act (or any successor provision), to be disclosed in a contested solicitation of proxies with respect to the election of such individual as a director; and
 
  (ii)   as to each Holder giving the notice, the class, series and number of all shares of beneficial interest of the Company that are owned by such Holder, beneficially or of record.
  (e)   Notice . Not less than 15 nor more than 25 days before the Special Election Meeting, the Secretary of the Company shall give to each stockholder entitled to vote at, or to receive notice of, such meeting at such stockholder’s address as it appears in the share transfer records of the Company, notice in writing setting forth (i) the time and place of the Special Election Meeting, (ii) the purposes for which the Special Election Meeting has been called and (iii) the name of each Nominee.
4.   Rules 144 and 144A Reporting
With a view to making available the benefits of certain rules and regulations of the Commission that may at any time permit the sale of the Registrable Shares to the public without registration, the Company agrees to:
  (a)   make and keep current public information available, as those terms are understood and defined in Rule 144 under the Securities Act at all times after the effective date of the first registration statement under the Securities Act filed by the Company with the Commission for an offering of its securities to the general public;
 
  (b)   to file with the Commission in a timely manner all reports and other documents required to be filed by the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements);
 
  (c)   so long as a Holder owns any Registrable Shares, if the Company is not required to file reports and other documents under the Securities Act and the Exchange Act, it will make available other information as required by, and so long as necessary to permit sales of Registrable Shares pursuant to, Rule 144 or Rule 144A, and in any event shall make available (either by mailing a copy thereof, by posting on

 


 

      the Company’s website, by press release or by any other means that the Company reasonably believes to be a reliable means of communication) to each Holder a copy of:
  (i)   the Company’s annual consolidated financial statements (including at least balance sheets, statements of profit and loss, statements of stockholders’ equity and statements of cash flows) prepared in accordance with U.S. generally accepted accounting principles, accompanied by an audit report of the Company’s independent registered public accountants, no later than 90 days after the end of each fiscal year of the Company; and
 
  (ii)   the Company’s unaudited quarterly financial statements (including at least balance sheets, statements of profit and loss, statements of stockholders’ equity and statements of cash flows) prepared in a manner consistent with the preparation of the Company’s annual financial statements, no later than 45 days after the end of each of the first three fiscal quarters of the Company;
  (d)   the Company shall hold, a reasonable time after the availability of such financial statements and upon reasonable notice to the Holders and FBR (either by mail, by posting on the Company’s website, or by press release), a quarterly investor conference call to discuss such financial statements, which call will also include an opportunity for the Holders to ask questions of management with regard to such financial statements, and will also cooperate with, and make management reasonably available to, FBR personnel in connection with making Company information available to investors; and
 
  (e)   so long as a Holder owns any Registrable Shares, to furnish to the Holder promptly upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to the reporting requirements of the Exchange Act), (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company, and take such further actions, as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such Registrable Shares without registration.
5.   Registration Procedures
In connection with the obligations of the Company with respect to any registration pursuant to this Agreement, the Company shall use its commercially reasonable efforts to effect or cause to be effected the registration of the Registrable Shares under the Securities Act to permit the sale of such Registrable Shares by the Holder or Holders in accordance with the Holder’s or Holders’ intended method or methods of distribution, and the Company shall:

 


 

  (a)   notify FBR and Selling Holders’ Counsel, in writing, at least ten Business Days prior to filing a Registration Statement, of its intention to file a Registration Statement with the Commission and, at least five Business Days prior to filing, provide a copy of the Registration Statement to FBR, its counsel and Selling Holders’ Counsel for review and comment; prepare and file with the Commission, as specified in this Agreement, a Registration Statement(s), which Registration Statement(s) shall (x) comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith and (y) be reasonably acceptable to FBR, its counsel and Selling Holders’ Counsel; notify FBR and Selling Holders’ Counsel in writing, at least five Business Days prior to filing of any amendment or supplement to such Registration Statement and, at least three Business Days prior to filing, provide a copy of such amendment or supplement to FBR, its counsel and Selling Holders’ Counsel for review and comment; promptly following receipt from the Commission, provide to FBR, its counsel and Selling Holders’ Counsel copies of any comments made by the staff of the Commission relating to such Registration Statement and of the Company’s responses thereto for review and comment; and use its commercially reasonable efforts to cause such Registration Statement to become effective as soon as practicable after filing and to remain effective, subject to Section 6 hereof, until the earliest to occur of (i) such time as all Registrable Shares covered thereby have been sold in accordance with such Registration Statement, (ii) there are no Registrable Shares outstanding and (iii) the first anniversary of the effective date of such Registration Statement (subject to extension as provided in Section 6(c) hereof), assuming that the Registrable Shares can be sold under Rule 144 without limitation as to manner of sale or volume; provided , however , that the Company shall not be required to cause the IPO Registration Statement to remain effective for any period longer than 90 days following the effective date of the IPO Registration Statement (subject to extension as provided in Section 6(c) hereof); provided , further , that if the Company has an effective Shelf Registration Statement on Form S-1 (or other form then available to the Company) under the Securities Act and becomes eligible to use Form S-3 or such other short-form registration statement form under the Securities Act, the Company may, upon 30 Business Days prior written notice to all Holders, register any Registrable Shares registered but not yet distributed under the effective Shelf Registration Statement on such a short-form Shelf Registration Statement and, once the short-form Shelf Registration Statement is declared effective, de-register such shares under the previous Registration Statement or transfer the filing fees from the previous Registration Statement (such transfer pursuant to Rule 429, if applicable) unless any Holder notifies the Company within 15 Business Days of receipt of the Company notice that such a registration under a new Registration Statement and de-registration of the initial Shelf Registration Statement would interfere with its distribution of Registrable Shares already in progress, in which case, the Company shall delay the effectiveness of the short-form Registration Statement and termination of the then-effective initial Registration Statement or any short-form Registration

 


 

      Statement for a period of not less than 30 days from the date that the Company receives the notice from such Holders requesting a delay;
 
  (b)   subject to Section 5(i) hereof, (i) prepare and file with the Commission such amendments and post-effective amendments to each such Registration Statement as may be necessary to keep such Registration Statement effective for the period described in Section 5(a) hereof; (ii) cause each Prospectus contained therein to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act; and (iii) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof;
 
  (c)   promptly furnish to the Holders, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Shares; the Company consents, subject to Section 6 hereof, to the use of such Prospectus, including each preliminary Prospectus, by the Holders, if any, in connection with the offering and sale of the Registrable Shares covered by any such Prospectus;
 
  (d)   use its commercially reasonable efforts to register or qualify, or obtain exemption from registration or qualification for, all Registrable Shares by the time the applicable Registration Statement is declared effective by the Commission under all applicable state securities or “blue sky” laws of such jurisdictions as FBR or any Holder of Registrable Shares covered by a Registration Statement shall reasonably request in writing, keep each such registration or qualification or exemption effective during the period such Registration Statement is required to be kept effective pursuant to Section 5(a) and do any and all other acts and things that may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Shares owned by such Holder; provided , however , that the Company shall not be required to (i) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 5(d) and except as may be required by the Securities Act, (ii) subject itself to taxation in any such jurisdiction, or (iii) submit to the general service of process in any such jurisdiction;
 
  (e)   use its commercially reasonable efforts to cause all Registrable Shares covered by such Registration Statement to be registered and approved by such other governmental agencies or authorities as may be necessary to enable the Holders thereof to consummate the disposition of such Registrable Shares;
 
  (f)   (i) notify FBR and each Holder promptly and, if requested by FBR or any Holder, confirm such advice in writing (1) when a Registration Statement has become

 


 

      effective and when any post-effective amendments and supplements thereto become effective, (2) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation, assertion or threat of any Proceeding for that purpose, (3) of any request by the Commission or any other federal, state or foreign governmental authority for (A) amendments or supplements to a Registration Statement or related Prospectus or (B) additional information and (4) of the happening of any event during the period a Registration Statement is effective as a result of which such Registration Statement or the related Prospectus or any document incorporated by reference therein contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading (which information shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) and (ii) at the request of any Holder, promptly furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchaser of such securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading;
 
  (g)   use its commercially reasonable efforts to avoid the issuance of, or if issued, to obtain the withdrawal of, any order enjoining or suspending the use or effectiveness of a Registration Statement or suspending the qualification of (or exemption from qualification of) any of the Registrable Shares for sale in any jurisdiction, as promptly as practicable;
 
  (h)   upon request, promptly furnish to each requesting Holder of Registrable Shares covered by a Registration Statement, without charge, one conformed copy of such Registration Statement and any post-effective amendment or supplement thereto (without documents incorporated therein by reference or exhibits thereto, unless requested);
 
  (i)   except as provided in Section 6 hereof, upon the occurrence of any event contemplated by Section 5(f)(i)(4) hereof, use its commercially reasonable efforts to promptly prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
 
  (j)   if requested by the representative of the underwriters, if any, or any Holders of Registrable Shares being sold in connection with such offering, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information as the representative of the underwriters, if any, or such Holders indicate relates to them or that they reasonably request be included therein and

 


 

      (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as reasonably practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment;
 
  (k)   in the case of an Underwritten Offering, use its commercially reasonable efforts to furnish to each Holder of Registrable Shares covered by such Registration Statement and the underwriters a signed counterpart, addressed to each such Holder and the underwriters, of: (i) an opinion of counsel for the Company customary for underwritten public offerings, dated the date of each closing under the underwriting agreement, reasonably satisfactory to such Holder and the underwriters; and (ii) a “comfort” letter, dated the effective date of such Registration Statement and the date of each closing under the underwriting agreement, signed by the independent public accountants who have certified the Company’s financial statements included in such Registration Statement, covering substantially the same matters with respect to such Registration Statement (and the Prospectus included therein) and with respect to events subsequent to the date of such financial statements, as are customarily covered in accountants’ letters delivered to underwriters in underwritten public offerings of securities and such other financial matters as such underwriters may reasonably request and are customarily obtained by underwriters in underwritten offerings;
 
  (l)   enter into customary agreements (including in the case of an Underwritten Offering, an underwriting agreement in customary form and reasonably satisfactory to the Company) and take all other reasonable action in connection therewith in order to expedite or facilitate the distribution of the Registrable Shares included in such Registration Statement and, in the case of an Underwritten Offering, make representations and warranties to the Holders covered by such Registration Statement and to the underwriters in such form and scope as are customarily made by issuers to selling security holders and to underwriters in underwritten offerings and confirm the same to the extent customary if and when requested;
 
  (m)   make available for inspection by representatives of the Holders and the representative of any underwriters participating in any disposition pursuant to a Registration Statement and any special counsel or accountants retained by such Holders or underwriters, all financial and other records, pertinent corporate documents and properties of the Company and cause the respective officers, directors, employees and agents of the Company to supply all information reasonably requested by any such representatives of the Holders, the representative of the underwriters, counsel thereto or accountants in connection with a Registration Statement; provided , however , that such records, documents or information that the Company determines, in good faith, to be confidential and notifies such representatives of the Holders, representative of the underwriters, counsel thereto or accountants are confidential shall not be disclosed by the Company unless the Company receives from such parties customary agreements, or such parties are subject to obligations, to maintain the confidentiality of such

 


 

      records, documents or information providing, among other things, that such representatives, representative of the underwriters, counsel thereto or accountants shall not disclose any of such records, documents or information unless (i) the disclosure of such records, documents or information is necessary to avoid or correct a misstatement or omission in a Registration Statement or Prospectus, (ii) the release of such records, documents or information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (iii) such records, documents or information have been generally made available to the public; provided , further , that the representatives of the Holders and any underwriters will use commercially reasonable efforts, to the extent practicable, to coordinate the foregoing inspection and information gathering and not materially disrupt the Company’s business operations;
 
  (n)   use its commercially reasonable efforts (including, without limitation, seeking to cure any deficiencies cited by the exchange or market in the Company’s listing or inclusion application) to list or include all Registrable Shares on the New York Stock Exchange or The Nasdaq Global Market;
 
  (o)   prepare and file in a timely manner all documents and reports required by the Exchange Act and, to the extent the Company’s obligation to file such reports pursuant to Section 15(d) of the Exchange Act expires prior to the expiration of the effectiveness period of the Registration Statement as required by Section 5(a) hereof, the Company shall register the Registrable Shares under the Exchange Act and shall maintain such registration through the effectiveness period required by Section 5(a) hereof;
 
  (p)   provide a CUSIP number for all Registrable Shares, not later than the effective date of the Registration Statement;
 
  (q)   (i) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, (ii) make generally available to its stockholders, as soon as reasonably practicable, earnings statements covering at least 12 months beginning after the effective date of the Registration Statement that satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, but in no event later than 90 days after the end of each fiscal year of the Company and (iii) not file any Registration Statement or Prospectus or amendment or supplement to such Registration Statement or Prospectus to which any Holder of Registrable Shares covered by any Registration Statement shall have reasonably objected on the grounds that such Registration Statement or Prospectus or amendment or supplement does not comply in all material respects with the requirements of the Securities Act, such Holder having been furnished with a copy thereof at least two Business Days prior to the filing thereof;
 
  (r)   provide and cause to be maintained a registrar and transfer agent for all Registrable Shares covered by any Registration Statement from and after a date not later than the effective date of such Registration Statement;

 


 

  (s)   in connection with any sale or transfer of the Registrable Shares (whether or not pursuant to a Registration Statement) that will result in the securities being delivered no longer being Registrable Shares, cooperate with the Holders and the representative of the underwriters, if any, to facilitate (unless the Registrable Shares are in book-entry only form) the timely preparation and delivery of certificates representing the Registrable Shares to be sold, which certificates shall not bear any restrictive transfer legends (other than as required by the Company’s Certificate of Incorporation, as amended) and to enable such Registrable Shares to be in such denominations and registered in such names as the representative of the underwriters, if any, or the Holders may request at least three Business Days prior to any sale of the Registrable Shares;
 
  (t)   in connection with the initial filing of a Shelf Registration Statement and each amendment thereto with the Commission pursuant to Section 2(a) hereof, cooperate with FBR in connection with the filing with FINRA of all forms and information required or requested by FINRA in order to obtain written confirmation from FINRA that FINRA does not object to the fairness and reasonableness of the underwriting terms and arrangements (or any deemed underwriting terms and arrangements) (each such written confirmation, a “ No Objections Letter ”) relating to the resale of Registrable Shares pursuant to the Shelf Registration Statement, including, without limitation, information provided to FINRA through its COBRADesk system, and pay all costs, fees and expenses incident to FINRA’s review of the Shelf Registration Statement and the related underwriting terms and arrangements, including, without limitation, all filing fees associated with any filings or submissions to FINRA and the legal expenses, filing fees and other disbursements of FBR and any other FINRA member that is the Holder of, or is affiliated or associated with an owner of, Registrable Shares included in the Shelf Registration Statement (including in connection with any initial or subsequent member filing);
 
  (u)   in connection with the initial filing of a Shelf Registration Statement and each amendment thereto with the Commission pursuant to Section 2(a) hereof, provide to FBR and its representatives, the opportunity to conduct due diligence, including, without limitation, an inquiry of the Company’s financial and other records, and make available members of its management for questions regarding information which FBR may request in order to fulfill any due diligence obligation on its part;
 
  (v)   upon effectiveness of the first Registration Statement filed under this Agreement, take such actions and make such filings as are necessary to effect the registration of the Common Stock under the Exchange Act simultaneously with or immediately following the effectiveness of the Registration Statement;
 
  (w)   in the case of an Underwritten Offering, use its commercially reasonable efforts to cooperate and assist in any filings required to be made with FINRA and in the performance of any due diligence investigation by any underwriter and its counsel

 


 

      (including any “qualified independent underwriter,” if applicable) that is required to be retained in accordance with the rules and regulations of FINRA.
The Company may require the Holders to furnish (and each Holder shall furnish) to the Company such information regarding the proposed distribution by such Holder of such Registrable Shares as the Company may from time to time reasonably request in writing or as shall be required to effect the registration of the Registrable Shares, and no Holder shall be entitled to be named as a selling stockholder in any Registration Statement and no Holder shall be entitled to use the Prospectus forming a part thereof if such Holder does not provide such information to the Company. Any Holder that sells Registrable Shares pursuant to a Registration Statement or as a selling security holder pursuant to an Underwritten Offering shall be required to be named as a selling shareholder in the related prospectus and to deliver a prospectus to purchasers. Each Holder further agrees to furnish promptly to the Company in writing all information required from time to time to make the information previously furnished by such Holder not misleading.
Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(f)(i)(3) or 5(f)(i)(4) hereof, such Holder will immediately discontinue disposition of Registrable Shares pursuant to a Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus. If so directed by the Company, such Holder will deliver to the Company (at the expense of the Company) all copies in its possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Shares current at the time of receipt of such notice.
Notwithstanding any other provision of this Agreement, if the Commission or any rules, regulations or guidance thereof sets forth a limitation of the number of Registrable Shares or other shares of Common Stock permitted to be registered on a particular Shelf Registration Statement, the number of Registrable Shares or other shares of Common Stock to be registered on such Shelf Registration Statement will be reduced as follows: first, the Company shall reduce or eliminate the shares of Common Stock to be included by any Person other than a Holder; second, the Company shall reduce or eliminate any shares of Common Stock to be included by the Company; and third, the Company shall reduce the number of Registrable Shares to be included by all Holders pro rata based on the total number of unregistered Registrable Shares held by such Holders, subject to a determination by the Commission that certain Holders must be reduced before other Holders based on the number of Registrable Shares held by such Holders. In the event the Company amends the Shelf Registration Statement or files a Shelf Registration Statement, the Company will file with the Commission, as promptly as allowed by the Commission, one or more shelf registration statements to register for resale those Registrable Shares that were not registered for resale on the Shelf Registration Statement.
6.   Black-Out Period
  (a)   Subject to the provisions of this Section 6 and a good faith determination by a majority of the independent members of the Board of Directors that it is in the best interests of the Company to suspend the use of the Registration Statement, following the effectiveness of a Registration Statement (and the filings with any

 


 

      international, federal or state securities commissions), the Company, by written notice to FBR and the Holders, may direct the Holders to suspend sales of the Registrable Shares pursuant to a Registration Statement for such times as the Company reasonably may determine is necessary and advisable (but in no event for more than an aggregate of 90 days in any rolling 12 month period commencing on the Closing Date or more than 60 days in any rolling 90 day period), if any of the following events shall occur: (i) the representative of the underwriters of an Underwritten Offering of primary shares by the Company has advised the Company that the offer or sale of Registrable Shares pursuant to the Registration Statement would have a material adverse effect on the Company’s primary Underwritten Offering; (ii) the majority of the independent members of the Board of Directors shall have determined in good faith that (A) the offer or sale of any Registrable Shares would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction involving the Company, (B) upon the advice of counsel, the sale of Registrable Shares pursuant to the Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law, and (C) either (x) the Company has a bona fide business purpose for preserving the confidentiality of such transaction or information or (y) disclosure would have a material adverse effect on the Company or the Company’s ability to consummate such transaction, in each case under circumstances that would make it impractical or inadvisable to cause the Registration Statement (or such filings) to become effective or to promptly amend or supplement the Registration Statement on a post-effective basis, as applicable; or (iii) the majority of the independent members of the Board of Directors shall have determined in good faith, upon the advice of counsel, that it is required by law, rule or regulation or that it is in the best interests of the Company to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to incorporate information into the Registration Statement for the purpose of (1) including in the Registration Statement any prospectus required under Section 10(a)(3) of the Securities Act; (2) reflecting in the Prospectus included in the Registration Statement any facts or events arising after the effective date of the Registration Statement (or of the most recent post-effective amendment) that, individually or in the aggregate, represent a fundamental change in the information set forth therein; (3) correcting any misstatement or omission in the Registration Statement or the Prospectus included therein; or (4) including in the Prospectus included in the Registration Statement any material information with respect to the plan of distribution not disclosed in the Registration Statement or any material change to such information. Upon the occurrence of any such suspension, the Company shall use its best efforts to cause the Registration Statement to become effective or to promptly amend or supplement the Registration Statement on a post-effective basis or to take such action as is necessary to make resumed use of the Registration Statement compatible with the Company’s best interests, as applicable, so as to permit the Holders to resume sales of the Registrable Shares as soon as possible.

 


 

  (b)   In the case of an event that causes the Company to suspend the use of a Registration Statement (a “ Suspension Event ”), the Company shall give written notice (a “ Suspension Notice ”) to FBR and the Holders to suspend sales of the Registrable Shares and such notice shall state generally the basis for the notice and that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and the Company is using its best efforts and taking all reasonable steps to terminate suspension of the use of the Registration Statement as promptly as possible. The Holders shall not effect any sales of the Registrable Shares pursuant to such Registration Statement (or such filings) at any time after they have received a Suspension Notice from the Company and prior to receipt of an End of Suspension Notice (as defined below). If so directed by the Company, each Holder will deliver to the Company (at the expense of the Company) all copies other than permanent file copies then in such Holder’s possession of the Prospectus covering the Registrable Shares at the time of receipt of the Suspension Notice. The Holders may recommence effecting sales of the Registrable Shares pursuant to the Registration Statement (or such filings) following further notice to such effect (an “ End of Suspension Notice ”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders and FBR in the manner described above promptly following the conclusion of any Suspension Event and its effect.
 
  (c)   Notwithstanding any provision herein to the contrary, if the Company shall give a Suspension Notice pursuant to this Section 6, the Company agrees that it shall extend the period of time during which the applicable Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from the date of receipt by the Holders of the Suspension Notice to and including the date of receipt by the Holders of the End of Suspension Notice and provide copies of the supplemented or amended Prospectus necessary to resume sales.
7.   Indemnification and Contribution
  (a)   The Company agrees to indemnify and hold harmless (i) each Holder of Registrable Shares and any underwriter (as determined in the Securities Act) for such Holder (including, if applicable, FBR), (ii) each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) any such Person described in clause (i) (any of the Persons referred to in this clause (ii) being hereinafter referred to as a “ Controlling Person ”), and (iii) the respective officers, directors, partners, members, employees, representatives and agents of any such Person or any Controlling Person (any Person referred to in clause (i), (ii) or (iii) above may hereinafter be referred to as a “ Purchaser Indemnitee ”), to the fullest extent lawful, from and against any and all losses, claims, damages, judgments, actions, out-of-pocket expenses, and other liabilities (the “ Liabilities ”), including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or Proceeding by any governmental or regulatory agency or body, commenced or threatened,

 


 

      including the reasonable fees and expenses of counsel to any Purchaser Indemnitee, joint or several, directly or indirectly related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto), any Prospectus (or any amendment or supplement thereto) or any Issuer Free Writing Prospectus (or any amendment or supplement thereto), or any preliminary Prospectus or any other document used to sell the Shares, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such Liabilities arise out of or are based upon (A) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Purchaser Indemnitee furnished to the Company or any underwriter in writing by such Purchaser Indemnitee expressly for use therein; or (B) sales of Registrable Shares made in violation of Section 6(b) hereof by any Holder who has received actual notice of the suspension prior to such sale. The Company shall notify FBR and the Holders promptly of the institution, threat or assertion of any claim, Proceeding (including any governmental or regulatory investigation), or litigation of which it shall have become aware in connection with the matters addressed by this Agreement that involves the Company or a Purchaser Indemnitee. The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on behalf of any Purchaser Indemnitee.
 
  (b)   In connection with any Registration Statement in which a Holder of Registrable Shares is participating, and as a condition to such participation, such Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and each Person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act and their respective officers, directors, partners, members, employees, representatives and agents of such Person or Controlling Person to the same extent as the foregoing indemnity from the Company to each Purchaser Indemnitee, but only with reference to (i) untrue statements or omissions or alleged untrue statements or omissions made in reliance upon and in strict conformity with information relating to such Holder furnished to the Company in writing by or on behalf of such Holder expressly for use in such Registration Statement (or any amendment thereto), Prospectus (or any amendment or supplement thereto), Issuer Free Writing Prospectus (or any amendment or supplement thereto) or any preliminary Prospectus; or (ii) Liabilities arising out of or based upon sales of Registrable Shares made by such Holder who has received actual notice of the suspension prior to such sale in violation of Section 6(b). Absent gross negligence or willful misconduct, the liability of any Holder pursuant to this paragraph shall in no event exceed the net proceeds received by such Holder from sales of Registrable Shares pursuant to such Registration Statement (or any amendment thereto), Prospectus (or any amendment or supplement thereto), Issuer Free Writing Prospectus (or any amendment or supplement thereto) or any preliminary Prospectus.

 


 

  (c)   If any suit, action, Proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to paragraph (a) or (b) above, such Person (the “ Indemnified Party ”) shall promptly notify the Person against whom such indemnity may be sought (the “ Indemnifying Party ”) in writing of the commencement thereof (but the failure to so notify an Indemnifying Party shall not relieve it from any liability which it may have under this Section 7, except to the extent the Indemnifying Party is materially prejudiced by the failure to give notice), and the Indemnifying Party, upon request of the Indemnified Party, shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and any others the Indemnifying Party may reasonably designate in such Proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such Proceeding. Notwithstanding the foregoing, in any such Proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party, unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Party failed within a reasonable time after notice of commencement of the action to assume the defense and employ counsel reasonably satisfactory to the Indemnified Party, (iii) the Indemnifying Party and its counsel do not actively and vigorously pursue the defense of such action or (iv) the named parties to any such action (including any impleaded parties) include both such Indemnified Party and Indemnifying Party, or any Affiliate of the Indemnifying Party, and such Indemnified Party shall have been reasonably advised by counsel that, either (x) there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party or such Affiliate of the Indemnifying Party or (y) a conflict may exist between such Indemnified Party and the Indemnifying Party or such Affiliate of the Indemnifying Party (in which case the Indemnifying Party shall not have the right to assume nor direct the defense of such action on behalf of such Indemnified Party; it being understood, however, that the Indemnifying Party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all such Indemnified Parties, which firm shall be designated in writing by those Indemnified Parties who sold a majority of the Registrable Shares sold by all such Indemnified Parties and any such separate firm for the Company, the directors, the officers and such control Persons of the Company as shall be designated in writing by the Company). The Indemnifying Party shall not be liable for any settlement of any Proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent or if there is a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify any Indemnified Party from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened Proceeding in respect of which any Indemnified

 


 

      Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement (i) includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding and (ii) does not include a statement as to or an admission of, fault, culpability or a failure to act by or on behalf of the Indemnified Party.
 
  (d)   If the indemnification provided for in paragraphs (a) and (b) of this Section 7 is for any reason held to be unavailable to an Indemnified Party in respect of any Liabilities referred to therein (other than by reason of the exceptions provided therein) or is insufficient to hold harmless a party indemnified thereunder, then each Indemnifying Party under such paragraphs, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liabilities (i) in such proportion as is appropriate to reflect the relative benefits to the Indemnified Party on the one hand and the Indemnifying Party(ies) on the other hand in connection with the statements or omissions that resulted in such Liabilities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Party(ies) and the Indemnified Party, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and any Purchaser Indemnitees on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by such Purchaser Indemnitees and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
 
  (e)   The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if such Indemnified Parties were treated as one entity for such purpose), or by any other method of allocation that does not take account of the equitable considerations referred to in Section 7(d) above. The amount paid or payable by an Indemnified Party as a result of any Liabilities referred to in Section 7(d) above shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Purchaser Indemnitee be required to contribute any amount in excess of the amount by which the net proceeds received by such Purchaser Indemnitee from sales of Registrable Shares exceeds the amount of any damages that such Purchaser Indemnitee has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. For purposes of this Section 7, each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) FBR or a Holder of Registrable Shares shall have the same rights to contribution as FBR or such Holder, as the case may be, and each Person,

 


 

      if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) the Company, and each officer, director, member, partner, employee, representative, agent or manager of the Company shall have the same rights to contribution as the Company. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or Proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 7 or otherwise, except to the extent that any party is materially prejudiced by the failure to give notice. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
 
  (f)   The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Parties may otherwise have to the Indemnified Parties referred to above. The Purchaser Indemnitees’ obligations to contribute pursuant to this Section 7 are several in proportion to the respective number of Registrable Shares sold by each of the Purchaser Indemnitees hereunder and not joint.
8.   Market Stand-off Agreement
Each Holder hereby agrees that it shall not, to the extent requested by the Company or an underwriter of securities of the Company, directly or indirectly sell, offer to sell (including without limitation any short sale), grant any option or otherwise transfer or dispose of any Registrable Shares or other shares of Common Stock of the Company or any securities convertible into or exchangeable or exercisable for shares of Common Stock of the Company then owned by such Holder (other than to donees or partners of the Holder who agree to be similarly bound) for a period (i) in the case of the Company’s officers, directors and employees, in each case to the extent such person or entity holds shares of Common Stock or securities convertible into or exchangeable or exercisable for shares of Common Stock, beginning on the effective date of, and continuing for 180 days following the effective date of, the IPO Registration Statement of the Company; and (ii) in the case of all other Holders, beginning on the effective date of, and continuing for 60 days following the effective date of the IPO Registration Statement of the Company; provided , however , that :
  (a)   the restrictions above shall not apply to Registrable Shares sold pursuant to the IPO Registration Statement;
 
  (b)   all executive officers and directors of the Company then holding shares of Common Stock of the Company or securities convertible into or exchangeable or exercisable for shares of Common Stock of the Company enter into agreements that are no less restrictive;

 


 

  (c)   the Holders shall be allowed any concession or proportionate release allowed to any officer or director that entered into agreements that are no less restrictive (with such proportion being determined by dividing the number of shares being released with respect to such officer or director by the total number of issued and outstanding shares held by such officer or director); provided, however nothing in this Section 8(c) shall be construed as a right to proportionate release for the executive officers and directors of the Company upon the expiration of the 60 day period applicable to all Holders other than the executive officers and directors of the Company; and
 
  (d)   this Section 8 shall not be applicable if a Shelf Registration Statement of the Company filed under the Securities Act has been declared effective prior to the filing of an IPO Registration Statement.
In order to enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the certificates representing the securities subject to this Section 8 and to impose stop transfer instructions with respect to the Registrable Shares and such other securities of each Holder (and the securities of every other Person subject to the foregoing restriction) until the end of such period.
9.   Termination of the Company’s Obligation
The Company shall have no obligation pursuant to this Agreement with respect to any Registrable Shares proposed to be sold by a Holder in a registration pursuant to this Agreement if, in the opinion of counsel to the Company, (i) all such Registrable Shares proposed to be sold by a Holder may be sold in a single transaction without registration under the Securities Act pursuant to Rule 144, (ii) the Company has become subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act for a period of at least 90 days and is current in the filing of all such required reports, and (iii) the Registrable Shares have been listed for trading on a nationally recognized securities exchange.
10.   Limitations on Subsequent Registration Rights
From and after the date of this Agreement, the Company shall not, without the prior written consent of Holders beneficially owning not less than a majority of the then outstanding Registrable Shares ( provided , however , that solely for purposes of this Section 10, Registrable Shares that are owned, directly or indirectly, by an Affiliate of the Company (other than Ares Management LLC or Green Equity Investors V, L.P. or their respective subsidiaries, affiliates, partners, members, employees, agents, officers or directors) shall not be deemed to be outstanding), enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (a) to include such securities in any Registration Statement filed pursuant to the terms hereof, unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of Registrable Shares of the Holders that is included, or (b) to have its securities registered on a registration statement that could be declared effective prior to, or within 180 days after, the effective date of any registration statement filed pursuant to this Agreement.

 


 

11.   Miscellaneous
  (a)   Remedies . Subject to the last sentence of Section 2(f), in the event of a breach by the Company of any of its obligations under this Agreement, each of FBR and each Holder, in addition to being entitled to exercise all rights provided herein or, in the case of FBR, in the Purchase/Placement Agreement, or granted by law will be entitled to specific performance of its rights under this Agreement. Subject to Section 7, the Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.
 
  (b)   Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, without the written consent of the Company and the consent of Holders beneficially owning not less than a majority of the then outstanding Registrable Shares; provided , however , that solely for purposes of this Section 11(b), Registrable Shares that are owned, directly or indirectly, by an Affiliate of the Company (other than Ares Management LLC or Green Equity Investors V, L.P. or their respective subsidiaries, affiliates, partners, members, employees, agents, officers or directors) or by an “executive officer” (as defined in Rule 405 of the Securities Act) of the Company shall not be deemed to be outstanding. No amendment shall be deemed effective unless it applies uniformly to all Holders in their capacities as such. Notwithstanding the foregoing, a waiver or consent to or departure from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders may be given by such Holder; provided , however , the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the first and second sentences of this paragraph.
 
  (c)   Notices . All notices and other communications, provided for or permitted hereunder, shall be made in writing and delivered by facsimile (with receipt confirmed), overnight courier or registered or certified mail, return receipt requested, or by telegram:
  (i)   if to a Holder, at the most current address given by the transfer agent and registrar of the Shares to the Company;
 
  (ii)   if to the Company, at the offices of the Company at 2000 Avenue of the Stars, Suite 600N, Los Angeles, CA 90067, Attention: General Counsel, (facsimile: (310) 553-0999); with a concurrent copy (which shall not constitute notice) to Gibson, Dunn & Crutcher LLP, 333 South Grand

 


 

      Avenue, Los Angeles, California 90071, Attention: Dhiya El Saden, Esq. (facsimile: (213) 229-6196); and
 
  (iii)   if to FBR, at the offices of FBR at 1001 Nineteenth Street North, Arlington, Virginia 22209, Attention: William Ginivan, Esq. (facsimile 703-469-1140).
  (d)   Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including, without limitation and without the need for an express assignment or assumption, subsequent Holders. The Company agrees that the Holders shall be third party beneficiaries to the agreements made hereunder by FBR and the Company, and each Holder shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder; provided , however , that such Holder fulfills all of its obligations hereunder.
 
  (e)   Counterparts . This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
 
  (f)   Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
 
  (g)   Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE COURT IN THE CITY OF NEW YORK, STATE OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 


 

  (h)   Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties hereto that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
 
  (i)   Entire Agreement . This Agreement, together with the Purchase/Placement Agreement, is intended by the parties hereto as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.
 
  (j)   Registrable Shares Held by the Company or its Affiliates . Whenever the consent or approval of Holders of a specified percentage of Registrable Shares is required hereunder, Registrable Shares held by the Company or its Affiliates (other than Ares Management LLC or Green Equity Investors V, L.P. or their respective subsidiaries, affiliates, partners, members, employees, agents, officers or directors) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.
 
  (k)   Adjustment for Stock Splits, etc . Wherever in this Agreement there is a reference to a specific number of shares, then upon the occurrence of any subdivision, combination, or stock dividend of such shares, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the effect on the outstanding shares of such class or series of stock by such subdivision, combination, or stock dividend.
 
  (l)   Survival . This Agreement is intended to survive the consummation of the transactions contemplated by the Purchase/Placement Agreement. The indemnification and contribution obligations under Section 7 of this Agreement shall survive the termination of the Company’s obligations under Section 2 of this Agreement.
 
  (m)   Attorneys’ Fees . In any action or Proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party, as determined by the court, shall be entitled to recover its reasonable attorneys’ fees in addition to any other available remedy.

 


 

  (n)   Actions by Holders and Stockholders . Any approvals, consents, waivers or other actions of Holders or stockholders of the Company contemplated hereunder may be obtained by vote at a meeting or by written consent.
[Signature page follows]

 


 

IN WITNESS WHEREOF , the parties have executed this Agreement as of the date first above written.
         
  AIR LEASE CORPORATION

 
 
  By:   /s/ Steven F. Udvar-Házy  
    Name:   Steven F. Udvar-Házy  
    Title:   Chairman and Chief Executive Officer  
 
         
  FBR CAPITAL MARKETS & CO.

 
 
  By:   /s/ Paul Dell’Isola  
    Name:   Paul Dell’Isola  
    Title:   Senior Managing Director and Co-Head of Capital Markets  
 
[Signature Page to Registration Rights Agreement]

 

Exhibit 10.1
EXECUTION VERSION
 
 
WAREHOUSE LOAN AGREEMENT
Dated as of May 26, 2010
among
ALC WAREHOUSE BORROWER, LLC, as Borrower,
THE LENDERS FROM TIME TO TIME PARTY HERETO,
and
CREDIT SUISSE AG, NEW YORK BRANCH, as Agent
 
 

 


 

TABLE OF CONTENTS
             
        Page  
 
           
ARTICLE I DEFINITIONS; RULES OF INTERPRETATION     1  
 
           
SECTION 1.01
  Certain Definitions     1  
SECTION 1.02
  Rules of Interpretation     39  
 
           
ARTICLE II ALLOCATIONS, ADVANCES AND NOTES     40  
 
           
SECTION 2.01
  Allocations and Advances     40  
SECTION 2.02
  Optional Extensions of Availability Period     43  
SECTION 2.03
  Advancing Loan Proceeds     44  
SECTION 2.04
  Conduit Lenders     46  
SECTION 2.05
  Notes     47  
SECTION 2.06
  Reduction of Maximum Facility Amount     47  
SECTION 2.07
  Termination of Availability Period Upon Servicer Replacement Event     48  
SECTION 2.08
  Concentration Limits; Eligibility Criteria     48  
SECTION 2.09
  Defaulting Lenders     48  
 
           
ARTICLE III PAYMENTS     49  
 
           
SECTION 3.01
  Voluntary Prepayments     49  
SECTION 3.02
  Mandatory Prepayments     50  
SECTION 3.03
  Application of Funds     51  
SECTION 3.04
  Interest     55  
SECTION 3.05
  Unutilized Fee     57  
SECTION 3.06
  Agent Fee Letter     57  
SECTION 3.07
  Availability Expiration Payments and Credits     57  
 
           
ARTICLE IV ILLEGALITY; INCREASED COSTS AND OTHER PROVISIONS     57  
 
           
SECTION 4.01
  Illegality     57  
SECTION 4.02
  Deposits Unavailable     58  
SECTION 4.03
  Increased LIBOR Loan Costs, Etc     58  
SECTION 4.04
  Funding Losses     59  
SECTION 4.05
  Increased Capital Costs     60  
SECTION 4.06
  Taxes     61  
SECTION 4.07
  Payments, Computations, Proceeds of Collateral, Etc     65  
SECTION 4.08
  Sharing of Payments     66  
SECTION 4.09
  Setoff     66  
 
           
ARTICLE V CONDITIONS PRECEDENT     67  
 
           
SECTION 5.01
  Conditions Precedent to the Effectiveness of the Loan Documents; Cash Collateral Account     67  
SECTION 5.02
  Conditions Precedent for Each Transfer Date     68  
SECTION 5.03
  Deferral of Conditions     77  

i


 

TABLE OF CONTENTS
(continued)
             
        Page  
 
           
ARTICLE VI REPRESENTATIONS AND WARRANTIES     78  
 
           
SECTION 6.01
  Representations and Warranties of the Borrower     78  
SECTION 6.02
  Representations and Warranties of the Lenders     86  
 
           
ARTICLE VII COVENANTS     86  
 
           
SECTION 7.01
  Borrower’s Covenants     86  
 
           
(a)
  Financial Information; Reports, Notices, Etc     86  
(b)
  Existence and Citizenship     88  
(c)
  Keep Well Covenant     88  
(d)
  Compliance with Assumptions     88  
(e)
  Authorizations, Approvals and Recordations     88  
(f)
  Inspection Rights; Records; Appraisals     89  
(g)
  Payment of Charges; Maintenance of Licenses     90  
(h)
  Maintenance of Records     91  
(i)
  Separateness     91  
(j)
  Insignia     91  
(k)
  Registration of Aircraft     91  
(l)
  Change in Location of Records     92  
(m)
  Monthly Report     92  
(n)
  Follow-On Leases     92  
(o)
  Removal of Servicer     92  
(p)
  Management of Aircraft     93  
 
           
SECTION 7.02
  Negative Covenants     93  
 
           
(a)
  Seller Finance Loans     93  
(b)
  Liens     93  
(c)
  Consolidation, Merger and Sale or Purchase of Assets     94  
(d)
  No Sale, Alteration or Modification     94  
(e)
  No Amendments to Loan Documents, Organic Documents or Lease Documents     94  
(f)
  Investments     94  
(g)
  Consolidation with Any Other Person     95  
(h)
  Lease Default     95  
(i)
  Action After Facility Event of Default or a Servicer Replacement Event     95  
(j)
  Title to Aircraft     95  
(k)
  Restrictive Agreements, Etc     95  
(l)
  Prohibited Jurisdictions     96  
 
           
SECTION 7.03
  Maintenance     96  

ii


 

TABLE OF CONTENTS
(continued)
             
        Page  
 
           
SECTION 7.04
  Depository Accounts, Deposits and Maintenance Reserves; Aircraft Expenses     97  
SECTION 7.05
  Servicer     100  
SECTION 7.06
  Modifications and Improvements     101  
SECTION 7.07
  Operations Subject to Insurance Coverage     101  
SECTION 7.08
  Insurance     101  
SECTION 7.09
  Event of Loss     105  
SECTION 7.10
  Servicing Agreement     106  
SECTION 7.11
  Derivatives Agreement     106  
SECTION 7.12
  Enforcement of Lease Documents and Other Borrower Covenants     107  
SECTION 7.13
  Further Assurances     107  
SECTION 7.14
  Annual Budget     108  
SECTION 7.15
  Return of Aircraft     108  
SECTION 7.16
  Required Disclosures     109  
SECTION 7.17
  Registrations to be Made in the International Registry     109  
 
           
ARTICLE VIII OTHER COVENANTS     109  
 
           
SECTION 8.01
  Quiet Enjoyment     109  
SECTION 8.02
  Mortgages     109  
SECTION 8.03
  Lenders’ Covenants     109  
 
           
ARTICLE IX DEFAULT AND REMEDIES     110  
 
           
SECTION 9.01
  Facility Events of Default     110  
SECTION 9.02
  Remedies After Default     113  
SECTION 9.03
  Deficiencies     114  
 
           
ARTICLE X AGENCY     114  
 
           
SECTION 10.01
  Appointment, Authorization and Action     114  
SECTION 10.02
  Agent’s Standard of Liability, Reliance, Etc.     115  
SECTION 10.03
  Agent in Individual Capacity; Acknowledgment and Waiver     116  
SECTION 10.04
  Lender Credit Decision     116  
SECTION 10.05
  Indemnification     117  
SECTION 10.06
  Resignation and Removal of Agent; Successor Agent     117  
SECTION 10.07
  Holder and Lender List; Ownership of Notes     118  
SECTION 10.08
  Security Documents     119  
SECTION 10.09
  Distribution of Funding Packages; Request for Documents     119  
 
           
ARTICLE XI MISCELLANEOUS     119  

iii


 

TABLE OF CONTENTS
(continued)
             
        Page  
 
           
SECTION 11.01
  Amendments, Etc     119  
SECTION 11.02
  Indemnification     121  
SECTION 11.03
  Assignments and Participations     123  
SECTION 11.04
  Notices, Etc     126  
SECTION 11.05
  Costs and Expenses     128  
SECTION 11.06
  No Waiver; Remedies Cumulative     129  
SECTION 11.07
  Modifications     129  
SECTION 11.08
  Marshalling; Reinstatement     130  
SECTION 11.09
  Obligations Several; Independent Nature of Lenders’ Rights     130  
SECTION 11.10
  Headings     130  
SECTION 11.11
  Performance by the Agent     130  
SECTION 11.12
  Binding Effect; Successors and Assigns     130  
SECTION 11.13
  Counterparts; Effectiveness     130  
SECTION 11.14
  Integration     130  
SECTION 11.15
  Dollars     131  
SECTION 11.16
  Governing Law, Jurisdiction and Venue     131  
SECTION 11.17
  Waiver of Trial by Jury     131  
SECTION 11.18
  Confidentiality     132  
SECTION 11.19
  Survival of Representations and Warranties     133  
SECTION 11.20
  Severability     133  
SECTION 11.21
  Third Party Beneficiaries     133  
SECTION 11.22
  No Proceedings     133  
SECTION 11.23
  Release of Collateral; Termination     133  
SECTION 11.24
  Patriot Act     134  
SECTION 11.25
  Limited Recourse to Conduit Lenders     134  
 
           
EXHIBITS          
 
           
Exhibit A
  Form of Note        
Exhibit B
  Form of Lease Checklist        
Exhibit C
  Form of Assignment and Assumption Agreement        
Exhibit D
  Form of Monthly Report        
Exhibit E
  Form of Notice of Borrowing        
Exhibit F
  Form of Request        
Exhibit G
  Form of Assignment of Lease        
Exhibit H
  Form of Consent and Agreement        
Exhibit I
  Form of Mortgage        
Exhibit J
  Form of Agent’s Financing Notice        
Exhibit K
  Form of Disbursement Certificate        
Exhibit L
  Form of New Allocation Agreement        
Exhibit M
  Form of Non-Bank Tax Exemption Certificate        

iv


 

TABLE OF CONTENTS
(continued)
             
        Page  
 
           
Exhibit N
  Form of Deferral Request        
 
           
SCHEDULES
           
 
           
Schedule I
  Allocations; Lenders’ Payment Instructions; Designation of Conduit Lenders;        
 
  Designated Lenders’ Notice Information        
Schedule II
  Eligibility Criteria        
Schedule III
  Prohibited Jurisdictions        

v


 

WAREHOUSE LOAN AGREEMENT
     This WAREHOUSE LOAN AGREEMENT, dated as of May 26, 2010 (this “ Agreement ”), among ALC WAREHOUSE BORROWER, LLC, a Delaware limited liability company (the “ Borrower ”), THE LENDERS FROM TIME TO TIME PARTY HERETO, and CREDIT SUISSE AG, NEW YORK BRANCH, a Swiss banking corporation acting through its New York branch (“ Credit Suisse ”), as Agent (in such capacity, the “ Agent ”).
     In consideration of the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
     SECTION 1.01 Certain Definitions . For all purposes of this Agreement the following terms shall have the following meanings:
     “ Acceptable Alternate Engine ” means (a) with respect to any Engine subject to a Lease, an aircraft engine that qualifies under the terms of such Lease to replace such Engine and to thereby become an “Engine” as defined in such Lease and, (b) with respect to an Engine not subject to a Lease, an aircraft engine of the same make, model and manufacture, and having a value, utility and airworthiness at least equal to, and being in at least as good an operating and maintenance condition as, and having been maintained in the equivalent or better manner as, the Engine being replaced (assuming that such Engine had been maintained in accordance with the Loan Documents and the applicable Lease); provided that such aircraft engine shall be suitable for installation and use on the Airframe related to the Engine being replaced.
     “ Acceptable Letter of Credit ” means one or more irrevocable standby letters of credit issued (or confirmed) to the Collateral Agent, by an Eligible L/C Issuer, each of which (i) provides for presentation and payment at the issuer’s or confirming bank’s office in New York, New York, or by such other method acceptable to the Agent, (ii) shall be payable in Dollars in immediately available funds, (iii) among other reasons, allows for such letter of credit to be drawn if not renewed, replaced or extended at least twenty (20) days prior to the expiration thereof unless the Cash Collateral Account is funded to an amount at least equal to the Cash Collateral Target Amount as of the most recent Calculation Date to have occurred, (iv) shall permit multiple draws, and (v) shall otherwise be reasonably satisfactory to the Agent.
     “ Additional Collateral Account ” means the “Additional Collateral Account” established by the Depositary pursuant to the Depository Agreement.
     “ Additional Collateral Certificate ” means a certificate substantially in the form of Annex II to the Security Agreement, with appropriate insertions and deletions and with such other changes as may be reasonably agreed to by the Agent, and which certificate contains a description of the aircraft (including but not limited to a description of the airframe and engines) and related leases which are to become Aircraft and Leases under this Agreement and the other Loan Documents.

 


 

[Warehouse Loan Agreement]
     “ Adjusted Eurodollar Rate ” means, for each Interest Period with respect to Loans and for the period from the Business Day immediately succeeding a Prefunding Date to the Transfer Date with respect to Prefunding Advances, the quotient obtained (rounded upward, if necessary, to the next higher 1/100th of 1%) by dividing (a) the applicable London Interbank Offered Rate for such Interest Period or other period by (b) 1.00 minus the Eurodollar Reserve Percentage.
     “ Advance ” means each advance of Loans by the Lenders to the Borrower pursuant to Section 2.01 hereof.
     “ Advance Borrowing Base ” means, as of any date with respect to the Portfolio and calculated on an aggregate basis (after giving effect to (x) the addition to the Advance Borrowing Base of any and all Aircraft to the Portfolio on such date and Cash Collateral to be added to the Cash Collateral Account or made available for drawing under any Acceptable Letter of Credit, in each case, on such date and (y) the reduction of the Advance Borrowing Base in respect of any and all Aircraft, Airframes or Engines to be released from the Portfolio, Cash Collateral to be released from the Cash Collateral Account, and availability to be reduced or eliminated with respect to any Acceptable Letter of Credit, in each case, on such date in accordance with Section 7.04(d) , Section 11.23 or otherwise), the sum of (a) sixty-five percent (65.0%) of the Aggregate Aircraft Value at such time plus (b) fifty percent (50.0%) of Cash Collateral held by the Depositary in the Cash Collateral Account and available for drawing under any Acceptable Letter of Credit, in each case, at such time.
     “ Affiliate ” means any Person that has a relationship with the designated Person whereby either of such Persons directly or indirectly controls or is controlled by or is under common control with the other. For this purpose “control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.
     “ Agent ” means Credit Suisse AG, New York Branch, a Swiss banking corporation acting through its New York branch, in its capacity as agent and representative for the Lenders under the Loan Documents pursuant to Article X or any successor(s) thereto.
     “ Agent Fee Letter ” means the agent fee letter agreement dated as of May 26, 2010 between the Borrower and the Agent regarding certain fees payable to Agent and/or its Affiliates in connection with the transactions contemplated herein.
     “ Agent’s Financing Notice ” means a notice in substantially the form of Exhibit J hereto, with appropriate insertions.
     “ Aggregate Aircraft Value ” means, as of any date, the aggregate of the Aircraft Values of each of the Aircraft (including, if calculated with respect to a Transfer Date, aircraft that will become Aircraft included in the Portfolio on such Transfer Date, but, other than with respect to the calculation of a Prepayment Percentage, excluding any Aircraft that will cease to be an

2


 

[Warehouse Loan Agreement]
Aircraft included in the Portfolio at the time of such determination pursuant to Section 11.23 or otherwise).
     “ Aggregated Additional Interest ” is defined in Section 3.04(b) .
     “ Aggregated Default Interest ” is defined in Section 3.04(c) .
     “ Aggregated Default Interest Rate ” means, for any day during any Interest Period, the sum of the Adjusted Eurodollar Rate for such Interest Period plus three and one-half percent (3.50%) per annum.
     “ Agreement ” is defined in the preamble .
     “ Aircraft ” means (a) individually, each (i) Airframe, together with the Engines identified therewith in Schedule II of the Security Agreement and/or an Additional Collateral Certificate and owned legally or beneficially by the Borrower or an Aircraft Owning Subsidiary, as the case may be, whether or not any of such Engines may at any time of determination be installed on such Airframe or installed on any other airframe, and the Aircraft Documentation in respect thereof or (ii) each spare engine that may be acquired by the Borrower or an Aircraft Subsidiary with an Airframe and the Aircraft Documentation in respect thereof and (b) collectively, all such Aircraft.
     “ Aircraft Documentation ” means, with respect to each Aircraft then subject to a Lease, the “aircraft documents,” “technical documents” or similarly defined term in such Lease and with respect to each Aircraft not then subject to a Lease (a) the documents (including microfilm), data, manuals, diagrams and other written information originally furnished by the Manufacturer and/or the Seller, (b) the documents, records, logs and other data maintained (or required to be maintained) in respect of the Airframes and Engines pursuant to the terms of Leases related to such Airframes and Engines during the term of such Leases, (c) the documents, records, logs and other data maintained (or required to be maintained) in respect of the Airframes and Engines pursuant to the applicable Aviation Authority under which the Airframes and Engines are subject, and (d) the documents, records, logs and other data maintained (or recommended to be maintained) in respect of the Airframes and Engines pursuant to the applicable Manufacturer’s recommendations and/or the Maintenance Program, as applicable.
     “ Aircraft Expenses ” means (a) with respect to the Portfolio, (i) storage, maintenance, test flight, navigation, landing, operation, ferry flights, shipping fuel, repossession (whether or not successful), reconfiguration, inspection, refurbishment, upgrade, integration, repair and engine replacement expenses related to the Aircraft and Engines incurred by the Borrower, any direct or indirect Subsidiary of the Borrower or the Servicer, including all expenses relating to compliance with airworthiness directives and service bulletins, and the fees and expenses of independent technicians and other experts retained for any of the foregoing purposes other than with respect to expenditures specifically agreed to be borne by the Servicer; (ii) amounts due and payable under Section 11.05 related to acquisition of an Aircraft or an Aircraft Owning Subsidiary, (iii) insurance expenses related to the Aircraft and Engines, including, without limitation, all premiums and all fees and expenses of insurance advisors and brokers; (iv) fees and expenses of appraisers and independent advisors; (v) outside legal counsel fees and expenses and other

3


 

[Warehouse Loan Agreement]
professional fees and expenses (A) related to litigation concerning any Aircraft, Engine or Lease, (B) related to negotiations, documentation, registration, legal opinions and other legal assistance incurred by the Borrower or any Subsidiary thereof or by the Agent in connection with the acquisition, disposition or leasing of an Aircraft or Engine or registering an Aircraft or an Engine, (C) related to any actual or proposed amendment, forbearance and subleasing relating to any Aircraft, Engine or Lease, (D) related to any actual or proposed enforcement, workout, repossession, foreclosure, restructuring or other remedial action relating to any Aircraft, Engine or Lease and (E) related to maintenance of the registration of the Aircraft or the related Aircraft Subsidiary’s title or interest therein; (vi) all amounts payable by the Borrower or any Aircraft Subsidiary pursuant to any Lease or termination thereof or otherwise; (vii) sales, use and property taxes, income taxes paid by the Borrower or any Aircraft Subsidiary and other taxes (including any of those which may have been paid by the Servicer on behalf of any of the Borrower or any Aircraft Subsidiary) payable in connection with the ownership, sale or lease of any Aircraft or Engine by or on behalf of the Borrower or any Aircraft Subsidiary or otherwise payable by the Borrower or any Aircraft Subsidiary; and (viii) remarketing expenses and broker fees in connection with the actual or potential sale or lease of any Aircraft and (b) all other fees, costs and operating expenses of the Borrower and each Aircraft Subsidiary, including, without limitation, those incurred in connection with maintaining the legal existence of the Borrower and each Aircraft Subsidiary (including trustees fees), obtaining and maintaining in effect any consent, permit, license or registration required by any Governmental Entity (other than those to which any amounts are applied (or that would be applied) under any provision in Section 3.03 other than clause third of Section 3.03(a) , clause ninth of Section 3.03(b) or clause second of Section 3.03(c) , and other than any fees, costs and expenses financed with Loans, as permitted under Section 2.01(e) ), including all day-to-day expenses and all capital costs; provided however , in no event shall Aircraft Expenses include Excluded Expenses.
     “ Aircraft Expenses Account ” means the “Aircraft Expenses Account” established by the Depositary pursuant to the Depository Agreement.
     “ Aircraft Expenses Notice ” is defined in the Depository Agreement.
     “ Aircraft Holding Subsidiary ” means a wholly owned (directly or indirectly) Subsidiary of the Borrower which was created for the sole purpose of owning Aircraft Owning Subsidiaries or Aircraft Leasing Subsidiaries and is incorporated, organized or formed under the laws of any state of the United States (or the District of Columbia), Ireland or any other jurisdiction acceptable to the Agent.
     “ Aircraft Leasing Subsidiary ” means (a) a wholly owned (directly or indirectly) Subsidiary of the Borrower which was created for the sole purpose of leasing an Aircraft from the Borrower or an Aircraft Owning Subsidiary and leasing such Aircraft to a Lessee or (b) a trust, the entire beneficial interest in which is wholly owned (directly or indirectly) by the Borrower, which was created for the sole purpose of leasing (directly or indirectly) an Aircraft from the Borrower or an Aircraft from an Aircraft Owning Subsidiary and leasing such Aircraft to a Lessee, in any case, incorporated, organized or formed under the laws of any state of the United States (or the District of Columbia), Ireland or any other jurisdiction acceptable to the Agent.

4


 

[Warehouse Loan Agreement]
     “ Aircraft Lending Subsidiary ” means a wholly owned (directly or indirectly) Subsidiary of the Borrower which was created for the sole purpose of borrowing money from the Borrower and lending money to an Aircraft Owning Subsidiary and is incorporated, organized or formed under the laws of any state of the United States (or the District of Columbia), Ireland, Luxembourg or any other jurisdiction acceptable to the Agent.
     “ Aircraft Owning Subsidiary ” means (a) a wholly owned (directly or indirectly) Subsidiary of the Borrower which was created for the sole purpose of owning and leasing an Aircraft or (b) a trust, the entire beneficial interest in which is wholly owned (directly or indirectly) by the Borrower, which was created for the sole purpose of owning and leasing an Aircraft, in any case, incorporated, organized or formed under the laws of any state of the United States (or the District of Columbia), Ireland or any other jurisdiction acceptable to the Agent.
     “ Aircraft Subsidiary ” means any Aircraft Holding Subsidiary, Aircraft Leasing Subsidiary, Aircraft Lending Subsidiary or Aircraft Owning Subsidiary.
     “ Aircraft Type ” is defined in Section 2(c)(ii) of Schedule II hereto.
     “ Aircraft Value ” means, with respect to any Aircraft, the lesser of (a) (i) the arithmetic average of the Appraised Values as set forth in three Independent Appraisals, one from each of the three Independent Appraisers, provided to the Agent with respect to the Transfer Date for such Aircraft minus (ii) as of any date of determination, the product of (x) the Monthly Depreciation for such Aircraft multiplied by (y) the number of full Measuring Periods elapsed from the Transfer Date of such Aircraft to such date of determination and (b) the arithmetic average of the Appraised Values as set forth in three Independent Appraisals, one from each of the three Independent Appraisers, then most recently delivered to the Agent (or, in the case of an Aircraft which has suffered an Event of Loss, then most recently delivered to the Agent prior to such Event of Loss); provided , however , that in any event, with respect to any Aircraft with a Financed Modification, the “grossed up” Independent Appraisal with respect thereto shall be applicable upon substantial completion of such Financed Modification.
     “ Airframe ” means, in respect of each Aircraft, (a) the airframe constituting part of such Aircraft and bearing the Manufacturer’s serial number and registration and nationality mark set forth on Schedule II to the Security Agreement and/or an Additional Collateral Certificate; and (b) any and all Parts so long as the same shall be incorporated or installed in, or attached to, such Airframe, or removed therefrom, so long as such Parts shall remain owned by the Borrower or the applicable Aircraft Owning Subsidiary that owns such Aircraft, as the case may be.
     “ ALC ” means Air Lease Corporation, a Delaware corporation.
     “ ALC Party ” means any of ALC, the Servicer (provided ALC or its Affiliate is the Servicer), the Borrower, any Subsidiary of the Borrower and any Affiliate of the foregoing.
     “ Allocation ” means, with respect to any Designated Lender, the Dollar amount set forth opposite such Designated Lender’s name on Schedule I or as set forth in an Assignment and Assumption Agreement or any New Allocation Agreement, in each case, under the heading “Allocation”, as such amount may be adjusted from time to time pursuant to this Agreement;

5


 

[Warehouse Loan Agreement]
provided that no Lender shall be deemed to have an Allocation on or after the Availability Expiration Date.
     “ Amortization Event ” means, with respect to any Settlement Date (and as determined on each Settlement Date commencing with the second Settlement Date after the first Transfer Date to have occurred):
     (a) on any Calculation Date, the Interest Coverage Ratio is or has been on a prior Calculation Date (and with respect to such prior Calculation Date was not waived in accordance with this Agreement) less than 1.35:1.00;
     (b) on any Calculation Date, the Six Month Interest Coverage Ratio is or has been on a prior Calculation Date (and with respect to such prior Calculation Date was not waived in accordance with this Agreement) less than 1.75:1.00;
     (c) on the most recent Calculation Date to have occurred, the weighted average (by Aircraft Value) age of all of the Aircraft in the Portfolio is greater than 5.0 years old; and
     (d) on the most recent Calculation Date to have occurred, the weighted average (by Aircraft Value) remaining lease term of all of the Aircraft in the Portfolio is less than 36 months.
     “ Annual Budget ” means a detailed annual budget for the Borrower which shall, among other things, specify for each month in such annual period, (a) the Borrower’s projected revenues, including projected rental receipts, reinvestment income, maintenance receipts and aircraft sales receipts and miscellaneous receipts and late interest received, (b) the Borrower’s projected expenses, including interest on the Notes, Derivatives Obligations, Aircraft related expenditures, Aircraft Expenses, Servicer’s Fees, Sales Fees, trustee’s fees and miscellaneous expenses and (c) such other information reasonably requested by the Agent, in form and substance reasonably satisfactory to the Agent.
     “ Applicable Aircraft ” means, with regard to each Advance, any aircraft whose acquisition is being financed by such Advance plus additional capital contributions from ALC, if applicable.
     “ Applicable Aircraft Subsidiary ” means, with regard to each Advance, any Aircraft Subsidiary whose aircraft or intercompany loan will be financed by such Advance plus additional capital contributions from ALC, if applicable.
     “ Applicable Law ” means all applicable laws, treaties, judgments, decrees, injunctions, writs and orders of any court, Governmental Entity or governmental authority and all applicable rules, regulations, orders, directives, licenses and permits of any governmental body, instrumentality, agency or authority and all applicable interpretations thereof.
     “ Applicable LTV Percentage ” means, from and including the Closing Date to but excluding the twelfth Settlement Date following the Availability Expiration Date, 65.0%; from and including the twelfth Settlement Date following the Availability Expiration Date to but

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excluding the twenty-fourth Settlement Date following the Availability Expiration Date, 60.0%; from and including the twenty-fourth Settlement Date following the Availability Expiration Date to but excluding the thirty-sixth Settlement Date following the Availability Expiration Date, 55.0%; and on the thirty-sixth Settlement Date following the Availability Expiration Date and thereafter, 50.0%.
     “ Applicable Margin ” means three and one-quarter percent (3.25%).
     “ Applicable Rate ” means (a) with respect to Base Rate Loans and Base Rate Advances, the sum of the Corporate Base Rate plus the Applicable Margin and (b) with respect to LIBOR Loans and LIBOR Advances, the sum of the Adjusted Eurodollar Rate plus the Applicable Margin.
     “ Appraised Value ” means, with respect to any Aircraft, the then “current market value” (as defined by ISTAT or any similar term that is reasonably acceptable to the Agent), adjusted based on the Aircraft’s current condition reflected in the most recent maintenance status report, as such value is determined on a “desktop” basis by the applicable Independent Appraiser.
     “ Approved Fund ” means (a) with respect to any Designated Lender, an entity (whether a corporation, partnership, limited liability company, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is managed by such Designated Lender or an Affiliate of such Designated Lender, (b) with respect to any Designated Lender that is a fund that invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Designated Lender or by an Affiliate of such investment advisor, (c) with respect to any Designated Lender, its Eligible Conduit Lender, and (d) with respect to any Conduit Lender, any of its Support Parties.
     “ AS Joinder and Security Agreement Supplement ” is defined in the Security Agreement.
     “ Assignee ” is defined in Section 11.03(b) .
     “ Assignment ” has the meaning assigned to the term “assignment” in the Cape Town Convention.
     “ Assignment Agreement ” means any agreement relating to the assignment or novation of the Seller’s rights under a Lease to the Borrower or an Aircraft Subsidiary, as the case may be.
     “ Assignment and Assumption Agreement ” means an Assignment and Assumption Agreement substantially in the form of Exhibit C hereto, with appropriate insertions and deletions, or with such other changes as may be reasonably agreed to by the Agent.
     “ Authorized Officer ” means, with respect to any Person, the Chairman, Vice Chairman, the President, Manager or any Vice President of such Person (or in the case of a limited liability company, any President, Vice President, Manager or Director of a direct or indirect manager thereof), or any other authorized signatory or agent for such Person who has been authorized by the Board of Directors (or comparable authorizing body) of such Person to perform the specific act or duty or to sign the specific document in question.

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[Warehouse Loan Agreement]
     “ Authorized Sale ” is defined in Section 3.02(g) .
     “ Availability Expiration Date ” means the last day of the Availability Period, as such Availability Period may be extended or terminated from time to time in accordance with the provisions of this Agreement.
     “ Availability Period ” means a period of twenty-four (24) months commencing on the Closing Date, as extended in accordance with Section 2.02 , and as earlier terminated pursuant to the terms hereof, including Section 2.07 hereof.
     “ Available Collateral Debt Amount ” means, with respect to any Aircraft, the product of (A) the Prepayment Percentage related to such Aircraft immediately prior to the time of determination times (B) the Total Funded Amount at the time of determination.
     “ Aviation Authority ” means, with respect to any Aircraft, any Person who is or shall from time to time be vested with the control and supervision of, or have jurisdiction over, the registration, airworthiness and operation of aircraft or other matters relating to civil aviation in the State of Registration under Applicable Law.
     “ Back-Up Servicer ” is defined in Section 12(c) of the Servicing Agreement.
     “ Bankruptcy Code ” means Title 11 of the United States Code (11 U.S.C. 101 et seq. ), as in effect from time to time and any successor statute.
     “ Base Rate Advance ” means a Prefunding Advance bearing interest at a fluctuating rate determined by reference to the Corporate Base Rate.
     “ Base Rate Loan ” means a Loan bearing interest at a fluctuating rate determined by reference to the Corporate Base Rate.
     “ Bills of Sale ” means all bills of sale delivered to the applicable Aircraft Owning Subsidiary or the Borrower from the respective Sellers in connection with such Aircraft Owning Subsidiary’s or Borrower’s purchase of an Aircraft (in each case whether or not such Aircraft Owning Subsidiary is actually a Subsidiary of the Borrower at such time).
     “ Borrower ” is defined in the preamble .
     “ Borrowing Base ” means, as of any date with respect to the Portfolio and calculated on an aggregate basis (after giving effect to (a) the addition to the Borrowing Base of any and all Aircraft to the Portfolio on such date and Cash Collateral to be added to the Cash Collateral Account or made available for drawing under any Acceptable Letter of Credit, in each case, on such date and (b) the reduction of the Borrowing Base in respect of any and all Aircraft, Airframes or Engines to be released from the Portfolio, Cash Collateral to be released from the Cash Collateral Account, and availability to be reduced or eliminated with respect to any Acceptable Letter of Credit, in each case, on such date in accordance with Section 7.04(d) , Section 11.23 or otherwise), the Applicable LTV Percentage times the result of (i) the Aggregate Aircraft Value at such time plus (ii) the aggregate amount of Cash Collateral held by the Depositary in the Cash Collateral Account or available for drawing under any Acceptable Letter

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of Credit, in each case, at such time minus (iii) the Aircraft Value of all Aircraft in respect of which the Borrower has breached its obligations contained in a Deferral Request or breached the representation contained in Section 6.01(d) .
     “ Break Amount ” means, with respect to any repayment of principal of the Loan on any day other than a Settlement Date the amount equal to the product of (i) the amount to be repaid, (ii) the amount (if any) expressed as a percentage by which London Interbank Offered Rate for the Interest Period commencing on the Settlement Date before the date of repayment exceeds (in which case the Break Amount shall be positive) or is less than (in which case the Break Amount shall be negative) London Interbank Bid Rate as of the date of such repayment on such amount of principal to be repaid for the period from the date of repayment to the next succeeding Settlement Date and (iii) a fraction, the numerator of which is the number of days from and including the date of repayment, to but excluding the date when interest would next have been payable on a Loan and the denominator of which is 360.
     “ Break Costs ” means the relevant Break Amount if such Break Amount is a positive number.
     “ Business Day ” means any day of the week, other than a Saturday or a Sunday, on which banks are open for business in London, England for the conduct of transactions in the London interbank market and on which commercial banks in New York City, New York, United States of America; Los Angeles, California, United States of America; Paris, France; Sydney, Australia and Frankfurt, Germany are open for business and are not required or authorized to close.
     “ Calculation Date ” means, with respect to any Settlement Date, the last day of the calendar month immediately preceding such Settlement Date.
     “ Cape Town Convention ” means the official English language texts of the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment which were signed in Cape Town, South Africa on November 16, 2001.
     “ Cape Town Registration ” is defined in Section 7.17 .
     “ Capital Stock ” means, with respect to any Person, any and all shares, interests (including membership interests in limited liability companies), participations, rights (including options, warrants and the like convertible or exercisable into shares of Capital Stock) or other equivalents (however designated, whether voting or non-voting) of such Person’s capital, whether now outstanding or issued after the Closing Date.
     “ Cash Adjusted Eurodollar Rate ” means for the period from the Prefunding Date to the next succeeding Business Day with respect to Prefunding Advances, the quotient obtained (rounded upward, if necessary, to the next higher 1/100th of 1%) by dividing (a) the applicable Cash London Interbank Offered Rate for such period by (b) 1.00 minus the Eurodollar Reserve Percentage.

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[Warehouse Loan Agreement]
     “ Cash Collateral ” means, at any time of determination, the sum of (i) amounts of cash and the principal amount of Permitted Investments deposited in, and held in, the Cash Collateral Account and (ii) the amount available for drawing under any Acceptable Letter of Credit.
     “ Cash Collateral Account ” means the “Cash Collateral Account” established by the Depositary pursuant to the Depository Agreement.
     “ Cash Collateral Target Amount ” means, (i) with respect to the date of the first Advance hereunder and each Settlement Date during the Availability Period, an amount equal to the sum of (a) $15,000,000 plus (b) the aggregate amount of Settlement Date Deposits related to such Settlement Date and each prior Settlement Date; provided however , that in no event shall the Cash Collateral Target Amount exceed the Maximum Cash Collateral Amount at the time of calculation and (ii) at any time after the Availability Expiration Date, the Maximum Cash Collateral Amount.
     “ Cash Flow ” means all amounts due and owing to, or received by, the Borrower or any Subsidiary thereof from any source (including a seller of Aircraft in connection with the purchase, ownership, operation or sale of the Portfolio (or any portion thereof)), including prepaid rent, Maintenance Reserves, Deposits, Monthly Rent, insurance proceeds and all amounts paid under each Lease and all amounts receivable or received by the Borrower or the Aircraft Owning Subsidiaries pursuant to any Loan Document, other than Excepted Payments.
    Cash London Interbank Offered Rate ” means, for any Prefunding Period:
     (a) the rate per annum equal to the rate determined by the Agent to be the offered rate that appears on the page of the Reuters screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for one-month deposits in Dollars (for delivery two Business Days after the first day of the Prefunding Period), determined as of approximately 11:00 a.m. (London time) on the first day of the Prefunding Period; or
     (b) if the rate referred to in clause (a) above does not appear on such Reuters page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Agent to be the offered rate that appears on such other page or service that displays an average British Bankers Association Interest Settlement Rate for one-month deposits in Dollars (for delivery two Business Days after the first day of the Prefunding Period), determined as of approximately 11:00 a.m. (London time) on the first day of such Prefunding Period; or
     (c) if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Agent as the rate of interest (rounded upwards to the next 1/100th of 1%) at which one-month deposits in Dollars for delivery two Business Days after the first day of the Prefunding Period in same day funds in the approximate amount of the Prefunding Advances held by Credit Suisse AG, New York Branch, as would be offered by the principal London Office of Credit Suisse to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) on the first day of such Prefunding Period; or

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[Warehouse Loan Agreement]
     (d) subject to Article IV , the rates referenced in the preceding clauses (a) , (b) and (c) are not available or are not established for any reason for any Interest Period, the “Cash London Interbank Offered Rate” shall equal the Corporate Base Rate for each day during such Prefunding Period until such rates can be determined pursuant to clause (a) , (b) or (c) above.
     “ Change In Law ” means an introduction, enactment, imposition, implementation, phase in or variation or change after the date of this Agreement of any law, order, regulation or official directive, concession, guideline, decision, request or requirement by any central bank, fiscal, governmental or other competent authority (whether or not having the force of law but in respect of which compliance in the relevant jurisdiction is generally customary) or any change after the date of this Agreement in any interpretation, implementation, phase in, effectiveness or application, or the introduction or making of any new or further interpretation, implementation, phase in, effectiveness or application by any court, tribunal, central bank, fiscal, governmental, or other competent authority or compliance with any new or different request or direction made after the date of this Agreement (in either case whether or not having the force of law but in respect of which compliance in the relevant jurisdiction is generally customary) from any central bank, fiscal, governmental or other competent authority. The implementation and/or phase in of the International Convergence of Capital Measurement and Capital Standards: A Revised Framework (Basel II) shall be deemed a Change In Law.
    Change of Control ” means any of the following:
     (a) ALC shall not own legally and beneficially one hundred percent (100%) of all outstanding Capital Stock (both by vote and by value) of the Borrower; or
     (b) the Borrower shall not own legally or beneficially (directly or indirectly) one hundred percent (100%) of all outstanding Capital Stock (both by vote and by value) of each Aircraft Subsidiary, unless such Aircraft Subsidiary is released from the Lien of the Security Documents in accordance with Section 11.23 .
     “ Chattel Paper Legend ” means the following statement: TO THE EXTENT THAT THIS AGREEMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE IN THE STATE OF NEW YORK OR ANY CORRESPONDING LAW IN ANY OTHER JURISDICTION, NO SECURITY INTEREST IN THIS AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HERETO OTHER THAN THE COUNTERPART EXECUTED BY THE COLLATERAL AGENT BELOW.
    Closing Date ” means May 26, 2010.
    Code ” means the Internal Revenue Code of 1986, as amended.
     “ Collateral ” means all of the property, rights and privileges in which the Collateral Agent is granted a security interest under the Loan Documents.
     “ Collateral Agent ” means Deutsche Bank Trust Company Americas, a New York banking corporation, in its capacity as collateral agent and representative for the Protected

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[Warehouse Loan Agreement]
Parties under the Security Agreement, the Depository Agreement and the other Security Documents.
     “ Collateral Deficiency ” means, as of any date of determination, the Dollar amount of the excess, if any, of the aggregate outstanding principal amount of the Loans as of such date over the Borrowing Base calculated as of such date.
     “ Collection Account ” means the “Collection Account” established by the Depositary pursuant to the Depository Agreement.
    Competitor ” means any of the following Persons:
     (a) any Person (other than ALC and its Affiliates) engaged in, or that has an Affiliate engaged in, the business of manufacturing aircraft or aircraft engines, which business had consolidated revenues attributable to such business for such Person’s and/or its Affiliates’, as the case may be, most recently completed fiscal year in excess of $200,000,000; or
     (b) any of the following Persons (or any of their respective Affiliates) and their respective successors:
     (i) AerCap Holdings N.V.;
     (ii) Aergo Capital;
     (iii) Airbus Asset Management;
     (iv) Aircastle Limited;
     (v) Aircorp Incorporated;
     (vi) ALAFCO;
     (vii) American International Group, Inc.;
     (viii) Arkia Leasing;
     (ix) ATR Asset Management;
     (x) Automatic;
     (xi) Avolon Aircraft Corp.;
     (xii) Aviation Capital Group;
     (xiii) AWAS Aviation Holdings LLC;
     (xiv) Babcock & Brown Air Limited;

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[Warehouse Loan Agreement]
     (xv) Babcock & Brown Aircraft Management LLC;
     (xvi) BAE Systems Asset Management;
     (xvii) Bavaria International Aircraft Leasing;
     (xviii) BCI Aircraft Leasing;
     (xix) BOC Aviation PTE. LTD.;
     (xx) Boeing Aircraft Holding Co.;
     (xxi) Boeing Capital Corporation;
     (xxii) Bombardier Capital;
     (xxiii) Center-Capital;
     (xxiv) Central Air Leasing;
     (xxv) CIT Group Inc.;
     (xxvi) Dubai Aerospace Enterprise;
     (xxvii) Deutsche Structured Finance;
     (xxviii) FINOVA Capital Corporation;
     (xxix) GA Telesis;
     (xxx) GE Commercial Aviation Services Limited;
     (xxxi) Global Aviation Asset Management;
     (xxxii) Goal;
     (xxxiii) GreenStone Aviation;
     (xxxiv) Guggenheim Aviation Partners;
     (xxxv) Hong Kong Aviation Company;
     (xxxvi) International Lease Finance Corporation;
     (xxxvii) Itochu Airlease Inc.;
     (xxxviii) Jackson Square Aviation LLC.;
     (xxxix) Jetscape;

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[Warehouse Loan Agreement]
     (xl) Macquarie Aircraft Leasing Limited;
     (xli) Marathon Asset Management LLC;
     (xlii) Nomura Babcock & Brown Co., Ltd.;
     (xliii) Nordic Aviation Contractor A/S;
     (xliv) Oak Hill Capital Management, Inc.;
     (xlv) Oasis International Leasing Co.;
     (xlvi) ORIX Aviation Systems Ltd.;
     (xlvii) Pembroke Capital Limited;
     (xlviii) Q Aviation, LLC;
     (xlix) Raytheon Aircraft Credit Corp.;
     (l) RBS Aviation Capital; SAAB Aircraft Leasing;
     (li) Safair Lease Finance;
     (lii) Singapore Aircraft Leasing Enterprise (SALE);
     (liii) Skytech-AIC;
     (liv) Skyworks Leasing LLC;
     (lv) Sojitz Aircraft Leasing BV;
     (lvi) Sumisho Aircraft Asset Management BV;
     (lvii) Tombo Aviation;
     (lviii) Veling; or
     (lix) VGS Aircraft Holding LTD.
     (c) any other Person (or any Affiliate thereof) (other than ALC, and its Affiliates) which either (x) engages in a business as an operating lessor of commercial aircraft in competition with the Borrower in succession to any of the Persons specified in clause (b) above or (y) has consolidated aircraft operating leasing-related revenues (excluding revenues from sales of aircraft) attributable to such business for its most recently completed fiscal year in excess of $100,000,000;
provided that the term “Competitor” shall not include any Initial Lender or any of their Affiliates.

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[Warehouse Loan Agreement]
     “ Concentration Account ” means the “Concentration Account” established by the Depositary pursuant to the Depository Agreement.
     “ Conduit Lender ” means a special purpose financing entity acting as a Lender hereunder and designated as a Conduit Lender by a Granting Lender pursuant to Section 2.04 .
     “ Contingent Obligation ” of a Person in respect of any Indebtedness of another Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon such Indebtedness of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including any comfort letter, operating agreement, take-or-pay contract, application for a letter of credit or granting of a security interest in any property of such Person to secure such Indebtedness of such other Person; provided that “Contingent Obligation” shall not include any undertaking by a Person on behalf of another Person in respect of representations and warranties in connection with the sale of Aircraft.
     “ Corporate Base Rate ” means, for any day, the higher of (a) the base commercial lending rate per annum announced from time to time by Credit Suisse in New York in effect on such day, or (b) the interest rate per annum quoted by Credit Suisse at approximately 11:00 a.m., London time, on such day, to dealers in the New York Federal funds market for the overnight offering of funds by Credit Suisse plus one-half of one percent (0.50%). The Corporate Base Rate is not intended to represent the lowest rate charged by Credit Suisse for extensions of credit.
    Covered Party ” is defined in Section 4.05(a) .
    Credit Suisse ” is defined in the preamble .
    Default Interest ” is defined in Section 3.04(c) .
    Default Margin ” means, as of any date, two percent (2.00%) per annum.
     “ Defaulting Lender ” means any Lender, as determined by the Agent, that has on the date of determination (a) failed to fund any portion of its Loans at the time required to be funded by it hereunder, except that a Lender shall not be a Defaulting Lender pursuant to this clause (a) with respect to an Advance pursuant to Section 2.03 that is received in the Prefunding Account prior to 11:59 p.m. (New York City time) on the relevant Prefunding Date, (b) notified the Borrower, the Agent, or any Lender that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under other agreements in which it commits to extend credit or (c)(i) become or is insolvent or (ii) become the subject of an Insolvency or Liquidation Proceeding, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such Insolvency or Liquidation Proceeding.
     “ Deferral Request ” means a Deferral Request substantially in the form of Exhibit N hereto, with appropriate insertions and deletions, or with such other changes as may be reasonably agreed to by the Agent.

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[Warehouse Loan Agreement]
     “ Deposit ” is defined in Section 7.04(b) .
     “ Deposit Account ” means the “Deposit Account” established by the Depositary pursuant to the Depository Agreement.
     “ Depositary ” means Deutsche Bank Trust Company Americas, a New York banking corporation, or a successor thereto appointed pursuant to the Depository Agreement.
      “ Depository Accounts ” is defined in Section 1.01 of the Depository Agreement.
     “ Depository Agreement ” means the Depository Agreement dated as of May 26, 2010 among the Borrower, the Collateral Agent, the Agent and the Depositary.
     “ Depreciated Purchase Price ” means with respect to any Aircraft as of any date of determination, the difference of (a) the original Purchase Price of such Aircraft minus (b) the product of (x) the Monthly Depreciation of such Aircraft multiplied by (y) the number of full Measuring Periods elapsed from the Transfer Date of such Aircraft to such date of determination.
     “ Derivatives Agreement ” means any and all rate swap transactions (including but not limited to caps and collars), currency swap transactions or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), in each case, entered into by the Borrower with a Derivatives Creditor in relation to this Agreement.
     “ Derivatives Creditor ” means any Designated Lender or any Affiliate of any Designated Lender from time to time party to one or more Derivatives Agreements with the Borrower on the day of determination (even if any such Designated Lender for any reason ceases after the execution of such agreement to be a Designated Lender hereunder), and its successors and assigns.
     “ Derivatives Obligations ” of any Person means all obligations (including, without limitation, any amounts which accrue after the commencement of any bankruptcy or insolvency proceeding with respect to such Person, whether or not allowed or allowable as a claim under the Bankruptcy Code) of such Person in respect of any Derivatives Agreement, excluding any amounts which such Person is entitled to set-off against its obligations under Applicable Law.
     “ Derivatives Termination Value ” means, as of any date after the termination of any Derivatives Agreement, after taking into account the effect of any legally enforceable netting agreements relating to such Derivatives Agreement, the amount payable by (in which case the amount shall be positive) or payable to (in which case the amount shall be negative), the Borrower as a result of the termination of such Derivatives Agreement.
    Designated Lender ” means any Lender other than a Conduit Lender.
     “ Designated Lender Fee Letter ” means each committed lender fee letter agreement dated as of May 26, 2010 between the Borrower and a particular Designated Lender regarding certain fees payable to such Designated Lender on the Closing Date in connection with the transactions contemplated herein.

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[Warehouse Loan Agreement]
     “ Disbursement Certificate ” means a Disbursement Certificate relating to reserves for Aircraft Expenses delivered by the Borrower and the Servicer to the Agent pursuant to Section 3.03 , in the form of Exhibit K attached hereto.
    Disbursement Notice ” is defined in the Depository Agreement.
    Dispose ” or “ Disposition ” is defined in Section 7.02(d) .
    Dollar ” or “ Dollars ” or “ $ ” means the legal currency of the United States.
     “ Eligibility Amount ” means, at any time, an amount equal to the quotient of (a) the Maximum Facility Amount (without regard to any increase in the Maximum Facility Amount until any such increase is effective as provided in Section 2.01(c)(iii) ) divided by (b) 65.0%.
     “ Eligible Assignee ” means (a) any Lender, (b) any Affiliate of a Lender or Eligible Conduit Lender of a Lender for which it acts as a Granting Lender hereunder, (c) in the case of an assignment pursuant to a Support Facility, any Support Party, (d) any Approved Fund and (e) any other Person that is a financial institution, institutional investor or investment fund; provided that in the case of clause (e) , such Person shall have been approved by the Agent and, provided no Facility Event of Default, Facility Default described in clause (ii) or (iii) of Section 9.01(h) , Amortization Event or Servicer Replacement Event has occurred and is continuing, the Borrower, such approvals not to be unreasonably withheld.
     “ Eligible Conduit Lender ” means, with respect to any Designated Lender, a special purpose financing entity (i) administered or sponsored by such Designated Lender or (ii) with respect to which such Designated Lender acts as a Support Party.
     “ Eligible L/C Issuer ” means any bank or other financial institution acceptable to the Agent which has at all times both (a) a long-term senior unsecured debt rating of “A” or better from S&P and (b) a long-term senior unsecured debt rating of “A” or better from Moody’s.
     “ Engine ” means with respect to any Aircraft (a) each of the aircraft engines, identified by Manufacturer’s model and serial number in a Lease and and/or Schedule II of the Security Agreement and/or an Additional Collateral Certificate, whether or not attached to the Airframe of such Aircraft or any other airframe on the Transfer Date, or (b) an Acceptable Alternate Engine subsequently substituted therefor in accordance with the provisions of the relevant Lease or this Agreement, whether or not from time to time any such aircraft engine is installed on the Airframe of such Aircraft or installed on any other airframe, together in each case with any and all Parts incorporated or installed in or attached to such aircraft engine and any and all Parts removed therefrom so long as such Parts shall remain owned by the Borrower or the Aircraft Owning Subsidiary that owns such Aircraft.
    ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.
     “ ERISA Affiliate ” means any entity (whether or not incorporated) that is treated as a single employer together with the Borrower under Section 414 of the Code.

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[Warehouse Loan Agreement]
     “ Eurodollar Reserve Percentage ” means for any day that percentage (expressed as a decimal and in no event less than zero) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any other entity succeeding to the functions currently performed thereby) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion Dollars in respect of “Eurocurrency liabilities”, whether or not a Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for prorations, exceptions or offsets that may be available from time to time to a Lender. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage.
     “ Event of Loss ” means, with respect to any Aircraft, Airframe or Engine, any of the following events with respect to such property:
     (a) during the term of any Lease with respect to such Aircraft, such Aircraft shall have been deemed under such Lease to have suffered an “event of loss” (as such term or similar term is defined in the applicable Lease) as to the entire Aircraft; and
     (b) when no Lease is in effect for such Aircraft, Airframe or Engine, any of the following events with respect to such Aircraft, Airframe or Engine:
     (i) loss of such Aircraft, Airframe or Engine or the use of such Aircraft, Airframe or Engine for a period in excess of ninety (90) days due to destruction of or damage to such property which renders repair uneconomic or which renders such property permanently unfit for normal use;
     (ii) any damage to such Aircraft, Airframe or Engine which results in the receipt of insurance proceeds by the Servicer, the Borrower, any Aircraft Subsidiary, the Collateral Agent or the Agent with respect to such Aircraft, Airframe or Engine on the basis of an actual, constructive or compromised total loss;
     (iii) the theft or disappearance of such Aircraft, Airframe or Engine for a period in excess of ninety (90) consecutive days; or
     (iv) the condemnation, confiscation, seizure of or requisition or taking of title to such Aircraft, Airframe or Engine by any Governmental Entity for a continuous period of more than six (6) months; other than a requisition of any Aircraft, Airframe or Engine by an instrumentality or agency of the United States, the obligations of which bear the full faith and credit of the United States, if such Person makes periodic cash payments for the use of the Aircraft, Airframe or Engine at the prevailing market rate.
An Event of Loss with respect to an Aircraft shall be deemed to have occurred if an Event of Loss occurs with respect to the Airframe which is a part of such Aircraft. An Event of Loss to an Engine only shall not constitute an Event of Loss with respect to the Aircraft of which such Engine is a part.

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     “ Excepted Payments ” means (a) the amount on deposit in the Luxembourg Account from time to time, if applicable, to the extent such amount does not exceed $20,000 and (b) amounts payable or paid to the Borrower, the Aircraft Subsidiaries, the Agent or any Lender (or any similar party defined and used in a Lease), or any other Person for (i) any indemnity payments or similar obligations payable by a Lessee to any Lessor, the Borrower, the Servicer or any of their Affiliates or any third party, including any officer, director, employee or agent thereof under or pursuant to a Lease, (ii) proceeds of public liability insurance (including insurance maintained by the Borrower or any Aircraft Subsidiary for its own account) payable to or for the benefit of the Borrower, any Aircraft Subsidiary, the Lessee or the Servicer (or governmental indemnities in lieu thereof) and (iii) any rights to enforce and collect the same.
     “ Excluded Expenses ” means (i) the costs and expenses of any counsel to ALC, the Borrower and/or such Aircraft Subsidiary other than, solely with respect to the period following the Closing Date to but excluding the Availability Expiration Date, as expressly permitted under clause (a)(v)(A) , (B) , (C) , (D) and (E) of the definition of Aircraft Expenses, (ii) all out-of-pocket costs and expenses of the Servicer incurred in connection with the acquisition of an Aircraft (other than the costs of the Independent Appraisals provided in accordance with this Agreement) and (iii) notwithstanding anything contained in clauses (i) or (ii) above, any costs and expenses of ALC, the Borrower or any Aircraft Subsidiary incurred in connection with the enforcement or exercise of remedies by the Agent or the Collateral Agent under this Agreement or any other Loan Document.
     “ Exemption Certificate ” is defined in Section 4.06(e)(ii) .
     “ Extra Parent Contribution ” is defined in Section 2.03(d) .
     “ FAA ” means the Federal Aviation Administration of the United States or any successor agency performing the duties thereof.
     “ Facility Accounts ” is defined in Section 1.01 of the Depository Agreement.
     “ Facility Default ” means any event which, with the giving of notice or lapse of time or both, would constitute a Facility Event of Default.
     “ Facility Event of Default ” is defined in Section 9.01 .
     “ Federal Aviation Act ” or “ Act ” means Subtitle VII of Title 49 of the United States Code, and the rules and regulations promulgated thereunder, as in effect on the Closing Date, and as modified or amended hereafter, or any subsequent legislation that supplements or supersedes such Subtitle.
     “ Financed Modification ” means a significant modification made to an Aircraft by or on behalf of the Borrower or an Aircraft Owning Subsidiary that is expected to materially increase the Aircraft Value of such Aircraft.
     “ Fiscal Quarter ” means a quarter ending on the last day of March, June, September or December.

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     “ Fiscal Year ” means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the “2010 Fiscal Year”) refer to the Fiscal Year ending on December 31 of such calendar year.
     “ Follow-On Lease ” is defined in Section 7.01(n) .
     “ Funding Package ” means, with respect to each aircraft proposed by the Borrower to become part of the Portfolio, the following information:
     (a) a summary of the proposed transaction;
     (b) a working group list and term sheet related to such transaction;
     (c) the related Request;
     (d) the related Lease Checklist;
     (e) the related proposed Lease(s), Assignment Agreement, all Title Warranty Agreements (excluding any Sale Agreements between the Borrower or an Aircraft Owning Subsidiary, as applicable, and any Manufacturer) and Bill(s) of Sale;
     (f) three (3) Independent Appraisals (including “grossed up” Independent Appraisals taking into account any proposed Financed Modification (if any) for such aircraft) from three (3) different Independent Appraisers which shall be issued and dated within sixty (60) days of the proposed Transfer Date with respect to such proposed aircraft based on the Independent Appraisers’ assumption as to the condition of the aircraft based upon the number of hours and cycles of operation with respect to the related airframe and each related engine;
     (g) technical data related to the proposed aircraft;
     (h) detailed information regarding the jurisdiction of the proposed lessee and the proposed aircraft’s country of registration as may be requested by the Agent; and
     (i) if made available following request, a six-month payment history with respect to the proposed Lease (if such aircraft shall be subject to a Lease on or about the applicable Transfer Date).
     “ GAAP ” means, for any Person, generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by the significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination and are consistently applied as to such Person.
     “ Governmental Entity ” means (a) any domestic or foreign national government, political subdivision thereof, or local jurisdiction therein having jurisdiction over any Aircraft or its

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[Warehouse Loan Agreement]
operation, the Borrower, the Servicer, any Aircraft Subsidiary, the Agent, the Collateral Agent, the Depositary or any Lender; (b) any domestic or foreign board, commission, department, minister, ministry, division, organ, instrumentality, court, or agency of any thereof, however constituted; and (c) any other domestic or foreign entity or institution or Person having jurisdiction over any Aircraft or its operation, the Borrower, the Servicer, any Aircraft Subsidiary, the Agent, the Collateral Agent, the Depositary or any Lender.
     “ Granting Lender ” is defined in Section 2.04 .
     “ Illegality Event ” is defined in Section 4.01 .
     “ Impermissible Qualification ” means, with respect to any Person, any qualification or exception to the opinion or certification of any independent public accountant as to any financial statement of such Person (a) which is of a “going concern” or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) in the case of any financial statement of or related to the Borrower or the Servicer, which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to result in a Facility Default, a Facility Event of Default, Amortization Event or a Servicer Replacement Event.
     “ Indebtedness ” means, with respect to any Person, without duplication, all obligations and liabilities of such Person: (a) for borrowed money; (b) evidenced by bonds, notes, debentures and other similar instruments; (c) under conditional sale or other title retention agreements relating to property purchased by such Person; (d) secured by any mortgage, pledge or other lien on property owned or acquired by such Person whether or not such indebtedness or obligation has, or such liabilities have, been assumed by such Person; (e) for any capitalized lease obligations of such Person; and (f) for any guaranty by such Person of, or other Contingent Obligation of such Person for, the Indebtedness of any other Person.
     “ Indemnitee ” is defined in Section 11.02 .
     “ Independent Appraisal ” means a document executed by an Independent Appraiser setting forth the Appraised Value of the item of equipment being appraised and the data and explanation, all in reasonable detail, supporting such Appraised Value.
     “ Independent Appraiser ” means ASCEND (a division of AirClaims Limited); Aviation Specialists Group, Inc. and Avitas, Inc. or, in substitution of any of the foregoing appraisers if any such appraiser ceases to provide appraisals of commercial aircraft on commercially reasonable terms, any independent aircraft appraisal expert of recognized standing, certified by ISTAT and (i) selected by the Borrower and consented to by the Agent and the Supermajority Lenders, such consent not to be unreasonably withheld, or (ii) if a Servicer Replacement Event, Amortization Event, Facility Default or a Facility Event of Default shall have occurred and be continuing, selected by the Agent and the Supermajority Lenders; provided further that if Lenders constituting the Supermajority Lenders fail to respond within fourteen (14) Business Days after such response is requested with respect to clauses (i) and (ii)  herein, the

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Supermajority Lenders shall be deemed to have consented to the decisions of the Agent under such clauses (i) and (ii) .
     “ Indirect Pledgor ” means an Aircraft Subsidiary that is prohibited by the laws of the jurisdiction of its organization from pledging its assets to secure the debts of the Borrower.
     “ Individual AS Account ” is defined in Section 2.01(a)(iv) of the Depository Agreement.
     “ Initial Lenders ” means the Lenders that are a party to this Agreement on the Closing Date.
     “ Insolvency Law ” means the Bankruptcy Code or similar law in any applicable jurisdiction.
     “ Insolvency or Liquidation Proceeding ” means, with respect to any Person, (a) any voluntary or involuntary case or proceeding under any Insolvency Law with respect to such Person as a debtor, (b) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, examinership, reorganization or other similar case or proceeding with respect to such Person as a debtor or with respect to any substantial part of its assets, (c) any liquidation, examinership, dissolution, reorganization or winding up of such Person whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (d) any assignment for the benefit of creditors or any other marshalling of a substantial part of the assets and liabilities of such Person.
     “ Insurer ” is defined in Section 7.08(b)(i) .
     “ Interest Coverage Ratio ” means, with respect to any full, one-month Measuring Period occurring after the first Transfer Date, the ratio of (a) the aggregate amount of Monthly Rent (including any overdue Monthly Rent) and interest thereon actually collected and paid into the Facility Accounts (excluding Individual AS Accounts) during such Measuring Period, plus , without duplication, the aggregate amount of Deposits transferred during such Measuring Period to the Rent Account or to the Concentration Account to the extent such Deposits transfer is with respect to Monthly Rent or overdue Monthly Rent and/or interest thereon, plus without duplication, the aggregate amount of any Servicer Advances made during such Measuring Period to (b) the aggregate amount of interest accrued on the Loans during such Measuring Period (excluding Aggregated Additional Interest and Aggregated Default Interest), minus any amounts received by the Borrower during such Measuring Period under any Derivatives Agreements, plus any amounts paid by the Borrower during such Measuring Period under any Derivatives Agreements.
     “ Interest Period ” means, with respect to each Loan made on each Transfer Date pursuant to this Agreement (i) initially, the period commencing on and including the Transfer Date related to such Loan and ending on the next succeeding Settlement Date thereafter; provided however , in the event a Transfer Date occurs during the period from and including five (5) Business Days prior to a Settlement Date to but excluding such Settlement Date, the Borrower may elect to have such initial period be the period commencing on and including the Transfer Date related to such Loan and ending on the second succeeding Settlement Date thereafter, and (ii) thereafter, the

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[Warehouse Loan Agreement]
period from and including the last day of the immediately preceding Interest Period to, and including, the next succeeding Settlement Date.
     “ Interim Repayment Date ” means each of (a) the thirty-sixth (36th) Settlement Date after the Availability Expiration Date, (b) the third Settlement Date after the date set forth in clause (a) herein and (c) the third Settlement Date after the date set forth in clause (b) herein.
     “ International Interest ” has the meaning assigned to the term “international interest” in the Cape Town Convention.
     “ International Registry ” means the international registry located in Dublin, Ireland, established pursuant to the Cape Town Convention.
     “ Investment Grade Rated ” means, with respect to any Person on the date of determination, such Person’s current long-term, senior unsecured debt obligations are rated “BBB-” or greater by S&P and “Baa3” or greater by Moody’s.
     “ Ireland ” means the Republic of Ireland.
     “ ISTAT ” means the International Society of Transport Aircraft Traders.
     “ Lease ” means, with respect to any Aircraft, any lease, head lease or sublease and any and all supplements and amendments thereto, relating to such Aircraft, and entered into by the Borrower or an Aircraft Subsidiary, as the case may be, or assigned to the Borrower or an Aircraft Subsidiary, as the case may be, pursuant to an Assignment Agreement, which lease, head lease and/or sublease and related Assignment Agreement, if applicable, shall, subject to Section 7.01(n) , each be in form and substance acceptable to the Agent in its reasonable discretion and which are, collectively, a “Lease” hereunder.
     “ Lease Assignment ” means, with respect to each Lease, an Assignment of Lease, substantially in the form of Exhibit G hereto, and a Consent and Agreement, substantially in the form of Exhibit H hereto, in each case with appropriate insertions, or with such other changes as may be reasonably agreed to by the Agent.
     “ Lease Checklist ” means a report by the Borrower and the Servicer in substantially the form of Exhibit B hereto with appropriate insertions.
     “ Lease Default ” means the occurrence of any default (other than a default which has been waived in accordance with Section 7.02(h) ) by a Lessee under a Lease which is not or has not become, through the giving of notice and/or passage of time or otherwise, a Lease Event of Default.
     “ Lease Documents ” means (i) each of the Leases, Lease Assignments, Assignment Agreements, Bills of Sale, Title Warranty Agreements and any notes or other documents evidencing or related to loans by the Borrower or an Aircraft Subsidiary to another Aircraft Subsidiary and (ii) each other document, certificate or opinion delivered or caused to be delivered by the Borrower or by any Aircraft Subsidiary pursuant thereto.

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[Warehouse Loan Agreement]
     “ Lease Event of Default ” means any default (other than a default which has been waived in accordance with Section 7.02(h)) under a Lease which has become an “event of default” or similar term (as defined and used in such Lease) thereunder, it being the intention that a Lease Event of Default shall mean a default under a Lease as to which the cure period, if any, has expired or which has no cure period.
     “ Lease Maturity ” means, with respect to each Lease, the date on which the lease term of such Lease expires in the absence of any early termination by the lessor thereunder as a result of a Lease Event of Default.
     “ Lender ” means each Person shown on the signature pages hereof as a Designated Lender or a Conduit Lender, each Person becoming a Conduit Lender pursuant to Section 2.04 and each Person becoming a Lender pursuant to Sections 2.01(c) , 2.03(d) or 11.03 , as the case may be.
     “ Lessee ” means any lessee under any Lease other than a Lease to a Subsidiary of the Borrower or a Lease from a lessor that is not an ALC Party.
     “ Lessee Accounts ” means, collectively, the Lessee Interest Accounts and the Lessee Segregated Accounts.
     “ Lessee Interest Accounts ” means the “Lessee Interest Accounts” established by the Depositary pursuant to the Depository Agreement.
     “ Lessee Power of Attorney ” means, in relation to an Aircraft, either or both, as the context may require, of (A) the power of attorney executed by a Lessee in favor of the Collateral Agent in connection with the repossession, re-export and deregistration of such Aircraft and (B) the irrevocable deregistration and export request authorization executed by a Lessee in favor of the Collateral Agent for such Aircraft in the form of the annex to the Cape Town Convention.
     “ Lessee Segregated Accounts ” means the “Lessee Segregated Accounts” established by the Depositary pursuant to the Depository Agreement.
     “ Lessor ” means the lessor under any Lease.
     “ Lessor Rights Notice ” has the meaning set forth in Section 5 of the Form of Consent and Agreement attached as Exhibit H .
     “ LIBOR Advance ” means a Prefunding Advance bearing interest, at all times prior to the first Business Day following the Prefunding Date related to such Prefunding Advance, at a rate of interest determined by reference to the Cash Adjusted Eurodollar Rate and/or the Adjusted Eurodollar Rate.
     “ LIBOR Loan ” means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a rate of interest determined by reference to the Adjusted Eurodollar Rate.

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[Warehouse Loan Agreement]
     “ Lien ” means any mortgage, lien, security interest, lease, charge or any other type of encumbrance or preferential arrangement.
     “ Loan Documents ” means (a) each of this Agreement, the Notes (if any), each Security Document, the Servicing Agreement, the Agent Fee Letter, the Designated Lender Fee Letter, each Title Warranty Agreement, each Bill of Sale, each Assignment and Assumption Agreement and each designation of a Conduit Lender pursuant to Section 2.04 , and (b) each other document, certificate or opinion, other than Lease Documents, delivered or caused to be delivered by the Borrower, Servicer, or any Aircraft Subsidiary to the Servicer, the Collateral Agent, the Depositary or the Agent or its designee pursuant thereto.
     “ Loan Percentage ” means, with respect to any Lender, the ratio, expressed as a percentage, of (i) the sum of such Lender’s (a) unfunded Allocation plus (b) the outstanding principal amount of such Lender’s Loans to (ii) the sum of (a) the aggregate amount of all unfunded Allocations plus (b) the outstanding principal amount of all Loans.
     “ Loans ” is defined in Section 2.01(a) .
     “ London Interbank Bid Rate ” means, for any date:
     (a) the rate per annum equal to (i) the rate determined by the Agent to be the offered rate that appears on the page of the Reuters screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for one-month deposits in Dollars (for delivery two (2) Business Days after the date of determination), determined as of approximately 11:00 a.m. (London time) on the date of determination minus (ii) one-eighth of one percent (0.125%); or
     (b) if the rate referred to in clause (a) above does not appear on such Reuters page or service or such page or service shall cease to be available, the rate per annum equal to (i) the rate determined by the Agent to be the offered rate that appears on such other page or service that displays an average British Bankers Association Interest Settlement Rate for one-month deposits in Dollars (for delivery two (2) Business Days after the date of determination), determined as of approximately 11:00 a.m. (London time) on the date of determination minus (ii) one-eighth of one percent (0.125%); or
     (c) if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Agent as (i) the rate of interest (rounded upwards to the next 1/100th of 1%) at which one-month deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Loans held by Credit Suisse AG, New York Branch, as would be offered by the principal London Office of Credit Suisse to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) on the date of determination minus (ii) one-eighth of one percent (0.125%); or
     (d) subject to Article IV , the rates referenced in the preceding clauses (a) , (b) and (c) are not available or are not established for any reason on the date of determination, the “London Interbank Bid Rate” shall (i) equal the Corporate Base Rate for such day minus (ii) one-eighth of one percent (0.125%).

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[Warehouse Loan Agreement]
     “ London Interbank Offered Rate ” means, for any Interest Period and for any period between a Prefunding Period and an Interest Period:
     (a) the rate per annum equal to the rate determined by the Agent to be the offered rate that appears on the page of the Reuters screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for one-month deposits in Dollars (for delivery on the first day of such period), determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such period; or
     (b) if the rate referred to in clause (a) above does not appear on such Reuters page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Agent to be the offered rate that appears on such other page or service that displays an average British Bankers Association Interest Settlement Rate for one-month deposits in Dollars (for delivery on the first day of such period), determined as of approximately 11:00 a.m. two Business Days prior to the first day of such period; or
     (c) if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Agent as the rate of interest (rounded upwards to the next 1/100th of 1%) at which one-month deposits in Dollars for delivery on the first day of such period in same day funds in the approximate amount of the Loans held by Credit Suisse AG, New York Branch, as would be offered by the principal London Office of Credit Suisse to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such period; or
     (d) subject to Article IV , the rates referenced in the preceding clauses (a) , (b) and (c) are not available or are not established for any reason for any period, the “London Interbank Offered Rate” shall equal the Corporate Base Rate for each day during such period until such rates can be determined pursuant to clause (a) , (b) or (c) above.
     “ Luxembourg Account ” means that certain bank account established or to be established by an Aircraft Lending Subsidiary organized or to be organized under the laws of Luxembourg.
     “ Maintenance Obligation Payment ” means the amount actually paid by or on behalf of the Borrower or the applicable Aircraft Subsidiary to or on behalf of the applicable Lessee with respect to maintenance obligations of an Aircraft that are reimbursable under the terms of the applicable Lease.
     “ Maintenance Program ” means, with respect to an Aircraft subject to a Lease, the Lessee’s maintenance program as approved by the applicable Aviation Authority applicable to such Aircraft and as may be further described in the applicable Lease.
     “ Maintenance Reserve ” is defined in clause (c) of Section 7.04 .

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[Warehouse Loan Agreement]
     “ Majority Lenders ” means, at any time, Designated Lenders who are holding (or whose related Conduit Lenders are holding) at least fifty and one tenth percent (50.1%) of the sum of (a) the outstanding principal amount of all Loans and (b) the unfunded amount of all Allocations.
     “ Manufacturer ” means the relevant manufacturer of each Airframe and each Engine.
     “ Material Adverse Effect ” means, with respect to any Person, (i) any material adverse effect upon the operations, business, properties or financial condition of such Person, (ii) a material adverse effect on the ability of such Person to consummate the transactions contemplated hereby to occur on any Transfer Date or any Settlement Date, (iii) a material impairment of the ability of any of the Borrower, the Servicer or any Aircraft Subsidiary to perform any of its obligations under this Agreement, any other Loan Document or any Lease Document or (iv) a material impairment of the ability of any of the Borrower, the Servicer or any Aircraft Subsidiary to fully enforce its rights with respect to the Loan Documents, the Lease Documents or any Related Property (with respect to any Aircraft).
     “ Maturity Date ” means the date occurring forty-eight (48) months following end of the Availability Period, as may be extended in accordance with Section 2.02 .
     “ Maximum Cash Collateral Amount ” means, on any date, the greater of (i) 125.0% of the Net Maintenance Reserves on such date and (ii) 5.0% of the Maximum Facility Amount on such date.
     “ Maximum Facility Amount ” means $1,500,000,000, as such amount may be increased from time to time in accordance with Section 2.01(c) or reduced from time to time in accordance with Section 2.06 ; provided however, after the Availability Expiration Date, the Maximum Facility Amount shall be the then outstanding principal amount of the Loans.
     “ Measuring Period ” means, with respect to any Settlement Date, the period commencing on and excluding the second preceding Calculation Date and ending on and including the then most recent preceding Calculation Date, provided , that the first Measuring Period shall commence on the first Transfer Date and end on the first Calculation Date.
     “ Monthly Depreciation ” means, with respect to any Measuring Period and with respect to any Aircraft, the aggregate monthly depreciation expense calculated for such Aircraft based upon the Aircraft Value of such Aircraft as of the related Transfer Date, using the straight-line method of depreciation and assuming a 15% residual value and a useful life of 25 years from the date of manufacture.
     “ Monthly Rent ” means the aggregate amount of monthly “Rent” payments (or other similar term used to describe scheduled monthly payments) payable by each Lessee under the applicable Lease, excluding Deposits, Maintenance Reserves, “additional rent” and any other payment made by a Lessee other than in regards to “Rent”; provided that if any Lease requires scheduled payments of rent other than on a monthly basis, an amount of such rent shall be allocated to each month on a pro rata basis for the purpose of determining the aggregate amount of “Monthly Rent”.

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[Warehouse Loan Agreement]
     “ Monthly Report ” means a report by the Servicer in substantially the form of Exhibit D hereto, with appropriate insertions, and with such other changes as may be reasonably agreed to by the Agent.
     “ Moody’s ” means Moody’s Investors Service, Inc., and any successor thereto.
     “ Mortgage ” means an Aircraft Security Agreement with respect to any Aircraft, in the form of Exhibit I , with appropriate insertions and deletions and with such other changes as may be reasonably agreed by the Agent.
     “ Net Maintenance Reserves ” means, on any Calculation Date, the result of (i) the aggregate amount of Maintenance Reserves actually paid by a Lessee at any time under the terms of the related Lease and credited to the Borrower or the applicable Aircraft Subsidiary related to a Portfolio Aircraft minus (ii) the aggregate amount of Maintenance Obligation Payments.
     “ New Allocation Agreement ” means a New Allocation Agreement substantially in the form of Exhibit L hereto, with appropriate insertions and deletions, or with such other changes as may be reasonably agreed to by the Agent.
     “ New Lender ” is defined in Section 2.01(c) .
     “ Non-Excluded Taxes ” means any Taxes other than (i) net income and franchise Taxes, imposed with respect to any Protected Party by any Governmental Entity under the laws of which such Protected Party is organized or in which it maintains its principal place of business or its applicable lending office (or in the case of a Protected Party that is not a Lender, any jurisdiction (or any political subdivision thereof) with which such Protected Party has a present or former connection) and (ii) any branch profits taxes imposed with respect to any Protected Party by the United States or any similar tax imposed by any other jurisdiction in which a Protected Party maintains its applicable lending office (or in the case of a Protected Party that is not a Lender, any jurisdiction with which it has a present or former connection).
     “ Non-U.S. Lender ” means any Lender that is not a U.S. Person.
     “ Note ” means a Note, substantially in the form of Exhibit A hereto, issued by the Borrower to a Lender from time to time pursuant to this Agreement.
     “ Notice of Borrowing ” means a notice in substantially the form of Exhibit E hereto, with appropriate insertions, including, among other things, (a) the proposed Transfer Date; (b) a description of the Aircraft to be financed and the Lease(s) to be pledged on such Transfer Date; and (c) the aggregate amount of the Advance to be made on such date, and with such other changes as may be reasonably agreed to by the Agent.
     “ Obligations ” means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of the Borrower and/or each Aircraft Subsidiary arising under or in connection with each Loan Document and each Derivatives Agreement, including the principal of and premium, if any, and interest (including interest accruing during the pendency of any proceeding of the type described in Section 9.01(h) , whether or not allowed in such proceeding) on the Loans.

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[Warehouse Loan Agreement]
     “ Officer’s Certificate ” means a certificate executed on behalf of the Borrower, the Servicer or an Aircraft Subsidiary, as applicable, by any Authorized Officer of such entity.
     “ Organic Document ” means, with respect to any Person, (i) as applicable, its certificate of incorporation, by-laws, memorandum and articles of association, certificate of partnership, partnership agreement, certificate of formation, limited liability agreement, operating agreement, trust agreement and (ii) all shareholder agreements, voting trusts and similar arrangements (x) among the holder (and in their capacity and holders) of such Person’s partnership interests, limited liability company interests, beneficial interests or authorized shares of Capital Stock and (y) to which such Person is a party.
     “ Other Taxes ” means (a) any and all stamp, documentary or similar Taxes, or any other excise or property Taxes or similar levies that arise on account of any payment made or required to be made under any Loan Document or from the execution, delivery, registration, recording or enforcement of any Loan Document and (b) any claim by any Governmental Entity for transfer tax, transfer gains tax, mortgage recording tax, filing or other similar taxes or fees in connection with the acquisition, purchase, sale, selection, design, financing, condition, location, storage, modification, repair, maintenance, possession, registration, delivery, nondelivery, transportation, transfer, rental, lease, use, operation, control, ownership or disposition of any Aircraft, Engine, Part or any other portion of the Collateral by the Borrower, the Servicer, any Aircraft Subsidiary, any Lessee or otherwise or measured in any way by the value thereof or by the business of, investment in, or ownership by the Borrower, an Aircraft Subsidiary or any Lessee with respect thereto.
     “ Parent Contribution ” is defined in Section 5.02(b)(i) .
     “ Part ” or “ Parts ” means all appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines or other aircraft engines), which may from time to time be installed on, incorporated in or attached to, an Airframe or an Engine and, so long as such items remain subject to this Agreement, all such items which are subsequently removed therefrom and which are owned by the Borrower or the applicable Aircraft Owning Subsidiary.
     “ Participant ” is defined in Section 11.03(c) .
     “ Patriot Act ” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended and supplemented from time to time.
     “ Patriot Act Disclosures ” means all documentation and other information which the Agent or any Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.
     “ Payment Notice ” has the meaning set forth in Section 4 of the Form of Consent and Agreement attached hereto as Exhibit H hereto.
     “ PBGC ” means the Pension Benefit Guaranty Corporation.

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     “ Permitted Interim Outstanding Principal Amount ” means (a) with respect to the first Interim Repayment Date, sixty-six and two thirds percent (66 2/3%) of the aggregate outstanding principal balance of the Loans on the Availability Expiration Date, and (b) with respect to the second Interim Repayment Date, thirty-three and one third percent (33 1/3%) of the aggregate outstanding principal balance of the Loans on the Availability Expiration Date.
     “ Permitted Investment ” means one or more of the following obligations which (a) are denominated and payable in Dollars, (b) acquired at a purchase price of not greater than par and (c) have predetermined and unalterable fixed Dollar amounts of principal due at maturity:
     (i) direct obligations of, or guaranteed as to the full and timely payment of principal and interest by, the United States or obligations of any agency or instrumentality thereof, when such obligations constitute the full faith and credit obligation of the United States (which in each case shall mature within 90 days from the date of purchase);
     (ii) repurchase agreements covering obligations specified in clause (i) (which in each case shall mature within 90 days from the date of purchase); provided that the short-term debt obligations are rated at least A-1+ by S&P and P-1 by Moody’s;
     (iii) federal funds, certificates of deposit, time deposits and bankers’ acceptances (which in each case shall mature within 90 days from the date of purchase) of any United States depository institution or trust company incorporated under the laws of the United States or any state; provided that the short-term debt obligations of such depository institution or trust company are rated at least A-1+ by S&P and P-1 by Moody’s;
     (iv) commercial paper (having original maturities of not more than thirty (30) days) of any corporation incorporated under the laws of the United States or any state thereof which on the date of acquisition are rated at least A-1+ by S&P and P-1 by Moody’s; and
     (v) securities of money market funds rated at least AAA by S&P and Aaa by Moody’s.
     “ Permitted Liens ” means (a) Liens granted by the Borrower or the applicable Aircraft Subsidiaries pursuant to this Agreement, any other Loan Document or any Lease Document, (b) Liens to which the Agent has consented in writing, (c) (i) any “Permitted Liens” (as defined in or the equivalent term in such Lease), other than any security interest securing any Person’s Indebtedness described in clauses (a) , (b) , (c) , (e) , and (f) of the definition of Indebtedness or any mortgage, pledge or similar lien, on any Aircraft, Engine or Part, and (ii) any Lien created by a Lessee, a sublessee of a Lessee or any Person claiming by or through a Lessee or sublessee that a Lessee is obligated to remove or indemnify against; (d) (i) Liens for Taxes either not yet due and payable or being contested in good faith by appropriate proceedings conducted with due diligence and for which adequate reserves in accordance with GAAP shall have been set aside, (ii) materialmen’s, hanger-keeper’s, mechanic’s, carrier’s, workmen’s, repairmen’s, employees’

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[Warehouse Loan Agreement]
or other like Liens arising in the ordinary course of business for amounts the payment of which is not overdue for a period in excess of thirty (30) days or has been adequately bonded in the reasonable opinion of the Agent or is being contested in good faith by appropriate proceedings, (iii) Liens (other than Liens for Taxes) arising out of judgments or awards against the Borrower or the applicable Aircraft Subsidiary with respect to which an appeal or proceeding for review is being prosecuted in good faith and with respect to which a stay of execution shall have been secured or an appeal bond shall have been filed pending such appeal or proceeding for review, (iv) Liens for any air navigation authority, airport tending, gate or handling (or similar) charges or levies arising in the ordinary course of business for amounts the payment of which is not overdue for a period in excess of thirty (30) days or has been adequately bonded in the reasonable opinion of the Agent or is being contested in good faith by appropriate proceedings and (v) Liens of an insurer for salvage value; and (e) Liens in favor of depository banks (including set-off rights) arising as a matter of law; provided that if a Lien described in section (d) above subjects any Lender, the Collateral Agent or the Agent to any material civil liability or criminal penalty or liability or involves any material risk of loss, sale or forfeiture of any one or more items of Collateral or any Airframe, any Engine, any Part or any interest therein, whether now owned or hereafter acquired, then such Lien shall not be a Permitted Lien.
     “ Person ” means any individual, firm, partnership, corporation, association, limited liability company, joint venture, joint-stock company, unincorporated organization, trust or other enterprise or any Governmental Entity.
     “ Plan ” means any employee pension benefit plan as defined in Section 3(2) of ERISA.
     “ Portfolio ” means, collectively, all of the Aircraft Subsidiaries, Aircraft, Engines and the Leases.
     “ Prefunding Account ” means the “Prefunding Account” established by the Depositary pursuant to the Depository Agreement.
     “ Prefunding Advances ” means Prefunding Advances made by Lenders to the Prefunding Account pursuant to Section 2.03 , but only to the extent that such amounts remain in the Prefunding Account.
     “ Prefunding Date ” means, for any Advance, the Business Day immediately preceding the related Transfer Date or such earlier date as requested by the Borrower and agreed to by the Agent as provided in Section 2.03(a) , on which the Prefunding Advances are to be advanced to the Prefunding Account.
     “ Prefunded Equity Amount ” means $200,000,000, as may be increased from time to time as provided in Section 2.01(c) or decreased from time to time as provided in Section 2.06 . For the avoidance of doubt, neither Parent Contributions nor Extra Parent Contributions shall be included as Prefunded Equity Amount.
     “ Prefunding Period ” means, with respect to each Advance made on each Prefunding Date pursuant to this Agreement, the period commencing on and including the Prefunding Date related to such Advance and ending on the next succeeding Business Day.

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[Warehouse Loan Agreement]
     “ Prefunding Rate ” means (a) with respect to Base Rate Advances, the sum of the Corporate Base Rate plus the Applicable Margin and (b) with respect to LIBOR Advances, the sum of the Cash Adjusted Eurodollar Rate plus the Applicable Margin.
     “ Prepayment Account ” means the “Prepayment Account” established by the Depositary pursuant to the Depository Agreement.
     “ Prepayment Amount ” means, with respect to any Aircraft, (i) at any time (a) on and after the Availability Expiration Date or (b) upon the occurrence and during the continuation of a Facility Event of Default or Amortization Event, all net proceeds from the sale of such Aircraft and all insurance and all other proceeds received in connection with any Event of Loss with respect to such Aircraft other than Excepted Payments, but in any event, not less than an amount equal to the Available Collateral Debt Amount related to such Aircraft and (ii) at any other time, an amount equal to the Available Collateral Debt Amount related to such Aircraft; provided that, in either case, if a Collateral Deficiency is existing as of the time of calculation, or the payment of such amount together with any related Event of Loss or any release of Aircraft, Cash Collateral and Deposit pursuant to any provision hereof would result in a Collateral Deficiency, such Prepayment Amount shall be increased to the extent required to cure or prevent such Collateral Deficiency from occurring.
     “ Prepayment Percentage ” means, with respect to any Aircraft, a fraction, expressed as a decimal carried to five (5) decimal places, calculated as follows:
         
PP
  =          AV
 
(AAV- PEA)
 
       
where
       
 
       
“AAV”
  =   the Aggregate Aircraft Value immediately prior to the applicable prepayment;
 
       
“AV”
  =   the Aircraft Value of such Aircraft immediately prior to the applicable prepayment;
 
       
“PEA”
  =   the Prefunded Equity Amount immediately prior to the applicable prepayment; and
 
       
“PP”
  =   the Prepayment Percentage.
     “ Proposed Lessee Default ” means, on the date of determination, the applicable lessee (i) is in default under and, after giving effect to any applicable notice requirement or grace period, there is a right to accelerate the obligations under, or an early termination of the applicable lease, (ii) is in default after giving effect to any applicable notice requirement or grace period, in making any payment of Rent under the applicable Lease and such default continues (for at least three (3) Business Days if there is no applicable notice requirement or grace period) or (iii) has disaffirmed, disclaimed, repudiated or rejects, in whole or in part, the applicable lease (or such action is taken by any Person appointed or empowered to operate it or act on its behalf).

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[Warehouse Loan Agreement]
     “ Prospective Assignment ” has the meaning assigned to the term “prospective assignment” in the Cape Town Convention.
     “ Prospective International Interest ” has the meaning assigned to the term “prospective international interest” in the Cape Town Convention.
     “ Protected Party ” means the Agent, the Collateral Agent, the Depositary, each Lender, each Derivatives Creditor, each Support Party and any Participant, successor or permitted assign of any thereof.
     “ Purchase Price ” means with respect to any Aircraft, the sum of (a) the cash purchase price payable or paid by the Borrower or the applicable Aircraft Owning Subsidiary, as the case may be, or, in the case of the acquisition of an Aircraft Owning Subsidiary, paid by the Borrower or a Subsidiary thereof (in any case, the “buyer”) to the seller of such Aircraft or Aircraft Owning Subsidiary (in either case, the “seller”), net of any amounts to be paid or transferred by the seller to the purchaser in connection therewith, plus (b) the amount of all Deposit and Maintenance Reserve balances under the applicable Lease at the time of such acquisition (excluding any letter of credit or other non-cash Deposit or Maintenance Reserve balances) plus (c) any Monthly Rent paid by the applicable Lessee prior to the Transfer Date that is allocated to the Borrower or the applicable Aircraft Owning Subsidiary and set off against the amounts described in clause (a) above.
     “ Refinancing ” means an asset-backed offering (whether term or interim financing) sponsored by any ALC Party, and backed by Aircraft and Leases and additional aircraft and leases similar thereto, if applicable, or any other refinancing by the Borrower or any Aircraft Subsidiary of any Aircraft other than pursuant to this Agreement.
     “ Register ” means the register of the holders from time to time of the Notes and each Lender, maintained by the Agent pursuant to Section 10.07 hereof.
     “ Reimbursement Amount ” is defined in Section 3.03(a) .
     “ Related Property ” means with respect to any Aircraft or any Lease, as applicable, (a) any and all options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, indemnifications, guarantees, licenses and permits of the Borrower and/or the applicable Aircraft Subsidiaries in connection with such Aircraft or Lease, (b) any and all purchase and sale agreements and/or other evidence of transfer of such Aircraft or such Leases from the applicable Seller to the Borrower or, if applicable, an Aircraft Subsidiary, and any and all other general intangibles delivered in connection with such transfer and (c) any and all Supporting Obligations, income, proceeds, rent, deposits and reserves related thereto and all other amounts payable to the Borrower and/or the applicable Aircraft Subsidiaries but not received in connection therewith by the applicable Transfer Date (including any and all income, rent and proceeds and all other such amounts due and owing to the Borrower and/or the applicable Aircraft Subsidiaries but not yet received as of such Transfer Date (or which may become due and owing to the Borrower and/or the applicable Aircraft Subsidiaries after such Transfer Date) whether or not relating to periods before or after such Transfer Date and all reserves, whether or not accrued to such Transfer Date).

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[Warehouse Loan Agreement]
     “ Release Amount ” means, with respect to any Aircraft, at any time, the sum of (i) the Prepayment Amount for such Aircraft at such time plus (ii) any Sales Fee payable at such time related to such Aircraft (unless payment thereof is waived by the Servicer) plus (iii) all other amounts then due and owing under the Loan Documents that are to be paid at such time ahead of the repayments and prepayments of principal on the Loans in accordance with clause (b) or (c) of Section 3.03 , as applicable.
     “ Remaining Lender ” is defined in Section 2.02(b) .
     “ Rent ” means all payments payable by a Lessee to any Person under a Lease, including, but not limited to, Monthly Rent.
     “ Rent Account ” means the “Rent Account” established by the Depositary pursuant to the Depository Agreement.
     “ Replacement Lender ” is defined in Section 11.03(d) .
     “ Replacement Servicing Agreement ” is defined in Section 7.01(p) .
     “ Request ” means a request signed by an Authorized Officer of the Borrower and the Servicer in substantially the form attached hereto as Exhibit F , with appropriate insertions, or with such other changes as may be reasonably agreed to by the Agent, which shall, among other things, specify with respect to each such aircraft the following information:
     (a) the aircraft manufacturer, type, model and serial number;
     (b) the current and proposed country of registration;
     (c) the aircraft engine manufacturer and the aircraft engine serial numbers, type and model;
     (d) the proposed Lessee;
     (e) the seller of the aircraft and whether it is an ALC Party;
     (f) the proposed Purchase Price and information on any material modifications (including but not limited to prospective material modifications) to the aircraft that relate to such Purchase Price;
     (g) any available fleet and route information on the lessee related to such aircraft known to the Borrower or the Servicer at the time and not subject to applicable nondisclosure obligations;
     (h) confirmation that addition of the proposed transaction to the Portfolio will not cause the concentration limits of Section 2.08 to be breached;

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[Warehouse Loan Agreement]
     (i) whether the Borrower or an Aircraft Owning Subsidiary will purchase such aircraft (and if an Aircraft Owning Subsidiary, a description of such Aircraft Owning Subsidiary);
     (j) if any ALC Party then owns or owned such aircraft at any time prior to the purchase of such aircraft by the Borrower or, if applicable, the relevant Aircraft Owning Subsidiary, the dates of such ownership;
     (k) if such aircraft is then subject to a Lien of record of any Person, information regarding all such Liens including, but not limited to (i) the name of such lienholder; (ii) a description of the collateral granted to each such lienholder to secure each such Lien and (iii) the payoff amount required to satisfy each such Lien;
     (l) the principal terms of the proposed Lease, including the term, monthly rent, maintenance reserves (if any), security deposit (if any), return conditions, early buyout options, extension options, and, as requested by the Agent, financial and credit information regarding the proposed lessee, including a six-month payment history on the proposed Lease (if available to the Borrower or the Servicer after reasonable effort);
     (m) for a lease of an aircraft with the lease in effect prior to the proposed Transfer Date, a statement that, to the extent such is known by the Borrower or the Servicer, whether, (i) the lessee has made rent payments on time under such lease or, if not, a description of any late payments under such lease of which the Borrower or the Servicer is aware during the two-year period (or shorter period, if any) prior to such Request and (ii) no default related to insurance on the aircraft subject to such lease or event of default of which the Borrower or the Servicer is aware has occurred under such lease during the six-month period (or shorter period, if any) prior to the date of such Request or, if not, a description of any such default or event of default;
     (n) if the proposed Lease includes maintenance reserves, a detailed account of the estimated amount of maintenance reserves to be paid to the Rent Account on the Transfer Date and the amount of maintenance reserve rates payable under the Lease;
     (o) if such aircraft was manufactured less than six (6) months prior to the proposed Transfer Date, information regarding any inspection of such aircraft by or on behalf of the Borrower, the applicable Aircraft Subsidiary or the Servicer; and
     (p) the Borrower shall supplement the Request with whatever additional information the Agent reasonably requests about the proposed transaction.
     “ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto.
     “ Sale Agreement ” means, with respect to any Aircraft, the agreement between the applicable Seller and the Borrower or the applicable Aircraft Subsidiary, for (i) the purchase by or contribution to the Borrower or, if applicable, such Aircraft Subsidiary of the Aircraft, or (ii) the purchase by or contribution to the Borrower or such Aircraft Subsidiary of an Aircraft Owning Subsidiary, or an Aircraft Leasing Subsidiary, or (iii) the purchase by or contribution to

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[Warehouse Loan Agreement]
the Borrower or, if applicable, such Aircraft Subsidiary of all of the beneficial interest in a trust that owns such Aircraft, as the case may be, in each case in form and substance acceptable to the Agent in its reasonable discretion.
     “ Sales Fee ” has the meaning provided in Section 5(b) of the Servicing Agreement or any replacement thereof in accordance with Section 7.10 .
     “ Security Agreement ” means the Pledge and Security Agreement, dated as of May 26, 2010 among ALC, the Borrower, each Aircraft Subsidiary that is a party thereto and the Collateral Agent, in form and substance satisfactory to the Agent.
     “ Security Documents ” means the Security Agreement and each supplement thereto, each AS Joinder and Security Agreement Supplement, each Mortgage, each Additional Collateral Certificate, each Lease Assignment, the Depository Agreement, each UCC financing statement and each other document (including without limitation, in relation to any Lease), instrument, agreement or certificate (including, without limitation, any power of attorney of the Agent) which the Agent enters into with the Borrower or any Subsidiary thereof or the Agent requires the Borrower or any Subsidiary thereof to deliver pursuant to the express terms hereof or otherwise to establish and/or perfect the security interest of the Collateral Agent on behalf of the Protected Parties in any Collateral or to otherwise protect the interests of the Protected Parties in any Collateral or Loan.
     “ Seller ” means the Person transferring (i) title to an Aircraft to the Borrower or, if applicable, an Aircraft Owning Subsidiary, (ii) Capital Stock of an Aircraft Subsidiary to the Borrower or another Aircraft Subsidiary or (iii) the beneficial interest in a trust to the Borrower or, if applicable, an Aircraft Subsidiary, in each case, on a Transfer Date.
     “ Seller Finance Loan ” means acquisition financing (whether direct or indirect and other than Loans) for an Aircraft or an Aircraft Subsidiary provided by the Seller thereof or any other third party to the Borrower or the corresponding Aircraft Subsidiary.
     “ Servicer ” means Air Lease Corporation in its capacity as “Servicer” under the Servicing Agreement or any replacement thereof in accordance with Section 7.10 .
     “ Servicer Advances ” has the meaning provided in Section 4 of the Servicing Agreement.
     “ Servicer Replacement Event ” is defined in the Servicing Agreement.
     “ Servicer’s Fee ” shall have the meaning defined in Section 5(a) of the Servicing Agreement or any similar fee under any replacement thereof in accordance with Section 7.10 .
     “ Servicing Agreement ” means the Servicing Agreement, dated as of May 26, 2010 among the Servicer, the Borrower and each Aircraft Subsidiary that becomes a party thereto or assumes obligations thereunder, as such agreement may be modified from time to time by any delegations and assumptions pursuant to an AS Joinder and Security Agreement Supplement.
     “ Settlement Date ” means the 21st day of each calendar month commencing July 21, 2010, and the Maturity Date.

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[Warehouse Loan Agreement]
     “ Settlement Date Deposit ” means, on any Settlement Date, an amount equal to the greater of (i) 10.0% of the aggregate Monthly Rent actually collected during the Measuring Period related to such Settlement Date and (ii) an amount equal to (but in no event less than zero) the result of (x) 125.0% of the amount of the Net Maintenance Reserves on the associated Calculation Date, minus (y) the sum of (A) the then current balance held by the Depositary in the Cash Collateral Account on the associated Calculation Date, but prior to any deposits being made on such date plus (B) the amount available for drawing under any Acceptable Letter of Credit.
     “ Six Month Interest Coverage Ratio ” means, with respect to any six consecutive full, one-month Measuring Periods (all six of which occur after the first Transfer Date), the ratio of (a) the aggregate amount of Monthly Rent (including any overdue Monthly Rent and interest thereon) actually collected and paid into the Facility Accounts (excluding Individual AS Accounts) during such Measuring Periods, plus, without duplication, the aggregate amount of Deposits transferred during such Measuring Periods to the Rent Accounts or to the Concentration Account to the extent such Deposits transfer is with respect to a Monthly Rent or overdue Monthly Rent and/or interest thereon, to (b) the aggregate amount of interest accrued on the Loans during such Measuring Periods (excluding Aggregated Additional Interest and Aggregated Default Interest), minus any amounts received by the Borrower during such Measuring Periods under any Derivatives Agreements, plus any amounts paid by the Borrower during such Measuring Periods under any Derivatives Agreements.
     “ Solvent ” means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of Indebtedness, including Contingent Obligations, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in business or a transaction, and such Person is not about to engage in a business or a transaction, for which the property of such Person would constitute unreasonably small capital.
     “ Special Loan ” is defined in Section 2.03(d) .
     “ State of Registration ” means, with respect to any Aircraft, the jurisdiction under the laws of which such Aircraft is registered.
     “ Subsidiary ” means, with respect to any Person, any other Person of which more than 50% of the outstanding voting Capital Stock of such other Person (irrespective of whether at the time Capital Stock of any other class or classes of such other Person shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. Unless the context otherwise specifically requires, the term “Subsidiary” shall be a reference to a Subsidiary of the Borrower.
     “ Subsidiary Lease ” means a lease between two Aircraft Subsidiaries.

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[Warehouse Loan Agreement]
     “ Successor Servicer ” is defined in Section 7.10 .
     “ Supermajority Lenders ” means Designated Lenders who are holding (or whose related Conduit Lenders are holding) at least sixty-six and two-thirds percent (66 2 / 3 %) of the sum of (a) the outstanding principal amount of all Loans and (b) the unfunded amount of all Allocations.
     “ Support Facility ” means any liquidity or credit support agreement or other facility with a Conduit Lender which relates, either generally or specifically, to this Agreement (including any agreement to purchase an assignment of or participation in, or to make loans or other advances in respect of, Notes, Loans or Advances).
     “ Support Party ” means any bank, insurance company or other entity extending or having a commitment to extend funds to or for the account of a Conduit Lender (including by agreement to purchase an assignment of or participation in, or to make loans or other advances in respect of, Notes, Loans or Advances) under a Support Facility.
     “ Supporting Obligation ” means a letter-of-credit right, guarantee or other secondary obligation supporting, or any Lien securing, the payment or performance of one or more receivables, accounts, chattel paper, general intangibles, documents, instruments or investment property.
     “ Taxes ” means all income, stamp, documentary, license, qualification, franchise, sales, use, receipts, ad valorem, business, personal property, value added, excise or other taxes, duties, levies, imposts, charges, assessments, fees, tolls, occupation fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Entity, and all interest, penalties or similar liabilities with respect thereto.
     “ Termination Date ” means the date on which all outstanding Obligations (excluding unmatured contingent obligations) have been paid in full in cash and the Availability Expiration Date has occurred.
     “ Title Warranty Agreement ” means, with respect to any Aircraft, a Sale Agreement or any other agreement between the applicable Seller and the Borrower or, if applicable, an Aircraft Subsidiary, with respect to, among other things, warranty of title of such Aircraft to the Borrower or the applicable Aircraft Owning Subsidiary, redacted to the extent required by applicable confidentiality provisions and in each case in form and substance acceptable to the Agent in its reasonable discretion.
     “ Total Funded Amount ” means, at any time, the sum of (i) the aggregate outstanding principal balance of the Loans (including any outstanding Special Loans) at such time plus (ii) the aggregate amount of Parent Contributions (including any outstanding Extra Parent Contributions) funded in connection with Aircraft included in the Portfolio at such time.
     “ Transfer Date ” means, with respect to any Aircraft, the date on which (i) a Loan is Advanced in connection with the direct or indirect acquisition of such Aircraft by the Borrower, or an Aircraft Subsidiary or (ii) such Aircraft is added to the Portfolio by the application of the Prefunded Equity Amount in accordance with Section 2.01(g) .

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[Warehouse Loan Agreement]
     “ UCC ” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that if, with respect to any financing statement or by reason of any provisions of law, the attachment of a security interest or the perfection or the effect of perfection or non-perfection of the security interests granted to the Collateral Agent pursuant to the applicable Loan Document is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than New York, UCC means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of each Loan Document and any financing statement relating to such attachment, perfection or effect of perfection or non-perfection.
     “ Unfunded Advance ” is defined in Section 2.03(d) .
     “ United States ” means the United States of America.
     “ Unused Allocated Amount ” means, with respect to any Lender as of any date of determination, the amount by which (i) the then applicable Allocation (as may be increased as provided in Section 2.01(c) regardless of the effectiveness of such increase, if such ineffectiveness is solely due to and to the extent provided in the last sentence of Section 2.01(c)(i) ) of such Lender exceeds (ii) the aggregate principal amount of all of such Lender’s outstanding Loans.
     “ Unutilized Fee ” is defined in Section 3.05 .
     “ U.S. Person ” shall mean any Person that is a “United States person” as defined under Section 7701(a)(30) of the Code.
     “ U.S. Withholding Taxes ” means all Taxes required to be collected by the United States by way of withholding.
     “ Wire Memo ” is defined in the Depository Agreement.
     SECTION 1.02 Rules of Interpretation . The following rules apply to this Agreement:
     (a) the singular includes the plural and the plural includes the singular;
     (b) “include” and “including” are not limiting;
     (c) “hereby,” “herein,” “hereof,” “hereunder,” “this Agreement,” or other like words refer to this Agreement;
     (d) a reference to any agreement or other contract includes amendments, supplements, amendments and restatements and other modifications;
     (e) a reference to a law includes any amendment or modification to such law and any rules or regulations issued thereunder or any law enacted in substitution or replacement therefor;

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[Warehouse Loan Agreement]
     (f) a reference to a Person includes its permitted successors and assigns;
     (g) a reference herein to an Article, Section, Exhibit or Schedule without further reference is to the relevant Article, Section, Exhibit or Schedule of this Agreement;
     (h) any reference herein to the purchase of an Aircraft by the Borrower shall also mean the purchase of Aircraft Subsidiary by the Borrower if the Borrower purchases an Aircraft Subsidiary that owns such Aircraft;
     (i) time shall be of the essence with respect to the performance of all obligations; and
     (j) all obligations are continuing obligations.
ARTICLE II
ALLOCATIONS, ADVANCES AND NOTES
     SECTION 2.01 Allocations and Advances . (a) On terms and subject to the conditions of this Agreement, including clauses (b) and (f) below and Article V , from time to time on any Business Day occurring on and after the Closing Date, but before the Availability Expiration Date, each Designated Lender agrees to make revolving loans (the “ Loans ”) to the Borrower equal to such Designated Lender’s Loan Percentage of the aggregate amount of the Advance of Loans to be made on such day. The Lenders have no obligation to make any Advance hereunder (i) except as expressly set forth in this Agreement and (ii) until the Prefunded Equity Amount has been fully applied by the Borrower in accordance with Sections 2.01(c)(iii) and 2.01(g) . Subject to the terms and conditions of this Agreement, amounts borrowed under this Section 2.01 may be repaid and reborrowed during the Availability Period.
     (b) No Advance made with respect to any Aircraft shall:
     (i) with respect to such Aircraft, exceed 85% of the Purchase Price of such Aircraft;
     (ii) with respect to any approved Financed Modification relating to such Aircraft, exceed the lesser of (A) 75.0% of the cost of such approved Financed Modification and (B) 65.0% of the increase in value of such Aircraft related to such Financed Modification, such increase in value being the arithmetic average of the increase in value attributed to such Financed Modification as set forth in the three (3) “grossed up” Independent Appraisals delivered in the Funding Package related to such Aircraft (or such lesser percentage as the Agent may decide in its sole and absolute discretion at the time the Agent approves the Advance to acquire such Aircraft as set forth in Section 5.02 );
     (iii) when added to the aggregate amount of the Loans then outstanding, exceed the least of (A) the Maximum Facility Amount, (B) the

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[Warehouse Loan Agreement]
Advance Borrowing Base and (C) 75% of the Purchase Price of all Aircraft then in the Portfolio (including, for purposes of this Section 2.01(b)(iii)(C) , the Aircraft to be funded) plus 65% (or such lesser amount, as the case may be) of the increase in value attributed to each Financed Modification then actually funded as provided in Section 2.01(b)(ii) ;
     (iv) when added to the aggregate amount of the Loans then outstanding, cause a Collateral Deficiency or fail to completely cure any existing Collateral Deficiency; or
     (v) with respect to the portion of the Advance funded by any Lender, when aggregated with all Loans then outstanding that were made by such Lender (including, with respect to any Granting Lender, any such Loans made by any Conduit Lender designated by such Granting Lender pursuant to Section 2.04 ), exceed the Allocation of such Lender.
     (c) Increases in Maximum Facility Amount and Allocations; Additional Allocations.
     (i) At any time that no Facility Default, Facility Event of Default, Amortization Event or Servicer Replacement Event has occurred and is continuing, and prior to the Availability Expiration Date, the Borrower may, upon notice to and the consent of (x) the Agent (which consent may be withheld in its sole and absolute discretion) and (y) the Majority Lenders (A) request that the then Maximum Facility Amount be increased to an amount set forth in such written notice and (B) obtain additional Allocations from the Designated Lenders and/or new lenders that meet the requirements of an Eligible Assignee (each a “ New Lender ”); provided that the consent of the Majority Lenders shall not be required if, after the requested increase, the Maximum Facility Amount is less than or equal to $2,000,000,000. No such increase in the Maximum Facility Amount shall be effective until the corresponding increase in the Prefunded Equity Amount has been fully applied as provided in Section 2.01(c)(iii) . Notwithstanding the foregoing or anything in this Agreement to the contrary, no Allocation with respect to a Lender shall be increased without such Lender’s written consent.
     (ii) If and to the extent that any Lenders and/or New Lenders agree, in their sole discretion, to provide any additional Allocations contemplated in clause (i) above, (A) each such Person shall execute and deliver a New Allocation Agreement, (B) subject to the second sentence of Section 2.01(c)(iii) , the Maximum Facility Amount shall be increased by the amount of the additional Allocations agreed to be so provided, and (C) at such time and in such manner as the Borrower and the Agent shall agree (x) the Lenders (including all New Lenders) shall assign and assume outstanding Loans so as to cause the amounts of Loans held by each Lender to conform to its adjusted Loan Percentage of the Loans and (y) the Loan Percentages of the respective Lenders in respect of the increased Allocations shall be proportionally adjusted and such adjustment shall

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be recorded in the Register. The Borrower shall execute and/or deliver any additional Notes, other amendments or modifications to any Loan Document, and any other certificates, consents or legal opinions as the Agent may reasonably request. Nothing contained in this Section or otherwise in this Agreement is intended to commit any Lender or any Agent to provide any portion of any such additional Allocations or Loans.
     (iii) Upon any increase of the Maximum Facility Amount as described in this Section 2.01(c) , the Prefunded Equity Amount shall be increased to maintain the initial relative proportion between the Maximum Facility Amount and the Prefunded Equity Amount (which, for the avoidance of doubt, is 7.5:1.0). No such increase in the Maximum Facility Amount shall be effective until the corresponding increase in the Prefunded Equity Amount has been applied by the Borrower as provided in Section 2.01(g) . Upon any such increase, the application of the increased Prefunded Equity Amount shall occur after funded Advances fully satisfy the prior Maximum Facility Amount and before the funding of Advances against Allocations related to the increased Maximum Facility Amount.
     (d) The Borrower will use or cause the corresponding Aircraft Owning Subsidiary to use the proceeds of each Advance to (i) purchase an Aircraft and related Lease for the Purchase Price thereof, (ii) purchase an Aircraft Subsidiary that owns an Aircraft and related Lease for the Purchase Price of such Aircraft, (iii) purchase all of the beneficial interest in a trust that owns such Aircraft for the Purchase Price thereof or (iv) partially fund on the date of substantial completion thereof a Financed Modification that has been approved for financing by the Agent at the time that the Agent approved the Advance to acquire the applicable Aircraft as set forth in Section 5.02 . In the event that the amount of an Advance plus the Parent Contribution related to an Aircraft exceeds the net cash amount to be paid to the applicable Seller on the Transfer Date, the excess amount (A) shall be paid to the applicable Deposit Account to the extent that the Deposits were offset against the purchase price of such Aircraft or to the extent that the cash Deposit balance under the applicable Lease exceeds the amounts transferred into such accounts on the applicable Transfer Date, (B) shall be paid to the Rent Account to the extent that Maintenance Reserves were offset against the Purchase Price of such Aircraft, (C) if the obligation to purchase the Aircraft or Aircraft Subsidiary was secured by a deposit paid by the Servicer or any Affiliate thereof, shall be paid to the Servicer or at its direction to the extent of such deposit and (D) to the extent any amount remains after application of clauses (A) , (B) or (C) shall be deposited in the Rent Account.
     (e) In connection with the transactions on any Transfer Date, the Borrower may request from the Agent an extension of time in performing its obligations (or shorten the notice requirements) under clause (a ) of Section 2.03 and the Agent may in its sole discretion grant or deny such request.
     (f) Nothing contained herein shall in any way obligate any Lender to make an Advance unless the condition set forth in Section 5.02(a)(iii) has been satisfied and nothing contained herein shall in any way obligate any Conduit Lender to make any Advance.

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     (g) The Prefunded Equity Amount shall be applied in the following manner: (i) contribution of cash to the Borrower or an Aircraft Subsidiary to be applied to the purchase of Aircraft in accordance with the terms hereof and/or (ii) an equity contribution of Aircraft to the Borrower or an Aircraft Subsidiary in a manner that satisfies the terms of this Agreement, including but not limited to Section 5.02 , and which is documented with a Sale Agreement or a Bill of Sale. For purposes of determining the application of the Prefunded Equity Amount, Aircraft added to the Portfolio shall be valued at the Aircraft Value at the Transfer Date for such amount. For the purposes of clarity, an Aircraft may be funded in part by application of the Prefunded Equity Amount as provided in this Section 2.01(g) and in part by Advances and a Parent Contribution as provided in this Section 2.01 , provided that after giving effect to the acquisition of such Aircraft all of the then-effective Prefunded Equity Amount shall have been applied in accordance with this Agreement.
     SECTION 2.02 Optional Extensions of Availability Period . (a) The Borrower may request, by notice to the Agent not less than 60 days prior to the Availability Expiration Date then in effect, that the Availability Period be extended. Upon receipt of such notice by the Agent, the Agent shall promptly (but in no event later than 5 Business Days after receipt thereof) notify each Designated Lender of such request, and each Designated Lender shall notify the Borrower and the Agent not more than 15 Business Days after the date on which the Agent shall have received the Borrower’s request (which date shall be set forth in the notice of such request given by the Agent) of its election so to extend or to not extend the Availability Period. Any Designated Lender that does not timely notify the Agent of an election shall be deemed to have elected not to extend such Availability Period. If a Designated Lender elects to extend the Availability Period it shall be deemed to do so with respect to all of its Allocation.
     (b) If one or more Designated Lenders shall have elected, or shall be deemed to have elected, not to extend the Availability Period in accordance with clause (a) above, then the Agent shall so advise the Borrower and the remaining Lenders (each a “ Remaining Lender ”), and the Borrower may, with the approval of the Agent, designate one or more Remaining Lenders (that are Designated Lenders) or Eligible Assignees willing to extend Allocations in accordance with the Borrower’s request and in an aggregate amount equal to the sum of the Allocations of the Designated Lenders who have, or have been deemed to have, elected not to extend the Availability Period. Each Designated Lender who elects, or who is deemed to elect, not to extend the Availability Period, in each case in accordance with clause (a) above, shall assign all of its Allocation and Loans and its Conduit Lender, if any, shall assign all of its Loans to any and all such Remaining Lenders or Eligible Assignees, as the case may be, designated as provided above, so as to cause the Allocation and outstanding Loan of each such Remaining Lender or Eligible Assignee, as the case may be, to be the amount as provided in this clause (b) . The purchase price to be paid for such Loans shall be the amount of the outstanding principal amount of such Lender’s Loans at such time together with accrued and unpaid interest, fees and Break Cost, if any, in respect thereof plus all other amounts owed to such Lender by the Borrower under the Loan Documents. Each of such assigning Lender and each such Remaining Lender or Eligible Assignee, as the case may be, shall execute an Assignment and Assumption Agreement evidencing such assignment. The Allocation of such Eligible Assignee shall become effective, and such

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Eligible Assignee shall become a Designated Lender hereunder, on the Availability Expiration Date then in effect for the Lenders who have, or have been deemed to have, elected not to extend the Availability Period (and any Remaining Lender shall remain a Lender and any new Allocation and Loan assigned to it under this clause (b) shall become effective on such Availability Expiration Date).
     (c) The Borrower shall deliver (i) to each Remaining Lender that increases its Allocation under clause (b) above, if such Lender has previously been issued a Note by the Borrower under this Agreement, on the Availability Expiration Date in effect for the Lenders who have, or have been deemed to have, elected not to extend the Availability Period, a new Note or an amendment to such existing Note (subject to the return to the Borrower of any existing Note), as requested by such Lender, to reflect any increase in its Allocation and (ii) to each Eligible Assignee that takes by assignment under clause (b) above (upon request of such Eligible Assignee), on the Availability Expiration Date in effect for the Lenders who have, or have been deemed to have, elected not to extend the Availability Period, a Note as provided in Section 2.05 .
     (d) If, after giving effect to any increase in the Allocations of one or more Remaining Lenders and any assignments to or new Allocations of one or more Eligible Assignees, in each case, pursuant to clause (b) above, the extension of the Availability Period as provided in this Section 2.02 would not have been approved by Lenders and Eligible Assignees holding Allocations equal in the aggregate to 100% of the Maximum Facility Amount, then the Availability Period shall not be extended but shall continue in effect until the Availability Expiration Date and shall then terminate. If, after giving effect to any increase in the Allocations of one or more Remaining Lenders and any assignments to or new Allocations of one or more Eligible Assignees, in each case, pursuant to clause (b) above, the extension of the Availability Period as provided in this Section 2.02 would have been approved by Remaining Lenders and Eligible Assignees holding Allocations equal in the aggregate to 100% of the Maximum Facility Amount, then the Availability Period with respect to the Allocations of such Remaining Lenders and Eligible Assignees shall continue until the date which is provided in the notice of the Borrower as set forth in clause (a) above, as to such Lenders, and the term “Availability Expiration Date”, as used herein, shall mean the last day of such extended period.
     SECTION 2.03 Advancing Loan Proceeds . (a) The making of each Advance by each Lender hereunder shall be subject to receipt by the Agent of a Notice of Borrowing not later than 11:00 a.m. (New York City time) on the third Business Day prior to the date of the proposed Transfer Date. Advances to fund an approved Financed Modification shall be made upon receipt by the Agent of a Notice of Borrowing not later than 11:00 a.m. (New York City time) on the third Business Day prior to the date of the proposed Advance, together with all information with respect thereto reasonably requested by the Agent (including, but not limited to evidence of the expected or actual cost (including but not limited to invoices) of such Financed Modification and evidence of substantial completion of such Financed Modification), in each case in form and substance satisfactory to the Agent. Upon receipt of such Notice of Borrowing (but in no event later than the end of the day the Agent receives such Notice of Borrowing), the Agent shall notify each applicable Designated Lender of the amount of the Advance to be made by such Designated Lender on such Transfer Date by delivering an Agent’s Financing Notice to such

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Designated Lender. At the time the Agent delivers to each Designated Lender an Agent’s Financing Notice, the Agent shall deliver to each Lender a copy of the related Request sent to the Agent by the Borrower. Each Designated Lender shall make its Advance, or instruct (followed by reasonably diligent attention to such instruction until such time as the Agent shall have received such Advance) its correspondent bank, if any, to make its Advance, or cause the Conduit Lender it sponsored or for which it acts as a Support Party, if any, to make its Advance, to the Prefunding Account by 2:00 p.m. (New York City time) on the Prefunding Date (and, if such Advance has been wired but not received by the time required hereby, the applicable Designated Lender shall immediately provide confirmation that such Advance has been made, which confirmation may be accomplished by providing a SWIFT confirmation or Fed Reference Number), which, unless extended in accordance with the following sentences, shall be the Business Day immediately preceding the date of the proposed Transfer Date to the Prefunding Account. Subject to the fulfillment of the conditions as set forth in Section 5.02 for such Advance (as may be modified by Section 5.03 ), and to the Agent’s receipt of each Lender’s Advance from such Lender, the Agent shall on the relevant Transfer Date make available to the Borrower at such account in the United States designated by the Borrower, the amount of such Advance in immediately available funds via wire transfer. Notwithstanding the preceding sentence, and subject to clause (b) below, the Borrower may request (i) the Transfer Date be extended to a date specified in writing by the Borrower to the Agent, which request the Agent may grant in its sole and absolute discretion and (ii) the Lenders make available the amount of such Prefunding Advance in the Prefunding Account for a period of time no greater than five (5) Business Days prior to the applicable Transfer Date. Such amounts contemplated in this Section 2.03 to be held in the Prefunding Account shall be invested overnight at the Borrower’s risk and direction in Permitted Investments (the proceeds of which shall be for the account of the Borrower) in accordance with the Depository Agreement. If the conditions of Section 5.02 are not satisfied, deferred pursuant to Section 5.03 or waived in accordance with this Agreement on such Transfer Date, as such Transfer Date may be extended in accordance with clause (i) above, any amounts advanced by the Lenders pursuant to this clause (a) shall be returned to the applicable Lenders and any amounts advanced by ALC pursuant to Section 5.02(b) shall be returned to ALC, in either case on such proposed Transfer Date (or, if after 2:00 p.m. New York time, on the next Business Day). Any amounts made available pursuant to clause (ii) above shall accrue interest as provided in Section 3.04(a)(i) and (ii) .
     (b) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. Following delivery of such Notice of Borrowing, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by any such Lender as a result of any failure to fulfill, on or before the proposed Transfer Date specified in the Notice of Borrowing, the conditions set forth in Section 5.02 (subject to deferral, modification or waiver thereof as provided in this Agreement), including any loss, cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by the Lenders to fund the Advances to be made pursuant to clause (a) above. The applicable Lender shall furnish to the Borrower a written notice specifying the loss, cost or expense claimed, which shall include reasonable supporting calculations. Any such loss, cost or expense shall be paid within two (2) Business Days after the Borrower receives such notice.

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     (c) Each Lender may, if it so elects, fulfill its obligation to make Loans hereunder by causing one of its foreign branches (or an international banking facility created and controlled by such Lender) to make or maintain such Loan; provided that such Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility.
     (d) If any Lender fails to fund an Advance to the account designated by the Agent as required by Section 2.03(a) (“ Unfunded Advance ”), then the Agent shall immediately give notice to the Borrower and the Servicer of such failure. Promptly after the receipt of such notice (and in no event more than five (5) Business Days from the receipt of such notice from the Agent) the Borrower will: (i) notify the Agent that the applicable Advance should not be made, (ii) cause such Defaulting Lender to assign all its interests, rights and obligations under this Agreement to an assignee, as provided in Section 2.09(d) , provided that such assignee will fund the Unfunded Advance within one (1) Business Day after the completion of such assignment, or (iii) notify the lender that the Unfunded Advance will be funded, within one (1) Business Day by (x) an increase in the Parent Contribution (an “ Extra Parent Contribution ”) and/or (y) subject to the consent of the Agent, not to be unreasonably withheld or delayed, a Loan (“ Special Loan ”) from another Lender or Lenders. The amounts held in the Prefunding Account until the Borrower gives such notice shall be invested overnight at the Borrower’s risk and direction in Permitted Investments (the proceeds of which shall be for the account of the Borrower) in accordance with the Depository Agreement and shall accrue interest as provided in Section 3.04(a)(i) and (ii). In no event shall a Lender be required to make a Prefunding Advance for any longer than five (5) Business Days. Upon any notice from the Borrower that the applicable Advance should not be made, the Agent shall return all Advances made by the non-defaulting Lenders pursuant to the applicable Notice of Borrowing. At the request of any Lender who made a Special Loan, the Loan Percentages of such Lender and the Defaulting Lender shall be proportionally adjusted to reflect such Special Loan and such adjustment shall be recorded in the Register. At the request of ALC and subject to the consent of the Agent, not to be unreasonably withheld, any Lender may pay ALC the Extra Parent Contribution, which will, upon such transaction be considered a Special Loan.
     (e) Subject to Section 4.02 , Prefunding Advances and Loans shall be LIBOR Advances and LIBOR Loans, respectively, unless the Cash London Interbank Offered Rate or the London Interbank Offered Rate, as applicable, are no longer available or quoted, in which case Prefunding Advances and Loans shall be Base Rate Advances and Base Rate Loans until such time that the Cash London Interbank Offered Rate or the London Interbank Offered Rate, as applicable, is available and quoted.
     SECTION 2.04 Conduit Lenders . Notwithstanding anything to the contrary contained herein, any Designated Lender (a “ Granting Lender ”) may grant to its Eligible Conduit Lender, identified in writing from time to time by the Granting Lender to the Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to Section 2.01 ; provided

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that (i) no Conduit Lender shall be committed to provide any Advance or have any obligation to pay any amount in excess of amounts available to such Conduit Lender after paying or making provision for the payment of its commercial paper and nothing herein shall constitute a commitment to make an Advance or pay any other obligation by any Conduit Lender, and (ii) if a Conduit Lender elects not to exercise such option or otherwise fails to provide all or any part of such Advance or any other obligation, the Granting Lender shall be obligated to make such Advance or pay such other obligation pursuant to the terms hereof on the date such Advance is to be made or other obligations paid, without notice or demand from Borrower. For the avoidance of doubt, no action or inaction by any Conduit Lender will excuse any of the obligations of any Designated Lender as provided herein, including, but not limited to, the obligations to make timely Advances, as provided in Section 2.01 and Section 2.03 . The making of an Advance by a Conduit Lender hereunder shall utilize the Allocation of the related Granting Lender to the same extent, and as if, such Advance were made by such Granting Lender. No Conduit Lender shall have an Allocation hereunder. Each Granting Lender listed in Schedule I under the heading “Granting Lender” hereby designates each entity listed opposite such Granting Lender’s name in such Schedule as its Conduit Lenders, each of which is, as of the date hereof, an Eligible Conduit Lender with respect to such Granting Lender.
     SECTION 2.05 Notes . (a) Upon the request of any Lender, the principal amount of the Loans of such Lender shall be evidenced by a promissory note of the Borrower maturing on the Maturity Date and designated as a Note. Each Designated Lender who shall so request shall be issued a Note, in a maximum principal amount equal to such Lender’s Allocation. Each Conduit Lender who shall so request shall be issued a Note in the amount of the Loans of such Conduit Lender and the Note of the Granting Lender shall be reduced by such amount. At the request and at the sole cost and expense of the Borrower, when the Borrower has paid a Note in full and the applicable Lender no longer has any Allocation outstanding, such Lender will promptly return such Note to the Agent, who will return such Note to the Borrower, against receipt therefor, marked “PAID IN FULL.”
     (b) If any Note shall become mutilated, destroyed, lost or stolen, the Borrower shall, upon the written request of the holder of such Note, execute and deliver to the Agent, who shall endorse and deliver to the applicable Lender in replacement thereof, a new Note, payable to the same holder in the same principal amount and dated the same date as the Note so mutilated, destroyed, lost or stolen. If the Note being replaced has become mutilated, such Note shall be surrendered to the Borrower for cancellation. If the Note being replaced has been destroyed, lost or stolen, the holder of such Note shall furnish to the Borrower such indemnity as may be reasonably required by the Borrower to hold the Borrower harmless and evidence reasonably satisfactory to the Borrower of the destruction, loss or theft of such Note and of the ownership thereof; provided that if the holder of such Note is a Designated Lender, the written undertaking of the Lender shall be sufficient indemnity for the purposes of this clause (b) .
     SECTION 2.06 Reduction of Maximum Facility Amount . The Borrower may, upon five (5) Business Days’ written notice to the Agent, irrevocably reduce the Maximum Facility Amount, provided that after such reduction the Maximum Facility Amount shall not be less than the sum of the aggregate principal balance of the Loans that would be outstanding after the effectiveness of such reduction. Any such reduction shall reduce the unfunded Allocation, if

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any, of each Lender proportionately. Upon any such decrease in the Maximum Facility Amount, so long as such reduction occurs on or prior to the date that is six (6) months prior to the Availability Expiration Date, the Prefunded Equity Amount shall be decreased to maintain the initial relative proportion between the Maximum Facility Amount and the Prefunded Equity Amount; provided, however, that the Prefunded Equity Amount shall not be decreased below $180,000,000. In the event that the amount of the Prefunded Equity Amount funded at such time exceeds the reduced Prefunded Equity Amount, such excess shall be refunded as provided in clause seventh of Section 3.03(a) . Notwithstanding the foregoing, the Maximum Facility Amount may only be reduced to the extent that such reduction does not cause a breach of (or any increase in any existing breach of) the criteria set forth in Schedule II hereto, such criteria to be tested on the date of the proposed reduction of Maximum Facility Amount based upon the proposed reduced Maximum Facility Amount.
     SECTION 2.07 Termination of Availability Period Upon Servicer Replacement Event . If (i) a Servicer Replacement Event shall have occurred or (ii) an Amortization Event described in clause (a) or (b) of the definition thereof shall have occurred, then the Availability Period shall immediately end and the Availability Expiration Date shall have occurred.
     SECTION 2.08 Concentration Limits; Eligibility Criteria . The Borrower will only acquire aircraft for inclusion in the Portfolio and lease such aircraft, so as not to breach (at the time of such acquisition or commencement of any Lease) the criteria set forth in Schedule II hereto. Such criteria shall only be waived by the Agent upon the approval of the Supermajority Lenders.
     SECTION 2.09 Defaulting Lenders . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by Applicable Law:
     (a) such Defaulting Lender’s consent or approval will not be required for any action or inaction by any Lender, the Agent, the Borrower, any Aircraft Subsidiary or the Servicer and the Loan Percentage of such Defaulting Lender shall not be included in determining whether the other Lenders, the Agent, the Borrower, any Aircraft Subsidiary or the Servicer may take any action or refrain from taking any action hereunder (including any consent to any amendment or waiver pursuant to Section 11.01 ), provided that any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender which materially and adversely affects such Defaulting Lender to a greater extent than the other affected Lenders shall require the consent of such Defaulting Lender;
     (b) that Defaulting Lender will not be entitled to Unutilized Fees for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender);
     (c) the Borrower may, at its sole expense and effort, upon notice to such Defaulting Lender and the Agent, require such Defaulting Lender to assign and delegate (in accordance with and subject to the restrictions contained in Section 11.03 related to

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assignments, provided that if the Agent is a Defaulting Lender the Agent’s consent will not be required to such assignment), together with all Loans held by any related Conduit Lender, all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations; and (ii) such assigning Defaulting Lender shall have received payment of an amount equal to the outstanding principal of its Loans and accrued interest thereon, accrued fees (except for Break Costs with respect to such assignment, which shall be considered waived by such Defaulting Lender) and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
     (d) as long as the Defaulting Lender’s Loans and Allocation have not been assigned, as provided in Section 2.09(c) , a Defaulting Lender may cease to be a Defaulting Lender upon: (i) the payment of any amounts owing by that Defaulting Lender to the Agent hereunder; (ii) the assignment to the Defaulting Lender of the Special Loans made by any Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement, provided that such Loans, once assigned to the Defaulting Lender, shall not be considered Special Loans, and provided further that any Lender who made such Special Loan will assign such Special Loans to the Defaulting Lender upon payment of the principal of such Special Loans and the accrued interest and fees thereon; and (iii) the payment of all Extra Parent Contributions that were made by ALC as a result of such Defaulting Lender’s breach of its obligations under this Agreement, provided that once such payments are made such Extra Parent Contribution shall be considered Loans of the Defaulting Lender. Following any assignment of any Loan provided herein the Loan Percentages of all Lenders shall be proportionally adjusted to reflect such assignments and such adjustment shall be recorded in the Register; and
     (e) no action taken by the Agent, the Borrower, any Lender or ALC in accordance with Sections 2.09(a) through (c) shall be deemed to be a waiver of any right that the Borrower, the Agent or any other Lender may have against such Defaulting Lender.
ARTICLE III
PAYMENTS
     SECTION 3.01 Voluntary Prepayments . The Borrower shall have the right to voluntarily prepay Loans in whole or in part without premium or penalty; provided that the Borrower shall have given prior notice to the Agent by 10:00 a.m., at least three (3) Business Days prior to the date of prepayment. Each notice of prepayment shall specify the prepayment date and the principal amount to be prepaid. Each notice of prepayment shall be irrevocable and shall commit the Borrower to prepay the Loans by the amount stated therein on the date stated therein. All voluntary prepayments made under this Section 3.01 shall be applied in accordance with clause (a) , (b) or (c) of Section 3.03 , as applicable, and shall be accompanied by accrued interest on the principal amount being prepaid to the date of payment together with any amounts owed to any Lender pursuant to Section 4.04 hereof. Within the foregoing limits, Borrower may

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borrow hereunder, may prepay or repay Loans from time to time and may reborrow pursuant to the terms hereof.
     SECTION 3.02 Mandatory Prepayments . The Borrower shall repay in full the unpaid principal amount of each Loan upon the Maturity Date. Prior thereto, payments and prepayments of the Loans shall be made as set forth in Section 3.01 and this Section 3.02 . All repayments and prepayments set forth below (other than clause (b) below) shall be applied in accordance with clause (b) or (c) of Section 3.03 , as applicable. All repayments and prepayments set forth in clause (b) below shall be made to the Lender owed such amounts. All payments under this Section 3.02 shall be accompanied by accrued interest on the principal amount being prepaid to the date of payment together with any amounts owed to any Lender pursuant to Section 4.04 hereof.
     (a) On each of the first two Interim Repayment Dates, the Borrower shall repay a principal amount of the Loans equal to the excess (if any) of (A) the aggregate principal amount of the Loans outstanding as of such Interim Repayment Date over (B) the Permitted Interim Outstanding Principal Amount applicable to such Interim Repayment Date. On the third Interim Repayment Date, the Borrower shall repay, and there shall become due and payable, the remainder of the aggregate outstanding principal amount of the Loans and all other Obligations due under the Loan Documents. The Agent may, upon the consent or request of Supermajority Lenders, extend any of the foregoing payment dates on terms satisfactory to such Lenders (in their sole discretion); provided that any such extension shall not extend the final Interim Repayment Date beyond the Maturity Date.
     (b) With respect to the affected Loans only, such Loans shall be prepaid, following an Illegality Event in accordance with Section 4.01 .
     (c) Following the occurrence of an Event of Loss with respect to an Aircraft, on the date specified in Section 7.09 , the Borrower shall prepay to the applicable Additional Collateral Account an aggregate amount equal to the Prepayment Amount for such Aircraft.
     (d) Following the occurrence of a Facility Event of Default and acceleration of the Loans as provided in this Agreement, the Borrower shall repay all outstanding Loans and all other Obligations due under the Loan Documents immediately.
     (e) If the Borrower Disposes of any Aircraft, subject to the proviso contained in Section 3.03(b) , on or before the first Settlement Date to occur after receipt of the proceeds of such Disposition, the Borrower shall repay a portion of the principal amount of the Loans in an aggregate amount equal to the Prepayment Amount for such Aircraft.
     (f) If any Monthly Report indicates that a Collateral Deficiency exists, the Borrower shall by the third Settlement Date immediately following the date of delivery of such Monthly Report do either or both of the following: (x) pay an amount to the Concentration Account sufficient so that, after application of funds on such third Settlement Date in accordance with Section 3.03 , such Collateral Deficiency no longer

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exists or (y) provided that the Availability Period Expiration Date has not occurred, pledge additional collateral acceptable to (i) the Agent and (ii) if such additional collateral is not either an aircraft that meets the eligibility criteria set forth in Schedule II or Cash Collateral, the Supermajority Lenders, in their sole discretion, in such amounts so that such Collateral Deficiency no longer exists. At any time on and after the Availability Period Expiration Date, the Borrower shall cure a Collateral Deficiency as provided in clause (x) of this Section 3.02(f) .
     (g) If (i) any amount payable under Section 3.02(a) shall not have been paid when due or (ii) a Servicer Replacement Event described in Section 12(a)(iii) of the Servicing Agreement shall have occurred, the Agent (at the direction of the Majority Lenders) may direct the Borrower to (and upon receipt of such direction the Borrower shall or shall cause the Servicer and the Aircraft Owning Subsidiaries to) sell all or any part of the Collateral in the amount and in the manner specified by the Agent, and upon any such sale (an “ Authorized Sale ”) and receipt of the sales proceeds thereof, the Borrower shall deposit (or cause to be deposited), the proceeds of such Authorized Sale into the Collection Account to be applied on or before the next Settlement Date in accordance with Section 3.03(b) .
     SECTION 3.03 Application of Funds . (a) Subject to clauses (b) and (c) below, on each Settlement Date, (i) amounts on deposit in the Rent Account, and the Concentration Account (to the extent such amounts in the Concentration Account are Monthly Rent or overdue Monthly Rent or interest thereon paid by a Lessee) and, to the extent requested by the Borrower, the Deposit Account (to the extent permitted under the Lease that relates to each applicable Deposit), the Additional Collateral Account (to the extent such amounts are not proceeds of an Event of Loss) and the Collection Account and (ii) amounts which are to be applied pursuant to clause (f) of Section 7.04 hereof shall be applied in the following order of priority:
      first , ratably to the Agent, any Lender, and any other Protected Party, an amount equal to all costs, fees, expenses, indemnities and reimbursements (other than principal and interest, including Aggregated Additional Interest and Aggregated Default Interest) then due and owing to each such Person under the Loan Documents, for payment thereof, including Section 2.03 , Article IV and Section 11.05 hereof, Section 6.01 of the Depository Agreement and Section 5.5 of the Security Agreement, but excluding such costs, fees, expenses, indemnities and reimbursements that are provided for below in clauses second through eighth of this clause (a) ;
      second , if (i) any amount (a “ Reimbursement Amount ”) paid by a Lessee into the Concentration Account since the last Settlement Date was specifically paid to reimburse any expense paid by the Servicer under the Servicing Agreement (but not to include payments by the Servicer in respect of unpaid Monthly Rent amounts) because the Lessee had failed to pay an amount due or perform an obligation under the applicable Lease, (ii) the Lessee has fully cured all payment defaults under the applicable Lease and (iii) the Servicer has provided the Agent with documentation that enables the Agent to verify the amounts distributable under this clause second , to the Servicer to reimburse the Servicer for such payment in an amount not to exceed such Reimbursement Amount;

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      third , to the Aircraft Expenses Account an amount sufficient to pay Aircraft Expenses anticipated to be incurred in the one (1) month period immediately following such Settlement Date plus an amount the Borrower and the Servicer certify to the Agent in writing (or the Agent otherwise determines) is reasonably necessary in order to create a reserve for Aircraft Expenses anticipated beyond such one (1) month period for which creating such a reserve would be prudent (taking into account the then current balance in the Aircraft Expenses Account, each such amount to be certified by the Borrower and the Servicer in a Disbursement Certificate (or otherwise determined by the Agent));
      fourth , to the Servicer and its designees, in aggregate, an amount equal to all Servicer’s Fees plus any interest thereon accrued on such and any previous Settlement Date which remain unpaid, for payment of such fees;
      fifth , ratably (i) to the Lenders, an amount equal to all accrued and unpaid interest (except for Aggregated Default Interest and accrued and unpaid interest thereon) on the outstanding principal amount of the Loans as of the then most recently ended Interest Period, for payment thereof, (ii) to the Lenders, an amount equal to all accrued Unutilized Fees then due and owing to such Lenders under Section 3.05 , for payment thereof and (iii) to the payment of Derivatives Obligations, if any, then due and payable;
      sixth , for deposit to the Cash Collateral Account, in an amount not to exceed the positive difference (if any) between (i) the Cash Collateral Target Amount minus (ii) the Cash Collateral, in each case as determined on the immediately preceding Calculation Date;
      seventh , to the Lenders for the payment of the unpaid principal amount of the Loans in an amount equal to but not exceeding an amount that, after giving effect to such payment, no Collateral Deficiency would then exist and then, if there has been a reduction of the Prefunded Equity Amount as described in Section 2.01(c) resulting from a reduction in the Maximum Facility Amount other than as a result of the expiration of the Availability Period, from any amount remaining, an amount equal to but not exceeding such reduction of the Prefunded Equity Amount to be paid at the direction of the Borrower (including to the Servicer);
      eighth , to the Servicer, in an amount not to exceed all unreimbursed Servicer Advances advanced during previous Measuring Periods and any interest owing thereon, for reimbursement thereof;
      ninth , ratably to the Lenders, for the payment of accrued but unpaid Aggregated Default Interest on the Loans plus accrued and unpaid interest thereon;
      tenth , ratably to each Person described in this clause tenth in an amount not to exceed all other Obligations then due and owing to each such Person for payment thereof in the following order: the Agent, the Collateral Agent, the Depositary, the Lenders and any related Protected Party and to each other Protected Party; and
      eleventh , as directed by the Borrower (including to the Servicer).
     (b) Subject to clause (c) below, proceeds received by the Collateral Agent, the Agent, the Borrower, the Servicer or any Aircraft Subsidiary in connection with any

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event set forth in clauses (c) , (e) or (g) of Section 3.02 with respect to an Aircraft, Airframe or Engine shall be applied in the following order of priority ( provided however , proceeds to be applied under this clause (b) that are received by the Borrower during a period commencing on and including a date five (5) Business Days prior to a Settlement Date to and including such Settlement Date shall be applied under this clause (b) on such Settlement Date):
      first , (i) ratably to the Agent, any Lender and any other Protected Party an amount equal to all costs, fees, expenses, indemnities and reimbursements (other than principal and interest, including Aggregated Additional Interest and Aggregated Default Interest) then due and owing to each such Person under the Loan Documents, including Section 2.03 , Article IV and Section 11.05 hereof, Section 6.01 of the Depository Agreement and Section 5.5 of the Security Agreement, but excluding such costs, fees, expenses, indemnities and reimbursements that are provided for below in clause second of this clause (b) or that are described in the exclusion from clause first of Section 3.03(a) , for payment thereof;
      second , to the Servicer, an amount equal to all Sales Fees previously due which remain unpaid plus any accrued interest due thereon, for payment of such fees and interest;
      third , ratably (i) to the Lenders, an amount equal to all accrued and unpaid interest (except for Aggregated Additional Interest and Aggregated Default Interest and accrued and unpaid interest thereon) on the outstanding unpaid principal amount of the Loans being repaid under this clause (b) as of the date of repayment, for payment thereof, (ii) to the Lenders, the shortfall, if any, of the amount to have been paid to the Lenders on the immediately preceding Settlement Date in respect of Unutilized Fees pursuant to clause fifth of Section 3.03(a) or clause fourth of Section 3.3(c) and (iii) to the payment of Derivatives Obligations, if any, then due and payable in connection with the prepayments of the Loans described in this clause (b) ;
      fourth , to the Servicer, the shortfall, if any, of the amount to have been paid to the Servicer on the immediately preceding Settlement Date pursuant to clause eighth of Section 3.03(a) , or clause fifth of Section 3.03(c) and related to the Aircraft, Airframe or Engine for which the proceeds then being applied under this Section 3.03(b) have been received;
      fifth , to the Lenders for the payment of the unpaid principal amount of the Loans in an amount equal to but not exceeding an amount that, after giving effect to such payment, no Collateral Deficiency would then exist;
      sixth , ratably to the Lenders for the payment of accrued but unpaid (i) Aggregated Additional Interest and (ii) Aggregated Default Interest on the Loans and in each case, plus accrued and unpaid interest thereon;
      seventh , to the Servicer, an amount equal to all Sales Fees accrued on such date, for payment of such fees;

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      eighth , any amount remaining, for deposit to the Cash Collateral Account in an amount not to exceed the positive difference (if any) between (i) the Cash Collateral Target Amount minus (ii) the Cash Collateral, in each case as determined on the immediately preceding Calculation Date, but assuming that the Aircraft at issue is no longer in the Portfolio;
      ninth , to the Aircraft Expenses Account the shortfall, if any, of the amount to have been so transferred on the immediately preceding Settlement Date pursuant to clause third of Section 3.03(a) or clause second of Section 3.03(c) ;
      tenth , any amount remaining, to each Person described in this clause tenth an amount not to exceed all other Obligations (other than principal and interest on the Loans) then due and owing to each such Person for payment thereof in the following order: the Agent, the Collateral Agent, the Depositary, the Lenders and any related Protected Party and to each other Protected Party; and
      eleventh , any amount remaining, as directed by the Borrower (including to the Servicer).
     (c) At any time (w) an Amortization Event has occurred and is continuing, (x) a Facility Default described in clause (ii) or (iii) of Section 9.01(h) or a Facility Event of Default has occurred and is continuing, (y) a Facility Event of Default (disregarding any cure period for late payment) would occur after giving effect to any application of funds in accordance with clause (a) or (b) above or (z) on or after the Availability Expiration Date, amounts on deposit in the Rent Account, and the Concentration Account (to the extent such amounts are Monthly Rent or overdue interest on Monthly Rent paid by a Lessee) and the Deposit Account (to the extent permitted under the Lease that relates to each applicable Deposit), the Collection Account and amounts which are to be applied pursuant to clause (f) of Section 7.04 hereof, shall be applied on each Settlement Date in the following order of priority:
      first , (i) ratably to the Agent, any Lender and any other Protected Party, an amount equal to all costs, fees, expenses, indemnities and reimbursements (other than principal and interest, including Aggregated Additional Interest and Aggregated Default Interest) then due and owing to each such Person under the Loan Documents for payment thereof, including Section 2.03 , Article IV and Section 11.05 hereof, Section 6.01 of the Depository Agreement and Section 5.5 of the Security Agreement, but excluding such costs, fees, expenses, indemnities and reimbursements that are described in the exclusion from clause first of Section 3.03(b) ;
      second , to the Aircraft Expenses Account an amount sufficient to pay Aircraft Expenses anticipated to be incurred in the one (1) month period immediately following such Settlement Date plus an amount the Borrower and the Servicer certify to the Agent in writing (or the Agent otherwise determines) is reasonably necessary in order to create a reserve for Aircraft Expenses anticipated beyond such one (1) month period for which creating such a reserve would be prudent (taking into account the then current balance in

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the Aircraft Expenses Account), each such amount to be certified by the Borrower and the Servicer in a Disbursement Certificate (or otherwise determined by the Agent);
      third , ratably to the Servicer and its designees, in aggregate, an amount equal to all Servicer’s Fees plus any interest thereon accrued on such and any previous Settlement Date which remain unpaid, for payment of such fees;
      fourth , ratably (i) to the Lenders, an amount equal to all accrued and unpaid interest (except for Aggregated Additional Interest and Aggregated Default Interest and accrued and unpaid interest thereof) on the outstanding principal amount of the Loans, for payment thereof, (ii) to the Lenders, an amount equal to all accrued Unutilized Fees then due and owing such Lenders under Section 3.05 , for payment thereof and (iii) to the payment of Derivatives Obligations, if any, then due and payable;
      fifth , any amount remaining, to the Servicer in an amount not to exceed all prior unreimbursed Servicer Advances and any interest owing thereon;
      sixth , to the Lenders for repayment of the outstanding principal amount of the Loans;
      seventh , ratably to the Lenders for the payment of accrued but unpaid (i) Aggregated Additional Interest and (ii) Aggregated Default Interest on the Loans and in each case, plus accrued and unpaid interest thereon;
      eighth , to the Servicer, an amount equal to all Sales Fees plus any interest thereon accrued on such and any previous Settlement Date which remain unpaid, for payment of such fees;
      ninth , any amount remaining, to each Person described in this clause ninth in an amount not to exceed all other Obligations then due and owing to each such Person for payment thereof in the following order: the Agent, the Collateral Agent, the Depositary, the Lenders and any related Protected Party and to each other Protected Party; and
      tenth , any amount remaining, as directed by the Borrower (including to the Servicer).
     (d) All payments to Designated Lenders shall be made in accordance with the payment instructions for the applicable Designated Lender in Schedule I , unless otherwise directed in writing by the applicable Designated Lender.
     SECTION 3.04 Interest . (a) Interest shall accrue on (i) the applicable Prefunding Date, the aggregate principal amount outstanding from time to time of the Prefunding Advances deposited into the Prefunding Account by 2:00 p.m. (New York City time) on such date, for each day from and including the Prefunding Date related to such Prefunding Advance to but excluding the next succeeding Business Day, at a rate per annum equal to the Prefunding Rate then in effect for each such Prefunding Advances for such day, (ii) the aggregate principal amount outstanding from time to time of the Prefunding Advances for each day, if any, from and including the Business Day immediately succeeding the Prefunding Date related to such Prefunding Advance

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to but excluding the first day of the first Interest Period relating to such Prefunding Advance, or in the event that such Prefunding Advances are not funded to the Borrower as Loans, to and including the date such Prefunding Advances are returned to the applicable Lenders, at a rate per annum equal to the Applicable Rate then in effect for such Prefunding Advances for such day and (iii) the aggregate principal amount outstanding from time to time of the Loans for each day from and including the first day of each Interest Period to but excluding the last day of such Interest Period, at a rate per annum equal to the Applicable Rate then in effect for such day, and, in the case of each of clause (i) , (ii) and (iii) , shall be payable in arrears on each Settlement Date and on the Maturity Date (or, if earlier, on the date any such Loans are repaid or prepaid). Without limitation of the foregoing, the records of the Agent regarding the amount of outstanding and unpaid principal and accrued interest of the Advances, the Loans and any other amounts owed by the Borrower from time to time under the Loan Documents shall be presumed to be correct absent manifest error.
     (b) From and after the Availability Expiration Date, the Loans shall bear additional interest (in addition to the interest payable pursuant to clause (a) above and clause (c) below (if any)) on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to, (i) from and including the Availability Expiration Date to but excluding the first Interim Repayment Date, 1.00% per annum, (ii) from and including the first Interim Repayment Date to but excluding the second Interim Repayment Date, 1.50% per annum, (iii) from and including the second Interim Repayment Date to but excluding the third Interim Repayment Date, 2.00% per annum and (iv) from and including the third Interim Repayment Date and thereafter, 2.50% per annum (all such aggregated additional interest owing on any Loans pursuant to clauses (i) through (iv ), the “ Aggregated Additional Interest ”). Such accrued interest shall be aggregated on the last day of such Interest Period and any such amount owing as Aggregated Additional Interest shall, upon such aggregation, accrue interest at the Applicable Rate (plus the Default Margin if a Facility Event of Default has occurred and is continuing) and shall be deemed “Aggregated Additional Interest”. Aggregated Additional Interest and the interest thereon shall be payable in arrears in accordance with Section 3.03 .
     (c) At any time during which a Facility Event of Default has occurred and is continuing, the Loans shall bear additional interest (in addition to the interest payable pursuant to clause (a) and (b) above (if any)) on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the Default Margin (all such interest owing on the Loans, the “ Default Interest ”). Such accrued interest shall be aggregated on the last day of such Interest Period, accrue interest at the Aggregated Default Interest Rate and shall be deemed “ Aggregated Default Interest ”. Aggregated Default Interest and the interest thereon shall be payable in accordance with Section 3.03 .
     (d) Commencing six (6) months after the Availability Expiration Date and notwithstanding the foregoing, if with respect to any Interest Period for any LIBOR Loan, a Lender provides notice to the Agent and the Borrower not less than three (3) Business Days prior to the commencement of such Interest Period that the London Interbank Offered Rate, as determined in accordance with the provisions hereof, does not

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accurately reflect the cost to such Lender of maintaining or funding its Loans for such Interest Period and that the actual cost of funds of such Lender for such Interest Period is greater than such London Interbank Offered Rate, then the Loans of such Lender shall bear interest for such Interest Period at a rate equal to (I) the Applicable Margin plus (II) the cost of funds of such Lender for such Interest Period determined as provided in the next succeeding sentence. If the provisions of this clause (d) are applicable, then such Lender shall set forth in a statement provided to the Agent and the Borrower its costs of funds for such Interest Period.
     SECTION 3.05 Unutilized Fee . A fee equal to 1.00% per annum of the daily average Unused Allocated Amount shall accrue from the Closing Date (the “ Unutilized Fee ”) and shall be due and payable to the Lenders ratably in accordance with each Lender’s Loan Percentage of such Unused Allocated Amount in arrears on each Settlement Date to the extent provided in Section 3.03 . To the extent that an Unutilized Fee paid to a Lender does not correspond with the amount provided herein for the applicable Settlement Date, such payment will be reconciled by the Borrower on the immediately succeeding Settlement Date, to the extent provided in Section 3.03 .
     SECTION 3.06 Agent Fee Letter . On each Settlement Date, the Borrower shall pay the Agent for its account such fee or fees as shall be payable at such time in accordance with the Agent Fee Letter, to the extent provided in Section 3.03 .
     SECTION 3.07 Availability Expiration Payments and Credits . (a) If on the Availability Expiration Date, the then current balance held by the Depositary in the Cash Collateral Account plus the amount available for drawing under any Acceptable Letter of Credit is less than the Maximum Cash Collateral Amount at such time, the Borrower shall immediately deposit, or shall cause to be immediately deposited, into the Cash Collateral Account an amount equal to the result of (i) the Maximum Cash Collateral Amount on such date minus (ii) the sum of (x) the then current balance held by the Depositary in the Cash Collateral Account on such date and (y) the amount available for drawing under any Acceptable Letter of Credit.
     (b) If on the Availability Expiration Date, the then current balance held by the Depositary in the Cash Collateral Account is greater than the Maximum Cash Collateral Amount at such time, such excess shall be deposited into the Concentration Account and applied in accordance with Section 3.03(b) or (c) , as applicable, on the first Settlement Date to occur after the Availability Expiration Date.
ARTICLE IV
ILLEGALITY; INCREASED COSTS AND OTHER PROVISIONS
     SECTION 4.01 Illegality . If any Lender shall determine (which determination shall, upon notice thereof to the Borrower and the Agent, be conclusive and binding on the Borrower absent manifest error) that any Change In Law makes it unlawful, or any Governmental Entity having jurisdiction over such Lender asserts that it is unlawful, for such Lender to fund or maintain its Loans (or any portion thereof) as funded or maintained hereunder

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or to give effect to all or any part of its obligations under this Agreement (any such event being hereinafter referred to as an “ Illegality Event ”), then
     (a) such Lender shall promptly serve notice of such fact on the Borrower and the Agent; and
     (b) if such Illegality Event can be avoided or reduced, including by transferring such Loans (or any portion thereof) to any Affiliate of such Lender, without incurring any consequences which are, in the sole judgment of such Lender, materially adverse to such Lender, then such Lender shall use its reasonable good faith efforts consistent with its internal policy to effect such avoidance or reduction; or
     (c) if such a transfer is not effected within ninety (90) days after such Lender has provided notice thereof to the Agent and the Borrower, the Borrower shall prepay such Loans, or that portion of the Loans affected by such Illegality Event.
     If an Illegality Event does not affect all Lenders, the Borrower may request that any Lenders that are not affected by such Illegality Event purchase the Loans held by the affected Lenders. The Lenders shall have no obligation to purchase any such Loans. The foregoing shall not delay or otherwise affect the Borrower’s obligation under clause (c) of this paragraph.
     SECTION 4.02 Deposits Unavailable . If the Agent shall have determined that
     (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to it in the London Interbank Bank market; or
     (b) by reason of circumstances affecting the London Interbank Bank market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBOR Loans;
then, upon notice from the Agent to the Borrower and the Lenders, the obligations of all Lenders hereunder to make or continue any Prefunding Advances or Loans as LIBOR Advances or LIBOR Loans shall forthwith be suspended and such Prefunding Advances and Loans shall be made or maintained as Base Rate Advances or Base Rate Loans, as applicable, until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.
     SECTION 4.03 Increased LIBOR Loan Costs, Etc . (a) The Borrower agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, such Lender’s Allocation and the making of Advances hereunder (including the making or maintaining any Loans and/or Prefunding Advances as LIBOR Loans or LIBOR Advances, as applicable) that arise in connection with any Change In Law, except for such changes with respect to increased capital costs which are governed by Section 4.05 .
     (b) Each affected Lender shall promptly notify the Agent and the Borrower by certification in writing (in a certificate which shall set out in reasonable detail the basis of the computation of such amounts; provided that such Lender shall not be required to set

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out details of its computations relating to its liability to pay corporation tax or any similar tax on profits or gains) of the occurrence of any such event, stating the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within thirty (30) Business Days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on the Borrower.
     (c) The provisions of this Section 4.03 shall not oblige the Borrower to make payment to any Lender in relation to any such additional amounts to the extent that:
     (i) such additional amounts are imposed by reason of the willful misconduct or gross negligence of such Lender or result from any failure on the part of such Lender to comply with any of the express terms of this Agreement or any other Loan Document (except where such failure results from any failure on the part of any party (other than such Lender) to this Agreement or any other Loan Document to comply with any of the express terms thereof); or
     (ii) such additional amounts result from any failure by such Lender duly to comply with all Applicable Laws of which it may reasonably be expected to be aware relating to filing of regulatory returns and statements, or
     (iii) such additional amounts were incurred more than one hundred eighty (180) days prior to the date that such Lender notified the Borrower of the Change In Law giving rise to such increased costs or reductions as contemplated by Section 4.03(b) ; provided that failure or delay on the part of any Lender to notify the Borrower of such an event shall not constitute a waiver of such Lender’s right to such additional amounts; provided , further , that if an event giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof; or
     (iv) such additional amounts constitute Taxes.
     (d) If any Lender requests compensation under this Section 4.03 , then such Lender shall use reasonable efforts to file any certificate or document reasonably requested by the Borrower or designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if such filing, designation or assignment (i) would eliminate or reduce amounts payable pursuant to this Section 4.03 in the future and (ii) in the judgment of such Lender, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
     SECTION 4.04 Funding Losses . In the event any Lender shall incur any Break Costs as a result of any repayment or prepayment of the principal amount of any LIBOR Loan on

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a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Article III or otherwise then, the Lender shall provide written notice of such to the Borrower (with a copy to the Agent). The Borrower shall, on the later of (x) the date such Loans are repaid or prepaid and (y) two (2) Business Days after its receipt of notice thereof, pay directly to each Lender the amount of the Break Costs certified by the Agent.
     SECTION 4.05 Increased Capital Costs . (a) If any Change In Law affects or would affect the amount of capital required or expected to be maintained by any Lender and in the case of Conduit Lender, its administrative agent or a Support Party with respect thereto (each, a “ Covered Party ”), and such Covered Party determines (in good faith but in its sole and absolute discretion) that the rate of return on its capital as a consequence of the Allocations, the Loans or the Prefunding Advances made by such Covered Party is reduced to a level below that which such Covered Party could have achieved but for the occurrence of any such circumstance, then upon notice from time to time by certification in writing (in a certificate which shall set out in reasonable detail the basis of the computation of such amounts provided that such Covered Party shall not be required to set out details of its computations relating to its liability to pay corporation tax or any similar tax on profits or gains) of the occurrence of any such event by such Covered Party to the Borrower, the Borrower shall within thirty (30) Business Days following receipt of such notice pay directly to such Covered Party additional amounts sufficient to compensate such Covered Party for such reduction in rate of return. A statement of such Covered Party as to any such additional amount or amounts shall, in the absence of manifest error, be conclusive and binding on the Borrower. In determining such amount, such Covered Party may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable.
     (b) The provisions of this Section 4.05 shall not oblige the Borrower to make payment to any Covered Party in relation to any additional amounts to the extent that:
     (i) such additional amounts are imposed by reason of the willful misconduct or gross negligence of such Covered Party or result from any failure on the part of such Covered Party to comply with any of the express terms of this Agreement or any other Loan Documents (except where such failure results from any failure on the part of any party (other than such Covered Party) to this Agreement or any other Loan Documents to comply with any of the express terms thereof); or
     (ii) such additional amounts result from any failure by such Covered Party duly to comply with all such laws of which it may reasonably be expected to be aware relating to filing of regulatory returns and statements; or
     (iii) such additional amounts were incurred more than one hundred eighty (180) days prior to the date that such Covered Party notified the Borrower of the Change In Law giving rise to such increased capital costs as contemplated by Section 4.05(a) ; provided that failure or delay on the part of any Lender to notify the Borrower of such Change In Law shall not constitute a waiver of such Lender’s right to such additional amounts; provided , further , that if the Change In Law giving rise to such increased capital costs is retroactive, then the 180-day

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period referred to above shall be extended to include the period of retroactive effect thereof; or
     (iv) such additional amounts constitute Taxes.
     (c) If any Covered Party requests compensation under this Section 4.05 , then such Covered Party shall use reasonable efforts to file any certificate or document reasonably requested by the Borrower or designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if such filing, designation or assignment (i) would eliminate or reduce amounts payable pursuant to this Section 4.05 in the future and (ii) in the judgment of such Covered Party would not subject such Covered Party to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Covered Party. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
     SECTION 4.06 Taxes . The Borrower covenants and agrees as follows with respect to Taxes:
     (a) Any and all payments by the Borrower to a Protected Party (which for purposes of this Section 4.06 shall exclude a Protected Party acting solely in a capacity of a Derivatives Creditor) under each Loan Document shall be made without setoff, counterclaim or other defense, and, except as otherwise required by law, free and clear of, and without deduction or withholding for or on account of, any Taxes. In the event that any Taxes are imposed and required to be deducted or withheld from any payment required to be made by the Borrower to any Protected Party under any Loan Document, then:
     (i) subject to clause (g) , if such Taxes are Non-Excluded Taxes, the amount of such payment shall be increased as may be necessary so that such payment is made, after withholding or deduction for or on account of such Non-Excluded Taxes, in an amount that is not less than the amount provided for in such Loan Document; and
     (ii) the Borrower shall withhold the full amount of such Taxes from such payment (as increased pursuant to clause (a)(i) ) and shall pay such amount to the Governmental Entity imposing such Taxes in accordance with Applicable Law.
     (b) In addition, the Borrower shall pay all Other Taxes imposed to the relevant Governmental Entity imposing such Other Taxes in accordance with Applicable Law.
     (c) As promptly as practicable after the payment by the Borrower of any Taxes or Other Taxes, the Borrower shall furnish to the Agent a copy of an official receipt (or a certified copy thereof) or other documentation reasonably acceptable to the Agent in each case, if available to the Borrower following the Borrower making best efforts to provide such official receipt (or certified copy) or other documentation

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evidencing the payment of such Taxes or Other Taxes. The Agent shall make copies thereof available to any Protected Party upon written request therefor.
     (d) Subject to clause (g) and without duplication of any amount payable under clause (a)(i) , the Borrower shall indemnify each Protected Party for any Non-Excluded Taxes and Other Taxes levied, imposed or assessed on such Protected Party with respect to any payment by or on account of any obligation of the Borrower under any Loan Document whether or not such Non-Excluded Taxes or Other Taxes are correctly or legally asserted by the relevant Governmental Entity. In addition, the Borrower shall indemnify each Protected Party for any incremental Taxes and Other Taxes that may become payable by such Protected Party as a result of any failure of the Borrower to deliver to the Agent, pursuant to clause (c) , documentation evidencing the payment of Taxes or Other Taxes. With respect to indemnification for Non-Excluded Taxes and Other Taxes actually paid by any Protected Party or the indemnification provided in the immediately preceding sentence, such indemnification shall be made within 30 days after the date such Protected Party makes written demand therefor accompanied by a written statement describing the basis for such indemnity and the computation of the amount payable. The Borrower acknowledges that any payment made to any Protected Party in respect of the indemnification obligations of the Borrower provided in this clause shall constitute a payment in respect of which the provisions of clause (a)(i) and this clause shall apply.
     (e) Each Protected Party that is not a U.S. Person, on or prior to the date on which such Person becomes a Protected Party hereunder (and from time to time thereafter immediately upon the obsolescence, expiration or invalidity of any form or certificate previously delivered, unless such Person is no longer legally entitled to do so as a result of (x) a change in Law after the date such Protected Party becomes a Protected Party hereunder or (y) an action taken by a Protected Party at the request of the Borrower), shall deliver to the Borrower and the Agent:
     (i) two duly completed copies of either (x) Internal Revenue Service Form W-8BEN, or applicable successor form, certifying eligibility of the Protected Party for benefits of an income tax treaty to which the United States is a party or (y) Internal Revenue Service Form W-8ECI, or applicable successor form, certifying that income receivable under each Loan Document by such Protected Party is effectively connected with the conduct by such Person of a trade or business in the United States; or
     (ii) in the case of a Lender or Support Party that is not a U.S. Person and that is not legally entitled to deliver either form listed in clause (e)(i) , (x) a certificate substantially in the form attached as Exhibit M to the effect that such Person is not (A) a “bank” as contemplated in Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code or (C) a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code and that interest payments being received are not effectively connected with the conduct by such Person of a trade or business in the United States (an

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Exemption Certificate ”) and (y) two duly completed copies of Internal Revenue Service Form W-8BEN certifying that such Person is not a U.S. Person, or applicable successor form; or
     (iii) any other form as may be reasonably requested by Borrower, which such Protected Party is legally entitled to deliver and which is prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. Withholding Tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Agent to determine the withholding or deduction required to be made, including any form, certification or other reasonable evidence demonstrating that such Protected Party has complied with the information gathering and reporting requirements, in each case, that may be required to obtain the available exemption from U.S. Withholding Tax under Sections 1471 through 1474 of the Code, and any regulations or official governmental interpretations thereof, with respect to any payments made under the Loan Documents to such Protected Party after December 31, 2012.
     (f) Furthermore, any Protected Party that is a U.S. Person, other than a Protected Party whose name contains one of the following word or words: Incorporated, Inc., Corporation, Corp., P.C., insurance company, indemnity company, reinsurance company or assurance company shall deliver to the Borrower and the Agent two duly completed copies of Internal Revenue Service Form W-9, or any applicable successor form prescribed by the Internal Revenue Service. The Borrower will be entitled to rely on any form or Exemption Certificate provided pursuant to clauses (e) and (f) until notified otherwise by the Protected Party that delivered such form or Exemption Certificate. Each Protected Party shall promptly (i) notify the Borrower and the Agent of any change in circumstances that would modify or render invalid any claimed exemption or reduction pursuant to clauses (e) and (f).
     (g) The Borrower shall not be obligated to pay any additional amounts to any Protected Party pursuant to clause (a)(i) , or to indemnify any Protected Party pursuant to clause (d) hereof or any indemnity provision of any other Loan Document, in respect of (1) U.S. Withholding Taxes to the extent imposed as a result of (i) the failure of such Protected Party to deliver to the Borrower the form or forms and an Exemption Certificate, as applicable to such Protected Party, pursuant to clause (e) or clause (f) , (ii) such form or forms and Exemption Certificate not establishing a complete exemption from U.S. Withholding Tax or the information or certifications made therein by the Protected Party being untrue or inaccurate in any material respect, in each case on the date such form or forms or Exemption Certificate is delivered, or (iii) the Protected Party designating a successor lending office at which it maintains its Loans (or in the case of a Protected Party that is not a Lender, such Person designating another location from which it operates in connection with any Loan Document) which has the effect of causing such Protected Party to become obligated for (or causing the Borrower to become obligated to withhold) U.S. Withholding Taxes in excess of those in effect immediately prior to such designation; provided that, the Borrower shall be obligated to pay additional amounts to any such Protected Party pursuant to clause (a)(i) , and to indemnify any such Protected

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Party pursuant to clause (d) , in respect of U.S. Withholding Taxes to the extent (i) any such failure to deliver a form or forms or an Exemption Certificate or the failure of such form or forms or Exemption Certificate to establish a complete exemption from U.S. Withholding Tax or inaccuracy or untruth contained therein resulted from a Change In Law, which change rendered such Protected Party no longer legally entitled to deliver such form or forms or Exemption Certificate or otherwise ineligible for a complete exemption from U.S. Withholding Tax, or rendered the information or certifications made in such form or forms or Exemption Certificate untrue or inaccurate in a material respect, (ii) the redesignation of the Protected Party’s lending office, or designation of another location, as applicable, was made at the request of the Borrower, or pursuant to Sections 4.01 , 4.03 or 4.05 , or (iii) the obligation to pay any additional amounts to any such Person pursuant to clause (a)(i) or to indemnify any such Person pursuant to clause (d) is with respect to an Assignee that becomes a Lender as a result of an assignment made at the request of the Borrower and (2) Taxes which result from, arise out of, or are attributable to a nonexempt prohibited transaction under ERISA or Section 4975 of the Code caused by the incorrectness of a Lender’s representation in Section 6.02 or a breach of a Lender’s covenant in Section 8.03 .
     (h) In the event that any Protected Party receives a refund in respect of Non-Excluded Taxes or Other Taxes as to which it has been paid additional amounts by the Borrower pursuant to clause (a)(i) or indemnified by the Borrower pursuant to clause (d) or any indemnity provision of any Loan Document and such Protected Party, as applicable, determines in its sole, good faith judgment that such refund is attributable to such additional amounts or indemnification, then such Protected Party shall promptly notify the Agent and the Borrower and shall within 30 Business Days remit to the Borrower an amount as such Protected Party determines to be the proportion of the refunded amount as will leave it, after such remittance, in no better or worse position than it would have been if the Non-Excluded Taxes or Other Taxes had not been imposed and the corresponding additional amounts or indemnification payment not been made; provided , however , that the Borrower, upon the request of the relevant Protected Party, agrees to repay any such amount paid over to the Borrower (plus any penalties, interest and other charges imposed by the relevant governmental authority) to the relevant Protected Party in the event that such Protected Party is required to repay such refund to such governmental authority. Notwithstanding any other provision of this Agreement, no Protected Party shall be obligated to disclose information regarding its tax affairs or computations to the Borrower in connection with this clause (h) or any other provision of this Section 4.06 .
     (i) If the Borrower is required to pay additional amounts to or for the account of any Protected Party pursuant to clause (a)(i) or is required to make indemnification payments to a Protected Party pursuant to clause (d) , then such Protected Party will, at the reasonable written request of the Borrower, promptly take all actions (including the re-designation of its lending office) to eliminate or reduce any such payment of additional amounts or indemnification obligations which may thereafter accrue or arise, provided , however , that such action is, in such Protected Party’s good faith judgment, determined not to be disadvantageous or cause undue hardship to such Protected Party, and provided that any out-of-pocket costs or expenses that are incurred in connection with such change

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shall be borne by the Borrower on behalf of such Protected Party, and the mere existence of such expenses or costs shall not be deemed to be disadvantageous or cause undue hardship to such Protected Party; and provided , further , that nothing in this clause (i) shall affect or postpone any of the obligations of the Borrower or the rights of any Protected Party pursuant to this Section 4.06 .
     (j) If the Borrower determines in good faith that a reasonable basis exists for contesting a Non-Excluded Tax, the relevant Protected Party shall cooperate with Borrower as Borrower may reasonably request in challenging such Tax. The Borrower shall indemnify and hold each Protected Party harmless against any out-of-pocket expenses incurred by such Person in connection with any request made by Borrower pursuant to this clause (j) . Nothing in this clause (j) shall obligate any Protected Party to take any action that such Person, in its sole but reasonable good faith judgment, determines may result in any detriment to such Person; provided , however , that the out-of-pocket expenses of a Protected Party paid by the Borrower pursuant to the preceding sentence shall not constitute a detriment for purposes of this sentence.
     SECTION 4.07 Payments, Computations, Proceeds of Collateral, Etc . (a) Unless otherwise expressly provided in a Loan Document, all payments by the Borrower to the Protected Parties pursuant to each Loan Document shall be made by the Borrower (or by its designee) to the Agent for the pro rata account of the Protected Parties entitled to receive such payment. All payments shall be made without setoff, deduction (except for Taxes which are expressly addressed in Section 4.06 ) or counterclaim not later than 1:00 p.m. New York City time on the date due in Dollars in same day or immediately available funds to such account in the United States as the Agent shall specify from time to time by notice to the Borrower at least one Business Day in advance of the date the payment is due. Funds received after that time shall be deemed to have been received by the Agent on the next succeeding Business Day. The Agent shall promptly remit in same day funds to each Protected Party its share, if any, of such payments received by the Agent for the account of such Protected Party. All interest (including interest on LIBOR Loans and LIBOR Advances) and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan (calculated at other than at the rate set forth in clause (b) of the definition of Corporate Base Rate), 365 days or, if appropriate, 366 days). Whenever any payment is to be made hereunder or under any Loan, or whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, such payment shall be made, and the last day of such Interest Period shall occur, on the next succeeding Business Day and interest at the Applicable Rate shall accrue on such amount from the original due date to such next Business Day; provided , that if such extension would cause the last day of such Interest Period to occur in a new calendar month, the last day of such Interest Period shall occur on the next preceding Business Day.
     (b) Each such distribution by the Agent to such Protected Party shall be made in accordance with Section 3.03 . Upon the request of any Protected Party, the Agent in its sole discretion may cause to be distributed to such Protected Party on such due date a corresponding amount with respect to the amount then due such Protected Party. If and to the extent the Borrower shall not have so made such payment in full to the Agent and

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the Agent shall have so caused to be distributed to such Protected Party a corresponding amount with respect to the amount then due such Protected Party, such Protected Party shall repay to the Agent forthwith on demand such amount distributed to such Protected Party together with interest thereon, for each day from the date such amount is distributed to such Protected Party until the date such Protected Party repays such amount to the Agent, at a rate per annum equal to the overnight federal funds rate.
     SECTION 4.08 Sharing of Payments . If any Protected Party shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than Excepted Payments described in clause (b) of the definition thereof and other than pursuant to the terms of Sections 4.03 , 4.04 , 4.05 or 4.06 ) in excess of its pro rata share of payments obtained by all Protected Parties, such Protected Party shall purchase from the other Protected Parties such participations in Loans and Allocations made by them as shall be necessary to cause such purchasing Protected Party to share the excess payment or other recovery ratably (to the extent such other Protected Parties were entitled to receive a portion of such payment or recovery) with each of them; provided that, if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Protected Party, the purchase shall be rescinded and each Protected Party which has sold a participation to the purchasing Protected Party shall repay to the purchasing Protected Party the purchase price to the ratable extent of such recovery together with an amount equal to such selling Protected Party’s ratable share (according to the proportion of (a) the amount of such selling Protected Party’s required repayment to the purchasing Protected Party to (b) total amount so recovered from the purchasing Protected Party) of any interest or other amount paid or payable by the purchasing Protected Party in respect of the total amount so recovered. The Borrower agrees that any Protected Party purchasing a participation from another Protected Party pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.09 ) with respect to such participation as fully as if such Protected Party were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law any Protected Party receives a secured claim in lieu of a setoff to which this Section applies, such Protected Party shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Protected Parties entitled under this Section to share in the benefits of any recovery on such secured claim.
     SECTION 4.09 Setoff . Each Protected Party shall, upon the occurrence and during the continuance of any Facility Default or Facility Event of Default described in clause (h) of Section 9.01 or, with the consent of the Majority Lenders, upon the occurrence and during the continuance of any other Facility Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) the Borrower hereby grants to each Protected Party a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Protected Party; provided that any such appropriation and application shall be subject to the provisions of Section 4.08 . Each Protected Party agrees promptly to notify the Borrower and the Agent after any such appropriation and application made by such Protected Party; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Protected Party under this Section are in addition to other rights

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and remedies (including other rights of setoff under applicable law or otherwise) which such Protected Party may have.
ARTICLE V
CONDITIONS PRECEDENT
     SECTION 5.01 Conditions Precedent to the Effectiveness of the Loan Documents; Cash Collateral Account . The effectiveness of this Agreement (other than the accrual of the Unutilized Fees) is subject to the satisfaction of the conditions precedent set forth in this Section 5.01 , in each case in form and substance satisfactory to the Agent and each of the Designated Lenders. In the event that the conditions precedent to effectiveness set forth in this Section 5.01 are not satisfied, in each case in form and substance satisfactory to the Agent and each of the Designated Lenders, on or before ten (10) Business Days from the date hereof, this Agreement and each other Loan Document shall not become effective.
     (a) Loan Documents . The Agent shall have received each of the following Loan Documents, in each case duly executed and delivered by the parties thereto and in case, in form and substance satisfactory to the Agent and each of the Designated Lenders:
     (i) this Agreement;
     (ii) the Security Agreement;
     (iii) the Depository Agreement;
     (iv) the Servicing Agreement.
     (v) the Agent Fee Letter; and
     (vi) the Designated Lender Fee Letter for each Designated Lender.
     (b) Opinions . The Agent shall have received legal opinions of special counsel to the Borrower (i) with respect to organizational, enforceability and other matters, and (ii) with respect to non-consolidation and other bankruptcy matters, in each case, which counsel and legal opinions shall be reasonably acceptable to the Agent and each of the Designated Lenders.
     (c) Certificates . The Agent shall have received:
     (i) a copy of a good standing certificate, dated a date reasonably close to the Closing Date, for the Borrower and the Servicer,
     (ii) a certificate from each of the Borrower and the Servicer, dated the Closing Date, duly executed and delivered by such Person’s Authorized Officer, as to (and attaching):

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     (A) the incumbency and signatures of those of its officers, managing member or general partner, as applicable, authorized to act with respect to each Loan Document to be executed by such Person; and
     (B) the full force and validity of each Organic Document of such Person and copies thereof;
upon which certificates the Agent and each Protected Party may conclusively rely until it shall have received a further certificate of an Authorized Officer of any such Person canceling or amending the prior certificate of such Person.
     (iii) A solvency certificate duly executed by an Authorized Officer of the Borrower, in form and substance satisfactory to the Agent, setting forth the conclusions that, after giving effect to the consummation of all financings contemplated herein, the Borrower will be Solvent.
     (d) Initial Equity . The Agent shall have received evidence acceptable to it that ALC shall have raised equity that yields to ALC, on an aggregate basis, at least $800,000,000 in net cash proceeds.
     (e) Fees . The Borrower shall have paid the then due and payable fees pursuant to each of the Agent Fee Letter and each Designated Fee Letter and the costs and expenses then payable by the Borrower under Section 11.05 of this Agreement to the extent then invoiced or otherwise notified to the Borrower in writing.
     SECTION 5.02 Conditions Precedent for Each Transfer Date . Subject to Section 5.03 , the obligation of any Lender to advance funds on a Transfer Date for the financing of any aircraft is subject to the terms and conditions set forth in this Section 5.02 , in each case in form and substance satisfactory to the Agent.
     (a) Notice of Borrowing; Funding Package; Determination of Approval .
     (i) Notice of Borrowing . The Agent shall have received a Notice of Borrowing in accordance with clause (a) of Section 2.03 .
     (ii) Funding Package . At least ten (10) Business Days prior to such Transfer Date (or such shorter period as Agent may agree) the Borrower shall have delivered to the Agent a Funding Package for such aircraft to be added to the Portfolio on such Transfer Date, provided that to the extent that any component of a Funding Package (other than the Request, the Independent Appraisals and jurisdiction information) has not been finalized and/or executed, as applicable, at the time such Funding Package is delivered to the Agent, drafts of such documents may be provided; provided , further , that if drafts of the foregoing are submitted, substantially final versions thereof shall be received by the Agent at least three (3) Business Days prior to the applicable Transfer Date (or such shorter period as the Agent may agree).

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     (iii) Determination . The Advance or the application of the Prefunded Equity Amount to be made on such Transfer Date shall have been approved by the Majority Lenders and the Agent; provided however , each of the Lenders hereby irrevocably delegates such approval right to the Agent for so long as (A) no Facility Event of Default, Amortization Event or Servicer Replacement Event has occurred and (B) the Availability Period has not expired. Each of the Lenders agrees to be bound by any such Agent’s approval described in the preceding sentence. Subject to the proviso contained in the first sentence of this clause (iii) , and provided that the eligibility criteria contained in Schedule II have been met or waived pursuant to Section 2.08 , the Agent shall have the right in its sole and absolute discretion to make a determination of whether or not to include in the Portfolio any aircraft and related lease described in a Request and Funding Package and the Majority Lenders and/or the Agent, as applicable, shall not be in any way obligated or committed to approve any aircraft for funding and/or inclusion in the Portfolio. The Agent shall promptly, but in no event any later than the second Business Day prior to the scheduled Transfer Date for an aircraft, notify the Borrower whether such aircraft and related lease described in the applicable Funding Package may be added to the Portfolio ( provided that failure to so notify shall not impose any liability on the Agent or any Lender, impose any obligation to fund an Advance, signify approval of the Agent of such aircraft or signify that any conditions precedent related to such aircraft have been satisfied or waived).
     (b) Parent Contribution; Prefunded Equity Amount . (i) ALC shall have contributed to the Prefunding Account an amount at least equal to the amount that the Purchase Price for the applicable Aircraft or Aircraft Subsidiary, as the case may be, exceeds the Advance or the application of Prefunded Equity Amount to be made by the Lenders on the Transfer Date related to the purchase of such Aircraft or Aircraft Subsidiary, as the case may be (the “ Parent Contribution ”).
     (ii) On the applicable Transfer Date, the Prefunded Equity Amount required to be applied as of the applicable Transfer Date shall have been fully applied in accordance with Sections 2.01(c)(iii) and (g) .
     (c) Cash Collateral Account . With respect to the first Transfer Date, the Borrower shall have (i) established the Cash Collateral Account with the Depositary in accordance with the Depository Agreement and (ii) deposited $15,000,000 in such account.
     (d) AS Joinder and Security Agreement Supplement . If any Aircraft Subsidiaries are to be created and/or used in connection with the financing or leasing of the applicable aircraft, the Agent shall have received (i) an originally executed AS Joinder and Security Agreement Supplement and (ii) an Additional Collateral Certificate, each duly executed and delivered by the Applicable Aircraft Subsidiaries, the Borrower and the Collateral Agent ( provided that in the event that an Advance involves an Indirect Pledgor, the AS Joinder and Security Agreement Supplements to be executed by the applicable Aircraft Subsidiaries shall be supplemented with additional documents and/or

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modified, in either case, in form and substance reasonably acceptable to the Agent in order (x) to pledge to the Borrower or another Aircraft Subsidiary (to be re-pledged by the Borrower or the Aircraft Subsidiary to the Collateral Agent) all of such Indirect Pledgor’s assets, including but not limited to assigning the Indirect Pledgor’s interest in its loan, if applicable, to the Borrower or another Aircraft Owning Subsidiary and pledging the bank account into which payments under such loan are to be made and (y) to comply with Applicable Law).
     (e) Assignment Agreement . The Agent shall have received the relevant Assignment Agreement relating to the lease for the applicable aircraft, if any, duly executed and delivered by the applicable Lessee, the Borrower or the Applicable Aircraft Subsidiary, as the case may be, and each other party thereto, together with originals of each of the documents delivered to the Borrower or the Applicable Aircraft Subsidiary, as the case may be, pursuant to the relevant Assignment Agreement.
     (f) Lease Assignment . The Agent shall have received a duly executed counterpart of each Lease Assignment or other agreement required to establish a perfected (to the extent possible and commercially reasonable under Applicable Law) first priority security interest in favor of the Collateral Agent for the benefit of the Protected Parties relating to each Lease, dated as of the applicable Transfer Date, satisfactory in form and substance to the Agent.
     (g) Power of Attorney . If reasonably required by the Agent, the Agent shall have received a duly executed Lessee Power of Attorney relating to the lease for the applicable Aircraft, satisfactory in form and substance to the Agent.
     (h) Resolutions, Etc. The Agent shall have received the following from the Borrower and each Applicable Aircraft Subsidiary:
     (i) a copy of a good standing certificate or any such similar document, to the extent available, dated a date reasonably close to the applicable Transfer Date;
     (ii) certificates, each dated the applicable Transfer Date and duly executed and delivered by an Authorized Officer, as to (and attaching):
     (A) the resolutions of the Board of Directors (or other applicable managing body) then in full force and effect authorizing the execution, delivery and performance of each Loan Document and Lease Document to be executed by such Person on such Transfer Date and the transactions contemplated hereby and thereby;
     (B) the full force and validity of each Organic Document of such Person; provided however , if such Organic Documents have not been amended or restated since a copy of such Organic Documents were last delivered to the Agent, such Person may certify as such rather than attach copies of such Organic Documents; and

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     (C) the incumbency and signatures of those of its officers, managing member or general partner, as applicable, authorized to act with respect to each Loan Document to be executed by such Person;
upon which certificates the Agent and each Protected Party may conclusively rely until it shall have received a further certificate of an Authorized Officer of any such Person canceling or amending the prior certificate of such Person.
     (i) Representations and Warranties; No Defaults .
     (i) Both before and after giving effect to any Advance the following statements shall be true and correct:
     (A) the representations and warranties set forth in each Loan Document shall, in each case, be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); and
     (B) no Facility Default, Facility Event of Default, Amortization Event or Servicer Replacement Event shall have then occurred and be continuing.
     (ii) The Agent shall have received a certificate from an Authorized Officer of the Borrower and any Applicable Aircraft Subsidiaries dated as of the applicable Transfer Date that:
     (A) all representations and warranties made by it herein or in any of the other Loan Documents or otherwise made in writing in connection herewith or therewith shall be true and correct in all material respects as though made at such time, provided however , if representations or warranties shall not be true and correct in all material respects at such time, such certificate shall specifically identify the representations and warranties that cannot be remade and the Agent shall then determine, in its sole discretion, if such representations and warranties shall be waived and if the proposed Advance shall be made on such Transfer Date; and
     (B) there exists no Collateral Deficiency (or that, after giving effect to the Aircraft being added to the Portfolio on such Transfer Date and any prepayment, if any, made by the Borrower on such Transfer Date no Collateral Deficiency will exist); and
     (C) no law, regulation, ruling or other governmental action shall be in effect or have occurred which, to the Borrower’s or the Applicable Aircraft Subsidiary’s knowledge (as applicable), would prevent the Borrower, the Applicable Aircraft Subsidiary, or, to the Borrower’s or the Applicable Aircraft Subsidiary’s knowledge, any Lessee, from performing in all material respects their respective

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obligations under the Loan Documents and Lease Documents to which they are a party; and
     (iii) The Agent shall have received a certificate from an Authorized Officer of the Servicer dated as of the applicable Transfer Date that:
     (A) all representations and warranties of the Servicer contained in any of the Loan Documents or otherwise made in writing in connection therewith shall be true and correct in all material respects as though made at such time; provided however , if representations or warranties shall not be true and correct in all material respects at such time, such certificate shall specifically identify the representations and warranties that cannot be remade and the Agent shall then determine, in its sole discretion, if such representations and warranties shall be waived and if the proposed Advance shall be made on such Transfer Date;
     (B) the Servicer has no knowledge of any of the representations and warranties of the Borrower contained in any Loan Document being untrue or incorrect in any material respect at the time made or deemed made; provided however , if the Servicer has knowledge of any such representation or warranty being untrue or incorrect at the time made or deemed made, the Servicer shall disclose such untrue or incorrect representations and warranties or representations or warranties that would be untrue or incorrect if made), and the Agent shall then determine, in its sole discretion, if such representations and warranties shall be waived and if the proposed Advance shall be made on such Transfer Date;
     (C) there exists no Servicer Replacement Event, Facility Event of Default or Amortization Event;
     (D) there exists no Collateral Deficiency (or that, after giving effect to the Aircraft being added to the Portfolio on such Transfer Date and any prepayment, if any, made by the Borrower on such Transfer Date no Collateral Deficiency will exist); and
     (E) no law, regulation, ruling or other governmental action shall be in effect or have occurred which would prevent the Servicer from performing in all material respects its obligations under the Servicing Agreement.
     (j) Legal Opinions . The Agent shall have received
     (i) if reasonably required by the Agent, a legal opinion of special counsel in respect of local Aviation Authority matters, which counsel and opinion shall be reasonably acceptable to the Agent;
     (ii) a legal opinion of special counsel to the Borrower with respect to matters of the Cape Town Convention relating to the transactions contemplated

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by the Loan Documents, which opinion shall be reasonably acceptable to the Agent;
     (iii) a legal opinion or opinions of special counsel to the Borrower, the Applicable Aircraft Subsidiaries and, if reasonably required by the Agent, the Servicer and ALC, which counsel and opinions shall be reasonably acceptable to the Agent;
     (iv) if the Seller related to the Aircraft to be funded is ALC or any Affiliate of ALC, a legal opinion of special counsel to the Borrower with respect to “true sale” and other bankruptcy related issues, in form and substance reasonably satisfactory to the Agent; and
     (v) if an Applicable Aircraft Subsidiary is incorporated, organized or formed under any jurisdiction outside of the United States and if required by the Agent in its discretion, a legal opinion of counsel to such Applicable Aircraft Subsidiary in such jurisdiction, in form and substance reasonably satisfactory to the Agent.
     (k) Chattel Paper Counterpart of Each Lease . The Agent shall have received (i) the originally executed counterpart of each Lease applicable to an aircraft which is to become an Aircraft on such Transfer Date bearing the Chattel Paper Legend and an original signature of the Collateral Agent as required by such Chattel Paper Legend or (ii) if the Agent determines in its sole discretion that an originally executed counterpart of a Lease for such Aircraft with such legend and marking does not exist or is not necessary to perfect assignment of such Lease to the Collateral Agent, an originally executed counterpart or copy, if the Agent deems a copy acceptable, of such Lease without such legend and marking.
     (l) UCC Financing Statements . The Agent shall have received the following, each in form and substance satisfactory to the Agent:
     (i) UCC financing statements suitable in form for naming the applicable Seller as debtor/seller, the Borrower or Applicable Aircraft Subsidiary, as the case may be, as secured party/buyer, and the Collateral Agent as assignee, or other similar instruments or documents to be filed under the UCC of all jurisdictions and all other laws otherwise applicable, all as may be necessary or, in the opinion of the Agent, desirable to perfect the outright assignment of each Lease to the Borrower or the Applicable Aircraft Subsidiary, as the case may be, under the Assignment Agreements referenced in Section 5.02(e) ;
     (ii) UCC financing statements suitable in form for naming the Borrower and/or such Applicable Aircraft Subsidiaries, as the case may be, as a debtor, and the Collateral Agent (or, in the case of an Indirect Pledgor, the Borrower) as the secured party, or other similar instruments or documents to be filed under the UCC of all jurisdictions and all other laws otherwise applicable, as

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may be necessary or, in the opinion of the Agent, desirable to perfect the security interests of the Collateral Agent pursuant to the Security Agreement;
     (iii) UCC financing statements suitable in form for naming the Borrower or the Applicable Aircraft Subsidiary, as the case may be, as debtor, and the Collateral Agent, as secured party, or other similar instruments or documents to be filed under the UCC of all jurisdictions and under all other Applicable Law as may be necessary or, in the opinion of the Agent, desirable to perfect the security interests of the Collateral Agent pursuant to the Lease Assignments referenced in Section 5.02(f) ;
     (iv) if required by the Agent, precautionary UCC financing statements suitable in form for naming the Borrower or the Applicable Aircraft Subsidiary, as the case may be, as secured party/lessor, the applicable Lessee, as debtor/lessee and the Collateral Agent, as assignee, or other similar instruments or documents to be filed under the UCC of all jurisdictions and under all other Applicable Law as may be necessary or, in the opinion of the Agent, desirable to perfect the security interests of the Borrower or the Applicable Aircraft Subsidiary, as the case may be, pursuant to each Lease.
     (m) UCC Termination Statements . The Agent shall have received termination statements, releases and such other similar documents, including but not limited to UCC Form UCC-3 termination statements, if any, necessary to release all existing Liens and other rights of any Person (other than the Collateral Agent) in any of the Collateral, together with such other termination statements and/or releases as the Agent may reasonably request from the Borrower or any Aircraft Subsidiary.
     (n) UCC Searches . If required by the Agent in its sole discretion, the Agent shall have received certified copies of UCC Requests for Information or Copies (Form UCC 11), or a similar search report in all applicable jurisdictions certified by a party acceptable to the Agent, dated a date reasonably near to the applicable Transfer Date, listing all effective financing statements or similar instruments or documents, which name any of the Borrower and/or any such Applicable Aircraft Subsidiaries (under their present name and any previous names) as the debtor, together with copies of such financing statements (none of which shall, except with respect to Permitted Liens, evidence a Lien on any Collateral).
     (o) Cape Town Convention . The Agent shall have received the following:
     (i) evidence of the registration of the following interests from the official records of the International Registry (or a legal opinion in form and substance reasonably acceptable to the Agent to such effect) with respect to each aircraft to be financed (provided, in each case, that the Cape Town Convention applies to such interest):
     (A) an International Interest (or a Prospective International Interest) under the Security Agreement with the Collateral Agent as

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creditor and the Borrower or, if applicable, the Applicable Aircraft Subsidiary, as debtor;
     (B) an International Interest (or a Prospective International Interest) under the related Lease with the Borrower or, if applicable, the Applicable Aircraft Subsidiary, as creditor and the applicable Lessee as debtor; and
     (C) an Assignment of International Interest (or a Prospective Assignment of International Interest) under each Lease Assignment with the Collateral Agent as assignee and the Borrower or, if applicable, the Applicable Aircraft Subsidiary, as assignor;
     (ii) with respect to any such aircraft whose State of Registration is the United States, (A) a duly executed counterpart of a Mortgage together with a copy of the AC Form 8050-135 related to such aircraft and (B) evidence of the official records of the FAA (or a legal opinion in form and substance reasonably acceptable to the Agent) that the Mortgage and AC Form 8050-135 have each been filed for recordation therewith; and
     (iii) with respect to any such aircraft (other than aircraft referred to in clause (ii) of this Section 5.2(o) ) whose State of Registration has designated an entity in its territory as the entry point through which information shall or may be transmitted to the International Registry, such documents and other items as may be necessary or, in the opinion of the Agent, desirable in order to comply with the requirements of such State of Registration (including, without limitation, the registration or filing of Mortgages or other documents or the payment of fees) in order to effectuate the registrations set forth in clause (i) of this Section 5.2(o) .
     (p) Recordations of Lease Assignments . The Agent shall have received evidence of the official records of the relevant
State(s) of Registration (or a legal opinion in form and substance reasonably acceptable to the Agent) that any lease with respect to the applicable aircraft and the related Lease Assignment (or other applicable agreements) have been registered, recorded or filed for recordation in accordance with and to the extent possible under Applicable Law (or assurances to the Agent’s reasonable satisfaction that such will be provided within a reasonable time thereafter), all as may be necessary or, in the opinion of the Agent, desirable to perfect the security interests of the Collateral Agent pursuant to such Lease Assignment.
     (q) Capital Stock. The Agent shall have received certificates (in the case of any Capital Stock that is a certificated security (as defined in the UCC)) evidencing all of the issued and outstanding Capital Stock owned by ALC in the Borrower and if any Aircraft Subsidiaries are to be used in connection with the financing of the applicable aircraft, owned by the Borrower in the Applicable Aircraft Subsidiaries, which certificates in each case shall be accompanied by undated instruments of transfer duly executed in blank, or, if any such Capital Stock is an uncertificated security (as defined in the UCC), confirmation and evidence satisfactory to the Agent that the security interest

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therein has been transferred to and perfected by the Collateral Agent in accordance with Articles 8 and 9 of the UCC and all laws otherwise applicable to the perfection of the pledge of such Capital Stock;
     (r) Acceptance . The Agent shall have received a copy of the certificate of acceptance of the applicable aircraft (or such other evidence of acceptance of such aircraft reasonably satisfactory to the Agent) executed by the Lessee.
     (s) Permits . The Agent shall have received such satisfactory evidence as it may require that any permits needed to make all required payments in Dollars under each lease with respect to the applicable aircraft to the Borrower and/or the applicable Aircraft Subsidiaries, as the case may be, have been obtained and are in full force and effect.
     (t) Deposits and Maintenance Reserves . On each Transfer Date, (i) all unapplied Deposits and Maintenance Reserves under each Lease shall have been transferred to the Depositary in accordance with clauses (b) and (c) of Section 7.04 and (ii) the Agent shall have received from the Borrower the certificate described in clauses (b)(ii) and (c)(ii) of Section 7.04(b) , if applicable, related thereto.
     (u) Title to the Collateral . Upon the funding of the applicable Loan, the Borrower or the Applicable Aircraft Subsidiary, as the case may be, shall have good and marketable title to such Aircraft and good title to all other items of Collateral to be pledged thereby, free and clear of all Liens other than Permitted Liens.
     (v) Insurance . The Agent shall have received certificates of insurance and reinsurance, in each case, (i) as required under Section 7.08 , from insurance brokers reasonably satisfactory to the Agent, together with a broker’s letter of undertaking from a broker reasonably acceptable to the Agent, together with evidence that the applicable Persons have been named as loss payee or contract party and additional insured in respect of such insurance as required under Section 7.08 and (ii) as required by the terms of the applicable Lease.
     (w) Registration . The Agent shall have received assurances reasonably satisfactory to it that within a reasonable time after the funding of the applicable Loan, the Agent shall receive a duplicate of the registration certificate of such Aircraft, or other evidence of registration satisfactory to the Agent, noting the interest of the Borrower or the Applicable Aircraft Subsidiary, as the case may be, as the owner of such Aircraft, issued by the State of Registration and a copy of the certificate of airworthiness issued by the State of Registration, or other evidence satisfactory to the Agent of the issuance of such certificate of airworthiness.
     (x) No Opposition . No suit, action or proceeding shall be pending or overtly threatened on the Transfer Date before or by any court or Governmental Entity seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement.
     (y) Loan Documents . The Loan Documents shall each be in full force and effect.

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     (z) Fees, Costs and Expenses . The Borrower shall have paid, or shall concurrently pay with such funding, the then due and payable fees pursuant to the Agent Fee Letter and the costs and expenses then payable by the Borrower under Section 11.05 of this Agreement to the extent then invoiced or otherwise notified to the Borrower in writing.
     (aa) Patriot Act Disclosures . The Agent and each Lender shall have received all Patriot Act Disclosures (or any similar disclosures required by any comparable law applicable to any Lender) requested by them prior to the applicable Transfer Date.
     (bb) Other Documents and Action . The Borrower, each applicable Aircraft Subsidiary and the Servicer shall deliver to the Agent such other instruments, agreements and documents and take such other action as the Agent may reasonably request in connection with the Advances to be made on such Transfer Date.
All documents executed or submitted pursuant hereto by or on behalf of the Borrower shall be reasonably satisfactory in form and substance to the Agent and its counsel, and the Agent and its counsel shall have received all information, approvals, opinions, documents or instruments as the Agent or its counsel may reasonably request.
     SECTION 5.03 Deferral of Conditions . (a) If the Borrower determines that any condition required to be satisfied by Section 5.02 will not be satisfied prior to a proposed Transfer Date, subject to clause (b) of this Section 5.03 , the Borrower may send the Agent a Deferral Request requesting that such conditions be satisfied by a date on or before sixty (60) days after the applicable Transfer Date. If the Agent agrees, in its sole discretion, that satisfaction of such conditions may be so deferred and if the Agent agrees to the time period requested by the Borrower to satisfy each condition listed in the Deferral Request, then the Agent shall execute the Deferral Request, the conditions described therein shall be so deferred and the relevant Advance shall be disbursed upon satisfaction or waiver of any remaining conditions. The consent of the Supermajority Lenders shall be required to (i) defer any condition precedent required to be satisfied by Section 5.02 for more than sixty (60) days beyond the applicable Transfer Date or (ii) permanently waive any condition precedent required to be satisfied by Section 5.02 .
     (b) Notwithstanding clause (a) of this Section 5.03 , the Agent must obtain (i) the consent of the Supermajority Lenders to defer (as provided in clause (a) above) the conditions contained in clause (a)(iii) , clause (j) (unless the issuance of an opinion is subject to the occurrence of an event permitted to occur after the funding as provided in this Section 5.03 , in which case on or prior to such funding, the form of opinion to be delivered after the funding shall be agreed to by the Agent and the issuer of such opinion) and clause (u) of Section 5.02 and (ii) the consent of all Lenders to defer (as provided in clause (a) above) the conditions contained in clause (a)(i) , clause (a)(ii) (but limited to a draft of the Request), clause (e) (but limited to the Assignment Agreement), clause (f) and clause (v) of Section 5.02 .
     (c) In the event that the Borrower fails to satisfy any condition described in a Deferral Request within the time provided in such Deferral Request, then the applicable

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Aircraft shall be excluded from the Portfolio for purposes of calculating the Aggregate Aircraft Value until such time as all such deferred conditions are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
     SECTION 6.01 Representations and Warranties of the Borrower . The Borrower represents and warrants on the Closing Date and, unless waived by the Agent in writing, on each Transfer Date as follows:
     (a) Due Organization, Standing, Citizenship, Etc. (i) The Borrower is a limited liability company duly organized and validly existing in good standing under the laws of the State of Delaware, and has the power and authority to enter into and to perform its obligations under the Loan Documents to which it is a party.
     (ii) The Borrower is duly qualified and in good standing in all of the jurisdictions in which the character of the properties owned or leased by it or the business conducted by it makes such qualification necessary and the failure to so qualify would have a Material Adverse Effect.
     (iii) Each Aircraft Subsidiary is duly organized and validly existing and in good standing under the laws of the jurisdiction in which it was organized and has the power and authority to enter into and to perform its obligations under the Loan Documents and the Lease Documents to which it is a party.
     (iv) Each Aircraft Subsidiary is duly qualified and in good standing in all of the jurisdictions in which the character of the properties owned or leased by it or the business conducted by it makes such qualification necessary and the failure to so qualify would have a Material Adverse Effect.
     (b) Loan and Lease Documents . Each of the Borrower and each Aircraft Subsidiary have duly authorized, executed and delivered the Loan Documents and Lease Documents to which it is a party, and, assuming due authorization, execution and delivery by the other parties thereto, the Loan Documents and Lease Documents to which they are parties are legal, valid and binding agreements of the Borrower and each Aircraft Subsidiary, enforceable in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, examinership, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting the enforcement of creditors’ rights generally, including, but not limited to, materiality, reasonableness, good faith and fair dealing, and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).
     (c) No Conflict; Consent . The execution and delivery by the Borrower and each Aircraft Subsidiary of the Loan Documents and Lease Documents to which they are parties are not, and the performance of their obligations under such documents will not be, inconsistent with their respective Organic Documents, do not and will not contravene such Organic Document or any Applicable Law, and do not and will not contravene the

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provisions of, or constitute a default, or result in the creation of any Lien upon any property of the Borrower or each Aircraft Subsidiary (other than Permitted Liens), under, or breach any indenture, mortgage, contract, agreement or other instrument to which they are a party or by which they are bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or under any Governmental Entity, except such as has been obtained, given or accomplished.
     (d) Title . The Borrower or the applicable Aircraft Owning Subsidiary, as the case may be, is the sole legal and beneficial owner (or in the event that the Borrower or an Aircraft Owning Subsidiary owns an Aircraft through a trust, the sole beneficial owner) of and has good and marketable title to the applicable Aircraft, the Collateral is free and clear of Liens other than Permitted Liens.
     (e) No Defaults or Event of Loss . No Facility Default, Facility Event of Default, Amortization Event or Servicer Replacement Event has occurred and is continuing and no Event of Loss has occurred with respect to any Aircraft, Airframe or Engine subject to the Loan Documents as of the applicable Transfer Date for which the mandatory prepayment described in Section 3.02(c) remains unpaid (x) for more than 120 days or (y) after payment of insurance proceeds therefor, or which is to become part of the Portfolio on the applicable Transfer Date.
     (f) Records . The Borrower’s and each Aircraft Subsidiary’s records with respect to the Collateral are located at 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067.
     (g) Litigation . There is no action, proceeding or investigation pending or, to the knowledge of the Servicer, the Borrower or any Aircraft Subsidiary, overtly threatened (or any basis therefor known to the Borrower) or outstanding judgments which, individually or in the aggregate, could reasonably be expected to materially impair the ability of the Servicer, the Borrower or any Aircraft Subsidiary to perform their obligations under any of the Loan Documents or Lease Documents to which they are a party.
     (h) Filings Made . Financing statements under the UCC, Lease Assignments and each Security Document (and any supplements thereto relating to Aircraft Subsidiaries) in the forms required by this Agreement have been executed or delivered, as required by this Agreement, by the Borrower and/or the Applicable Aircraft Subsidiary, and have been delivered to the Agent for filing or have been or will, promptly after the Transfer Date, be filed, recorded or registered, as applicable, against the Borrower, the Applicable Aircraft Subsidiary or the applicable Lessee, as the case may be, and all International Interests under the Cape Town Convention with respect to the Security Agreement, the applicable Leases and the applicable Lease Assignments required by this Agreement to be registered have been or will be promptly registered, in each of the above cases, in all necessary jurisdictions and with the International Registry, if applicable, in order to protect and establish the first priority security interest of the Collateral Agent for the benefit of the Protected Parties in and to the Collateral granted under each Lease Assignment, the Security Agreement and each other Security Document (provided that

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neither the Borrower nor any Aircraft Subsidiary shall be obligated to execute and deliver or file, record or register any mortgage, security assignment or the like over any Aircraft unless the execution and delivery and filing, recordation or registration of a mortgage, security assignment or the like is necessary or, in the opinion of the Agent, desirable, for the registration of an International Interest with respect to the Aircraft under the Security Agreement) and in all other jurisdictions in which the Agent reasonably determines and advises the Borrower that filings are to be made. Except for the execution and delivery of the Depository Agreement, the proper filing of UCC financing statements, the proper registering of the International Interests with the International Registry, as applicable, and the taking possession of the Capital Stock of the Aircraft Subsidiaries (if certificated), in each case by the Collateral Agent, no further action except as may have already been taken, or such action that the Agent agrees may later occur, is necessary in order to establish and perfect the Collateral Agent’s first priority security interest granted in the Collateral securing the Obligations against any third parties in any jurisdiction; provided that no representation or warranty is being given in this clause (h) as to the perfection of any security interest in any Aircraft or any Engine, other than (i) if the security interest is deemed to be perfected by the filing of a financing statement under the UCC, that such perfected security interest is prior to all other security interests that are deemed to be perfected by the filing of a financing statement under the UCC and (ii) if the security interest is deemed perfected by the registration of an International Interest under the Cape Town Convention, that such perfected security interest is prior to all other security interest that are deemed to be perfected by the registration of an International Interest under the Cape Town Convention.
     (i) No Borrower Debt . Other than Taxes, none of the Borrower nor any Aircraft Subsidiary has incurred Indebtedness other than (i) Indebtedness created or permitted by this Agreement or any other Loan Document, (ii) loans by the Borrower or an Aircraft Subsidiary to another Aircraft Subsidiary, (iii) liabilities created or permitted by this Agreement, any Lease Document or attributable to any business permitted hereunder or (iv) guarantees by the Borrower of obligations of an Aircraft Subsidiary.
     (j) Lease Documents . The Borrower has delivered or caused to be delivered to the Agent a copy of the Leases and any other Lease Document to which the Borrower or any Aircraft Subsidiary is a party including any amendments or supplements thereto to which the Borrower or any such Aircraft Subsidiary is a party, and except for amendments so disclosed to the Agent, such documents have not been amended or modified.
     (k) Sole Business of Borrower; Special Purpose Status . The sole business of the Borrower is its acquisition, ownership, financing, refinancing, marketing, remarketing, leasing and sale of Aircraft or of the ownership of Aircraft Subsidiaries and the sole business of such Aircraft Subsidiary is acquisition, ownership, financing, marketing, refinancing, remarketing, leasing and sale of the Aircraft. The Borrower and the Aircraft Subsidiaries engage in no other business except as described in this clause (k) or as otherwise expressly permitted under the Loan Documents. Neither the Borrower nor such Aircraft Subsidiary have engaged in any activities since their organization, other than those incidental to its above permitted activities, its organization and other

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appropriate steps and its arrangement for the payment of fees to, and director’s and officer’s insurance for, the officers and directors of the Borrower and the Aircraft Subsidiaries, the acquisition, lease and sale of the Aircraft at issue and the funding of the Purchase Price thereof, the authorization and issuance of the Notes, the execution of this Agreement, the other Loan Documents, the Servicing Agreement and Lease Documents to which they are a party and the activities referred to in or contemplated by such agreements.
     (l) Separate Corporate Structure; No Employees, Subsidiaries .
     (i) The legal and beneficial title to all of the issued and outstanding Capital Stock of each Aircraft Subsidiary is owned directly or indirectly by the Borrower.
     (ii) The Borrower is a separate legal entity from ALC and ALC’s Affiliates other than the Borrower.
     (iii) Each Aircraft Subsidiary is a separate legal entity from the Borrower.
     (iv) The Borrower has satisfied the minimum capitalization requirements, if any, under the laws of the State of Delaware for purposes of conducting its business.
     (v) Each Aircraft Subsidiary has satisfied the minimum capitalization requirements, if any, under the laws of the jurisdiction in which it was organized for purposes of conducting its business.
     (vi) The Borrower has complied in all respects with the requirements of Applicable Law and those set forth in its Organic Documents, including, without limitation, its Certificate of Formation and Operating Agreement except where failure to comply with Applicable Law would not result in a Material Adverse Effect.
     (vii) Each Aircraft Subsidiary has complied in all respects with the requirements of Applicable Law and those set forth in its Organic Documents, including but not limited to its charter documents, or such other similar documents except where the failure to comply with Applicable Law would not result in a Material Adverse Effect.
     (viii) The Borrower keeps complete and accurate corporate records, books, accounts and minutes separate from those of ALC, any of ALC’s Affiliates or any other Person other than the Borrower and the Borrower’s Subsidiaries.
     (ix) Each Aircraft Subsidiary keeps complete and accurate corporate records, books, accounts and minutes separate from those of ALC, any of ALC’s Affiliates or any other Person other than the Borrower and the Borrower’s Subsidiaries.

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     (x) The Borrower has held itself out to the public (including to creditors of the Borrower, ALC, each Aircraft Subsidiary and their Affiliates) under the Borrower’s own name as a separate and distinct corporate entity from ALC and all of its Affiliates other than the Borrower and the Borrower’s Subsidiaries.
     (xi) Each Aircraft Subsidiary has held itself out to the public (including to creditors of ALC, the Borrower, each Aircraft Subsidiary and their Affiliates) under its own name as a separate and distinct legal entity from ALC and all of its Affiliates other than the Borrower and the Borrower’s Subsidiaries.
     (xii) The Borrower has not directly or indirectly entered into any transaction with ALC or any of ALC’s Affiliates other than the Borrower’s Subsidiaries except the Servicing Agreement or except as expressly permitted by the Loan Documents and then on terms as may be found in an arm’s-length transaction.
     (xiii) No Aircraft Subsidiary has directly or indirectly entered into any transaction with ALC or any of ALC’s Affiliates other than the Borrower and the Borrower’s Subsidiaries and except the Servicing Agreement or except as expressly permitted by the Loan Documents and then on terms as may be found in an arm’s-length transaction.
     (xiv) The Borrower has not loaned funds to, guaranteed or become obligated with respect to claims against, ALC, or any of ALC’s Affiliates other than the Borrower’s Subsidiaries, or any other Person or entity except as expressly permitted by the Loan Documents.
     (xv) The Borrower has kept its assets and liabilities as reflected in its books and records separate from those of ALC and ALC’s Affiliates other than the Borrower’s Subsidiaries, and has not and at all times will not commingle such assets and liabilities with those of ALC or any of ALC’s Affiliates other than Borrower’s Subsidiaries.
     (xvi) Each Aircraft Subsidiary has kept its assets and liabilities as reflected in its books separate from those of ALC and ALC’s Affiliates other than the Borrower and the Borrower’s Subsidiaries, and has not and at all times will not commingle such assets and liabilities with those of ALC or any of ALC’s Affiliates other than the Borrower and the Borrower’s Subsidiaries.
     (xvii) The Borrower has kept adequate records to permit the segregation of its assets and liabilities from those of ALC and ALC’s Affiliates other than the Borrower’s Subsidiaries.
     (xviii) Each Aircraft Subsidiary has kept adequate records to permit the segregation of its assets and liabilities from those of ALC and ALC’s Affiliates other than the Borrower and the Borrower’s Subsidiaries.

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     (xix) The Borrower has not held itself out to the public as a division of ALC, or ALC as a division of the Borrower.
     (xx) No Aircraft Subsidiary has held itself out to the public as a division of ALC, or ALC a division of an Aircraft Subsidiary.
     (xxi) The Borrower has not induced third parties to rely on the creditworthiness of ALC in order to have third parties enter into contracts with the Borrower, except that ALC may guarantee the obligations of Borrower under an agreement to purchase an Aircraft by executing a separate written guaranty in which the creditor acknowledges the separate existence of ALC and its reliance on the separate assets of ALC and the Borrower, provided that the aggregate amount of ALC’s guarantee obligations under this section 6.01(l)(xxi) and section 6.01(l)(xxii) below do not exceed 10% of the Maximum Facility Amount.
     (xxii) No Aircraft Subsidiary has induced third parties to rely on the creditworthiness of ALC in order to have third parties enter into contracts with such Aircraft Subsidiary, except that ALC may guarantee the obligations of an Aircraft Subsidiary under an agreement to purchase an Aircraft by executing a separate written guaranty in which the creditor acknowledges the separate existence of ALC and its reliance on the separate assets of ALC and provided that the aggregate amount of ALC’s guarantee obligations under this section 6.01(l)(xxii) and section 6.01(l)(xxi) above do not exceed 10% of the Maximum Facility Amount.
     (xxiii) The Borrower has and will pay its obligations in the ordinary course of business as a legal entity separate and distinct from ALC and its Affiliates other than the Borrower and the Borrower’s Subsidiaries.
     (xxiv) Each Aircraft Subsidiary has and will pay its obligations in the ordinary course of business as a legal entity separate and distinct from ALC and its Affiliates other than the Borrower and the Borrower’s Subsidiaries.
     (xxv) The Borrower has and will keep its funds separate and distinct from any funds of ALC and its Affiliates, other than the Borrower’s Subsidiaries, and will receive, deposit, withdraw and disburse such funds separate from any funds of ALC and its Affiliates, other than the Borrower’s Subsidiaries, except as expressly permitted by the Loan Documents.
     (xxvi) Each Aircraft Subsidiary has and will keep its funds separate and distinct from any funds of ALC and ALC’s Affiliates, other than the Borrower and the Borrower’s Subsidiaries, and will receive, deposit, withdraw and disburse such funds separate from any funds of ALC and ALC’s Affiliates, other than the Borrower and the Borrower’s Subsidiaries, except as expressly permitted by the Loan Documents.
     (xxvii) The Borrower has no employees.

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     (xxviii) No Aircraft Subsidiary has employees.
     (xxix) The Borrower has at least one (1) Independent Manager (as defined in the Borrower’s Organic Documents or as any such similar term is defined in the Borrower’s Organic Documents).
     (m) ERISA Liability . None of the Borrower, the Aircraft Subsidiaries or any Plan fiduciary has engaged in any transaction in connection with which the Borrower, the Aircraft Owning Subsidiaries or any Plan fiduciary that the Borrower or any Aircraft Subsidiary has an obligation to indemnify with respect to such matters, could be subjected to either a material civil penalty assessed pursuant to Section 502(i) or (1) of ERISA, or a material tax imposed pursuant to Section 4975 of the Code; no material liability to the PBGC has been, or is expected by the Borrower or any Aircraft Subsidiary to be, incurred with respect to any Plan which is established or maintained, or to which contributions are required to be made, by the Borrower, any Aircraft Subsidiary or any ERISA Affiliate; there has been no event or condition which presents a material risk of termination of any such Plan by the PBGC which would result in a Material Adverse Effect on the Borrower or any Aircraft Subsidiary; no accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists with respect to any such Plan; no reportable event (within the meaning of Section 4043 of ERISA) for which the thirty (30) day notice to the PBGC is not waived by regulation has occurred with respect to any such Plan which would result in a Material Adverse Effect on the Borrower or any Aircraft Subsidiary; no unfunded liabilities which are not disclosed in the Borrower’s or any Aircraft Subsidiary’s unaudited financial statements exist with respect to any plan that provides medical, dental, life or other non-pension benefits to former employees of the Borrower or any Aircraft Subsidiary or for which the Borrower or any Aircraft Subsidiary have any liability that would result in a Material Adverse Effect on the Borrower or any Aircraft Subsidiary. None of the Borrower, any Aircraft Subsidiary and any ERISA Affiliate contribute to or have any liability or contingent liability with respect to any “multiemployer plan” within the meaning of Section 3(37) of ERISA that is subject to Title IV of ERISA.
     Neither the Borrower nor any Aircraft Subsidiary is, or is acting on behalf of, an “employee benefit plan” as defined in Section 3(3) of ERISA which is subject to Title I of ERISA, a “plan” as defined in Section 4975 of the Code which is subject to Section 4975 of the Code, an entity deemed to hold the “plan assets” of any of the foregoing, or a governmental, church or non-U.S. plan which is subject to any federal, state, local or non-U.S. law that is similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code. The Borrower and each Aircraft Subsidiary shall make the foregoing representation on each day from the Closing Date through the Termination Date.
     None of the transactions contemplated by the Loan Documents to which the Borrower is a party constitute a “prohibited transaction” within the meaning of Section 406(a)(1) of ERISA or Section 4975(c)(1)(A)-(D) of the Code. The representation by the Borrower in the prior sentence is made in reliance upon and subject to the accuracy of each Lender’s representation in Section 6.02 and each Lender’s

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covenants in Section 8.03 . None of the transactions contemplated by the Loan Documents to which the Borrower is a party constitute a “prohibited transaction” under Section 406(b) of ERISA, resulting or arising solely from an act or omission of the Borrower.
     (n) Certain Regulations . None of the transactions contemplated by this Agreement (including the use of the proceeds from the Loans) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including Regulations T, U, and X of the Board of Governors of Federal Reserve System, and none of the proceeds from the Loans will be used, directly or indirectly, to purchase, or to refinance any borrowing, the proceeds of which are used to purchase, any “security” within the meaning of said Securities Exchange Act or purchase (other than an equity interest in an Aircraft Subsidiary) or carry any “margin stock” as such term is defined in Regulation U.
     (o) Investment Company Act . None of ALC, the Borrower or any subsidiary thereof is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
     (p) Leases . (i) Except as otherwise disclosed in writing by the Borrower, the Servicer or the applicable Aircraft Subsidiary to the Agent prior to the applicable Transfer Date, (x) no Lease Event of Default related to the payment of “basic rent” (or such similar term) is in existence under any Lease and each Lease is in full force and effect, (y) to the knowledge of the Borrower or the applicable Aircraft Subsidiary, no other Lease Event of Default is in existence under any such Lease and (ii) the description of events of default occurring under each Lease, if any, included in a Funding Package relating to the applicable Transfer Date and any supplement thereto accurately describes in all material respects events of default during the periods described of which the Borrower is aware as of the relevant Transfer Date, without the Borrower having any duty of inquiry with respect to the same, other than inquiry of all Aircraft Subsidiaries and (z) each Lease contains a provision that protects (x) the Borrower or (y) the applicable Aircraft Subsidiaries, as the case may be, that may be subject to Taxes (but limited to withholding or similar Taxes) as a result of the transactions contemplated by such Lease or this Agreement, from any such Taxes.
     (q) Financial Information . All balance sheets, all statements of income and of cash flow and all other financial information furnished pursuant to clause (a) of Section 7.01 have been prepared in accordance with GAAP consistently applied and do or will present fairly in all material respects the consolidated financial condition of the Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended.
     (r) Subsidiaries . Neither the Borrower nor any Aircraft Subsidiary has any Subsidiary, except those subsidiaries which are party to the Security Agreement.
     (s) Taxes . The Borrower and each Aircraft Subsidiary has filed all material tax returns (including all income tax returns) and reports required by law to have been

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filed by it, such returns being true, correct and complete, and has paid all Taxes thereby shown to be due and owing and all other Taxes payable by it, except any such Taxes which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.
     (t) Accuracy of Information . All factual information heretofore or contemporaneously furnished in writing to any Protected Party in connection with any Loan Document or any transaction contemplated hereby or thereby by ALC, the Borrower, any Aircraft Subsidiary or the Servicer was (to the knowledge and belief of the ALC Parties, in the case of any such information provided by persons other than ALC Parties) true, complete and accurate in all material respects at the time so provided or, if applicable, later supplemented and does not omit any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
     (u) Solvency . The Borrower, taken as a whole with all of its Subsidiaries, on a consolidated basis, both before and after giving effect to any Advances, is Solvent.
     SECTION 6.02 Representations and Warranties of the Lenders . Each Lender represents and warrants as to itself (a) on the Closing Date, it has the power and authority to enter into and perform its obligations under the Loan Documents to which it is a party and it has duly authorized, executed and delivered the Loan Documents to which it is a party, and (b) on the Closing Date, and as to itself at all times until the Termination Date that no part of the assets to be used by such Lender to purchase the Notes constitutes assets of an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, a “plan” as defined in Section 4975 of the Code which is subject to Section 4975 of the Code, an entity whose underlying assets include “plan assets” by reason of any such employee benefit plan’s or plan’s investment in such entity, or a governmental, church or non-U.S. plan which is subject to any federal, state, local or non-U.S. law that is similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code.
ARTICLE VII
COVENANTS
     SECTION 7.01 Borrower’s Covenants . The Borrower agrees with the Agent and each Protected Party that, until the Termination Date shall have occurred, the Borrower will, and will cause the Aircraft Subsidiaries to, perform or cause to be performed the obligations set forth below.
     (a) Financial Information; Reports, Notices, Etc. The Borrower will furnish each Lender and the Agent copies of the following financial statements, reports, notices and information:
     (i) as soon as available and in any event within 90 days after the end of each of the first three Fiscal Quarters of each Fiscal Year an unaudited or audited consolidated balance sheet of the Borrower and the Aircraft Subsidiaries

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as of the end of such Fiscal Quarter and consolidated statements of income and cash flow of the Borrower and the Aircraft Subsidiaries for such Fiscal Quarter, and including (in each case) in comparative form (for such comparative form, commencing with the first Fiscal Quarter that begins one year after the first Advance has been made) the figures for the corresponding Fiscal Quarter in the immediately preceding Fiscal Year, certified by the chief financial or accounting Authorized Officer of the Borrower as fairly presenting in all material respects the consolidated financial condition of the Borrower, prepared in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes);
     (ii) as soon as available and in any event within 120 days after the end of each Fiscal Year, a copy of the balance sheet of the Borrower and the Aircraft Subsidiaries on a consolidated basis, and the related consolidated statements of income and cash flow of the Borrower and the Aircraft Subsidiaries on a consolidated basis for such Fiscal Year, and including (in each case) in comparative form (for such comparative form, commencing in 2011) the figures for the immediately preceding Fiscal Year, audited (without any Impermissible Qualification) by KPMG LLP, or at the Borrower’s election, such other independent public accountants reasonably acceptable to the Agent prepared in accordance with GAAP;
     (iii) as soon as practicable and in any event within three (3) Business Days after the Borrower, the Servicer or any Aircraft Subsidiary obtains knowledge of the occurrence of (A) any Facility Default, Facility Event of Default, Amortization Event or Servicer Replacement Event, (B) Liens with respect to any Collateral other than Permitted Liens, (C) any Lease Default, (D) any extension of any Lease and (E) any Lease Maturity, notice thereof;
     (iv) as soon as practicable and in any event within three (3) Business Days after the Borrower, the Servicer or any Aircraft Subsidiary obtains knowledge of the commencement of any litigation, action, proceeding or labor controversy of the type and materiality described in clause (g) of Section 6.01 , notice thereof and, to the extent the Agent requests, copies of all documentation relating thereto;
     (v) promptly upon receipt from any Manufacturer, the Servicer, any Lessee or any Lessee’s insurance carrier or broker, copies of any material notice, communication, document or agreement related to the Collateral including the Aircraft, Airframes or Engines; and
     (vi) such other financial and other information as any Lender through the Agent may from time to time reasonably request (including information and reports in such detail as the Agent may request with respect to the terms of and information provided pursuant to the Monthly Report).

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     (b) Existence and Citizenship . The Borrower will (i) at all times maintain (A) its existence in good standing under the laws of Delaware and the United States and (B) its right to transact business in each jurisdiction in which the character of the properties owned or leased by it or the business conducted by it makes such qualification necessary and the failure to so qualify would preclude the Borrower from enforcing its rights or meeting its obligations under or with respect to any Loan Documents to which it is a party or any material assets; and (ii) at all times maintain (A) each Aircraft Subsidiary solely as an entity incorporated, formed or created under the laws of the United States (or any state thereof or the District of Columbia), Luxembourg or Ireland unless otherwise agreed to in writing by the Agent, (B) subject to the Borrower’s right to wind-up or liquidate Subsidiaries under Section 11.23 (1) each Aircraft Subsidiary’s existence in good standing under the laws of the jurisdiction in which it was organized and (2) each Aircraft Subsidiary’s right to transact business in each jurisdiction in which the character of the properties owned or leased by it or the business conducted by it makes such qualification necessary and the failure to so qualify would preclude such Aircraft Subsidiary from enforcing its rights or meeting its obligations in any material respect under or with respect to its Leases, any Loan Documents to which it is a party or any other material assets.
     (c) Keep Well Covenant . The Borrower will take, or cause each Aircraft Subsidiary to take, all actions as are required to keep the representations and warranties applicable to it in clauses (a) , (d) , (h) , (i) , (k) , (l) , (m) , (n) , (o) , (r) , and (s) of Section 6.01 true and correct in all material respects (but without regard to when such representations or warranties were made or are expressed to be effective), until the occurrence of the Termination Date.
     (d) Compliance with Assumptions . The Borrower and each Aircraft Subsidiary will conduct its business in accordance with the assumptions contained in the opinion of counsel described in the parenthetical in Section 5.01(b)(ii) .
     (e) Authorizations, Approvals and Recordations . Promptly take, and maintain the effectiveness of, all action of the type referred to in clause (h) of Section 6.01 of this Agreement or otherwise that may, from time to time, be necessary or appropriate under Applicable Law in connection with the performance by the Borrower and the Aircraft Subsidiaries of their obligations under this Agreement, each Lease Assignment, each Security Document, the Notes, or any other Loan Document or any Lease Document, or the taking of any action hereby or thereby contemplated, or necessary for the legality, validity, binding effect or enforceability of this Agreement, the Notes, the Lease Assignments, each Security Document or any other Loan Document or any Lease Document, or for the making of any payment or the transfer or remittance of any funds by the Borrower and the Aircraft Subsidiaries under this Agreement, the Notes, the Lease Assignments, each Security Document or any other Loan Document or any Lease Document ( provided that neither the Borrower nor any Aircraft Subsidiary shall be obligated to execute and deliver or file, record or register any mortgage, security assignment or the like over any Aircraft unless the execution and delivery and filing, recordation or registration of a mortgage, security assignment or the like is necessary or, in the opinion of the Agent, desirable, for the registration of an International Interest with

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respect to the Aircraft under the Security Agreement, and the Borrower and the Aircraft Subsidiaries shall be obligated to execute, deliver and file or record Lease Assignments and the Borrower and each Aircraft Subsidiary shall be obligated to file the UCC financing statements required pursuant to Section 6.01(h) ).
     (f) Inspection Rights; Records; Appraisals .
     (i) The Borrower will permit, as may be reasonably requested, any duly authorized representatives of the Agent, at all reasonable times and upon five (5) Business Days’ notice from the Agent to the Borrower and the applicable Aircraft Subsidiaries (which notice shall not be required after the occurrence and during the continuance of a Facility Event of Default or a Servicer Replacement Event): to examine the Borrower’s and such Aircraft Subsidiaries’ books of account and records, reports and other papers related to the Borrower, such Aircraft Subsidiaries and the Collateral and to take memoranda and extracts therefrom and to make copies thereof; to visit and inspect its properties and operations; to examine all information then available to the Borrower and such Aircraft Subsidiaries regarding the location of each Aircraft, Airframe and Engine; to examine, take memoranda and extracts therefrom and obtain copies thereof from the Borrower of any and all such other information and copies of documents and print-outs of data related to the Collateral stored on any electronic or data processing medium under the control of the Borrower and such Aircraft Subsidiaries as the Agent may reasonably request, with respect to the Collateral, and the Aircraft, Airframes, Engines and Parts and the financial records of the Borrower and the Aircraft Subsidiaries related to the Collateral, and the Aircraft, Airframes, Engines and Parts; and, in connection with such inspection, to discuss any of the foregoing and the affairs, finances and accounts of the Borrower and such Aircraft Subsidiaries with any of their respective trustees, directors, officers, or employees (and, upon reasonable request of the Agent, the Borrower shall use reasonable efforts to arrange for the Borrower’s independent public accountants to meet with the Agent to discuss the foregoing), all at such reasonable times and as often as may be reasonably requested; provided , that unless a Facility Event of Default or a Servicer Replacement Event has occurred and is continuing, the Borrower shall only be obligated to pay the Agent’s expenses for two such inspections per calendar year.
     (ii) For each Aircraft, the Borrower shall at its expense provide three (3) Independent Appraisals to the Agent (A) (1) on the first Settlement Date to occur on or after twelve (12) months following the Closing Date (excluding Aircraft for which an Independent Appraisal in a Funding Package has been provided to the Agent within three months of such Settlement Date), (2) on the first Settlement Date to occur on or after twenty-four (24) months following the Closing Date (excluding Aircraft for which an Independent Appraisal in a Funding Package has been provided to the Agent within three months of such Settlement Date), (3) during the Availability Period, every six months after the date set forth in clause (2) of this Section 7.01(f)(ii) , (4) on the expiration of the Availability Period (excluding Aircraft for which an Independent Appraisal in a

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Funding Package has been provided to the Agent within three months of the end of the Availability Period) and (5) every six months after the expiration of the Availability Period and (B) upon the request of the Agent, after the occurrence and continuance of a Servicer Replacement Event or a Facility Event of Default. Such updated Independent Appraisals shall be conducted no more than thirty (30) days prior to the date of delivery thereof to the Agent. The Agent may at any time and from time to time obtain Independent Appraisals of any Aircraft (in addition to the Independent Appraisals required pursuant to this clause (ii) ) at its own expense. Each Independent Appraisal delivered pursuant to this clause (ii) shall be in form and substance reasonably satisfactory to the Agent; provided that with respect to any Aircraft, when appropriate and acceptable to the Agent, any such Independent Appraisal may be in the form of a letter from an Independent Appraiser confirming the Independent Appraisal previously delivered by such Independent Appraiser with respect to such Aircraft. Without limitation of the foregoing, subsequent Independent Appraisals of such Aircraft shall be adjusted for the then current physical condition of the Aircraft based on the relevant maintenance records to the extent applicable and available, and adjusted for any change to the underlying then “current market value” (as defined by ISTAT) of the Aircraft.
     (iii) In the event that (A) an Aircraft is subject to a Lien securing an obligation or claim with a value in excess of one percent (1.00%) of the Available Collateral Debt Amount related to such Aircraft other than a Permitted Lien or (B) a representation of the Borrower contained in Section 6.01(d) shall be false in any material respect with respect to an Aircraft, the Borrower shall at its expense provide three (3) Independent Appraisals with respect to such Aircraft and, for so long as any such Lien or defect in title shall exist, the amounts determined by such Independent Appraisers shall be reduced by the amount of such obligation or claim or the diminution in the value of the Aircraft resulting from such defect in title.
     (g) Payment of Charges; Maintenance of Licenses . The Borrower will duly pay and discharge (i) all of its and any Aircraft Subsidiary’s trade bills before the time that any Lien related thereto (other than Permitted Liens attributable thereto) attaches to any Collateral or other property or assets of the Borrower or the Aircraft Subsidiaries, including all Aircraft, Airframes, Engines and Parts and (ii) all lawful claims against the Borrower or an Aircraft Subsidiary (other than claims in respect of Taxes, which are governed by clause (s) of Section 6.01 and clause (c) of this Section 7.01 ), whether for labor, materials, supplies, services or anything else, which would, if unpaid, become a Lien upon such property or assets other than Permitted Liens, in each case unless and only to the extent that any such trade bills and claims are not yet due and payable or the validity thereof is being contested in good faith by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Collateral, any Aircraft, any Airframe or any Engine or any interest therein and the Borrower maintains appropriate reserves with respect thereto or has made adequate provision for the payment thereof, in accordance with GAAP and approved by the Agent (which approval shall not be unreasonably withheld); provided that notwithstanding

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anything to the contrary in this subsection, the Lien of the Lease Assignments and each other Security Document shall at all times be wholly preserved at the cost of the Borrower and without expense to the Agent or any other Protected Party. The Borrower will obtain and maintain, or cause to be obtained or maintained, in full force and effect, any authorization, approval, license, or consent of any governmental or judicial authority including, without limitation, registration of the Aircraft with the FAA or other Aviation Authority aircraft registry that is an “owner registry”, which may be or become necessary in order to obtain the full benefits of this Agreement, the Lease Assignments and Security Documents and all rights and remedies granted or to be granted herein, or in or under any Security Document; provided however , the Borrower shall not be obligated to file, register or record with any Government Entity any mortgage, security agreement or the like over any Aircraft other than as set forth in Section 7.01(e) .
     (h) Maintenance of Records . The Borrower shall keep, or, with respect to each Aircraft and its related Leases, cause the Servicer to keep, at all times, books of record and account adequate to identify each Aircraft and the revenue and expenses of the Borrower and each Aircraft Subsidiary, and, to the extent that the Lessee has provided such information to the Borrower or the applicable Aircraft Subsidiary pursuant to the applicable Lease, to disclose its maintenance and condition, in which full, true and correct entries will be made, and the Borrower will provide or cause to be provided adequate protection against loss or damage to such books of record and account.
     (i) Separateness . The Borrower will observe, and will cause each Aircraft Subsidiary to observe, all corporate formalities necessary to remain a legal entity separate and distinct from, and independent of, ALC, and ALC’s Affiliates (other than the Borrower and the Borrower’s Subsidiaries as applicable).
     (j) Insignia . With respect to any Aircraft not subject to a Lease other than a Subsidiary Lease, the Borrower shall place and leave or cause to be placed and left in a plain, distinct and conspicuous place in the cockpit of each Aircraft, and on each Engine, a fireproof nameplate, insignia or other identification bearing the following words in letters of a size reasonable under the circumstances and acceptable to the Agent as follows:
     Owned by [Borrower or appropriate Aircraft Owning Subsidiary].
     (k) Registration of Aircraft . Upon the termination of a Lease of an Aircraft registered at an Aviation Authority other than the FAA, the Borrower shall register or cause to be registered such Aircraft at the FAA as soon as reasonably practicable; provided , that if the Borrower reasonably anticipates entering into a Follow-On Lease (or causing an Aircraft Subsidiary to enter into a Follow-On Lease) within two (2) months of the termination of such Lease, then such Aircraft may remain registered at the Aviation Authority at which such Aircraft was registered at the termination of such Lease or the Aviation Authority at which the Aircraft is expected to be registered under the Follow-On Lease.

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     (l) Change in Location of Records . The Borrower shall provide the Agent written notice of any change in the address listed in Section 6.01(f) , which written notice shall be deemed the new address or addresses for purposes of representations and warranties made on Transfer Dates pursuant to Section 6.01(f) .
     (m) Monthly Report . The Borrower shall provide (or cause the Servicer to provide) to the Agent and each Designated Lender a Monthly Report (by electronic mail if requested by any such party) with respect to the immediately preceding Measuring Period not later than three (3) Business Days prior to each Settlement Date. The Agent shall review the Monthly Report and, in its sole discretion, provide the Borrower with any corrections or supplemental information regarding the Loan or amounts paid into or held in the Depository Accounts, which corrections and/or information the Borrower shall include in a revised Monthly Report. The Borrower shall (or shall cause the Servicer to) provide the Agent with a copy of each Monthly Report, as revised pursuant to the preceding sentence.
     (n) Follow-On Leases . Upon entering into, or causing or permitting an Aircraft Subsidiary to enter into, a Lease which was not in place as of the applicable Transfer Date for the applicable Aircraft (but excluding any extension of the term of any Lease) (a “ Follow-On Lease ”), the Borrower shall forward the Follow-On Lease to the Agent together with current financial and credit information and payment history in its possession, regarding the proposed lessee, and such other information reasonably requested by the Agent. The Borrower will not enter into, or cause or permit an Aircraft Subsidiary to enter into, such Follow-On Lease without the Agent’s consent, as determined in the Agent’s reasonable discretion, which determination the Agent shall make promptly (and the Agent shall not provide such consent if this Agreement also requires the consent of Lenders and such consent has not been obtained by the Agent) and until the conditions precedent described in clauses (a)(ii) (to the extent reasonably applicable to Leases; provided however, such Funding Package may be delivered as late as five (5) Business Days prior to the commencement of the applicable Follow-On Lease or such shorter period as Agent may agree), (d) , (f) , (g) , (j)(i) , (j)(ii) (if such Follow-On Lease may be registered under the Cape Town Convention ) , (j)(iii) (with respect to the Borrower and any Applicable Aircraft Subsidiaries), (j)(iv) , (j)(v) (with respect to any Aircraft Subsidiaries for which such an opinion has not been previously provided), (k) , (l)(iii) , (l)(iv) , (m) , (o)(i)(B) , (o)(i)(C) , (o)(ii) , (o)(iii) (provided that items under clause (o) shall only be required if such Follow-On Lease may be registered under the Cape Town Convention), (p) , (r) , (s) , (t) , (u) , (v) , (w) and (aa) (with respect to any Aircraft Subsidiaries for which any applicable information has not already been provided) of Section 5.02 have been satisfied with respect to such Follow-On Lease, as determined in the Agent’s sole and exclusive discretion, which determination the Agent shall make promptly.
     (o) Removal of Servicer . Upon the occurrence and during the continuation of a Servicer Replacement Event, the Borrower may, upon consent of the Agent acting at the direction of the Majority Lenders and shall, at the direction of the Agent acting at the direction of the Majority Lenders (i) terminate the Servicing Agreement in accordance with Section 12(b) thereof and/or (ii) proceed by appropriate court action to enforce

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performance of the Servicing Agreement by the Servicer and/or recover actual direct (and not consequential) damages which result from a breach of any of the Servicer’s representations, warranties or covenants thereunder. In the event that the Servicing Agreement is terminated as provided in clause (o)(i) above or otherwise, the Agent shall be entitled to direct the Borrower to enter into (or, if the Borrower fails to promptly take such direction, the Agent may enter into on the Borrower’s behalf) a new servicing agreement with a successor servicer on terms satisfactory to the Agent.
     (p) Management of Aircraft . Until the occurrence of the Termination Date, the Borrower shall cause the Portfolio to be managed by a Person which, if not ALC or the Servicer, shall (i) be acceptable to the Majority Lenders and, the Agent and (ii) be a nationally known entity which is engaged in the aircraft leasing or management business, capable of performing the services outlined in the Servicing Agreement and (iii) having a net worth in excess of $100,000,000 (or its obligations to perform such services be guaranteed by an entity having a net worth of at least $100,000,000), in each case unless otherwise waived by the Agent and the Majority Lenders. Any Person that meets the criteria listed in clauses (i) through (iii) above, as a condition to becoming Servicer, shall execute and deliver to the Borrower, each Aircraft Subsidiary and the Agent an instrument accepting the appointment as Servicer and outlining its duties in form and substance satisfactory to the Agent (such instrument, a “ Replacement Servicing Agreement ”). On or before appointing such Person as Servicer, the Borrower shall cause copies of all Aircraft Documents, Leases, Lessee information, all documents, records and other information relating to the foregoing and each other document, record or other information obtained, used or produced by the Servicer necessary for the replacement Servicer to provide its services under the Replacement Servicing Agreement, including all documents, records and other information relating to the Borrower, the Aircraft Subsidiaries, the Aircraft, the Engines, each Part and the Depository Accounts, in each case, that are reasonably requested by such Person to be delivered to such Person; provided that unless and until such Person is appointed Servicer, such information shall be delivered by the Borrower to and held by the Agent or its designee.
     SECTION 7.02 Negative Covenants . The Borrower covenants and agrees that, until the Termination Date shall have occurred, the Borrower will not, and will not cause or permit any Aircraft Subsidiary to:
     (a) Seller Finance Loans . Enter into any Seller Finance Loans;
     (b) Liens . Create, incur, assume or suffer to exist, and shall not cause or permit an Aircraft Subsidiary to create, incur, assume or suffer to exist, any Lien with respect to the Collateral or any other property or assets of the Borrower or any Aircraft Subsidiary, including any Aircraft, Airframe, Engine, Parts, Lease, insurance proceeds or other proceeds of any thereof, other than Permitted Liens and shall, at its own expense, promptly take such action as may be necessary to duly discharge all such Liens, and shall indemnify and hold harmless the Agent and the Protected Parties from and against any costs and expenses (including reasonable attorneys’ fees) in connection with any such Lien;

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     (c) Consolidation, Merger and Sale or Purchase of Assets . Wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease (substantially as a whole), or otherwise dispose of (whether in one or in a series of transactions) any part of the Collateral or the Portfolio except as expressly permitted by this Agreement;
     (d) No Sale, Alteration or Modification . Except as expressly permitted or required by the applicable Lease or under this Agreement (including Section 11.23 ), (i) sell, lease (other than pursuant to Leases and Follow-On Leases), convey, transfer or encumber (other than with respect to Permitted Liens) or otherwise dispose (“ Dispose ” or “ Disposition ”) of all or any part of any Collateral, or cause or consent to any Person doing any of the foregoing with respect to all or any part of any Collateral without the prior written consent of the Agent, to be granted or withheld in its sole discretion; provided that the Borrower or any Aircraft Owning Subsidiary may Dispose of any Aircraft and related Lease free and clear of the Liens of the Loan Documents at any time for a cash sales price equal to or greater than the Release Amount for such Aircraft, so long as such Disposition does not create a Collateral Deficiency or otherwise increase an existing Collateral Deficiency ( provided , that notwithstanding anything to the contrary herein, the Disposition of all or any part of any Collateral for an amount less than the Release Amount shall require the approval of all of the Lenders) and (ii) except as permitted or required in any Lease or required by Sections 7.03 and 7.06 , modify or cause or permit any modification to all or any part of the Aircraft. Except as otherwise permitted or required by any Lease and this Agreement, the Borrower shall not (and shall not cause or permit any Aircraft Subsidiary to) make or cause to be made or cause or consent to another to make any change or alteration in any registration, filing, or recordation of any of the Aircraft without the prior written consent of the Agent, to be granted or withheld in the Agent’s sole discretion;
     (e) No Amendments to Loan Documents, Organic Documents or Lease Documents . (i) Without the prior written consent of the Agent acting at the direction of the Majority Lenders subject to the terms of the Loan Documents, including but not limited to Section 11.01 , amend, modify, waive, approve or consent to any change in any of the terms or otherwise alter any of the Loan Documents or any Organic Document of the Borrower or any Aircraft Subsidiary in any manner except to increase the share capital as may be required by Applicable Law, or in the case of any Aircraft Subsidiary, to change any director; or (ii) without the prior written consent of the Agent, amend, modify, waive, approve or consent to any change in any of the terms or otherwise alter any of the Lease Documents to the extent any such amendment, modification, waiver, appeal or consent would materially adversely affect the Agent or any other Protected Party (or allow the Servicer or any Aircraft Subsidiary to do the same), except as otherwise expressly permitted in any Lease Assignment (for the avoidance of doubt, extension of lease terms or reductions in base rent which the Borrower (or the Servicer) in good faith believes will maximize overall collections under the applicable Lease will not be deemed to materially adversely affect the Agent or any other Protected Party);
     (f) Investments . Except as expressly permitted hereunder, or under any other Loan Document, make any investment in or make or advance money to any Person other

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than an Aircraft Subsidiary, through the direct or indirect lending of money, holding of securities or otherwise;
     (g) Consolidation with Any Other Person . Operate in a manner that would result in an actual, constructive or substantive consolidation of the “estate” (as defined in Section 541(c) of the United States Bankruptcy Code) of the Borrower or any Aircraft Subsidiary with the “estate” of any other Person (other than the Borrower or a Subsidiary thereof), and in such connection the Borrower and each Aircraft Subsidiary shall observe all corporate formalities, and maintain records separately and independently from those of any other Person;
     (h) Lease Default . Except as permitted in Section 7.02(e)(ii) above , without the prior written consent of the Agent, which consent may be granted or withheld at the Agent’s sole discretion, waive (or permit the waiver of) a Lease Default or Lease Event of Default under a Lease; provided that unless a Facility Default arising from the failure to make a payment when due hereunder or Facility Event of Default has occurred and is continuing, the Borrower may elect, in its reasonable discretion and upon written notice, which notice may be provided to the Agent in the next succeeding Monthly Report, to give such waiver (or permit such waiver), so long as such waiver is limited to the particular facts or set of facts giving rise to such Lease Default or Lease Event of Default and does not prejudice lessor’s (or Agent’s, by assignment) rights under the relevant Lease to exercise remedies with respect to any other or future Lease Defaults or Lease Events of Default;
     (i) Action After Facility Event of Default or a Servicer Replacement Event . Following the occurrence and during the continuance of a Facility Event of Default or a Servicer Replacement Event, take any action or exercise any right under any Lease Document or the Servicing Agreement, outside the ordinary course of business or permit the Servicer to take such action or exercise such right outside the ordinary course of business, without the Agent’s prior written consent acting at the direction of the Majority Lenders;
     (j) Title to Aircraft . Permit an Aircraft Owning Subsidiary to own the legal and/or beneficial title to more than one Aircraft or Airframe without the prior written consent of the Agent; and
     (k) Restrictive Agreements, Etc. Enter into any agreement (other than a Loan Document) prohibiting or restricting:
     (i) the creation or assumption of any Lien upon its properties (other than Aircraft to the extent that such conditions are contained in the Borrower’s or an Aircraft Subsidiary’s Organic Documents), revenues or assets, whether now owned or hereafter acquired;
     (ii) the ability of the Borrower or any Aircraft Subsidiary to amend or otherwise modify any Loan Document; or

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     (iii) the ability of any Aircraft Subsidiary to make any payments, directly or indirectly, to the Borrower, including by way of dividends, advances, repayments of loans, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments.
     (l) Prohibited Jurisdictions . Take an assignment of or enter into a lease of any Aircraft (including but not limited to Follow-On Leases) with a Lessee domiciled in any of the jurisdictions listed on Schedule III hereto.
     SECTION 7.03 Maintenance . In addition to its covenants with respect to the Collateral contained hereunder and in each Lease Assignment, the Borrower agrees that it will or will cause each applicable Aircraft Owning Subsidiary to, at all times and at its own cost and expense with respect to any Aircraft not subject to a Lease other than a Subsidiary Lease:
     (a) Cause each such Aircraft to be stored, maintained, serviced and repaired in accordance with customary commercial practice for similar stored equipment, which practices shall be at all times at (x) the Servicer’s standard for similar stored equipment owned or managed by the Servicer or any of its Affiliates or (y) the customary commercial practice for similar stored equipment; provided that, notwithstanding anything in this Section 7.03 to the contrary, the Borrower may, but shall not be required to, incur major maintenance expenses, including but not limited to “D” checks and Engine performance restoration shop visits, life limited part replacements, repairs and inspections with respect to any Aircraft not subject to a Lease; provided further however, in the event that a Facility Event of Default, Facility Default described in clause (ii) or (iii)  of Section 9.01(h) , an Amortization Event or a Servicer Replacement Event shall have occurred and is continuing, the Agent shall have the right to direct the Borrower to conduct such major maintenance if (i) such maintenance is due under the requirements of the applicable Aviation Authority, (ii) customary commercial practice would require such maintenance to be done at such time or (iii) such maintenance is done in accordance with a recommendation of the Servicer.
     (b) During the period commencing on the date such Lease expires or is terminated whether as a result of a Lease Event of Default, repossession or otherwise and ending on the date which is the earlier of (A) the date such Aircraft is re-leased, or the subject of a new lease agreement or binding letter of intent in respect thereof and (B) one hundred eighty (180) days after the date such Lease expires or is terminated in addition to the requirements contained in clause (a) of this Section 7.03 :
     (i) cause each such Aircraft to be maintained, serviced, repaired, overhauled and/or tested, as the case may be, so as to keep such Aircraft, (1) stored in the United States, Europe, China, Malaysia, Singapore, New Zealand, Australia or such other country as may be reasonably acceptable to the Agent, (2) in good operating condition and within the acceptable limits of performance provided in the Manufacturer’s maintenance manuals for stored aircraft and the rules and regulations of the relevant Aviation Authority, (3) in compliance with the requirements of the relevant insurance carriers, and (4) in such condition as may be necessary to enable the airworthiness certification or

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license of such Aircraft under Applicable Law to be maintained in good standing at all times (subject to any abeyance thereof, attributable to any maintenance or refurbishment being done on or to the Aircraft in accordance with this Agreement), unless such Applicable Law affecting airworthiness is being contested in good faith and by appropriate proceedings but only so long as such proceedings do not involve any material risk of the sale, forfeiture, loss or diminution of value of any Airframe or any Engine or any interest therein; and
     (ii) cause all Aircraft Documentation and other records, logs and materials required by the applicable Aviation Authority and in the Borrower’s, the Aircraft Subsidiary’s or the Servicer’s possession to be maintained with respect to an Aircraft and any Aircraft Documentation generated while an Aircraft is in the Borrower’s, an Aircraft Subsidiary’s or the Servicer’s possession to be generated in the English language and such other language required by the applicable Aviation Authority.
     (c) Provide the Agent reasonable documentation supporting any amounts expended by the Borrower or an Aircraft Subsidiary on maintenance related to any Aircraft, including but not limited to the certificates, documents and other data described in Section 7.04(c)(ii) .
     SECTION 7.04 Depository Accounts, Deposits and Maintenance Reserves; Aircraft Expenses . The Borrower hereby covenants that:
     (a) The Borrower shall cause the Depositary to create the Concentration Account, the Prepayment Accounts, the Collection Account, the Rent Account, the Deposit Account, the Cash Collateral Account, the Prefunding Account, the Aircraft Expenses Account, the Additional Collateral Account, the Lessee Accounts and other Depository Accounts, in each case in accordance with the terms of the Depository Agreement. The Borrower shall, and shall cause the Servicer and each Aircraft Subsidiary to, deposit all Cash Flow received by each such Person directly into the Concentration Account (other than Cash Flow that is Maintenance Reserves which shall be managed as provided in clause (c) of this Section 7.04 and other than Cash Flow which the Borrower and the Agent have agreed in writing in an AS Joinder and Security Agreement Supplement or otherwise, is to be deposited in an Individual AS Account). The Borrower shall, and shall cause the Servicer and each applicable Aircraft Subsidiary to, instruct each Lessee in writing to make all payments under the applicable Lease (except as provided in the parenthetical in the immediately preceding sentence and except for Excepted Payments (which shall be payable to the Persons for whose benefit any such payment is made)) directly to the applicable Concentration Account.
     (b) On or before the Transfer Date for an Aircraft, the Borrower shall (i) transfer or cause to be transferred all cash held by any ALC Party (or any applicable Seller) as a “security deposit” (or other similar term as defined and used in any aircraft lease), if any, with respect to any Lease for such Aircraft (each, along with any additional “security deposits” paid pursuant to any Lease for such Aircraft, a “ Deposit ”) to the Concentration Account for further credit to the Deposit Account, (ii) deliver to the Agent

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a certificate from an Authorized Officer of the Borrower certifying that the amount so transferred is the correct amount as required by the applicable Lease, and (iii) direct each applicable Lessee in writing to pay any Deposit paid after such Transfer Date and prior to the Termination Date directly to the applicable Concentration Account, and upon receipt thereof, by the Depositary, pursuant to the Depository Agreement, shall transfer such amount: (x) in the case of a Lease that requires that the Deposit be maintained in a separate account, to a Lessee Segregated Account to be maintained therein in accordance with the applicable terms of the Lease, (y) in the case of a Lease that requires that interest be paid on the Deposit, to a Lessee Interest Account and (z) in all other cases, to the applicable Deposit Account. The Agent shall cause the Depositary to pay to the Borrower or the applicable Aircraft Subsidiary for payment to the applicable Lessee all or part of the applicable Deposit as and when required pursuant to the applicable Lease upon receipt of a written notice to the Agent signed by an Authorized Officer of the Borrower certifying that the applicable Lessee is entitled to all or part of such Deposit under the applicable Lease, together, at the request of the Agent, with copies of all supporting documentation required under such Lease to evidence such entitlement. The Borrower or the applicable Aircraft Subsidiary, as the case may be, shall, as between it and its Lessee and notwithstanding the Depositary or the Collateral Agent’s holding of any such Deposits, remain responsible for transmitting, or causing to be transmitted, the appropriate amount of such Deposits to its Lessee entitled to the applicable Deposit. Upon termination of any Lease, any Deposits remaining in the Deposit Account with respect thereto after payment of any amounts owed to the related Lessee shall be transferred to the Concentration Account. If a Deposit is in the form of a letter of credit, unless waived by the Agent in writing, the letter of credit shall be issued or re-issued to the Borrower or the applicable Aircraft Subsidiary not later than the Transfer Date for the relevant Aircraft, the letter of credit shall be payable only to the Concentration Account, and the Borrower shall, or shall cause such Aircraft Subsidiary to, draw such letter of credit as a Deposit at the instruction of the Agent, subject to the terms of the applicable Lease and letter of credit, and such Deposit is to be transferred to and to be held or applied by the Borrower pursuant to the terms of this Agreement and the Depository Agreement. Upon request of the Agent, the Borrower or the applicable Aircraft Subsidiary shall deliver any such letters of credit to the Collateral Agent, and the Collateral Agent will hold such letters of credit pursuant to the terms of the Security Agreement.
     (c) On or before the Transfer Date for an Aircraft, the Borrower shall (i) transfer or cause to be transferred all cash held by any ALC Party (or any applicable Seller) as a “maintenance reserve” (or similar term defined and used in any aircraft lease), if any, with respect to such Aircraft (each, along with any additional “maintenance reserve” paid pursuant to any Lease for such Aircraft, a “ Maintenance Reserve ”) to the Rent Account, (ii) deliver to the Agent a certificate from an Authorized Officer of the Borrower and the Servicer certifying that the amount so transferred is correct as required by the applicable Lease, and submit copies of all supporting documentation and other data to which the Borrower or the Aircraft Subsidiary, as the case may be, is entitled to support the determination of such amount, and (iii) direct each applicable Lessee in writing to pay any such Maintenance Reserve paid after such Transfer Date and prior to the Termination Date directly to the Rent Account. Such amounts in the Rent Account

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shall be applied on the immediately succeeding Settlement Date as provided in Section 3.03 .
     (d) If a Lessee has completed maintenance on an Aircraft that is subject to a Lease, and if such Lessee requests reimbursement of any expenses related to such maintenance that are reimbursable by the lessor under such Lease or such Lessee requests reimbursement of amounts that are otherwise payable to the Lessee under such Lease, the Agent, upon receipt from or on behalf of the Borrower of (i) an Officer’s Certificate of the Borrower and the Servicer certifying that (x) customary due diligence has been performed by or on behalf of the Borrower or the Applicable Aircraft Subsidiary with respect to such maintenance, (y) the amount to be released from the Cash Collateral Account and/or drawn upon with respect to an Acceptable Letter of Credit is no greater than the amount of expenses that are reimbursable under such Lease for such maintenance or is no greater than the amount otherwise payable to the Lessee under such Lease, as applicable, and (z) the amounts to be released from the Cash Collateral Account and/or drawn upon with respect to an Acceptable Letter of Credit is no greater than the amount of Net Maintenance Reserves related to such Lease at such time and (ii) if requested by the Agent, copies of all documentation and other data then held by the Borrower, the Servicer or the applicable Aircraft Subsidiary related to such maintenance and payment of reimbursable expenses, shall release such amount set forth in such Officer’s Certificate from the Cash Collateral Account or shall draw such amount set forth in such Officer’s Certificate from an Acceptable Letter of Credit, in each case, to the Borrower’s, Servicer’s or Aircraft Subsidiary’s order. The Borrower or Aircraft Subsidiary, as the case may be, shall, as between it and the Lessee and notwithstanding the Depositary or the Collateral Agent’s holding of any amounts in the Cash Collateral Account, pursuant to an Acceptable Letter of Credit or otherwise, remain responsible for transmitting, or causing to be transmitted, the appropriate amount of such Maintenance Reserves to each Lessee entitled to the applicable Maintenance Reserve.
     (e) Any amounts from time to time held in the Concentration Account, the Collection Account, the Rent Account, the Deposit Account, the Cash Collateral Account, the Prepayment Accounts, the Prefunding Account, the Aircraft Expenses Account and the Lessee Accounts may be invested in Permitted Investments (subject to the provisions of the applicable Lease and the Depository Agreement, as applicable), at the Borrower’s risk as directed in writing by the Borrower, until the application thereof in accordance with Section 3.03 or 7.04(d) , but subject, in the case of the Deposits, to the terms of the applicable Lease.
     (f) Subject to the provisions of the applicable Leases and the Depository Agreement and unless not otherwise paid under Section 3.03(a) or (c) by means of the application of any other amounts described therein, (i) at any time prior to the Availability Expiration Date, the Agent shall instruct the Depositary to apply any and all amounts from time to time on deposit in the Depository Accounts or available pursuant to an Acceptable Letter of Credit to the repayment of the Obligations contained in clause first through clause fifth in Section 3.03(a) or from clause first through clause fourth in Section 3.03(c), and (ii) at any time on or after the Availability Expiration Date, (x) the Agent shall instruct the Depositary to apply any and all amounts from time to time on

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deposit in the Depository Accounts or available pursuant to an Acceptable Letter of Credit as described in clause (i) above and (y) the Agent may, in its sole discretion and in addition to the application of amounts described in clause (x) above, instruct the Depositary to apply any and all amounts from time to time on deposit in the Depository Accounts or available pursuant to an Acceptable Letter of Credit.
     (g) When Aircraft Expenses are to be paid from the Aircraft Expenses Account, if requested by the Agent, the Borrower shall provide to, or cause to be provided to, the Agent copies of all documentation and other data that the Borrower, the Servicer or the applicable Aircraft Subsidiary has related to such maintenance and/or payment of Aircraft Expenses.
     (h) At any time, the Borrower may elect to provide the Collateral Agent with an Acceptable Letter of Credit as Cash Collateral otherwise required to be maintained in the Cash Collateral Account. At any time an Acceptable Letter of Credit is issued as Cash Collateral, the amount of cash and the principal amount of Permitted Investments held in the Cash Collateral Account shall not be less than $15,000,000 in the aggregate. Any such Acceptable Letter of Credit shall be issued in favor of the Collateral Agent and shall secure the amounts described in clause (f) above and be made available for drawing against amounts described in clause (f) above. At the time of issuance of any Acceptable Letter of Credit, the Borrower shall use reasonable efforts to provide the Agent, the Collateral Agent, each Lender and each other Protected Party with an opinion of counsel to issuer reasonably acceptable to the Agent as to the due authorization, execution and delivery by and the enforceability against such issuer. If, after expending such reasonable efforts, the issuer does not provide such opinion of counsel, such requirement shall be deemed waived. If, at any time while Loans or other Obligations under the Loan Documents remain unpaid, an issuer ceases to be an Eligible L/C Issuer, unless the non-conforming Acceptable Letter of Credit is replaced with an Acceptable Letter of Credit within sixty (60) days after the Borrower obtains knowledge of such event, the Agent may, either (x) draw on the non-conforming Acceptable Letter of Credit in an amount equal to the amount available for drawing under such non-conforming Acceptable Letter of Credit or (y) direct that the Borrower fund the Cash Collateral Account in an amount equal to the amount available for drawing under the non-conforming Acceptable Letter of Credit. In the event that the Collateral Agent draws on an Acceptable Letter of Credit, such proceeds shall be immediately deposited into the Collection Account. Upon the replacement of any non-conforming Acceptable Letter of Credit with a conforming Acceptable Letter of Credit, such non-conforming Acceptable Letter of Credit shall be returned to the Borrower for cancellation.
     SECTION 7.05 Servicer . The Borrower and the Agent agree that the Agent, without the Borrower’s consent, shall have the right to remove the Servicer and terminate the Servicing Agreement upon the occurrence and during the continuation of a Servicer Replacement Event and as otherwise provided in the Servicing Agreement.

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     SECTION 7.06 Modifications and Improvements .
     (a) The Borrower shall, at its, or the applicable Aircraft Owning Subsidiary’s, expense, make or cause to be made such modifications and improvements to each Airframe and Engine not subject to a Lease (other than a Subsidiary Lease) as may be (i) set forth as requiring present compliance in any mandatory airworthiness directives adopted by the applicable Aviation Authority or (ii) required from time to time to meet the applicable standards of the Governmental Entity having jurisdiction over such Aircraft unless the validity of such standard is being contested in good faith by appropriate proceedings but only so long as such proceedings do not involve any material risk of the sale, forfeiture, loss or diminution of value of any Airframe or any Engine or any interest therein.
     (b) The Borrower may make or cause to be made such modifications and improvements to each Airframe and Engine as it may deem reasonably necessary or desirable for the re-marketing thereof provided that the aggregate cost of all such modifications and improvements for each Aircraft shall not exceed 7.5% of the Aircraft Value for such Aircraft determined as of the Transfer Date therefor.
     (c) Except as expressly provided in clause (b) of Section 7.03 and clauses (a) and (b) above or as permitted under any applicable Lease, neither the Borrower nor an Aircraft Subsidiary shall make any modifications or improvements to any Airframe or any Engine without the prior written consent of the Agent, which consent may be granted or withheld at the Agent’s reasonable discretion.
     (d) The Borrower agrees that it will or will cause the applicable Aircraft Subsidiary to, at its own cost and expense, provide the Agent reasonable documentation supporting any amounts expended by the Borrower or such Aircraft Subsidiary on modifications or improvements related to any Aircraft.
     SECTION 7.07 Operations Subject to Insurance Coverage . The Borrower shall not, and shall not permit any Aircraft Subsidiary to, operate any Aircraft or suffer any Aircraft not subject to a Lease to be operated in violation of any provision of any insurance policy in effect with respect to such Aircraft or in any jurisdiction where all of the insurance required hereunder shall not remain in full force and effect or in material violation of any law, treaty, statute, rule, airworthiness directive, regulation or order of any Governmental Entity having jurisdiction over such Aircraft or in violation of any applicable airworthiness certificate, license or registration relating to such Aircraft issued by any such government or governmental authority.
     SECTION 7.08 Insurance .
     (a) With respect to any Aircraft then subject to a Lease with a Lessee:
     (i) the Borrower shall monitor each Lessee’s performance of its obligations relating to insurance under its Leases, to ascertain whether appropriate evidence of insurance exists with respect to any Aircraft subject to a Lease and provide to the Agent such reports regarding insurance matters relating to each

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Aircraft subject to a Lease delivered by the relevant insurance broker from time to time; and
     (ii) the Borrower will (1) advise the Agent of any settlement offers received by the Borrower from a Lessee or its insurer with respect to any claim of damage or loss in excess of the damage notification threshold, if any, in the relevant Lease with respect to an Aircraft; (2) provide the Agent with copies of all relevant available documentation related thereto in its possession or otherwise available to the Borrower and such other additional information and advice from the relevant Lessee’s or the insurer’s agents, brokers or adjusters in its possession or otherwise available to the Borrower as the Agent may reasonably request; (3) upon direction from the Agent that any settlement offer received by the Servicer related thereto acceptable to the Borrower is also acceptable to the Agent (provided that the Agent’s direction shall not be required so long as the total amount to be paid to the Agent pursuant to any such settlement equals the Release Amount), forward to the relevant insurance broker such appropriate documentation as shall have been delivered or available to the Borrower, including releases and any indemnities required in connection with such releases, to give effect to such settlement offer; and (4) direct the execution of such documentation by the relevant Aircraft Subsidiaries.
     (b) With respect to each Aircraft (x) not subject to a Lease with a Lessee and (y) subject to a Lease with a Lessee (which coverages shall be on a contingent basis in the event that the Lessee maintains none of the coverages required by the Lease):
     (i) the Borrower or the applicable Aircraft Subsidiary shall maintain, at all times prior to the Termination Date, at least the following “possessed” insurance with insurers or re-insurers of recognized reputation and responsibility (the “ Insurers ”) through internationally recognized aviation insurance brokers:
     (A) Aircraft Hull All Risks, including Engines and Spares Insurance and Aircraft Hull War and Related Perils Insurance for no less than 110% of the greater of the Depreciated Purchase Price and the Available Collateral Debt Amount for such Aircraft at all times with deductible amounts that apply to an individual Aircraft which are no greater than the greater of $1,000,000 and standard industry deductibles; and
     (B) Comprehensive Aircraft Liability Insurance, having a combined single limit of not less than $750,000,000 per occurrence (or such other amount reasonably acceptable to the Agent but in each case such amount to be equivalent to the level of coverage underwritten with respect to aircraft of similar type by companies engaged in the same or similar business operating the same or similar aircraft) when any part of the Aircraft is operated and $25,000,000 when the Aircraft is in storage, or such other amount upon which the Servicer and the Agent may agree;

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     (ii) the insurance policies in respect of all insurance referred to in clause (i) above shall at all times be underwritten in full and shall contain the provisions contained in the AVN67B clause offered by London underwriters as of the date hereof (and in the case that a requirement herein conflicts with or contradicts the AVN67B clause, the terms of the AVN67B clause shall prevail and this Agreement shall be deemed so amended) or, in the event that no such clause exists at a future date, such provisions as are contained in such AVN67B clause as of the date hereof, and shall include the following provisions:
     (A) a letter of undertaking from an insurance broker reasonably acceptable to the Agent or provisions in the insurance policy requiring the insurers or underwriters to promptly notify the Agent of any cancellation, material change to any such policy or a failure of the Borrower or Aircraft Subsidiary to make any premium payment or installment;
     (B) a statement that, except as otherwise agreed, any lapse in coverage for the nonpayment of any premiums shall not be effective as to the Collateral Agent, the Agent or the Lenders until thirty (30) days (or seven (7) days in the case of war risk and allied perils) after receipt by the Agent of written notice thereof (or such other time frames agreed by the Agent);
     (C) to the extent that the primary insurance has not been placed directly in Lloyds of London, or other internationally recognized aviation insurance markets, they shall be reinsured (in any case not less than 90%) in such markets;
     (D) each reinsurance policy, if any, shall have, if available on commercially reasonable terms as determined by the Agent, a “cut-through” endorsement reasonably satisfactory to the Agent;
     (E) shall name the Collateral Agent as the sole loss payee or contract party (or loss payee or contract party for the account of the Protected Parties) with respect to the hull insurance and name each of the Collateral Agent, the relevant Aircraft Subsidiaries, the Agent, the Borrower, the Servicer and each Lender (which requirement shall be satisfied if such policy lists “each Lender from time to time a party to the Warehouse Loan Agreement dated May 26, 2010”) as an additional insured under the liability insurance policies;
     (F) shall provide that all insurances shall be expressed, payable and settled in Dollars with the exception of the risks referred to in Section 7.08(b)(i)(B) which shall be payable and settled in the currency in which the relevant liability covered by such insurance is paid or incurred;
     (G) shall provide that, in respect of the interest of any such additional insured or the loss payee or contract party in such policies, the

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insurance shall not be invalidated by any action or inaction of any Lessee, the Servicer, the Borrower, any Aircraft Subsidiary, the Agent or any additional insured as defined under the policy of insurance required by this Section (other than any action or inaction by such additional insured) and shall insure the additional insured and the loss payee or contract party regardless of any breach or violation of any warranty, declaration or condition in such policies by any Lessee, the Servicer, the Borrower, any Aircraft Subsidiary, the Collateral Agent or the Agent or any other additional insured as defined under the policy of insurance required under this Section;
     (H) shall provide that the insurers shall waive any rights of recourse and/or subrogation against the loss payee or contract party and such additional insureds except to the extent that any insured event arises solely from the gross negligence or willful misconduct of the loss payee or contract party or such additional insured as determined by a final judgment of a court of competent jurisdiction;
     (I) shall provide that such insurer shall waive any right of such insurer to any set off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any such additional insured or the loss payee or contract party except in respect of outstanding premiums in respect of the applicable Aircraft;
     (J) be primary and without rights of contribution from any other insurance that is carried by any such additional insured or the loss payee or contract party with respect to its interest in the Aircraft;
     (K) shall provide that no such additional insured or the loss payee or contract party other than an Aircraft Subsidiary or the Servicer shall have any obligation or liability for premiums or other payments, if any, in connection with such insurance (but shall reserve the right to pay the same should any of them elect to do so);
     (L) shall contain a 50/50 clause in accordance with current market practice as set forth in AVS103; and
     (M) shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured.
     (iii) the Borrower shall use reasonable efforts to deliver to the Agent at the time such insurance is required to be provided by this Section 7.08(b) and thereafter at least annually on or prior to each renewal date of such insurance certificate(s) of insurance confirming the existence of the insurance coverage required by this Section 7.08(b) (w) in English, (x) certifying the date and time of commencement and expiry of each insurance policy and (y) specifying the

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deductible amounts and levels of co-insurance, if any, for each type of loss; provided that the Borrower may, upon renewal of any insurance policy required by this Section 7.08(b) , make such changes to such insurance policy to conform with changes that have been made by the Servicer and its Affiliates to insurance policies covering each aircraft owned by them that is not subject to a lease provided that such changes are reasonably acceptable to the Agent; and
     (iv) the Borrower will not cause any Aircraft to be employed in any place or in any manner or for any purpose inconsistent with the terms of or outside the coverage provided by any required insurance.
     (c) With respect to each Aircraft subject to a Lease to a Lessee, the Borrower shall maintain, at all times prior to the Termination Date, Hull All-Risk and liability insurance contingent on the continuing insurance by the Lessee or other operator of such Aircraft to follow the terms and conditions of such Lessee’s or other operator’s insurance to protect the interests of the related Aircraft Subsidiary, the Collateral Agent, the Agent and the Lenders (but not the interests of the Lessee and/or operator); such policy to pay in the event (i) the Lessee and/or operator policies fail to respond, (ii) the Lessee and/or operator has insurance in effect but has failed to obtain sufficient coverages to satisfy its requirements under the corresponding Lease or (iii) in the case of liability coverages, there is a lack or insufficiency in the coverages required under the corresponding Lease due to error or accidental omission.
     (d) With respect to all Aircraft at all times, the Borrower will not make or consent to any modification to any insurance required hereunder without the prior written consent of the Agent (which consent shall not be unreasonably withheld).
     (e) The Agent shall pay to the Depositary for deposit and application pursuant to Section 2.01(i)(D) of the Depository Agreement all insurance proceeds from time to time received by the Agent in respect of occurrences not constituting an Event of Loss with respect to the applicable Airframe.
     SECTION 7.09 Event of Loss . (a) Event of Loss with Respect to an Aircraft . Upon the occurrence of an Event of Loss with respect to an Aircraft, the Borrower or the Applicable Aircraft Subsidiary shall, within five (5) Business Days after its knowledge thereof, give the Agent written notice of such Event of Loss, and concurrently with the applicable Lessee’s obligation to pay “stipulated loss value”, “casualty loss value” or similar term as defined and used in the applicable Lease or, in the case of an Aircraft not subject to a Lease, subject to the proviso contained in Section 3.03(b) , on or before the first Settlement Date to occur after the earlier of (i) receipt of insurance and other proceeds with respect to such Event of Loss and (ii) one hundred twenty (120) days after the date of occurrence of such Event of Loss, the Borrower shall prepay the Loans in the amounts stated in clause (c) of Section 3.02 . Any cash receipts from an Event of Loss (whether by way of insurance proceeds or Lessee indemnity payments or otherwise) shall be deposited by the Borrower or the applicable Aircraft Subsidiary in the Additional Collateral Account together with any additional amount payable under clause (c) of Section 3.02 and applied pursuant to Section 3.03 (except for Excepted Payments, which shall be payable to the Persons for whose benefit any such payment is made). No Event

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of Loss with respect to any Aircraft, Airframe or Engines then installed thereon shall result in any reduction in any amounts owed by the Borrower hereunder or under any other Loan Document except as a result of any prepayment of the Loans required hereunder with respect to an Event of Loss of such Aircraft.
     (b) Event of Loss with Respect to an Engine . Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the related Airframe, the Borrower shall within fifteen (15) days after it has received notice of such occurrence, give the Agent written notice thereof and (i) if the Engine is not subject to a Lease, not later than the earlier of (x) five (5) Business Days after receipt of insurance and other proceeds with respect to such Event of Loss and (y) ninety (90) days after the occurrence of such Event of Loss, and (ii) if the engine is subject to a Lease and the applicable Lessee shall not have replaced such Engine with an Acceptable Alternate Engine in accordance with the terms of such Lease by the expiration or early termination of such Lease, within thirty (30) days of such expiration or early termination, cause the respective Aircraft Owning Subsidiary to acquire, as replacement for the Engine with respect to which such Event of Loss occurred, title to an Acceptable Alternate Engine free and clear of all Liens (other than Permitted Liens). The Borrower, at its own expense, will (i) furnish the Agent with a copy of a warranty (as to title) bill of sale in favor of such Aircraft Owning Subsidiary, in form and substance reasonably satisfactory to the Agent, with respect to such replacement aircraft engine, (ii) cause an amendment or supplement to the applicable Lease or other appropriate instrument to be duly executed by the applicable Aircraft Subsidiaries and, if applicable, cause such document to be filed for recording pursuant to the Applicable Laws of any State of Registration in which the related Airframe may then be registered, and cause a financing statement or statements or other requisite documents of a similar nature (including precautionary filings) to be filed, recorded or registered with the applicable Aviation Authority and the International Registry, as applicable, and under the UCC in such place or places as necessary or prudent, and (iii) furnish the Agent with such evidence of compliance with the insurance provisions of Section 7.08 with respect to such Acceptable Alternate Engine as the Agent may reasonably request.
     SECTION 7.10 Servicing Agreement . Upon the resignation or removal of the Servicer pursuant to the terms of the Servicing Agreement or otherwise, or upon the termination of the Servicing Agreement for any reason, the Borrower shall promptly appoint a successor “servicer” that is reasonably acceptable to the Agent and the Majority Lenders (a “ Successor Servicer ”) and enter into such agreements with any such Successor Servicer on terms and conditions reasonably acceptable to the Agent and the Majority Lenders.
     SECTION 7.11 Derivatives Agreement . The Agent, the Lenders and the Borrower each agree (if requested by either the Agent or the Borrower) to negotiate in good faith with respect to a Derivatives Agreement with a Derivatives Creditor with respect to the Cash Flow; provided that in the event a Derivatives Agreement is entered into with respect to the Cash Flow, the Lenders shall be granted a first priority, perfected security interest in such Derivatives Agreement.

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     SECTION 7.12 Enforcement of Lease Documents and Other Borrower Covenants . The Borrower covenants and agrees as follows:
     (a) The Borrower will faithfully abide by, perform and discharge, or if applicable, cause to be faithfully abided by, performed and discharged by each Aircraft Subsidiary, each and every material obligation, covenant and agreement to be performed by the Borrower and/or the applicable Aircraft Subsidiary, as the case may be, in its capacity as lessor under the Lease Documents, and neither the Agent nor any Protected Party shall be responsible for any of such obligations, covenants or agreements under any circumstances.
     (b) At the sole cost and expense of the Borrower, the Borrower will use reasonable commercial efforts to enforce or secure the performance of each and every material obligation, covenant, condition and agreement contained in any Lease to be performed by the applicable Lessee with the goal of maximizing the income and residual value related to the applicable Aircraft and Lease; provided that upon the occurrence and continuance of a Facility Default described in Section 9.01(h)(ii) or (iii) , a Facility Event of Default or Servicer Replacement Event, the Agent may elect, by notice to the Lessee, to enforce the provisions of any Lease and otherwise exercise the rights of the Lessor thereunder in accordance with the terms thereof.
     (c) The Borrower shall give notice to a Lessee of any violation of the terms of the applicable Lease related to such Lessee’s non-payment or failure to insure as required by the terms of the Lease, promptly after the Borrower, or the Borrower through an Aircraft Subsidiary or otherwise, is aware of such violation, including, without limitation, any notice required to cause a Lease Default to become a Lease Event of Default thereunder (or to the same effect with respect to terms of similar meaning under any Lease), and the Borrower shall promptly advise the Agent of any such violation and provide the Agent with copies of every such notice; provided that (x) unless a Facility Default arising from the failure to make a payment when due hereunder or Facility Event of Default or Servicer Replacement Event shall have occurred and be continuing, the Borrower may elect, in its reasonable discretion, not to give notice to a Lessee otherwise required by this provision provided that the Borrower promptly advises the Agent in writing that it has refrained from doing so and (y) if a Facility Default, Facility Event of Default or Servicer Replacement Event has occurred and is continuing, the Agent may give a Lessee such notice and may otherwise enforce the provisions of the relevant Lease.
     SECTION 7.13 Further Assurances . Subject to the proviso set forth in Section 7.01(e) , the Borrower agrees that from time to time, at the expense of the Borrower, the Borrower will promptly execute and deliver, or cause the applicable Aircraft Subsidiary to promptly execute and deliver, all further instruments and documents, and take all further action, that may be necessary and as may be reasonably requested by the Agent in order to perfect and protect any security interest granted or purported to be granted hereby or pursuant to any Security Document or to enable the Agent and the Collateral Agent to exercise and enforce its rights and remedies hereunder and under the Security Documents. Without limiting the generality of the foregoing, the Borrower will execute and file, and cause the applicable Aircraft Subsidiary to execute and file, such financing or continuation statements, or amendments thereto,

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and such other instruments or notices and will make and cause the applicable Aircraft Subsidiary to make such registrations with the International Registry (subject to receipt of necessary consents from other parties) as may be necessary, as the Agent may request, in order to perfect and preserve the security interests granted or purported to be granted hereby or pursuant to any Lease Assignment or any Security Document. The Borrower hereby authorizes, and will cause each Aircraft Subsidiary to authorize, the Agent to file one or more financing or continuation statements, and amendments thereto, or any similar document, with respect to all or any part of the Collateral without the signature of the Borrower or such Aircraft Subsidiary where permitted by Applicable Law.
     SECTION 7.14 Annual Budget . On or before six months after the end of the Availability Period and annually thereafter, the Borrower shall deliver or cause to be delivered to the Agent an Annual Budget for the fiscal year then in effect, and thereafter the Borrower shall deliver or cause to be delivered to the Agent an Annual Budget for each fiscal year prior to the commencement of such fiscal year.
     SECTION 7.15 Return of Aircraft . In connection with a termination or expiration of a Lease, the Borrower shall provide or cause to be provided the following services:
     (i) arrange for the appropriate technical inspection of such Aircraft for the purpose of determining if the return conditions under such Lease have been satisfied;
     (ii) maintain a record of the return acceptance certificate and related written materials normally received and retained or generated by the Servicer in connection with such inspection and upon request, provide copies of such certificates and written materials to the Agent, the Servicer and the relevant Aircraft Subsidiary;
     (iii) on the basis of the final inspection and available records use reasonable efforts to (A) determine whether the relevant Lessee has complied with the return conditions and maintenance requirements of such Lease, (B) negotiate any modifications, repairs, refurbishments, inspections or overhauls to or compromises of such conditions that the Borrower deems reasonably necessary or appropriate, (C) determine whether any Person is entitled to any payment of Deposits or Maintenance Reserves under the applicable Lease (including reviewing and determining the adequacy and completeness of any documentation evidencing such entitlement) and (D) accept or cause the applicable Aircraft Subsidiary to accept redelivery of such Aircraft; and
     (iv) use reasonable efforts to determine the need for any maintenance or refurbishment of such Aircraft upon redelivery, including compliance with applicable airworthiness directives, service bulletins and other modifications in all cases in which the Borrower may deem it reasonably necessary or appropriate for the marketing of such Aircraft consistent with the practice of the Servicer and its Affiliates with respect to aircraft owned by them, make recommendations to the

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Agent in respect of such needs and procure, at the Borrower’s expense, such maintenance and/or refurbishment.
     SECTION 7.16 Required Disclosures . Promptly, following a request by the Agent or any Lender, the Borrower shall provide all documentation and other information the Agent or any Lender reasonably requests about the Borrower or any Affiliate thereof in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.
     SECTION 7.17 Registrations to be Made in the International Registry . The parties hereto agree that the interests set forth in Section 5.02(o) filed with the International Registry (collectively, the “ Cape Town Registrations ”) in respect of each Aircraft shall, with respect to such Aircraft, have the order of priority set forth therein (with the first listed having the highest priority under the Cape Town Convention and subsequent interests having decreasing priority), notwithstanding any variation from this order of priority which may appear according to the time of registration of any such interest in the records of the International Registry. The Borrower authorizes and consents to the Cape Town Registrations and shall procure that each Applicable Aircraft Subsidiary and each Lessee authorizes and consents to the Cape Town Registrations applicable to it. Subject to the proviso set forth in Section 7.01(e) , the Borrower agrees to cooperate and to take such actions, insofar as any such consent, cooperation or action of such party is required, as are necessary to timely effect the Cape Town Registrations.
ARTICLE VIII
OTHER COVENANTS
     SECTION 8.01 Quiet Enjoyment . The Agent and each Protected Party hereby covenant and agree that so long as no Lease Event of Default has occurred and is continuing, it shall not take or cause to be taken any action contrary to any Lessee’s or any permitted sublessee’s right to quiet enjoyment of, and the continuing possession, use and operation of, the relevant Aircraft during the term of such Lease in accordance with the terms of such Lease. To the extent reasonably requested by a Lessee in connection with a Transfer Date or any Follow-on Lease, the Agent and each Protected Party shall confirm this Section 8.01 at the sole cost and expense of the Borrower.
     SECTION 8.02 Mortgages . The Agent and each Protected Party hereby covenant and agree that it shall not file, register, or record or cause any Person to file, register or record, with any Government Entity any Lien over any Aircraft other than as provided in the Loan Documents.
     SECTION 8.03 Lenders’ Covenants . Each Lender, and each subsequent holder of any Note, agrees with the Borrower and each Protected Party that, until the Termination Date shall have occurred, it will not dispose of the Notes to be purchased by it or any interest therein (including, without limitation, any transfer by a change in the capacity in which such Lender holds its investment in such Notes) to any Person unless and until such Person shall (i) make all warranties and representations of such Lender contained in Section 6.02 and (ii) assume all

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covenants of such Lender contained in this Section 8 . Each Lender acknowledges that any assignment made in breach of Section 11.03 shall be null and void.
ARTICLE IX
DEFAULT AND REMEDIES
     SECTION 9.01 Facility Events of Default . Each of the following shall constitute a “ Facility Event of Default ” (for any reason whatsoever and whether or not such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body, including any order or directive of any Governmental Entity) hereunder, and each such Facility Event of Default shall be deemed to exist and continue so long as it shall not have been cured or remedied or waived in writing by the Agent:
     (a) failure to make any payment or prepayment of Unutilized Fee, principal of or interest on the Loans under this Agreement or any Note when due (other than with respect to a payment set forth in clause (a) of Section 3.02 , Aggregated Additional Interest or Aggregated Default Interest), or, without duplication, payment of Collateral Deficiency when due hereunder, and such payment is not received within three (3) Business Days of the due date therefor; provided that for purposes of this clause (a) , no amount of Aggregated Additional Interest or Aggregated Default Interest shall be deemed due under this Agreement solely because of the provisions of clause ninth of Section 3.03(a) , clause sixth of Section 3.03(b) or clause seventh of Section 3.03(c) , if such payment of Aggregated Additional Interest or Aggregated Default Interest (x) is not then due and payable under any other provision of this Agreement or any other Loan Document and (y) is not made solely because Cash Flow and other amounts in the Rent Account were insufficient to pay such Aggregated Additional Interest or Aggregated Default Interest in accordance with the priorities of Section 3.03 ; or
     (b) failure to make any payment under this Agreement, any Note or other Loan Document (other than payments set forth in clause (a) above and clause (a) of Section 3.02 , Aggregated Additional Interest and Aggregated Default Interest) when due and such payment is not received within twenty (20) Business Days after written notice of such non-payment has been given to the Borrower and the Servicer; provided that failure to pay any amounts which are payable to the Servicer, the payment of which has, for the time being, been waived by the Servicer, and amounts which are payable in clauses sixth , ninth and tenth of Section 3.03(a) , clauses sixth through tenth of Section 3.03(b) or clauses seventh through ninth of Section 3.03(c) , shall not be deemed a Facility Event of Default under this clause (b) if such amounts are not paid solely because Cash Flow and other amounts in the Rent Account were insufficient to pay such amounts in accordance with the priorities of Section 3.03(a) , as applicable; or
     (c) failure to maintain in effect at all times the insurance required by Section 7.08 ; or

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     (d) (i) any Loan Document or any Lien granted thereunder shall (except in accordance with its terms or in connection with a release of Collateral as provided in Section 11.23 ), in whole or in part, terminate or not be effective; (ii) any Loan Document, taken as a whole, shall not be the legally valid, binding and enforceable obligation of any of the Borrower, the Servicer or any Aircraft Subsidiary party thereto; (iii) any of the Borrower, the Servicer or any Aircraft Subsidiary or any other Person shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability; or (iv) except as permitted under any Loan Document, (x) any Lien or purported Lien over the Collateral (other than any Aircraft or Engine) securing or purporting to secure any Obligation shall, in whole or in part, cease to be a perfected first priority Lien; (y) any Lien or purported Lien over an Aircraft or an Engine which could be perfected by the filing of a UCC-1 or by the registration of an International Interest on the International Registry, securing or purportedly to secure any Obligation, shall, in whole or in part, cease to be a perfected Lien and/or cease to be prior to any other Liens perfected by the filing of a UCC-1 or by the registration of an International Interest on the International Registry, respectively and in any such case under this clause (d) , such default shall not have been cured within twenty (20) Business Days after written notice thereof has been given to the Borrower and the Servicer; or
     (e) failure of the Borrower to make (or cause to be made) any Disposition required under Section 3.02(g)(i) within six (6) months of receiving direction from the Agent to make any such Disposition, provided that within six (6) months of the date of receiving such direction such amount payable under Section 3.02(a) remains due and unpaid; or
     (f) other than as set forth in clauses (a) through (e) above, failure of the Borrower or any Aircraft Subsidiary to perform or observe any other undertaking, obligation or covenant of the Borrower or such Aircraft Subsidiary contained in this Agreement or any other Loan Document (other than a failure to make any payments excluded from the Facility Events of Default described in clauses (a) and (b) above) and (A) in the case of any failure to deliver any Monthly Report, such failure shall continue unremedied for a period of two (2) Business Days after written notice thereof (including by means of electronic mail) has been delivered by the Agent to the Borrower and the Servicer and (B) in the case of failure to perform any other undertaking, obligation or covenant of the Borrower or Aircraft Subsidiary, such failure to perform shall continue unremedied for a period of twenty (20) Business Days after written notice thereof has been delivered by the Agent to the Borrower and the Servicer; or
     (g) any statement, declaration, representation or warranty made by (i) the Borrower or any Subsidiary herein or in any Note, Lease Assignment, any Security Agreement or any other Loan Document to the Agent or the Lender or (ii) ALC as the Servicer in the Servicing Agreement or any certificate provided pursuant thereto or hereto, shall at any time prove to have been incorrect in any material respect at the time made, such representation or warranty shall remain incorrect at the time such incorrectness is discovered and, if capable of cure, such incorrectness shall not have been cured within twenty (20) Business Days after written notice thereof has been delivered by the Agent to the Borrower and the Servicer; or

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     (h) (i) subject to the Borrower’s right to wind-up any Subsidiary pursuant to Section 11.23 , the Borrower or any Aircraft Subsidiary shall consent to the appointment of or the taking of possession by a receiver, trustee or liquidator of itself or of a substantial part of its property, or the Borrower or any Aircraft Subsidiary shall admit in writing its inability to pay its debts generally as they become due, or does not pay its debts generally as they become due or shall make a general assignment for the benefit of creditors, or the Borrower or any Aircraft Subsidiary shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization, liquidation or other relief in a case under any bankruptcy laws or other insolvency laws (as in effect at such time) or an answer admitting the material allegations of a petition filed against the Borrower or any Aircraft Subsidiary, in any such case, or the Borrower or any Aircraft Subsidiary shall seek relief by voluntary petition, answer or consent, under the provisions of any other bankruptcy or other similar law providing for the reorganization or winding-up of corporations, trusts or banks (as in effect at such time) or the Borrower or any Aircraft Subsidiary shall seek an agreement, composition, extension or adjustment with its creditors under such laws, or the Borrower or any Aircraft Subsidiary shall adopt a resolution authorizing action in furtherance of any of the foregoing; or
     (ii) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Borrower or any Aircraft Subsidiary, a receiver, trustee or liquidator of the Borrower or any Aircraft Subsidiary or of any substantial part of their respective property, or any substantial part of the respective property of the Borrower or any Aircraft Subsidiary shall be sequestered, or granting any other relief in respect of the Borrower or any Aircraft Subsidiary as a debtor under any bankruptcy laws or other insolvency laws (as in effect at such time), and any such order, judgment or decree of appointment or sequestration shall remain in force, undismissed, unstayed and unvacated for a period of sixty (60) days after the date of entry thereof; or
     (iii) a petition against the Borrower or any Aircraft Subsidiary, in a case under any bankruptcy laws or other insolvency laws (as in effect at such time) is filed and not withdrawn or dismissed within sixty (60) days thereafter if, under the provisions of any law providing for reorganization or winding-up of corporations, trusts or banks which may apply to the Borrower or any Aircraft Subsidiary, any court of competent jurisdiction assumes jurisdiction, custody or control of the Borrower or any Aircraft Subsidiary or of any substantial part of their respective property and such jurisdiction, custody or control remains in force unrelinquished, unstayed and unterminated for a period of sixty (60) days; or
     (i) there occurs under any Derivatives Agreement an “Early Termination Date” or similar term (as defined in such Derivatives Agreement) resulting from (i) any event of default under such Derivatives Agreement as to which the Borrower is the “Defaulting Party” or similar term (as defined in such Derivatives Agreement) or (ii) any “Termination Event” or similar term (as so defined) as to which the Borrower is an “Affected Party” or similar term (as so defined), and, in either event, the “Derivatives

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Termination Value” or similar term (as so defined) owed by the Borrower as a result thereof is greater than $25,000,000; or
     (j) failure of all Deposits that have not been applied in accordance with the applicable Lease to be deposited into the Deposit Account, as applicable, as provided in Section 7.04 within five (5) days after such amounts are required to be so deposited; or
     (k) any Change of Control shall occur.
     SECTION 9.02 Remedies After Default . (a) (i) If any Facility Event of Default described in clause (h) of Section 9.01 shall occur, the Availability Period shall be automatically terminated and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand to any Person.
     (ii) If any Facility Event of Default (other than any Facility Event of Default described in clause (h) of Section 9.01 ) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Agent, upon the direction of the Majority Lenders, shall by notice to the Borrower (x) declare the Availability Period to be terminated and/or (y) declare all of the outstanding principal amount of the Loans and other Obligations to be due and payable, whereupon the Availability Expiration Date shall have occurred and the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment.
     (b) If a Facility Event of Default shall have occurred and be continuing and the Loans have been accelerated pursuant to clause (a)(i) or (a)(ii) of this Section 9.02 , then and in every such case, the Collateral Agent, as assignee hereunder of any Lease or as secured party under any Security Document or otherwise, may exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Section 9.02 and pursuant to any Security Document and available to a secured party or a mortgagee under the UCC or any other Applicable Law and, in the event a Lease Event of Default shall also be continuing under any Lease, any and all of the remedies pursuant to such Lease, and, subject to the terms of the Lease, may take possession of all or any part of the Collateral and may exclude the Borrower, the Aircraft Subsidiaries and all Persons claiming under any of them wholly or partly therefrom.
     (c) Each and every right, power and remedy herein given to the Agent or the Collateral Agent specifically or otherwise in this Agreement and any other Loan Document shall be cumulative and shall be, except as limited in clause (b) above, in addition to every other right, power and remedy herein or therein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein or therein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Agent or the Collateral Agent, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the

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same time or thereafter any other right, power or remedy. No delay or omission by the Agent or the Collateral Agent in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Borrower or to be an acquiescence therein.
     (d) The rights of the Agent and the Collateral Agent hereunder shall be in addition to, and shall not limit or be limited by, the rights of the Agent or the Collateral Agent under any Lease Assignment, Mortgage or any other Loan Document.
     (e) Promptly upon obtaining actual knowledge thereof, the Agent shall deliver to each Lender notice of the occurrence of a Facility Event of Default.
     SECTION 9.03 Deficiencies . If the proceeds of any sale of the Collateral shall be insufficient to pay in full the Obligations, the Borrower shall continue to owe such Obligations and shall forthwith pay any balance of such amounts remaining unpaid to the Agent for distribution in accordance with Section 3.03 , and any deficiencies remaining unpaid thereafter may be entered as a judgment against the Borrower in any court of competent jurisdiction.
ARTICLE X
AGENCY
     SECTION 10.01 Appointment, Authorization and Action . (a) Credit Suisse AG, New York Branch, is hereby appointed as the Agent hereunder and under the other Loan Documents for the Lenders and each such Lender hereby authorizes the Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. The Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Article X (except for Section 10.07 hereof) are solely for the benefit of the Agent and the Lenders, and no ALC Party shall have any rights under any of the provisions hereof. In performing its functions and duties under this Agreement and the other Loan Documents, the Agent shall act solely as an agent of the Lenders and shall not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for any ALC Party, except with respect to Section 10.07 .
     (b) Each Lender irrevocably authorizes the Agent to take such action on such Person’s behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to the Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto (including the authorization made by the Agent in the immediately following sentence). The Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents in respect of such agent. The Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. The Agent shall not have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any

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obligations in respect of this Agreement, any of the other Loan Documents or in connection with any Refinancing except as expressly set forth herein or therein.
     SECTION 10.02 Agent’s Standard of Liability, Reliance, Etc. None of the Agent, nor any Affiliate, director, officer, agent or employee of the foregoing shall be liable to the Lenders for any action taken or omitted by it or them under or in connection with any Loan Document (including for any action in connection with approving any Aircraft or Aircraft Subsidiaries to be included in the Portfolio pursuant to the delegation contained in Section 5.02(a)(iii) or otherwise), except to the extent caused by their respective gross negligence or willful misconduct. Except as otherwise expressly provided in this Agreement or the other Loan Documents and without limitation of any provision requiring the Agent to obtain the instructions, consent or agreement of a percentage of the Lenders other than the Majority Lenders prior to taking or refraining from any action, if the Agent shall request instructions from the Lenders with respect to any act or action (including the failure to take an action) under this Agreement or any of the other Loan Documents, the Agent shall not be required to exercise any discretion or take any action (and shall be fully protected in so acting or refraining from acting) unless it has received instructions of the Majority Lenders, and the Agent shall follow such instructions and such instructions shall be binding upon all Lenders and all holders of Notes; provided that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement, any other Loan Document or Applicable Law. Without limitation of the generality of the foregoing, the Agent: (a) may consult with legal counsel (including counsel for any ALC Entity), independent public accountants and other experts and advisors selected by it and shall not be liable for any action taken or omitted in good faith by it in accordance with the advice of such counsel, accountants, experts and other professional advisors selected by it; (b) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with any Loan Document; (c) shall not have any duty to inspect the property (including the books and records) of the Borrower, the Servicer, ALC or any of their respective Affiliates; and (d) shall incur no liability under or in respect of any Loan Document by acting upon any notice, resolution, request, consent, order, certificate, report, opinion, bond or other document, instrument or writing (which may be by fax, telegram, cable, electronic mail or telex) believed by it to be genuine and correct and signed or sent by the proper party or parties.
     The Lenders shall not have any right of action whatsoever against the Agent as a result of the Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of any percentage of Lenders in accordance with the terms of this Agreement and each other Loan Document. The Agent shall not be required to take any action hereunder, under the Notes, or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes, or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Agent shall be or become inadequate, in the Agent’s sole determination, the Agent may require additional indemnification from the Lenders and cease to do the acts indemnified against hereunder unless and until such additional indemnity is given.
     The Agent shall not be responsible to any Lender or any other Person for (a) the execution, effectiveness, genuineness, legality, validity, enforceability, collectability, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document

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furnished pursuant thereto; (b) any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by or on behalf of the Borrower, the Servicer, ALC or any of their respective Affiliates to the Agent, the Depositary or any Lender in connection with the Loan Documents and the transactions contemplated thereby; (c) the financial condition or business affairs of the Borrower, the Servicer, ALC or any of their respective Affiliates or any other Person liable for the payment of any Obligations; (d) the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents; (e) the validity, genuineness, enforceability, existence, value or sufficiency of any of the Collateral; and (f) any information contained in a Monthly Report. The Agent shall not be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of any Loan or as to the existence or possible existence of any Facility Default, Facility Event of Default, Amortization Event or Servicer Replacement Event. Any such inquiry which may be made by the Agent shall not obligate it to make any further inquiry or to take any action. Anything contained in this Agreement to the contrary notwithstanding, the Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof.
     SECTION 10.03 Agent in Individual Capacity; Acknowledgment and Waiver . (a) 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 as a Lender hereunder. With respect to its Allocations, any Advances made by it and any Note issued to it, the Agent shall have the same rights and powers under each Loan Document as any other Lender (except to the extent provided otherwise for the Agent in its capacity as Designated Lender) and may exercise the same as though it were not an agent hereunder; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include each such of the Agent in its individual capacity. The Agent, and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of banking, trust, financial advisory, investment banking or other business with, any ALC Party and any Person who may do business with or own securities of any ALC Party, all as if the Agent was not an agent hereunder or a Lender and may accept fees and other consideration from any ALC Party for services in connection with this Agreement and otherwise, in each case without any duty to account therefor to any Lender.
     (b) Without limiting the foregoing, the parties hereto each acknowledge that Credit Suisse is acting as the Agent and is the holder of Allocations. The parties hereto each irrevocably waive any existing or future conflict of interest created by such relationship.
     SECTION 10.04 Lender Credit Decision . Each Lender represents and warrants that it has made its own independent investigation of the financial condition of the Borrower, each Aircraft Subsidiary and the Servicer based on the financial statements of the Borrower, each Aircraft Subsidiary and the Servicer and such other documents and information as it has deemed appropriate in connection with its decision to enter into this Agreement and the making and refinancing of the Loans hereunder. Each Lender also acknowledges that it will, independently and without reliance upon any of the Agent or any Lender and based on such documents and

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information as it shall deem appropriate at the time, continue to make its own analysis of the creditworthiness of the Borrower, each Aircraft Subsidiary and the Servicer and its own credit decisions in taking or not taking action under the Loan Documents. Neither the Agent nor any Lender shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of any Lender to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making or refinancing of the Loans or at any time or times thereafter, and neither the Agent nor any Lender shall have any responsibility with respect to the accuracy of or the completeness of any information provided to any Lender.
     SECTION 10.05 Indemnification . Each Lender severally agrees to indemnify and hold harmless (which shall survive any termination of this Agreement) the Agent and its agents, officers, employees and Affiliates (to the extent not promptly reimbursed by the Borrower), ratably according to their Loan Percentage, whether or not related to any singular, joint or concurrent negligence of the Agent from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating or arising out of this Agreement, the Notes, or any other Loan Document or any action taken or omitted by the Agent, its agents, officers, employees or its Affiliates under any Loan Document; provided that the Lenders shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that have resulted from such agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any reasonable and properly incurred out-of-pocket expenses (including counsel fees and disbursements) incurred by the Agent in connection with the preparation, execution, delivery, administration, syndication, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, any Loan Document, to the extent that such agent is not reimbursed for such expenses by the Borrower. Each party hereto hereby agrees that no Conduit Lender shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the related Granting Lender).
     SECTION 10.06 Resignation and Removal of Agent; Successor Agent . Unless prohibited by Applicable Law and subject to the following sentence, Credit Suisse shall remain as Agent at least until the Availability Expiration Date. At any time (whether or not prior to the Availability Expiration Date), the Agent may be removed by the affirmative vote of Lenders who at the time of determination are holding at least seventy-five percent (75%) of the outstanding principal amount of all Loans and unfunded Allocations (excluding Loans and unfunded Allocations held by Credit Suisse for so long as Credit Suisse is the Agent) if in such Lenders’ good faith determination the Agent has failed to diligently discharge any material duty under the Loan Documents; provided however, the Agent may not be removed based on its approval or failure to approve aircraft for inclusion in the Portfolio or based on the Agent’s approval or failure to approve the disposition of Aircraft from the Portfolio. In the event of such an affirmative vote to remove the Agent, the Agent shall remain as Agent until the later of (x) the date a successor Agent is appointed pursuant to the following sentence and such successor accepts such appointment and (y) ninety (90) days from the date of such affirmative vote. Upon

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the affirmative vote of Lenders required to remove the Agent, the Majority Lenders shall select a replacement Agent subject to the consent of the Borrower, such consent not to be unreasonably withheld; provided however, the consent of the Borrower shall not be required in the event that a Facility Event of Default, Facility Default described in clause (ii) or (iii) of Section 9.01(h) or Servicer Replacement Event has occurred and is continuing. At any time after the Availability Expiration Date, the Agent may resign by giving thirty (30) days’ prior written notice thereof to each Lender and the Borrower, such resignation to be effective only upon acceptance of its appointment of a successor Agent as provided herein. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor Agent, and (provided no Facility Event Default has occurred and is continuing) subject to the consent of the Borrower and the Servicer, such consent not to be unreasonably withheld. If no successor Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within thirty (30) days after any such resignation or removal, the retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Any successor Agent appointed under this Section 10.06 shall, regardless of who appoints such successor, be a Person having a nationally recognized reputation as an agent in syndicated credit facilities similar to this Agreement and expertise in aircraft financing transactions, which shall be a commercial banking institution organized under the laws of the United States (or any State thereof) or a branch or agency in the United States of a commercial banking institution and have a combined capital and surplus or net worth of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the obligations under each Loan Document and the retiring or removed Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Agent’s resignation or removal hereunder as Agent, the provisions of this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement.
     SECTION 10.07 Holder and Lender List; Ownership of Notes . (a) The Agent (as agent for the Borrower for purposes of this Section 10.07 only) shall preserve in as current a form as is reasonably practicable a register (the “ Register ”) containing the most recent list available to it of each Allocation to, and principal amount of each Loan owing to, directly or indirectly, each Lender, and the holders of the Notes from time to time, and the name and address of each such Person having an Allocation or holding a Loan or Note from time to time, which list shall be available to the Borrower and the Servicer for inspection at its request. Failure to make any recordation, or any error in such recordation, shall not affect the Borrower’s, or any other Person’s Obligations in respect of such Loans or Notes. A Lender’s Allocation and the Loans made pursuant thereto and the Notes evidencing such Loans may be assigned or otherwise transferred in whole or in part, subject to the terms of this Agreement, only by, and commencing upon, the registration of such assignment or transfer in the Register. Any assignment or transfer of a Lender’s Allocation or the Loans or the Notes evidencing such Loans made pursuant thereto shall be registered in the Register only upon delivery to the Agent of an Assignment and Assumption Agreement duly executed by the assignor thereof. No assignment or transfer of a Lender’s Allocation or the Loans made pursuant thereto or the Notes evidencing such Loans shall be effective until such assignment or transfer shall have been recorded in the Register by the Agent as provided in this Section.

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     (b) Ownership of the Notes shall be proved by the Register kept by the Agent. Prior to due presentment for registration of transfer of any Note, the Agent and the Borrower may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, and interest on, such Note and for all other purposes whatsoever, whether or not such Note is overdue, and neither the Agent nor the Borrower shall be affected by any notice to the contrary.
     SECTION 10.08 Security Documents . Without limiting the generality of Section 10.01 , each Lender hereby further authorizes the Agent to appoint Deutsche Bank Trust Company Americas, a New York banking corporation, as Collateral Agent and Depositary to enter into any Security Document as secured party on behalf of and for the benefit of such Lender or otherwise and to require the delivery of any Security Document which the Agent determines is necessary or advisable to protect or perfect the interests of the Protected Parties in any Collateral and agrees to be bound by the terms of each of the Security Documents. Anything contained in any of the Loan Documents to the contrary notwithstanding, but subject to Sections 4.09 , each Lender agrees that no Lender shall have any right individually to realize upon any of the Collateral under any Security Document or Loan Document, it being understood and agreed that all powers, rights and remedies under the Security Documents may be exercised solely by the Agent (or its designee, including the Collateral Agent and the Depositary) for the benefit of Protected Parties in accordance with the terms thereof. Each Lender hereby authorizes the Agent (a) to release or subordinate Collateral as permitted or required under this Agreement or the Security Documents, and agrees that a certificate or other instrument executed by the Agent evidencing such release of Collateral shall be conclusive evidence of such release as to any third party and (b) except as otherwise expressly provided in Section 11.01 hereof, to enter into any amendments or waivers of the Security Documents which the Agent determines are necessary or advisable including, without limitation, Security Documents the form of which are exhibits to this Agreement.
     SECTION 10.09 Distribution of Funding Packages; Request for Documents . The Agent shall furnish to each Lender copies of Funding Packages within twenty (20) Business Days after the applicable Transfer Date and Lease Documents and/or Loan Documents from time to time upon reasonable request therefor (to the extent such Funding Packages, Lease Documents and/or Loan Documents are provided by the Borrower or other third parties, in the form and to the extent provided to the Agent by the Borrower or such third parties).
ARTICLE XI
MISCELLANEOUS
     SECTION 11.01 Amendments, Etc. Except as otherwise expressly provided in this Agreement, no amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, or consent to any departure by the Borrower therefrom, shall in any event be effective without the written concurrence of the Majority Lenders; provided that any such amendment, modification, termination, waiver or consent that:

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     (a) reduces the principal amount of the Loans or any of the Advances (other than by payment thereof);
     (b) changes in any manner the definition of “Majority Lenders” or “Amortization Event”;
     (c) changes in any manner any provision of this Agreement which, by its terms, expressly requires the approval or concurrence of all Lenders;
     (d) other than as set forth in Sections 2.02 and 3.02(a) , postpones any Interim Repayment Date or the Maturity Date of the Loans or any of the Advances;
     (e) other than as set forth in Sections 2.02 and 3.02(a) , postpones the date or reduces the amount of any scheduled payment (but not prepayment) of principal of the Loans, including any payment due on any Interim Repayment Date;
     (f) other than as set forth in Sections 2.02 and 3.02(a) , postpones the date on which any interest is payable;
     (g) decreases the rate of any interest or the amount of any fees payable hereunder;
     (h) releases any of the Collateral (except as expressly provided herein and in the Security Documents); or
     (i) changes in any manner the provisions contained in Section 3.03 , 4.03 , 4.04 , 4.05 or 4.06 or this Section 11.01
shall be effective only if evidenced by a writing signed by or on behalf of the Agent and each Designated Lender who is owed (or whose related Conduit Lender is owed) Obligations being directly affected by such amendment, modification, termination, waiver or consent.
     Any such amendment, modification, termination, waiver or consent that changes in any manner any provision of this Agreement which, by its terms, expressly requires the approval or concurrence of the Majority Lenders (or any other percentage of Lenders less than all Lenders) shall be effective only if evidenced by a writing signed by or on behalf of the Agent and the Majority Lenders or such other percentage of Lenders as applicable.
     In addition, (i) no increase in the Allocations of any Lender over the amount thereof then in effect shall be effective without the written concurrence of that Lender, it being understood and agreed that in no event shall waivers or modifications of conditions precedent, covenants, Facility Defaults, Facility Events of Default, Servicer Replacement Event or of a mandatory prepayment or a reduction of any or all of the Allocations be deemed to constitute an increase of the Allocation of any Lender, (ii) no amendment, modification, termination or waiver of any provision of Article IX or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of the Agent shall be effective without the written concurrence of the Agent, and (iii) no amendment, waiver or modification of Section 2.04 , the last sentence of Section 10.05 or the last sentence of Section 11.03(b) shall be effective without

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the concurrence of each Conduit Lender. The Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 11.01 and agreed in writing by the Borrower shall be binding upon each Lender and the Borrower.
     If, in connection with any proposed change, waiver, discharge or termination to any of the provision of this Agreement as contemplated by the provision in either of the first or second paragraphs of this Section 11.01 , the consent of the Majority Lenders is obtained but consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrower may, so long as all non-consenting Lenders are so treated, elect to terminate such Lender as a party to this Agreement; provided that, concurrently with such termination, (i) the Borrower shall pay that Lender all principal, interest and fees and other amounts owed to such Lender through such date of termination (including but not limited to Break Costs, if any), (ii) another Eligible Assignee satisfactory to the Borrower and the Agent (or if the Agent is also the Lender to be terminated, the successor Agent) shall agree, as of such date, to become a Lender for all purposes under this Agreement (whether by assignment or amendment) and to assume all obligations of the Lender to be terminated as of such date, and (iii) all documents and supporting materials necessary, in the judgment of the Agent (or if the Agent is also the Lender to be terminated, the successor Agent) to evidence the substitution of such Lender shall have been received and approved by the Agent as of such date.
     No amendment to (i) the definitions of “Derivatives Agreement,” “Derivatives Creditor,” “Derivatives Obligation,” “Derivatives Termination Value,” “Obligations” or “Protected Party” contained in Section 1.01 , (ii) Section 3.03 , (iii) Section 9.01 , (iv) this paragraph of Section 11.01 or (v) Section 11.21 , in each of clauses (i) through (v) , in a manner that adversely affects a Derivatives Creditor, shall be effective without the written concurrence of such Derivatives Creditor and no addition of any new provision to this Agreement in a manner that impacts any of the sections described in clauses (i) through (v) of this paragraph and that adversely affect a Derivatives Creditor shall be effective without the written concurrence of such Derivates Creditor.
     SECTION 11.02 Indemnification . The Borrower shall indemnify each Protected Party and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the “ Indemnitees ”), in each case whether or not otherwise indemnified, and save, protect, defend and hold each Indemnitee harmless from any and all liability, obligation, loss, damage, cost or expense (including reasonable attorneys’ fees and disbursements; provided that the indemnification for attorneys’ fees and disbursements under this Section 11.02 incurred in any judicial or administrative proceeding where the Borrower has assumed responsibility for and control thereof in accordance with the penultimate paragraph of this Section 11.02 shall be limited to one law firm for the applicable Indemnitees, unless an Indemnitee reasonably believes that it has rights or interests different from the other Indemnitees, or representing both the Agent and/or Lenders could create, in the reasonable opinion of the Agent, any Lender or its counsel, a conflict of interest for such law firm, in which case such

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Indemnitee’s separate attorneys’ fees and expenses shall be indemnified), penalties, causes of action, suits, claims (including claims based on strict liability in tort or patent infringement) or judgments of whatsoever kind and nature (“ Losses ”) imposed on, incurred by or asserted against such Indemnitee in any way arising out of, relating to or resulting from or based upon (i) any Loan Document or any document contemplated thereby, any payments made pursuant thereto, any transaction contemplated thereby, performance of any of the terms thereof or the exercise of rights and remedies thereunder, excluding any costs and expenses related to the transfer of a Loan, (ii) any breach by the Borrower, the Servicer or any Aircraft Subsidiary of any Loan Document, (iii) any Lease Document or the exercise of rights and remedies thereunder, or any breach by a Lessee thereunder and (iv) any Aircraft, any Engine, any Part or any other portion of the Collateral or the Borrower’s or any Aircraft Subsidiary’s acquisition, purchase, sale, selection, design, financing, condition, location, storage, modification, repair, maintenance, possession, registration, delivery, nondelivery, transportation, transfer, rental, lease, use, operation, control, ownership or disposition of any Aircraft, Engine, Part or any other portion of the Collateral or any interest therein.
     The Borrower shall, no later than ten (10) days following demand, reimburse any Indemnitee for any sum or sums expended with respect to any of the foregoing or, upon request from any Indemnitee, shall pay such amounts directly. Without duplication of any amounts payable under this Section 11.02 , any payment made to or on behalf of any Indemnitee pursuant to this Section 11.02 shall be adjusted to such amount as will, after taking into account all Taxes imposed with respect to the accrual or receipt of such payment (net of any Tax savings) (as the same may be increased pursuant to this sentence), equal the amount of the payment. To the extent that the Borrower in fact indemnifies any Indemnitee pursuant to the provisions of this Section 11.02 (other than in respect of Taxes), the Borrower shall be subrogated to such Indemnitee’s rights in the affected transaction and shall have a right to determine the settlement of claims therein.
     The indemnities contained in this Section 11.02 shall not be affected by and shall survive any termination of this Agreement, the Lease Assignments and each other Loan Document or the repayment of the Loans and the occurrence of the Termination Date.
     Notwithstanding any provisions of this Section 11.02 to the contrary, the Borrower shall not indemnify and hold harmless any Indemnitee under this Section 11.02 in respect of any (a) Taxes (except to the extent provided in the second paragraph of this Section 11.02 ); (b) Losses which would not have occurred but for the willful misconduct, bad faith or the gross negligence of such Indemnitee including without limitation the willful breach of any express obligation to the Borrower under the Loan Documents; and (c) losses which result from, arise out of, or are attributable to a nonexempt prohibited transaction under ERISA or Section 4975 of the Code caused by the incorrectness of a Lender’s representation in Section 6.02 or a breach of a Lender’s covenant in Section 8.03 .
     If a claim of the type described above is made against an Indemnitee and such Indemnitee has notice thereof, such Indemnitee shall promptly, upon receiving such notice, give notice of such claim to the Borrower; provided that the failure to provide such notice shall not release the Borrower from any of its obligations hereunder except if and to the extent that such failure results in an increase in the Borrower’s indemnification obligations hereunder. The Borrower

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shall be entitled, at its sole cost and expense, acting through counsel reasonably acceptable to the relevant Indemnitee in any judicial or administrative proceeding that involves solely a claim of the type described in clause (iii) or (iv) of the first paragraph of this Section 11.02 (other than with respect to Taxes), to assume responsibility for and control thereof. Notwithstanding anything in the foregoing to the contrary, the Borrower shall not be entitled to assume responsibility for and control of any such judicial or administrative proceedings: (w) while a Facility Default described in clause (ii) or (iii) of Section 9.01(h) , Facility Event of Default, Amortization Event or Servicer Replacement Event shall have occurred and be continuing; (x) if such proceedings will involve any risk of criminal liability on the part of such Indemnitee or a material risk of the sale, forfeiture or loss of any part of the Collateral; (y) where the interests of the Borrower or any other ALC Party are adverse to such Indemnitee, as determined by counsel for such Indemnitee or (z) to the extent that the Indemnitee has defenses available to it which are not available to the Borrower and allowing the Borrower to assert such defenses will be prejudicial to the interests of such Indemnitee; provided that the limitation on the Borrower’s ability to control such judicial or administrative proceeding shall apply only to those aspects of such proceeding which address issues with respect to which such defenses are available.
     The relevant Indemnitee shall supply the Borrower with such information reasonably requested by the Borrower as is necessary or advisable for the Borrower to control or participate in any proceeding to the extent permitted by this Section 11.02 . Such Indemnitee shall not enter into a settlement or other compromise with respect to any covered claim without the prior written consent of the Borrower, which consent shall not be unreasonably withheld or delayed, unless such Indemnitee waives its right to be protected with respect to such covered claim.
     SECTION 11.03 Assignments and Participations . (a) The Borrower may not, and may not cause or permit any Aircraft Subsidiary to, assign or delegate any of its rights, obligations or interests under this Agreement or any other Loan Document without the prior written consent of the Agent and all Lenders in their sole discretion.
     (b) No Lender may at any time assign any of its rights and obligations under this Agreement, any other Loan Document or any of the Collateral, in each case, related to a Loan or the unfunded amount of an Allocation (i) without the prior written consent of the Agent (which consent shall not be unreasonably withheld and which consent shall be deemed granted with respect to an assignment to a Person described in any of clauses (a) through (d) of the definition of Eligible Assignee) and (ii) without the prior written consent of the Borrower (which consent shall not be unreasonably withheld (refusing consent to an assignment to a Competitor shall not be deemed unreasonable) and which consent shall not be required (A) if a Facility Event of Default, Facility Default described in clause (ii) or (iii) of Section 9.01(h) , Amortization Event or Servicer Replacement Event shall have occurred and is continuing or, (B) after the occurrence of the Availability Expiration Date, with respect to an assignment to a Person described in any of clauses (a) through (d) of the definition of Eligible Assignee); provided that, in any event, the assignment must comply with Applicable Law and the Person to which such assignment is intended to be made (an “ Assignee ”) (x) shall be an Eligible Assignee and (y) shall either (1) acquire either all of the outstanding Loans and unfunded Allocations of the assigning Lender, or (2) hold in the aggregate upon any such assignment by one or more Lenders, and the assigning Lender shall retain, Loans and/or unfunded Allocations

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with an aggregate principal balance of at least $25,000,000 ($1,000,000 if a Facility Event of Default, Facility Default described in clause (ii) or (iii) of Section 9.01(h) , Amortization Event or Servicer Replacement Event has occurred and is continuing), or such lesser amount agreed by the Borrower and the Agent, in their sole and absolute discretion, in writing (the Agent shall promptly notify each Lender in writing of any such lesser amount and the name of the involved Lenders). Any assignment made in breach of Section 11.03 shall be null and void. No ALC Party that is or becomes a Lender shall have any consent or voting rights of a Lender unless one or more ALC Parties hold all of the outstanding Loans and undrawn Allocations. Notwithstanding the other provisions of this Section 11.03 , so long as no Facility Event of Default has occurred and is continuing, if an Assignee (including a Person that is already a Lender at the time of the proposed assignment) would otherwise be entitled to receive any greater amounts pursuant to Sections 4.03 , 4.05 or 4.06 after giving effect to such assignment based on the law existing at the time of such assignment, than that to which the assigning Lender would have been entitled (as determined on the date of such assignment) had no such assignment occurred (such excess amounts are herein referred to as “ Excess Amounts ”), then except as provided in clause (ii) or (iii) of the proviso to clause (g) of Section 4.06 with respect to U.S. Withholding Taxes, such Assignee shall forego such Excess Amount absent another applicable event or Change In Law. Any such assignment that is consented to by the Agent shall be made pursuant to an Assignment and Assumption Agreement acceptable to the Agent in its sole discretion between the Assignee and the transferring Lender and shall be subject to an assignment and processing fee of $3,500. Such Assignment and Assumption Agreement shall be executed by such Assignee and such transferor and shall be delivered before the proposed effective date of such assignment to the Agent for acceptance. The transferor shall pay all fees and expenses of the Agent and the Borrower (including, without limitation, legal fees and expenses) in connection with such assignment, as determined by the Agent in its sole discretion. Upon such execution, delivery and acceptance by the Agent, from and after the effective date specified in such Assignment and Assumption Agreement and the making of appropriate entries in the Register with respect to such transfer, (x) the Assignee thereunder shall be a party hereto and, to the extent of the portion of the Allocation of the transferor purchased by it, have the rights and obligations of a Lender hereunder and (y) the transferor thereunder shall, to the extent of the portion of its Allocation so sold, be released from its obligations under this Agreement (and, in the case of an assignment agreement covering all or the remaining portion of a transferor’s rights and obligations under this Agreement, such transferor shall cease to be a party hereto). If the transferor is a holder of the Notes, on or prior to the effective date specified in such Assignment and Assumption Agreement, the Borrower, at the expense of the transferor, shall execute and deliver to the Agent in exchange for the Notes previously delivered to such transferor (and provided that such transferor returns such previously delivered Notes and upon the request of the Assignee) new Notes to the order of such Assignee in an amount based upon the Allocation assumed by it pursuant to such Assignment and Assumption Agreement and, unless the transferor has not retained an Allocation hereunder, new Notes to the order of the transferor in an amount based upon the Allocation retained by it hereunder. Each such new Note shall be dated the effective date of such assignment and shall otherwise be in the form of the Note replaced thereby. The Notes surrendered by the transferor shall,

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upon receipt by the Agent from the applicable Lender, be returned by the Agent to the Borrower. Notwithstanding anything to the contrary contained in this Agreement, any Lender may pledge, hypothecate or otherwise grant a security interest in all or any part of its rights hereunder or in its Advances to any Federal Reserve Bank and any Lender which is a commercial paper conduit may pledge its Loans pursuant to any security agreement applicable to its commercial paper program generally; provided that no such pledge, hypothecation or grant shall relieve such Lender of any of its obligations under this Agreement. Notwithstanding anything to the contrary in this Section 11.03 , any Conduit Lender may (i) with notice to, but without the prior written consent of, the Borrower or the Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Advances to its Granting Lender or to any Support Party therefor effective upon the making of appropriate entries in the Register with respect to such transfer and (ii) disclose on a confidential basis any non-public information relating to its Advances to any rating agency, commercial paper dealer or Support Party.
     (c) Any Lender may grant to any one or more Persons (each a “ Participant ”), on a participating basis but not as a party to or a Lender under this Agreement, a participation or participations in all or any part of such Lender’s rights and benefits under this Agreement (on a pro rata basis in the case of the Loans) or any Loan Document (a “ Participation ”). In the event of any such grant by a Lender of a Participation to a Participant, whether or not upon notice to the Borrower and the Agent, such Lender shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. The Borrower agrees that each Participant shall, to the extent of its Participation, be entitled to the benefits of Sections 4.06 and 11.02 as if such Participant were a Lender; provided that no granting of a participation shall increase the Borrower’s costs, liabilities or expenses as a result thereof and, in particular, no Participant shall be entitled to receive any amount under Sections 4.06 and 11.02 that would increase the Borrower’s obligations above that which would have been the case if such Participation had not been granted. Each Lender that sells a Participation in any Loan, Allocation or other interest to a Participant shall record in book entries maintained by such Lender the name and the amount of the participating interest of each Participant entitled to receive payments in respect of such participating interests and shall, upon the request of the Borrower or the Agent, provide such Person with the amount of such participation and the name, address and telephone number of, and individual contact for, such Participant.
     (d) In the event that any Lender shall demand payment of increased costs or other payment pursuant to Section 4.03 or 4.05 , or if any Tax, indemnity or other amount is owed pursuant to Section 4.06 or if an Illegality Event shall have occurred and be continuing with respect to a Lender, then the Borrower shall have the right, but not the obligation, upon notice to such Lender and the Agent, to replace such Lender with an Eligible Assignee acceptable to the Agent (such consent not to be unreasonably withheld or delayed; provided that no such consent shall be required if the Replacement Lender is an existing Lender) (a “ Replacement Lender ”), and upon any such request by the Borrower, such Lender hereby agrees to transfer and assign (in accordance with this Section) all of its Allocations and Loans and other rights and obligations under the Loan

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Documents to such Replacement Lender (unless such Lender withdraws or waives its claim for increased costs or such other payments or mitigates any Illegality Event); provided that (i) such assignment shall be without recourse, representation or warranty (other than that such Lender owns the Allocations, Loans and Notes being assigned, free and clear of any Liens) and (ii) the purchase price paid by the Replacement Lender shall be in the amount of such Lender’s Loans, together with all accrued and unpaid interest, fees and Break Costs in respect thereof, plus all other amounts (other than the amounts (if any) demanded and unreimbursed under Sections 4.02 through (and including) 4.06 , which shall be paid by the Borrower), owing to such Lender hereunder. Upon any such termination or assignment, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of, and subject to the obligations of, any provisions of the Loan Documents which by their terms survive the termination of this Agreement.
     SECTION 11.04 Notices, Etc. All notices, offers, instructions, acceptances, approvals, waivers, requests, demands and other communications required or permitted hereunder to be given to or made upon any party hereto or under any instrument, certificate or other document delivered in connection with the transactions described herein shall be in writing (including facsimile and electronic mail transmissions), shall be addressed as provided below and shall be considered as properly given (a) if delivered in person, (b) if sent by overnight courier service, (c) if sent by telecopier provided receipt is confirmed by an electronic or mechanical confirmation that the facsimile transmission had been received, or (d) if sent by electronic mail but in the case of electronic mail such notice shall be confirmed by a copy sent by the methods described in clause (a) or (b) above. For the purposes of communications, the addresses of the parties shall be as set forth below; provided that any party shall have the right to change its address for communications hereunder to any other location by giving written notice to the other parties in the manner set forth herein; provided further , that the Agent may provide to the Borrower written instructions for the delivery of Notices of Borrowing pursuant to Section 5.02(a)(i) and Funding Packages pursuant to Section 5.02(a)(ii) and the Agent shall have the right to change such instructions at any time by giving written notice to the Borrower in the manner set forth herein. The initial addresses of the parties hereto are as follows:
     
BORROWER’S ADDRESS:
  ALC Warehouse Borrower, LLC
 
  2000 Avenue of the Stars
 
  Suite 600N
 
  Los Angeles, California 90067
 
  Attention: Legal Department and Chief Accounting Officer
 
  Tel: (310) 553-0555
 
  Fax: (310) 553-0999
 
  E-mail: legalnotices@airleasecorp.com

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WITH COPIES TO:
  (such copies not to constitute a notice hereunder):
 
  Munger Tolles & Olson
 
  355 South Grand Avenue
 
  35th Floor
 
  Los Angeles CA 90071-1560
 
  Attention: Ron Olson, esq. and Judith Kitano, esq.
 
  Tel: (213) 683-9111
 
  Fax: (213) 683-5111
 
   
 
            and
 
   
 
  The Servicer, if the Servicer is not ALC.
 
   
AGENT’S ADDRESS:
  Credit Suisse AG, New York Branch
 
  Eleven Madison Avenue
 
  5 th Floor
 
  New York, New York 10010
 
  Attention: Scott Corman
 
  Tel: (212) 325-3003
 
  Fax: (212) 743-2626
 
  E-mail: scott.corman@credit-suisse.com
 
   
WITH COPIES TO:
  Credit Suisse Securities (USA) LLC
 
  Eleven Madison Avenue
 
  5 th Floor
 
  New York, New York 10010
 
  Attention: David Center
 
  Tel: (212) 325-0875
 
  Fax: (917) 326-8592
 
  E-mail: david.center@credit-suisse.com
 
   
 
            and
 
   
 
  Credit Suisse Securities (USA) LLC
 
  Legal and Compliance Department
 
  Eleven Madison Avenue
 
  New York, New York 10010
 
  Attention: Robbin Conner
 
  Tel: (212) 325-6688
 
  E-mail: robbin.conner@credit-suisse.com

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LENDER’S ADDRESS:
  With respect to Credit Suisse to the same address as the Agent, with respect to the Lenders identified in the signature pages hereof, to the addresses provided in Schedule I, with respect to the other Designated Lenders, as provided to the Agent and the Borrower by each Designated Lender becoming a party hereto pursuant to an Assignment and Assumption Agreement and with respect to the Conduit Lenders, in care of the related Granting Lender.
     Any notice shall be deemed to have been delivered upon its actual receipt; provided that if any such notice is received upon a day that is not a Business Day at the place of delivery, such notice shall be deemed to have been received on the immediately following Business Day at the place of delivery; provided , further , that if tender of any notice is refused by the addressee thereof, such notice shall be deemed to have been delivered upon such tender.
     SECTION 11.05 Costs and Expenses . The Borrower shall pay on demand all reasonable fees and out-of-pocket expenses incurred by the Agent (and its Affiliates), (a) in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (other than the reasonable fees and out-of-pocket expenses incurred in connection with the preparation, execution and delivery of the Loan Documents entered into on the Closing Date, which shall be for the account of ALC as separately agreed) including (i) due diligence, collateral review, syndication, transportation, computer, duplication, audit, insurance, consultant, search, filing and recording fees and expenses and (ii) the reasonable fees and expenses of counsel for the Agent with respect thereto, subject to any limitations agreed by the Borrower and the Agent, with respect to advising the Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights and interests, under the Loan Documents and Lease Documents, (b) in connection with wire transfers to be made by the Agent in connection with the distribution of proceeds under this Agreement and (c) in connection with any amendment, refinancing, modification, supplement (or, if related to a request by the Borrower, any Aircraft Subsidiary, the Servicer or any Lessee, interpretation), or waiver under any of the Notes or other Loan Documents and Lease Documents requested by the Borrower whether or not such amendment, refinancing, modification, supplement, interpretation or waiver is obtained or becomes effective or by the Agent if such amendment, refinancing, modification, supplement, interpretation or waiver becomes effective, and in connection with the consideration of any potential, actual or proposed restructuring or workout of the transactions contemplated hereby or by any other Loan Document. Each Lender, other than Agent in its capacity as Lender, shall be responsible for its own costs and expenses incurred in connection with any of the matters set forth in clause (a) above or as otherwise may be agreed.
     The Borrower shall pay on demand all reasonable filing fees and reasonable attorneys’ fees and expenses incurred by the Agent, all reasonable fees and expenses of special FAA, International Registry or other Aviation Authority counsel (and other local counsel reasonably engaged by the Agent), as the case may be, in connection with the preparation and review of each Security Document, the Assignment and Assumption Agreements and the other Loan Documents and Lease Documents from time to time entered into or reviewed pursuant to this

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Agreement and all documents related thereto, the search of aircraft title and conveyance records, the recordation, filing for recordation or registration of documents with the FAA, the International Registry or other applicable Aviation Authority, reasonable appraisal fees and the making of the Advances hereunder, whether or not any Transfer Date or other transaction contemplated hereby closes.
     In addition, the Borrower shall pay on demand all reasonable out-of-pocket fees and expenses (including, without limitation, reasonable attorneys’ fees and expenses; provided that the Borrower shall only be liable for attorneys’ fees and expenses for one law firm for both the Agent and the Lenders unless the Agent or a Lender reasonably believes that it has rights or interests different from the other Lenders or the Agent, if applicable, or representing both the Agent and/or Lenders could create, in the reasonable opinion of the Agent, any Lender or their counsel, a conflict of interest for such law firm, in which case such Lender’s or Agent’s separate attorneys’ fees and expenses shall be indemnified) and fees and expenses of any expert witnesses incurred by the Agent and the Lenders in connection with the enforcement and protection of the rights of the Agent and the Protected Parties under any of the Loan Documents and any amendments thereto and waivers thereof and any Servicer Replacement Event, Facility Default, Facility Event of Default or Amortization Event, including the performance by the Agent or the Lenders of any act the Borrower has covenanted to do under the Loan Documents to the extent the Borrower fails to comply with any such covenant.
     The Borrower shall pay the costs and expenses of all Independent Appraisals, unless specifically provided otherwise herein. The Borrower shall pay all fees and expenses in connection with the Depository Agreement including all fees (including the Depositary’s annual fee pursuant to Section 5.06 of the Depository Agreement), expenses and any indemnity payments to the Depositary and all fees and expenses in creating, maintaining and administrating the Depository Accounts.
     If any jurisdiction in which an Aircraft is registered, operated or located, from time to time, requires the payment of a stamp tax, fee or its equivalent in order to perfect the Collateral Agent’s security interest in the Leases or otherwise to allow the Agent to realize upon the Collateral, the Borrower shall pay the amount of such stamp tax, fee or its equivalent.
     SECTION 11.06 No Waiver; Remedies Cumulative . No failure or delay on the part of any Protected Party or ALC Party in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available.
     SECTION 11.07 Modifications . Notwithstanding any provisions to the contrary herein, but subject to the terms of Section 11.02 , no amendment, modification or waiver of any provision of any of the Loan Documents, nor consent to any departure by the Borrower, the Servicer or any Aircraft Subsidiary therefrom shall be effective unless the same shall be in writing and signed by the Agent and Borrower and then such amendment, modification, waiver or consent shall be effective only in the specific instance and for the purpose for which given.

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     SECTION 11.08 Marshalling; Reinstatement . Neither the Agent nor any Lender shall be under any obligation to marshal any assets in favor of the Borrower, any Aircraft Subsidiary or any other party or against or in payment of any or all of the Obligations. To the extent that the Borrower makes a payment or payments to the Agent or Collateral Agent (or to the Agent or Collateral Agent for the benefit of the Lenders) or to the Lenders, or the Agent or Collateral Agent enforces any security interests or exercises its rights of set-off, and such payment or payments or the proceeds of such enforcement or set-off or any part thereof or any other obligations are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or set-off had not occurred.
     SECTION 11.09 Obligations Several; Independent Nature of Lenders’ Rights . The obligations of the Lenders hereunder are several and none of the Lenders shall be responsible for the obligations of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute the Lenders or any or all of the Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt.
     SECTION 11.10 Headings . Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
     SECTION 11.11 Performance by the Agent . If the Borrower, the Servicer or any Aircraft Subsidiary fails to perform any of its obligations under this Agreement or any other Loan Document in a timely fashion, the Agent shall be entitled, but not obliged, to perform such obligation at the expense of the Borrower and without waiving any rights that it may have with respect to such breach.
     SECTION 11.12 Binding Effect; Successors and Assigns . This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and permitted assigns of the Lenders and the Agent.
     SECTION 11.13 Counterparts; Effectiveness . This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.
     SECTION 11.14 Integration . This Agreement, the Lease Assignments, the Security Agreement and each other Loan Document, and the other agreements executed in connection

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therewith constitute the entire understanding among the parties hereto with respect to the matters covered thereby, and shall supersede any prior agreements covering such matters.
     SECTION 11.15 Dollars . All amounts payable hereunder or under any Loan Document shall be payable in Dollars. The obligation of the Borrower in respect of any sum due from it to the Agent or any Protected Party hereunder or under any Loan Document shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt by the Agent or its designee of any sum adjudged to be so due in such other currency the Agent may in accordance with normal banking procedures purchase Dollars with such other currency; if the Dollars so purchased are less than the sum in Dollars originally due that is so adjudicated to be due in another currency to the Agent or any Protected Party in Dollars, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Agent and each Protected Party against such loss.
     SECTION 11.16 Governing Law, Jurisdiction and Venue . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
     ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION PROVIDED THEREIN MAY BE BROUGHT IN SUPREME COURT OF THE STATE OF NEW YORK (WITHOUT PREJUDICE TO THE RIGHT OF ANY PARTY TO REMOVE TO THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK) AND TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR OTHER COURT OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT EACH SUCH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH OBLIGATION PROVIDED THEREIN (SUBJECT TO ANY RIGHT OF APPEAL TO A HIGHER COURT). The Borrower hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to the Borrower at its address provided in Section 11.04 , such service being hereby acknowledged by the Borrower to be sufficient for personal jurisdiction in any action against the Borrower in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any Protected Party to bring proceedings against the Borrower in the courts of any other jurisdiction.
     SECTION 11.17 Waiver of Trial by Jury . EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE AND DOES WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL. The scope of the above waiver and agreement encompasses of any and all disputes that may be filed in any court and that relate to the subject matter of this

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[Warehouse Loan Agreement]
transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that the above waiver and agreement is a material inducement to enter into a business relationship, that each has already relied on the above waiver and agreement in entering into this Agreement, and that each will continue to rely on the above waiver and agreement in their related future dealings. Each party hereto further warrants and represents that it has reviewed the above waiver and agreement with its legal counsel and that it knowingly and voluntarily waives its jury trial rights and agrees as described above following consultation with legal counsel. THIS WAIVER AND AGREEMENT SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE ADVANCES MADE HEREUNDER. In the event of litigation, this Agreement may be filed as written consent to a trial by the court or by judicial reference proceeding, as applicable.
     SECTION 11.18 Confidentiality . Each party hereto agrees to treat information concerning the terms of this Agreement, Monthly Reports, Funding Packages, each other Loan Document and, with respect to the Agent and the Lenders, written materials provided to them by the Borrower or the Servicer regarding Lessees or proposed lessees, the information provided pursuant to Section 7.01(a) , confidentially including all information received or obtained hereunder, except to the extent that disclosure is required by law or GAAP. The foregoing constraint shall not include: (a) information that is now in the public domain or subsequently enters the public domain without fault on the part of the disclosing party; (b) information currently known to the disclosing party or developed by its own sources; (c) information that the disclosing party receives from a third party not known by the disclosing party to be under any obligation to keep such information confidential; (d) disclosure made to Affiliates or any related entity or their management or compliance departments or as may be necessary in the course of the fulfillment of the disclosing party’s internal policies, accounting or legal obligations or the professional advisors of the disclosing party; (e) disclosure made in connection with the enforcement of any right or the fulfillment of any obligation pursuant hereto or pursuant to any other Loan Document; (f) disclosure made to the Agent, any Assignee, potential Assignee, Note holder, Lender, potential Lender, Participant, potential Participant, Support Party, the Servicer, any managing agent of a Lender that is a commercial paper conduit, credit insurance providers or to (i) any rating agency that is deemed a nationally recognized statistical rating organization under the Securities Exchange Act of 1934, as amended, or (ii) a rating agency that rates such conduit’s obligations or any credit enhancer to any commercial paper conduit, a proposed permitted transferee of any Lender and any Affiliate, director, officer, agent or advisor of the foregoing (g) disclosure required by any statute, court or administrative order or decree or governmental ruling or regulation or requested by any regulatory, financial services, supervisory body, whether de jure or de facto, or governmental authorities (including routine disclosures to regulatory authorities in the ordinary course of business) or by any subpoena or similar compulsory legal process; (h) ALC, any beneficial owner of ALC; (i) disclosure to effect any registration of any Lien created pursuant to any of the Security Documents or registration of any Aircraft with relevant authority; (j) information that has been approved for release by written authorization of the applicable party; and (k) disclosure by the Borrower, ALC or their respective Affiliates in filings with the Securities and Exchange Commission, or to any underwriter, initial purchaser, purchaser representative or similar party with respect to any debt or equity securities

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of such Persons; provided that in the case of clause (f) and only with respect to any potential Assignees, Note holder, potential Lender and potential Participant and to the extent such parties are not already subject to confidentiality restrictions with regard to such information the recipient of such information agrees to keep it confidential in accordance with the terms hereof for the benefit of the parties hereto; and, provided further, that in the case of clause (g), to the extent permitted by Applicable Law and commercially practicable, the disclosing party will provide the party to which the confidential information belongs reasonably prompt notice of any such requirement. Notwithstanding anything to the contrary in this Section 11.18, neither the Borrower nor any of its Affiliates shall be restricted in any way from disclosing the “tax treatment” or “tax structure” (as such terms are defined in Treasury Regulation Sections 1.6011-4 and 301.6111-3(c)) of the transactions contemplated in the Loan Documents.
     SECTION 11.19 Survival of Representations and Warranties . All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the Notes and the other Loan Documents and the making of the Loans.
     SECTION 11.20 Severability . In case any provision in or obligation under this Agreement or the Notes or the other Loan Documents shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
     SECTION 11.21 Third Party Beneficiaries . Except with respect to the rights specifically provided to the Protected Parties herein, no provision of this Agreement or the other Loan Documents is intended, nor will be interpreted, to provide or create any third party beneficiary rights or any other rights of any kind in any Person.
     SECTION 11.22 No Proceedings . Each party hereto hereby agrees that it will not institute, and the Borrower agrees that it will not permit any Aircraft Subsidiary to institute, against any Conduit Lender, or join any other Person in instituting against any Conduit Lender, any bankruptcy, insolvency, receivership, liquidation or similar proceeding from the Closing Date until one year plus one day following the last day on which all commercial paper notes and other publicly or privately placed indebtedness for borrowed money of such Conduit Lender shall have been indefeasibly paid in full.
     SECTION 11.23 Release of Collateral; Termination . (a) With respect to any Aircraft and with respect to any date, after a mandatory repayment is made in accordance with clause (a) , (c) , (e) or (g) of Section 3.02 of the full Release Amount (including but not limited to a mandatory repayment of principal in the amount of the Prepayment Amount) with respect to such Aircraft on such date and after such amounts are applied in accordance with Section 3.03 , the Agent shall release (or shall direct the release of): (v) such Aircraft, (w) the Lease relating to such Aircraft, (x) the Capital Stock of the Aircraft Subsidiaries that own or lease such Aircraft (unless any such Aircraft Subsidiary then owns or leases other Aircraft in the Portfolio), (y) Deposits in an amount and in a manner set forth in clause (b) below and (z) all other Collateral owned by such Aircraft Subsidiaries, from the Lien of the Security Documents; provided that no such release shall occur if (i) a payment Facility Default or Facility Event of Default shall then exist or would occur on such date after giving effect to all applications of

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funds to be made on such date under Section 3.03 or (ii) a Collateral Deficiency shall then exist after giving effect to any payments or pledge of additional collateral pursuant to Section 3.02(f) . Notwithstanding anything else to the contrary in the Loan Documents, the Borrower may cause to be wound up, liquidated or subject to examinership any Aircraft Subsidiary subject to a release under clause (x) of this Section 11.23(a) .
     (b) With respect to any Aircraft that is released from the Lien of the Security Agreement as provided in clause (a) above, the Agent shall release (or shall direct the release of) the Deposits related to such Aircraft, to the extent that the Lease associated with such Aircraft requires such amounts to be returned to the related Lessee, and otherwise in accordance with Section 7.04(b) .
     (c) Upon the occurrence of the Termination Date, the Agent shall release (or shall direct the release of) all grants and assignments hereunder and under all Security Documents and other Loan Documents in favor of the Collateral Agent for the benefit of the Protected Parties.
     (d) Upon satisfaction of the conditions of this Section 11.23 with respect to any Collateral, the Agent and Collateral Agent shall, at the Borrower’s expense, execute and deliver or shall cause the execution and delivery of any evidence of such release and termination as the Borrower may reasonably request and furnish to the Agent with respect to such Collateral.
     (e) The indemnification provisions hereof contained in this Agreement and each other Loan Document shall survive any such termination.
     (f) With respect to any Engine replaced in accordance with a Lease or in accordance with Section 7.09(b) , the Agent shall release and terminate (or shall direct the termination of) any interest it or the Collateral Agent has with respect to such Engine, pursuant to any Loan Document.
     SECTION 11.24 Patriot Act . The Agent and each Lender hereby notifies the Borrower and each Aircraft Subsidiary that pursuant to the requirements of the Patriot Act and any comparable law applicable to any Lender, it is required to obtain, verify and record information that identifies the Borrower and each Aircraft Subsidiary, which information includes the name and address of the Borrower and each Aircraft Subsidiary and other information that will allow the Agent and/or any Lender to identify the Borrower and each Aircraft Subsidiary in accordance with the Patriot Act.
     SECTION 11.25 Limited Recourse to Conduit Lenders . No recourse under any obligation, covenant or agreement of a Conduit Lender as contained in any Loan Document shall be had against any incorporator, stockholder, member, affiliate, officer, employee or director of a Conduit Lender (other than the related Designated Lender), by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that the agreements of each Conduit Lender contained in any Loan Document are solely corporate or limited liability company obligations of such Conduit Lender and that no personal liability whatsoever shall attach to or be incurred by the

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[Warehouse Loan Agreement]
incorporators, stockholders, members, affiliates, officers, employees or directors of such Conduit Lender, under or by reason of any of the respective obligations, covenants or agreements of such Conduit Lender (other than the related Designated Lender) contained in any Loan Document, or implied therefrom, and that any and all personal liability of every such incorporator, stockholder, member, affiliate, officer, employee or director of such Conduit Lender (other than the related Designated Lender) with respect to any such obligation, covenant or agreement (including arising out of any breach thereof by such Conduit Lender), which liability may arise either at common law or in equity, by statute or constitution, or otherwise, is hereby expressly waived as a condition of and in consideration for the execution of this Agreement. The provisions of this Section 11.25 shall survive the termination of this Agreement.
* * *

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[Warehouse Loan Agreement]
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their representative officers thereunto duly authorized, as of the date first above written.
         
  ALC WAREHOUSE BORROWER, LLC, as Borrower
 
 
  By:   Air Lease Corporation    
  Its:  Manager   
     
  By:   /s/ James C. Clarke   
    Name:   James C. Clarke   
    Title:   Senior Vice President and
Chief Financial Officer 
 

 


 

[Warehouse Loan Agreement]
         
  CREDIT SUISSE AG, NEW YORK BRANCH, as Agent
 
 
  By:   /s/ Scott Corman    
    Name:   SCOTT CORMAN   
    Title:   MANAGING DIRECTOR   
 
     
  By:   /s/ Josh Borg    
    Name:   Josh Borg   
    Title:   Director   

 


 

[Warehouse Loan Agreement]
         
  CREDIT SUISSE AG, CAYMAN ISLANDS
BRANCH, as a Designated Lender
 
 
  By:   /s/ Maureen Coen    
    Name:   MAUREEN COEN    
    Title:   MANAGING DIRECTOR   
     
  By:   /s/ Oliver Nisenson    
    Name:   Oliver Nisenson   
    Title:   Vice President   
 
  ALPINE SECURITIZATION CORP, as a Conduit Lender
 
 
  By:   Credit Suisse AG, New York Branch, as    
    attorney-in-fact   
     
  By:   /s/ Josh Borg    
    Name:   Josh Borg   
    Title:   Director   
     
  By:   /s/ Anita Johal    
    Name:   Anita Johal   
    Title:   Vice President   

 


 

[Warehouse Loan Agreement]
         
  COMMONWEALTH BANK OF AUSTRALIA,
OFFSHORE BANKING UNIT, as a Designated
Lender
 
 
  By:   /s/ Michael Brown    
    Name:   MICHAEL BROWN   
    Title:   SENIOR VICE PRESIDENT   

 


 

[Warehouse Loan Agreement]
         
  DEUTSCHE BANK AG, LONDON BRANCH, as
a Designated Lender
 
 
  By:   /s/ Vanghan Williams    
    Name:   VANGHAN WILLIAMS   
    Title:   MD   
     
  By:   /s/ Nich Ross    
    Name:   NICH ROSS   
    Title:   MD   

 


 

[Warehouse Loan Agreement]
         
  NORDDEUTSCHE LANDESBANK
GIROZENTRALE, as a Designated Lender
 
 
  By:   /s/ Brauns  
    Name:   Brauns   
    Title:   Authorized Signatory   
     
  By:   /s/ Sygusch  
    Name:   Sygusch   
    Title:   Authorized Signatory   

 


 

[Warehouse Loan Agreement]
         
  SCOTIABANK EUROPE PLC, as a Designated Lender
 
 
  By:   /s/ Richard Walsh  
    Name:   RICHARD WALSH    
    Title:   ASSOCIATE DIRECTOR   

 


 

[Warehouse Loan Agreement]
         
 
SOCIÉTÉ GÉNÉRALE, as a Designated Lender
 
 
  By:      
    Name:      
    Title:      
     
  By:      
    Name:      
    Title:      
 

 

Exhibit 10.2
EXECUTION VERSION
 
 
PLEDGE AND SECURITY AGREEMENT
Dated as of May 26, 2010
among
AIR LEASE CORPORATION, as Parent,
ALC WAREHOUSE BORROWER, LLC, as Borrower,
THE SUBSIDIARIES OF THE BORROWER
FROM TIME TO TIME PARTY HERETO,
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Collateral Agent,
and
CREDIT SUISSE AG, NEW YORK BRANCH, as Agent
 
 

 


 

TABLE OF CONTENTS
             
        Page  
 
           
ARTICLE I DEFINITIONS     1  
 
           
SECTION 1.1.
  Certain Terms     1  
SECTION 1.2.
  Warehouse Agreement Definitions     3  
SECTION 1.3.
  UCC Definitions     3  
 
           
ARTICLE II SECURITY INTEREST     4  
 
           
SECTION 2.1.
  Grant of Security Interest     4  
SECTION 2.2.
  Security for Obligations     5  
SECTION 2.3.
  Grantors Remain Liable     5  
SECTION 2.4.
  Assignment Rights     6  
SECTION 2.5.
  Security Interest Absolute, Etc.     6  
 
           
ARTICLE III REPRESENTATIONS AND WARRANTIES     7  
 
           
SECTION 3.1.
  As to Capital Stock of the Aircraft Subsidiaries and Investment Property     7  
SECTION 3.2.
  Grantor Name, Location, Etc.     8  
SECTION 3.3.
  Aircraft, Leases and Related Property     9  
SECTION 3.4.
  Ownership, No Liens, Etc.     9  
SECTION 3.5.
  Sole Entitlement Holder     9  
SECTION 3.6.
  Negotiable Documents, Instruments and Chattel Paper     9  
SECTION 3.7.
  Validity, Etc.     10  
SECTION 3.8.
  Authorization, Approval, Etc.     10  
SECTION 3.9.
  Best Interests     11  
 
           
ARTICLE IV COVENANTS     11  
 
           
SECTION 4.1.
  As to Investment Property, Etc.     11  
SECTION 4.2.
  Change of Name, Etc.     14  
SECTION 4.3.
  As to Accounts     14  
SECTION 4.4.
  As to Letter-of-Credit Rights     15  
SECTION 4.5.
  As to Commercial Tort Claims     15  
SECTION 4.6.
  Electronic Chattel Paper and Transferable Records     15  
SECTION 4.7.
  Further Assurances, Etc.     16  
SECTION 4.8.
  Deposit Accounts and Securities Accounts     17  
SECTION 4.9.
  Security Agreement Supplement; AS Joinder and Security Agreement Supplement     17  
 
           
ARTICLE V THE COLLATERAL AGENT     18  
 
           
SECTION 5.1.
  Appointment of Collateral Agent     18  
SECTION 5.2.
  Actions by Collateral Agent     20  
SECTION 5.3.
  Replacement of Collateral Agent; Appointment of Successor     20  
SECTION 5.4.
  Collateral Agent Requirement; Eligibility     21  
SECTION 5.5.
  Indemnification     22  


 

TABLE OF CONTENTS
(continued)
             
        Page  
 
           
SECTION 5.6.
  Collateral Agent Appointed Attorney-in-Fact     23  
SECTION 5.7.
  Collateral Agent Has No Duty     24  
SECTION 5.8.
  Reasonable Care     25  
 
           
ARTICLE VI THE PROTECTED PARTIES     25  
 
           
SECTION 6.1.
  Prohibition on Contesting Liens     25  
SECTION 6.2.
  Insurance     25  
SECTION 6.3.
  Preference Issues     25  
SECTION 6.4.
  Reliance     25  
SECTION 6.5.
  No Waiver of Lien Priorities     25  
SECTION 6.6.
  No Proceedings Against Grantors     26  
SECTION 6.7.
  No Proceeding Against the Conduit Lenders     26  
 
           
ARTICLE VII REMEDIES     26  
 
           
SECTION 7.1.
  Certain Remedies     26  
SECTION 7.2.
  Compliance with Restrictions     30  
SECTION 7.3.
  Protection of Collateral     31  
SECTION 7.4.
  Replacement of the Servicer     31  
 
           
ARTICLE VIII MISCELLANEOUS PROVISIONS     31  
 
           
SECTION 8.1.
  Loan Document     31  
SECTION 8.2.
  Binding on Successors, Transferees and Assigns; Assignment     31  
SECTION 8.3.
  Amendments, Etc.     32  
SECTION 8.4.
  Notices     32  
SECTION 8.5.
  Release of Liens     33  
SECTION 8.6.
  Additional Grantors; Additional Collateral     33  
SECTION 8.7.
  No Waiver; Remedies     33  
SECTION 8.8.
  Headings     34  
SECTION 8.9.
  Severability     34  
SECTION 8.10.
  Governing Law, Jurisdiction and Venue; Waiver of Trial by Jury; Entire Agreement     34  
SECTION 8.11.
  Counterparts     35  
SECTION 8.12.
  Reinstatement     35  
SECTION 8.13.
  Certain Rights Subject to Law; Waiver     36  
SECTION 8.14.
  Compliance with Applicable Anti-Terrorism and Anti-Money Laundering Regulations     36  

ii 


 

Table of Contents
Page
SCHEDULES
     
Schedule I
  Additional Grantor Information
Schedule II
  Aircraft, Leases and Related Property
ANNEXES
     
Annex I
  Form of AS Joinder and Security Agreement Supplement
Annex II
  Form of Additional Collateral Certificate


 

PLEDGE AND SECURITY AGREEMENT
     This PLEDGE AND SECURITY AGREEMENT, dated as of May 26, 2010 (this “ Security Agreement ”), is among AIR LEASE CORPORATION, a Delaware corporation (“ Parent ”), ALC WAREHOUSE BORROWER, LLC, a Delaware limited liability company (the “ Borrower ”), each AIRCRAFT SUBSIDIARY that becomes a party hereto through execution and delivery of an AS Joinder and Security Agreement Supplement (Parent, the Borrower and each such Aircraft Subsidiary, individually a “ Grantor ” and collectively the “ Grantors ”), DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation, as collateral agent (together with its successor(s) thereto in such capacity, the “ Collateral Agent ”) for each Protected Party, and CREDIT SUISSE AG, NEW YORK BRANCH, as agent for the Lenders under the Warehouse Agreement (as defined below) (the “ Agent ”).
RECITALS :
     A. Pursuant to a Warehouse Loan Agreement, dated as of May 26, 2010 (the “ Warehouse Agreement ”), among the Borrower, the Lenders from time to time a party thereto, and the Agent, the Borrower may request Advances from the Designated Lenders.
     B. As a condition precedent to the making of the Loans under the Warehouse Agreement, each Grantor is required to execute and deliver this Security Agreement.
     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor hereto agrees for the benefit of each Protected Party, as follows:
ARTICLE I
DEFINITIONS
     SECTION 1.1. Certain Terms . The following terms (whether or not underscored) when used in this Security Agreement, including its preamble and recitals, shall have the following meanings:
     “ Agent ” is defined in the preamble .
     “ Agent Incumbency Certificate ” is defined in clause (b) of Section 5.1 .
     “ AS Collateral ” is defined in clause (b) of Section 2.1 .
     “ AS Joinder and Security Agreement Supplement ” means an AS Joinder and Security Agreement Supplement executed and delivered by an Aircraft Subsidiary, in form and substance substantially similar to Annex I .
     “ Bankruptcy Code ” means Title 11 of the United States Code (11 U.S.C. 101 et seq.), as in effect from time to time and any successor statute.
     “ Borrower ” is defined in the preamble .

 


 

[Pledge and Security Agreement]
     “ Borrower Collateral ” is defined in clause (b) of Section 2.1 .
     “ Collateral ” means, collectively, the Parent Collateral, the Borrower Collateral and the AS Collateral.
     “ Collateral Agent ” is defined in the preamble .
     “ Control Agreement ” means an authenticated record in form and substance satisfactory to the Collateral Agent (including the Depository Agreement) that provides for the Collateral Agent to have “control” (as such term is used in Articles 8 and 9 of the UCC) over certain Collateral.
     “ Distributions ” means all dividends paid on Capital Stock, liquidating dividends paid on Capital Stock, shares (or other designations) of Capital Stock resulting from (or in connection with the exercise of) stock splits, reclassifications, warrants, options, non-cash dividends, mergers, consolidations, and all other distributions (whether similar or dissimilar to the foregoing) on or with respect to any Capital Stock constituting Collateral.
     “ Filing Statements ” is defined in clause (b) of Section 3.7 .
     “ General Intangibles ” means all “general intangibles” and all “payment intangibles”, each as defined in the UCC, and shall include all interest rate or currency protection or hedging arrangements, all tax refunds, all licenses, permits, concessions and authorizations and all Intellectual Property Collateral (in each case, regardless of whether characterized as general intangibles under the UCC).
     “ Grantor ” and “ Grantors ” are defined in the preamble .
     “ Insolvency Law ” means the Bankruptcy Code or similar law in any applicable jurisdiction.
     “ Insolvency or Liquidation Proceeding ” means, with respect to any Person, (a) any voluntary or involuntary case or proceeding under any Insolvency Law with respect to such Person as a debtor, (b) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding with respect to such Person as a debtor or with respect to any substantial part of its assets, (c) any liquidation, dissolution, reorganization or winding up of such Person whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (d) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of such Person.
     “ Intellectual Property Collateral ” means, collectively, computer hardware and software collateral, copyrights, patents, trademarks and Trade Secrets Collateral.
     “ Lender Liens ” means Liens on Collateral in favor of the Collateral Agent on behalf of the Protected Parties created as collateral security for the Obligations.
     “ Parent Collateral ” is defined in clause (a) of Section 2.1 .

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[Pledge and Security Agreement]
     “ Proceeding ” means any suit in equity, action at law, or other judicial or administrative proceeding.
     “ Recovery ” is defined in Section 6.3 .
     “ Related Property ” means with respect to any Aircraft or any Lease, as applicable, (a) any and all options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, indemnifications, guarantees, licenses and permits in connection therewith, (b) any and all purchase and sale agreements and/or other evidence of transfer of such Aircraft or such Leases from any Seller or other Person to the Borrower or any Aircraft Subsidiary and any and all other general intangibles delivered in connection with such transfer and (c) any and all Supporting Obligations, income, proceeds, rent, deposits and reserves related thereto and all other amounts payable but not received in connection therewith by the applicable Transfer Date (including any right to income, rent and proceeds and all other such amounts due and owing but not yet received as of such Transfer Date (or which may become due and owing after such Transfer Date) whether or not relating to periods before or after such Transfer Date and all reserves, whether or not accrued to such Transfer Date).
     “ Safe Keeping Documents ” is defined in clause (d) of Section 5.1 .
     “ Security Agreement ” is defined in the preamble .
     “ Trade Secrets Collateral ” means all common law and statutory trade secrets and all other confidential, proprietary or useful information and all know-how obtained by or used in or contemplated at any time for use in the business of a Grantor (other than Parent) (all of the foregoing being collectively called a “ Trade Secret ”), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all Documents and things embodying, incorporating or referring in any way to such Trade Secret, and all Trade Secret licenses, including the right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license.
     “ Warehouse Agreement ” is defined in recital “A” .
     SECTION 1.2. Warehouse Agreement Definitions . Unless otherwise defined herein or the context otherwise requires, terms used in this Security Agreement, including its preamble and recitals, have the meanings provided in the Warehouse Agreement as in effect from time to time and the rules of interpretation set forth therein are hereby incorporated herein by this reference, provided that “hereby,” “herein,” “hereof,” “hereunder,” “this Agreement,” or other like words refer to this Security Agreement.
     SECTION 1.3. UCC Definitions . When used herein the capitalized terms Account, Certificated Securities, Chattel Paper, Commercial Tort Claim, Commodity Account, Commodity Contract, Deposit Account, Document, Electronic Chattel Paper, Equipment, Fixtures, Goods, Instrument, Inventory, Investment Property, Letter-of-Credit Rights, Proceeds, Promissory Notes, Securities Account, Security Entitlement, Supporting Obligations and Uncertificated Securities have the meaning provided in Article 8 or Article 9, as applicable, of

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[Pledge and Security Agreement]
the UCC. When used herein the capitalized term Letters of Credit has the meaning provided in Section 5-102 of the UCC.
ARTICLE II
SECURITY INTEREST
     SECTION 2.1. Grant of Security Interest . (a) Parent hereby grants, assigns and pledges to the Collateral Agent, for its benefit and the ratable benefit of the Lenders and each other Protected Party, a continuing first priority security interest in all of Parent’s following property, whether now or hereafter existing, owned or acquired by Parent, and wherever located (collectively, the “ Parent Collateral ”):
     (i) the Borrower’s Capital Stock; and
     (ii) all Proceeds of the Collateral described in clause (i) above, provided that notwithstanding any other provision to the contrary, the Parent Collateral will not include any distribution to the Parent, unless such distribution is in breach of the Warehouse Agreement.
     (b) Each Grantor (other than Parent) hereby grants, assigns and pledges to the Collateral Agent, for its benefit and the ratable benefit of the Lenders and each other Protected Party, a continuing first priority security interest in all of such Grantor’s following property, whether now or hereafter existing, owned or acquired by such Grantor, and wherever located (in respect of the Borrower, the “ Borrower Collateral ” and, in respect of any Aircraft Subsidiary, the “ AS Collateral ”):
     (i) Accounts;
     (ii) Chattel Paper;
     (iii) Commercial Tort Claims listed on Item I of Schedule I (as such schedule may be amended or supplemented from time to time);
     (iv) Deposit Accounts;
     (v) Documents;
     (vi) General Intangibles and any Derivatives Agreement;
     (vii) Goods (including but not limited to all Equipment, Fixtures and Inventory) together with all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor;
     (viii) Instruments;
     (ix) Investment Property (including, but not limited to Certificated Securities, Uncertificated Securities and the Capital Stock of any Aircraft Subsidiary);

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[Pledge and Security Agreement]
     (x) Letter-of-Credit Rights and Letters of Credit;
     (xi) Supporting Obligations;
     (xii) Aircraft (including but not limited to Aircraft described in Schedule II and/or any Additional Collateral Certificate that may be executed from time to time), Leases (including but not limited to Leases described on Schedule II and/or any Additional Collateral Certificate that may be executed from time to time), Related Property, Title Warranty Agreements and Depository Accounts;
     (xiii) money (as such term is defined in Article 1 of the UCC) of every jurisdiction whatsoever;
     (xiv) all books, records, writings, databases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this clause (b) ;
     (xv) its interest in each of the Loan Documents;
     (xvi) all Proceeds of the Collateral described in clause (i) through (xv) above and, to the extent not otherwise included, (A) all payments under insurance (whether or not the Collateral Agent is the loss payee thereof) and (B) all tort claims; and
     (xvii) all other property and rights of every kind and description and interests therein, including all property and rights listed in or otherwise described in any AS Joinder and Security Agreement Supplement.
     Notwithstanding the foregoing, the terms “Borrower Collateral” or “AS Collateral” shall not include (1) such Grantor’s real property interests (including fee real estate, leasehold interests and fixtures); (2) any Excepted Payments; (3) any Collateral that was released from the Lien of the Security Documents pursuant to the Warehouse Agreement, including Section 11.23 thereto; (4) any amounts distributed to or at the direction of the Borrower pursuant to clause eleventh of Section 3.03(a) of the Warehouse Agreement, clause eleventh of Section 3.03(b) of the Warehouse Agreement or clause tenth of Section 3.03(c) of the Warehouse Agreement; or (5) any asset, the granting of a security interest which would be void or illegal under any applicable governmental law, rule or regulation, or pursuant thereto would result in, or permit the termination of, such asset.
     SECTION 2.2. Security for Obligations . This Security Agreement and the Collateral in which the Collateral Agent is granted a security interest hereunder by the Grantors for its benefit and for the benefit of the Protected Parties secure the payment and performance of all of the Obligations.
     SECTION 2.3. Grantors Remain Liable . Anything herein to the contrary notwithstanding:

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     (a) the Grantors will remain liable under any contracts and agreements included in the related Collateral to the extent set forth therein;
     (b) the exercise by the Collateral Agent of any of its rights hereunder will not release any Grantor from any of its duties or obligations under any such contracts or agreements included in the related Collateral; and
     (c) no Protected Party will have any obligation or liability under any contracts or agreements included in the related Collateral by reason of this Security Agreement, nor will any Protected Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to present or file any claim or take any action to collect or enforce any claim for payment assigned hereunder.
     SECTION 2.4. Assignment Rights . Each Grantor acknowledges that, subject to Section 11.23 of the Warehouse Agreement, the assignments for security herein, in each AS Joinder and Security Agreement Supplement, in each Lease Assignment, in each Mortgage and in each other Security Document are irrevocable and agrees that it will not permit the Servicer or any Aircraft Subsidiary, until any such Collateral is released in accordance with this Security Agreement and the Warehouse Agreement, to take any action as “lessor” under any Lease or otherwise which is inconsistent with this Agreement or any other Loan Document, make any other assignment, designation or direction inconsistent herewith or therewith and that any assignment, designation or direction inconsistent herewith or therewith shall be void.
     SECTION 2.5. Security Interest Absolute, Etc. This Security Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable grant of security interest, and shall remain in full force and effect until the Termination Date. Except as provided herein, all rights of the Protected Parties and the security interests granted to the Collateral Agent (for its benefit and the ratable benefit of each other Protected Party) hereunder, and all obligations of the Grantors hereunder, shall, in each case, be absolute, unconditional and irrevocable irrespective of:
     (a) any lack of validity, legality or enforceability of any Loan Document or any Lease Document;
     (b) the failure of any Protected Party (i) to assert any claim or demand or to enforce any right or remedy against any Grantor or the Servicer or any other Person under the provisions of any Loan Document or any Lease Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Obligation;
     (c) any change in the time, manner or place of payment of, or in any other term of, all or any part of any Obligation, or any other extension, compromise or renewal of any Obligation;
     (d) any reduction, limitation, impairment or termination of any Obligation for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each Grantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the

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[Pledge and Security Agreement]
invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligation or otherwise;
     (e) any amendment to, rescission, waiver, or other modification of, or any consent to or departure from, any of the terms of any Loan Document;
     (f) any addition, exchange or release of any Collateral, or any surrender or non-perfection of any Collateral, or any amendment to or waiver or release or addition to, or consent to or departure from, any other guaranty held by any Protected Party securing any Obligation; or
     (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Grantor or the Servicer, any surety or any guarantor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
     In order to induce the Protected Parties to enter into the Loan Documents and make Loans thereunder, to induce the Lenders to enter into any Derivatives Agreements, each Grantor (in the case of the Parent and each Aircraft Subsidiary, as to itself only and in the case of the Borrower, as to itself and the Aircraft Subsidiaries only) represents and warrants on the Closing Date and each Transfer Date (except as otherwise specified in an AS Joinder and Security Agreement Supplement in form and substance acceptable to the Agent) to each of the Collateral Agent and each Protected Party as set forth below.
     SECTION 3.1. As to Capital Stock of the Aircraft Subsidiaries and Investment Property .
     (a) With respect to any Aircraft Subsidiary that is
     (i) a corporation, business trust, joint stock company or similar Person, all Capital Stock issued by such Person is duly authorized and validly issued, fully paid and non-assessable, and represented by a certificate; and
     (ii) a partnership or limited liability company, no Capital Stock issued by such Person (A) is dealt in or traded on securities exchanges or in securities markets, (B) expressly provides that such Capital Stock is a security governed by Article 8 of the UCC (nor does any Organic Document of such Person so provide) or (C) is held in a Securities Account, except for Capital Stock (x) for which the Collateral Agent is the registered owner or (y) with respect to which the issuer has agreed in an authenticated record with each applicable Grantor and the Collateral Agent to comply with any instructions of the Collateral Agent without the consent of such Grantor.
     (b) Each Grantor has delivered all Certificated Securities constituting Collateral held by such Grantor on the Closing Date and on each Transfer Date to the Collateral Agent, together with duly executed undated blank stock powers, or other equivalent instruments of transfer requested by and acceptable to the Collateral Agent.

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     (c) With respect to Uncertificated Securities constituting Collateral owned by any Grantor, such Grantor has caused the issuer thereof either to (i) register the Collateral Agent as the registered owner of such security or (ii) agree in an authenticated record with such Grantor and the Collateral Agent that such issuer will comply with instructions with respect to such security originated by the Collateral Agent without further consent of such Grantor.
     (d) The Parent is pledging 100% of the issued and outstanding Capital Stock of the Borrower to the Collateral Agent hereunder. The percentage of the issued and outstanding Capital Stock of each Aircraft Subsidiary pledged by each Grantor hereunder is as set forth in the applicable AS Joinder and Security Agreement Supplement.
     SECTION 3.2. Grantor Name, Location, Etc .
     (a) The jurisdiction in which each Grantor is located for purposes of Sections 9-301 and 9-307 of the UCC is set forth in Item A of Schedule I , in the case of the Parent and the Borrower, and in the applicable AS Joinder and Security Agreement Supplement, in the case of each Aircraft Subsidiary.
     (b) Each location where a secured party would have filed a UCC financing statement (or continued a previously filed UCC financing statement) in the five years prior to the date hereof to perfect a security interest in Equipment, Inventory and General Intangibles owned by such Grantor is set forth in Item B of Schedule I , in the case of the Parent and the Borrower, and in the applicable AS Joinder and Security Agreement Supplement, in the case of each Aircraft Subsidiary.
     (c) The Grantors do not have any trade names other than those set forth in Item C of Schedule I , in the case of the Parent and the Borrower, and in the applicable AS Joinder and Security Agreement Supplement, in the case of each Aircraft Subsidiary.
     (d) During the four months preceding the date it becomes a party to this Agreement, no Grantor has been known by any legal name different from the one set forth on the signature page hereto, nor has such Grantor been the subject of any merger or other corporate reorganization (except for initial incorporation or organization), except as set forth in Item D of Schedule I , in the case of the Parent and the Borrower, and in the applicable AS Joinder and Security Agreement Supplement, in the case of each Aircraft Subsidiary.
     (e) With respect to each Grantor organized in the United States, its federal taxpayer identification number is (and, during the four months preceding the date it becomes a party to this Agreement, such Grantor has not had a federal taxpayer identification number different from that) set forth in Item E of Schedule I , in the case of the Parent and the Borrower, and in the applicable AS Joinder and Security Agreement Supplement, in the case of each Aircraft Subsidiary.
     (f) No Grantor other than the Parent is a party to any federal, state or local government contract except as set forth in Item F of Schedule I , in the case of the

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Borrower, and in the applicable AS Joinder and Security Agreement Supplement, in the case of each Aircraft Subsidiary.
     (g) No Grantor other than the Parent maintains any Deposit Accounts, Securities Accounts or Commodity Accounts (other than accounts established pursuant to the Depository Agreement) with any Person, in each case, except as set forth on Item G of Schedule I , in the case of the Borrower, and in the applicable AS Joinder and Security Agreement Supplement, in the case of each Aircraft Subsidiary.
     (h) No Grantor other than the Parent is the beneficiary of any letters of credit, except as set forth on Item H of Schedule I , in the case of the Borrower, and in the applicable AS Joinder and Security Agreement Supplement, in the case of each Aircraft Subsidiary, and such other letters of credit which comply with Section 4.4.
     (i) The name set forth on the signature page attached hereto or the applicable AS Joinder and Security Agreement Supplement is the true and correct legal name (as defined in the UCC) of each Grantor.
     (j) Each Grantor other than the Parent has obtained a legal, valid and enforceable consent of each issuer of any letter of credit addressed to it to the assignment of the Proceeds of such letter of credit to the Collateral Agent and no Grantor has consented to, and is otherwise unaware of, any Person (other than the Collateral Agent pursuant hereto) having control (within the meaning of Section 9-104 of the UCC) over, or any other interest in any of such Grantor’s rights in respect thereof.
     SECTION 3.3. Aircraft, Leases and Related Property . The Aircraft and Leases owned by the applicable Grantor other than the Parent are as set forth on Schedule II , in the case of the Borrower, and in the applicable Additional Collateral Certificate, in the case of each Aircraft Subsidiary.
     SECTION 3.4. Ownership, No Liens, Etc. Each Grantor owns its Collateral free and clear of any Lien, except for Permitted Liens. No effective UCC financing statement or other filing similar in effect covering all or any part of such Collateral authorized by any ALC Party is on file in any recording office, except those filed in favor of the Collateral Agent relating to this Security Agreement, Permitted Liens or Liens that are subordinated to the Liens of this Security Agreement or as to which a duly authorized termination statement relating to such UCC financing statement or other instrument has been delivered to the Collateral Agent. There exist no Liens (other than Permitted Liens) on any of the Collateral that are prior to the Liens created by this Security Agreement.
     SECTION 3.5. Sole Entitlement Holder . Each Grantor other than the Parent is the sole entitlement holder of its Securities Accounts and no other Person (other than the Collateral Agent pursuant to this Security Agreement or the Depository Agreement) has control or possession of, or any other interest in, any of its (other than the Parent’s) Securities Accounts or any other securities or property credited thereto.
     SECTION 3.6. Negotiable Documents, Instruments and Chattel Paper . Subject to Section 5.02(k) of the Warehouse Agreement, each Grantor other than the Parent has delivered to

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the Collateral Agent possession of all originals of all Documents, Instruments, Promissory Notes, and tangible Chattel Paper other than letters of credit or bank guarantees that constitute Collateral and are owned and held by such Grantor on the date such Grantor becomes a party to this Agreement, or, with respect to such property or rights that become Collateral on a later date, promptly after such later date.
     SECTION 3.7. Validity, Etc .
     (a) This Security Agreement creates a valid security interest in the Collateral securing the payment of the Obligations.
     (b) Each Grantor has filed or caused to be filed all UCC-1 financing statements in the filing office in the “location” (as such term is defined in Section 9-307 of the UCC) of such Grantor as listed in Item A of Schedule I , in the case of the Parent and the Borrower, and in the applicable AS Joinder and Security Agreement Supplement, in the case of each Aircraft Subsidiary necessary to perfect the Collateral Agent’s security interest with respect to any Collateral for which a security interest can be perfected by filing a UCC-1 financing statement under the UCC (collectively, the “ Filing Statements ”) (or has authenticated and delivered to the Collateral Agent the Filing Statements suitable for filing in such offices), has registered with the International Registry an International Interest related to the Aircraft with respect to the Lien of the Security Agreement, and has taken all other
     (i) actions necessary for the Collateral Agent to obtain control of the Collateral as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC to the extent applicable; and
     (ii) actions necessary to perfect the Collateral Agent’s security interest with respect to any Collateral evidenced by a certificate of ownership; provided that no representation or warranty is being given in this clause (b)(ii) as to the perfection of any security interest in any Aircraft or any Engines, other than with respect to such security interests as may be deemed to be perfected (A) under the UCC by the filing of a financing statement or (B) under the Cape Town Convention by the registration of an International Interest with the International Registry.
     (c) The security interests created under this Security Agreement constitute a perfected security interest in the Collateral in favor of the Collateral Agent, prior to all other than Permitted Liens; provided that no representation or warranty is being given in this clause (c) as to the perfection of any security interest in any Aircraft or any Engines, other than as set forth above in clause (b)(ii) of this Section 3.7.
     SECTION 3.8. Authorization, Approval, Etc. Except as have been obtained or made and are in full force and effect, no authorization, approval or other action by, and no notice to or filing with, any Governmental Entity or any other third party is required
     (a) for the grant by the Grantors of the security interests granted hereby or for the execution, delivery and performance of this Security Agreement, each Additional

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Collateral Certificate, each AS Joinder and Security Agreement Supplement, each Mortgage and each other Security Document by the Grantors;
     (b) for the perfection or maintenance of the security interests hereunder including the first priority nature of such security interest (subject to Permitted Liens) or the exercise by the Collateral Agent of its rights and remedies hereunder, except for (i) the filing of the Filing Statements, (ii) with respect to Intellectual Property Collateral, the recordation of any agreements with the U.S. Patent and Trademark Office or the U.S. Copyright Office, or (iii) with respect to the Aircraft and Engines, the filing of a “mortgage” or similar instrument against (or otherwise registering a notice of Lien with an Aviation Authority or the International Registry) such Aircraft and Engines or compliance with applicable security interest requirements of the laws of jurisdictions other than the United States; or
     (c) for the exercise by the Collateral Agent of the voting or other rights provided for in this Security Agreement, or the remedies in respect of the Collateral pursuant to this Security Agreement, except with respect to any securities issued by the Borrower or an Aircraft Subsidiary, (i) as may be required in connection with a disposition of such securities by laws affecting the offering and sale of securities generally, and (ii) any “change of control” or similar filings required by state licensing agencies.
     SECTION 3.9. Best Interests . It is in the best interests of each Aircraft Subsidiary to execute this Security Agreement inasmuch as such Grantor will, as a result of being a Subsidiary of the Borrower, derive substantial direct and indirect benefits from the Loans and other extensions of credit made from time to time to the Borrower by the Lenders pursuant to the Warehouse Agreement, and each Aircraft Subsidiary agrees that the Protected Parties are relying on this representation in agreeing to make such Loans and other extensions of credit pursuant to the Warehouse Agreement to the Borrower.
ARTICLE IV
COVENANTS
     Each Grantor covenants and agrees that, subject to Section 19 of the AS Joinder and Security Agreement Supplement, until the occurrence of the Termination Date such Grantor (in the case of the Parent and each Aircraft Subsidiary, as to itself only and in the case of the Borrower, as to itself and the Aircraft Subsidiaries only) will perform, comply with and be bound by the following obligations to the extent set forth below.
     SECTION 4.1. As to Investment Property, Etc .
     SECTION 4.1.1. Capital Stock of Aircraft Owning Subsidiaries . Unless otherwise agreed by the Agent acting at the direction of the Majority Lenders, the Borrower will not allow any Aircraft Subsidiary:
     (a) that is a corporation, business trust, joint stock company or similar Person, to issue Uncertificated Securities, other than Aircraft Lending Subsidiaries that are

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organized under the laws of Luxembourg or as otherwise agreed by the Agent in its sole discretion;
     (b) that is a partnership or limited liability company, to (i) issue Capital Stock that is to be dealt in or traded on securities exchanges or in securities markets, (ii) expressly provide in its Organic Documents that its Capital Stock is a security governed by Article 8 of the UCC, or (iii) place such Aircraft Subsidiary’s Capital Stock in a Securities Account; and
     (c) to issue Capital Stock in addition to or in substitution for the Capital Stock pledged hereunder, except to the Borrower (and such Capital Stock is immediately pledged and delivered to the Collateral Agent pursuant to the terms of this Security Agreement).
     SECTION 4.1.2. Investment Property (other than Certificated Securities); Deposit Accounts .
     (a) With respect to any Deposit Accounts, Securities Accounts, Commodity Accounts, Commodity Contracts or Security Entitlements constituting Investment Property owned or held by any Grantor other than the Parent, such Grantor will cause the intermediary maintaining such Investment Property to execute a Control Agreement relating to such Investment Property pursuant to which such intermediary agrees to comply with the Collateral Agent’s instructions with respect to such Investment Property without further consent by such Grantor.
     (b) With respect to any Uncertificated Securities (other than Uncertificated Securities credited to a Securities Account) constituting Investment Property owned or held by any Grantor other than the Parent, such Grantor will cause the issuer of such securities to either (i) register the Collateral Agent as the registered owner thereof on the books and records of the issuer or (ii) execute a Control Agreement relating to such Investment Property pursuant to which the issuer agrees to comply with the Collateral Agent’s instructions with respect to such Uncertificated Securities without further consent by such Grantor.
     SECTION 4.1.3. Certificated Securities (Stock Powers) . Each Grantor agrees that all Certificated Securities that constitute Collateral that it has pledged hereunder, including the Capital Stock delivered by such Grantor pursuant to this Security Agreement, will be immediately pledged and delivered to the Collateral Agent pursuant to this Security Agreement and accompanied by duly executed undated blank stock powers, or other equivalent instruments of transfer reasonably acceptable to the Collateral Agent.
     SECTION 4.1.4. Continuous Pledge . Each Grantor will (subject to the terms of the Warehouse Agreement) deliver to the Collateral Agent and at all times keep pledged to the Collateral Agent pursuant hereto, on a first-priority (subject to Permitted Liens), perfected basis all Investment Property, all Distributions with respect thereto, all Payment Intangibles to the extent they are evidenced by a Document, Instrument, Promissory Note or Chattel Paper, and all interest and principal with respect to such Payment Intangibles, and all Proceeds and rights from

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time to time received by or distributable to such Grantor in respect of any of the foregoing, but only to the extent the foregoing constitutes Collateral. Each Grantor agrees that it will, promptly following receipt thereof, deliver to the Collateral Agent possession of all originals of negotiable Documents, Instruments, Promissory Notes and Chattel Paper that constitute Collateral and that it acquires following the Closing Date.
     SECTION 4.1.5. Voting Rights; Dividends, Etc. Each Grantor agrees:
     (a) (i) except as otherwise permitted under Section 11.23(a) of the Warehouse Agreement, not to exercise any voting or consensual rights with respect to the commencement of any voluntary Insolvency Proceeding with respect to any Aircraft Subsidiary or its Indebtedness under any Insolvency Law now or hereafter in effect or consent to the entry of an order for relief in an involuntary Insolvency or Liquidation Proceeding or seeking the appointment of a trustee, receiver, liquidator, sequestrator, assignee, custodian or other similar official for any Aircraft Subsidiary or any part of its property without obtaining the prior written consent of the Collateral Agent who shall solely act at the direction of and after consultation with the Agent, (ii) that such Grantor shall not amend or approve any amendment to or modification, alteration or repeal of the Organic Document or other similar agreement of any Aircraft Owing Subsidiary without obtaining the prior written consent of the Agent which consent shall not be unreasonably withheld; and (iii) that such Grantor shall not increase the number of directors, members or beneficiaries or modify in any way the composition of the board of directors, members, beneficiaries or trustees of the Borrower or any Aircraft Subsidiary, as the same exists as of the date the Borrower or such Aircraft Subsidiary becomes a party hereto without obtaining the prior written consent of the Agent which consent shall not be unreasonably withheld;
     (b) with respect to Collateral that a Grantor has pledged hereunder (in the case of the Parent and each Aircraft Subsidiary, as to itself only and in the case of the Borrower, as to itself and the Aircraft Subsidiaries only), subject to the provisions of the Warehouse Agreement and the Depository Agreement, promptly upon receipt of notice of the occurrence and continuance of a Facility Event of Default from the Collateral Agent and without any request therefor by the Collateral Agent, so long as such Facility Event of Default shall continue, to deliver (properly endorsed where required hereby or requested by the Collateral Agent) to the Collateral Agent all Dividends and Distributions distributed during the occurrence and continuance of such Facility Event of Default with respect to Investment Property constituting such Collateral, all interest, principal, other cash payments on Payment Intangibles constituting such Collateral, and all Proceeds of such Collateral, in each case thereafter received by such Grantor, all of which shall be held by the Collateral Agent as additional Collateral; and
     (c) with respect to Collateral consisting of general partner interests or limited liability company interests, during the continuance of a Facility Event of Default and upon receipt of written notice from the Collateral Agent of the Collateral Agent’s intention to exercise its voting power under this clause, promptly to modify the Organic Documents of such partnership or limited liability company to admit the Collateral Agent as a general partner or member,

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     (i) that the Collateral Agent may exercise (to the exclusion of such Grantor) the voting power and all other incidental rights of ownership with respect to any Investment Property constituting Collateral and such Grantor hereby grants the Collateral Agent an irrevocable proxy, exercisable under such circumstances, to vote such Investment Property; and
     (ii) to deliver promptly to the Collateral Agent such additional proxies and other documents as may be necessary to allow the Collateral Agent to exercise such voting power.
Subject to the provisions of the Warehouse Agreement and the Depository Agreement, all dividends, Distributions, interest, principal, cash payments, Payment Intangibles and Proceeds that may at any time and from time to time be held by such Grantor, but which such Grantor is then obligated to deliver to the Collateral Agent, shall, until delivery to the Collateral Agent, be held by such Grantor separate and apart from its other property in trust for the Collateral Agent.
     SECTION 4.2. Change of Name, Etc. No Grantor will change its name or place of incorporation or organization or federal taxpayer identification number or legal form or “location” for purposes of the UCC, except upon 30 days’ prior written notice to the Collateral Agent.
     SECTION 4.3. As to Accounts .
     (a) Each Grantor shall instruct all Persons obligated on any Account or Payment Intangible constituting Collateral to make a payment thereon to the Concentration Accounts as provided in the Depository Agreement.
     (b) Subject to the provisions of the Warehouse Agreement and the Depository Agreement, all Proceeds of Collateral received by such Grantor shall be delivered in kind to the Depositary for deposit in the Depository Accounts, and such Grantor shall not commingle any such Proceeds, and shall hold separate and apart from all other property, all such Proceeds in express trust for the benefit of the Collateral Agent until delivery thereof is made to the Depository Accounts.
     (c) Subject to the provisions of the Warehouse Agreement and the Depository Agreement, the Collateral Agent shall have the right to apply any amount in the Depository Accounts to the payment of any Obligations which are due and payable, in accordance with Section 3.03 of the Warehouse Agreement.
     (d) With respect to each of the Depository Accounts, it is hereby confirmed and agreed that (i) deposits in such Depository Accounts are subject to a security interest as contemplated hereby, (ii) such Depository Accounts shall be under the control of the Collateral Agent and (iii) subject to the provisions of the Warehouse Agreement and the Depository Agreement, the Collateral Agent shall have the sole right of withdrawal over such Depository Account.

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     SECTION 4.4. As to Letter-of-Credit Rights .
     (a) Each Grantor other than the Parent, by granting a security interest in its Letter-of-Credit Rights to the Collateral Agent, intends to (and hereby does) collaterally assign to the Collateral Agent its rights (including its contingent rights) to the Proceeds of all Letter-of-Credit Rights of which it is or hereafter becomes a beneficiary or assignee. Such Grantor will promptly use its commercially reasonable efforts to cause the issuer of each letter of credit and each nominated person (if any) with respect thereto to consent to such assignment of the Proceeds thereof in a consent agreement in form and substance satisfactory to the Collateral Agent and deliver written evidence of such consent to the Collateral Agent.
     (b) Upon the occurrence and during the continuance of a Facility Event of Default, such Grantor will, promptly upon request by the Collateral Agent, (i) notify (and such Grantor hereby authorizes the Collateral Agent to notify) the issuer and each nominated person with respect to each of the Letters of Credit that the Proceeds thereof have been assigned to the Collateral Agent hereunder and any payments due or to become due in respect thereof are to be made directly to the Collateral Agent and (ii) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit.
     SECTION 4.5. As to Commercial Tort Claims . Each Grantor other than the Parent covenants and agrees that, until the occurrence of the Termination Date, with respect to any Commercial Tort Claim hereafter arising, it shall deliver to the Collateral Agent a completed supplement to this Agreement, in form and substance satisfactory to the Collateral Agent, together with all supplements to schedules thereto identifying such new Commercial Tort Claims.
     SECTION 4.6. Electronic Chattel Paper and Transferable Records . If any Grantor other than the Parent at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as that term is defined in Section 201 of the U.S. Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the U.S. Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, with a value in excess of $1,000,000, such Grantor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, shall take such action as the Collateral Agent may request to vest in the Collateral Agent control under Section 9-105 of the UCC (if applicable) of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act (if applicable) or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so (and if) in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for such Grantor to make alterations to the electronic chattel paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the U.S. Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the U.S. Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless a Facility Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic chattel paper or transferable record.

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     SECTION 4.7. Further Assurances, Etc. Each Grantor agrees that, from time to time at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary (other than with respect to taking action to “mortgage” Aircraft and Engines in any manner in addition to the Security Documents (unless such action is necessary or, in the opinion of the Agent, desirable, for the registration of an International Interest under the Cape Town Convention) or that the Collateral Agent may request, in order to perfect, preserve and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, such Grantor will
     (a) from time to time upon the request of the Collateral Agent, promptly deliver to the Collateral Agent such stock powers, instruments and similar documents, satisfactory in form and substance to the Collateral Agent, with respect to such Collateral as the Collateral Agent may reasonably request and will, from time to time upon the request of the Collateral Agent, after the occurrence and during the continuance of any Facility Event of Default, promptly transfer any securities constituting Collateral into the name of any nominee designated by the Collateral Agent; if any Collateral shall be evidenced by an Instrument, negotiable Document, Promissory Note or tangible Chattel Paper, deliver and pledge to the Collateral Agent hereunder such Instrument, negotiable Document, Promissory Note or tangible Chattel Paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent;
     (b) register and/or file (and hereby authorize the Collateral Agent to register and/or file, which authorization shall not be construed as an obligation of the Collateral Agent) such International Interests (including any “mortgages” or similar instruments with respect to the Aircraft and Engines which may be necessary or, in the opinion of the Agent, desirable, for the registration thereof), Filing Statements or continuation statements, or amendments thereto, and such other instruments or notices (including any assignment of claim form under or pursuant to the federal assignment of claims statute, 31 U.S.C. § 3726, any successor or amended version thereof or any regulation promulgated under or pursuant to any version thereof) as may be necessary or that the Collateral Agent may reasonably request in order to perfect and preserve the security interests and other rights granted or purported to be granted to the Collateral Agent hereby under the laws of any applicable jurisdiction or under the Cape Town Convention;
     (c) deliver to the Collateral Agent and at all times keep pledged to the Collateral Agent pursuant hereto, on a first-priority, perfected basis, at the request of the Collateral Agent, all Investment Property constituting Collateral, all Dividends and Distributions with respect thereto, and all interest and principal with respect to Promissory Notes, and all Proceeds and rights from time to time received by or distributable to such Grantor in respect of any of the foregoing Collateral;
     (d) not take or omit to take any action the taking or the omission of which would result in any impairment or alteration of any obligation of the maker of any Payment Intangible or other Instrument constituting Collateral;

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     (e) not create any tangible Chattel Paper constituting Collateral without placing a legend on such tangible Chattel Paper similar to the Chattel Paper Legend or as otherwise acceptable to the Collateral Agent indicating that the Collateral Agent has a security interest in such Chattel Paper;
     (f) furnish to the Collateral Agent, from time to time at the Collateral Agent’s reasonable request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail; and
     (g) do all things reasonably requested by the Collateral Agent in accordance with this Security Agreement in order to enable the Collateral Agent to have and maintain control over the Collateral consisting of Investment Property, Deposit Accounts, Electronic Chattel Paper and, subject to the Grantors’ limited obligations under Section 4.4(a) , Letter-of-Credit-Rights.
With respect to the foregoing and the grant of the security interest hereunder, each Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral. Each Grantor agrees that a carbon, photographic or other reproduction of this Security Agreement or any UCC financing statement covering the Collateral or any part thereof shall be sufficient as a UCC financing statement where permitted by law. Each Grantor other than the Parent hereby authorizes the Collateral Agent to file financing statements describing as the collateral covered thereby “all of the debtor’s personal property or assets” or words to that effect, notwithstanding that such wording may be broader in scope than the Collateral described in this Security Agreement. Nothing in the foregoing clauses (a) through (g) shall obligate any Grantor to file or record any mortgages or other Liens over any Aircraft or Engine (other than as set forth in clause (b) above).
     SECTION 4.8. Deposit Accounts and Securities Accounts . Each Grantor other than the Parent will maintain all of its Deposit Accounts and Securities Accounts only with the Depositary pursuant to the Depository Agreement or with a depository institution that has entered into a Control Agreement in favor of the Collateral Agent.
     SECTION 4.9. Security Agreement Supplement; AS Joinder and Security Agreement Supplement . The Borrower will, and will cause each Subsidiary to, execute any documents, Filing Statements, supplements, agreements and instruments, and take all further action that is necessary to make the information contained herein (including the Schedules hereto) true and correct in all material respects, that may be required under Applicable Law, or that the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents in order to grant, preserve, protect and perfect the validity and first priority (subject to Permitted Liens) of the Liens created or intended to be created by the Loan Documents (except the perfection of any security interest in any Aircraft or any Engines under any Applicable Law other than to the extent permitted (a) by the filing of financing statements under Article 9 of the UCC or (b) under the Cape Town Convention by the registration of an International Interest with the International Registry). Each Grantor other than the Parent will (x) deliver a duly executed Additional Collateral Certificate with respect to each Aircraft of which it becomes the owner and each Lease related thereto and (y) cause any Subsidiary thereof

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subsequently acquired or organized, to deliver a duly executed AS Joinder and Security Agreement Supplement and a duly executed Additional Collateral Certificate with respect to each Aircraft of which it is the owner and each Lease related thereto. In addition, upon any change or addition to any of the information contained in the Schedules hereto and to the AS Joinder and Security Agreement Supplements and Additional Collateral Certificate resulting from any transaction not prohibited by the Loan Documents, the applicable Grantor other than the Parent will deliver to the Collateral Agent a certified supplement to such Schedules, AS Joinder and Security Agreement Supplement or Additional Collateral Certificate reflecting such changes and this Security Agreement shall be so supplemented and modified to reflect such changes and additions.
ARTICLE V
THE COLLATERAL AGENT
     SECTION 5.1. Appointment of Collateral Agent .
     (a) (i) The Agent hereby appoints Deutsche Bank Trust Company Americas as Collateral Agent hereunder, and the Agent hereby authorizes the Collateral Agent to act as its agent in accordance with the terms of this Security Agreement and the other Loan Documents to hold, administer and enforce its interests in the Collateral in accordance with the terms of this Security Agreement.
     (ii) The Collateral Agent agrees to act upon the express conditions contained in this Security Agreement.
     (iii) The Collateral Agent agrees to comply with its obligations under this Agreement and agrees that (A) any action to be taken not otherwise required under this Security Agreement or any other Loan Document or consent to be given under this Security Agreement or any other Loan Document by the Collateral Agent shall only be taken or given, as the case may be, upon direction of the Agent (B) any action to be taken not otherwise required under any Loan Document (other than the Security Agreement or the Depository Agreement) or consent to be given under any such Loan Document by the Collateral Agent shall only be taken or given, as the case may be, upon the direction of the Agent, (C) any notice received by the Collateral Agent under this Security Agreement or any other Loan Document from any party other than the Agent shall be promptly delivered to the Agent by the Collateral Agent, and (D) upon the written instructions at any time and from time to time of the Agent, the Collateral Agent shall take any action that it is otherwise permitted to take under this Security Agreement and the other Loan Documents.
     (iv) The Collateral Agent, upon receipt of documents or instruments furnished to the Collateral Agent pursuant to the provisions of this Security Agreement or the other Loan Documents shall be under a duty to examine the same to determine whether or not such instruments or documents conform to the requirements of this Agreement or the other Loan Documents, as the case may be.

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     (v) Whenever any provision of this Security Agreement or any of the other Loan Documents provides that a matter (w) must be “satisfactory” or “reasonably satisfactory” to the Collateral Agent, (x) shall be “as the Collateral Agent shall determine”, (y) subject to the Collateral Agent’s consent or approval, or (z) or otherwise subject to the Collateral Agent’s discretion, however expressed, then the Collateral Agent shall act at the direction of the Agent, in taking action based in decisions using such discretion.
     (vi) The provisions of this Section 5.1 , except for Section 5.1(f) , are solely for the benefit of the Agent and the other Protected Parties and no Grantor or Affiliate of any Grantor shall have any rights under any of such provisions. In performing its functions and duties under this Security Agreement and the other Loan Documents, the Collateral Agent shall act solely as an agent of the Protected Parties, and shall not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for any Grantor or Affiliate of any Grantor.
     (vii) The Collateral Agent may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care, and shall not be responsible for any willful misconduct or negligence on the part of any agent, attorney, custodian or nominee so appointed.
     (b) With the delivery of this Security Agreement, the Agent shall furnish to the Collateral Agent, and from time to time thereafter may furnish to the Collateral Agent, at the Agent’s discretion, or upon the Collateral Agent’s request, a certificate (an “ Agent Incumbency Certificate ”) of a responsible officer of the Agent certifying as to the incumbency and specimen signatures of the officers of the Agent and the attorney-in-fact and agents of the Agent authorized to give written notices on behalf of the Agent hereunder. Until the Collateral Agent receives a subsequent Agent Incumbency Certificate, it shall be entitled to rely conclusively and shall be fully protected in such reliance on the last Agent Incumbency Certificate delivered to it hereunder.
     (c) The Agent shall notify the Collateral Agent when the Agent has actual notice that a Facility Default, Facility Event of Default, Amortization Event or a Servicer Replacement Event has occurred.
     (d) The Grantors may from time to time deliver or cause to be delivered to the Collateral Agent Related Property, Capital Stock, Leases and certain related documents (“ Safe Keeping Documents ”) and the Collateral Agent shall segregate and maintain continuous custody of all Safe Keeping Documents received by it in secure and fireproof facilities in accordance with its customary and industry practices for such custody. The Collateral Agent shall execute and deliver to the Agent promptly after the Collateral Agent’s receipt of each Safe Keeping Document, a receipt acknowledging possession of each such Safe Keeping Document delivered. Upon reasonable notice to the Collateral Agent, the Agent and its agents, accountants, attorneys and auditors will be permitted during normal business hours to examine the Safe Keeping Documents and any other

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records, paper or documents relating to any or all of the Safe Keeping Documents. The Collateral Agent will maintain insurance that provides coverage for the Safe Keeping Documents in accordance with standard practice in the industry.
     (e) The Collateral Agent may also receive from a Grantor or the Servicer on a monthly basis a contact list of the Lessees. The Collateral Agent shall maintain such list for the Agent.
     (f) The Collateral Agent agrees that unless a Facility Event of Default shall have occurred and be continuing and the Collateral Agent shall give the notice referred to in Section 4.1.5(b) , such Grantor will have the exclusive voting power with respect to any Investment Property constituting Collateral and the Collateral Agent will, upon the written request of such Grantor, promptly deliver such proxies and other documents, if any, as shall be reasonably requested by such Grantor which are necessary to allow such Grantor to exercise that voting power; provided that no vote shall be cast, or consent, waiver, or ratification given, or action taken by such Grantor that would impair any such Collateral or be inconsistent with or violate any provision of any Loan Document.
     SECTION 5.2. Actions by Collateral Agent .
     (a) Nothing contained in this Security Agreement or any other Loan Document shall require the Collateral Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers unless it is indemnified to its reasonable satisfaction. The Collateral Agent shall not be required to take any action under this Security Agreement, nor shall any other provision of this Security Agreement be deemed to impose a duty on the Collateral Agent to take any action, if the Collateral Agent shall have been advised by counsel that such action is contrary to the terms hereof or is otherwise contrary to law.
     (b) The Collateral Agent shall not have any duty or obligation to take or refrain from taking any action under, or in connection with, this Security Agreement or any other Loan Document, except as expressly provided by the terms of this Security Agreement or such other Loan Document and no implied duties or obligations shall be read into this Security Agreement or any other Loan Document against the Collateral Agent. The Collateral Agent agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Section 5.5 or otherwise) promptly take such action as may be necessary to duly discharge all Liens on any of the Collateral that result from claims against it in its individual capacity not related to its activities hereunder or any other Loan Document. The Collateral Agent shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with any direction of the Agent given under this Security Agreement or any other Loan Document.

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     SECTION 5.3. Replacement of Collateral Agent; Appointment of Successor .
     (a) Subject to clause (f) of this Section 5.3 , the Collateral Agent may resign at any time upon ninety (90) days’ prior notice to the Agent, such resignation to be effective upon the later of the date specified in such notice or the date a successor Collateral Agent has been appointed by the Agent or by a court (as provided in clause (e) of this Section 5.3 ) and has accepted such appointment. The Agent may remove the Collateral Agent for cause by so notifying the Collateral Agent and may appoint a successor Collateral Agent. Without limiting the generality of the foregoing, the Agent shall have cause to remove the Collateral Agent if (a) the Collateral Agent fails to satisfy or otherwise comply with Section 5.4 ; (b) the Collateral Agent fails to satisfy any of its material duties hereunder, (c) the Collateral Agent is subject to an Insolvency or Liquidation Proceeding; (d) a receiver or other public officer takes charge of the Collateral Agent or its property; or (e) the Collateral Agent otherwise becomes incapable of acting as a Collateral Agent.
     (b) If the Collateral Agent resigns or is removed or if a vacancy exists in the office of the Collateral Agent for any reason (the Collateral Agent in such event being referred to herein as the retiring Collateral Agent), the Agent shall promptly appoint a successor Collateral Agent.
     (c) Any corporation into which the Collateral Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Collateral Agent shall be a party, or any corporation to which substantially all the corporate trust business of the Collateral Agent may be transferred, shall, subject to the terms of Section 5.4 , be the Collateral Agent hereunder upon the prior written consent of the Agent.
     (d) A successor Collateral Agent shall deliver a written acceptance of its appointment as the Collateral Agent hereunder to the retiring Collateral Agent, the Agent and the Borrower, and the successor Collateral Agent shall have all the rights, powers and duties of the Collateral Agent under this Security Agreement and the other Loan Documents. The successor Collateral Agent shall mail a notice of its succession to the Agent. The retiring Collateral Agent shall promptly transfer all Collateral to the successor Collateral Agent, together with all of the retiring Collateral Agent’s rights under any and all of the Collateral held by it as the Collateral Agent to the successor Collateral Agent. All monies and other amounts owed to the retiring Collateral Agent shall be paid by the Borrower promptly upon demand of the retiring Collateral Agent.
     (e) If a successor Collateral Agent does not take office within forty-five (45) days after the retiring Collateral Agent resigns or is removed, the retiring Collateral Agent, the Agent or the Borrower may petition any court of competent jurisdiction for the appointment of a successor Collateral Agent.
     (f) Notwithstanding the foregoing, no resignation or removal of the Collateral Agent shall be effective unless and until a successor has been appointed.

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     SECTION 5.4. Collateral Agent Requirement; Eligibility . The Collateral Agent shall be a corporation or other institution organized and doing business under the laws of any State of the United States or the District of Columbia having a combined capital and surplus of at least $100,000,000 and shall not be a Competitor. Such institution shall be a citizen of the United States and shall be authorized under the laws of the United States or any State thereof or of the District of Columbia to exercise corporate trust powers and shall be subject to supervision or examination by federal, state or District of Columbia authorities. If such institution publishes reports of condition at least annually, pursuant to law or to the requirements of any of the aforesaid supervising or examining authorities, then, for the purposes of this Section 5.4 , the combined capital and surplus of such institution shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
     SECTION 5.5. Indemnification . The Borrower shall indemnify each Protected Party, and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact of the foregoing (collectively the “ Indemnitees ”), in each case whether or not otherwise indemnified, and save, protect, defend and hold each Indemnitee harmless from any and all liability, obligation, loss, damage, cost or expense (including reasonable attorneys’ fees and disbursements; provided that the indemnification for attorneys’ fees and disbursements under this Section 5.5 incurred in any judicial or administrative proceeding where the Borrower has assumed responsibility for and control thereof in accordance with the penultimate paragraph of this Section 5.5 shall be limited to one law firm for the applicable Indemnitees, unless an Indemnitee reasonably believes that it has rights or interests different from the other Indemnitees, or such representation could create, in the reasonable opinion of the Agent, any Lender or their counsel, a conflict of interest for such law firm, in which case such Indemnitee’s separate attorneys’ fees and expenses shall be indemnified), penalties, causes of action, suits, claims (including claims based on strict liability in tort or patent infringement) or judgments of whatsoever kind and nature (“ Losses ”) imposed on, incurred by or asserted against such Indemnitee in any way arising out of, relating to or resulting from or based upon (i) any Loan Document or any document contemplated thereby and payments made pursuant thereto or any transaction contemplated thereby or the exercise of rights and remedies thereunder, excluding any costs and expenses related to the transfer of a Loan, (ii) any breach by any Grantor or the Servicer of any Loan Document, (iii) any Lease Document or the exercise of rights and remedies thereunder, or any breach by a Lessee thereunder, (iv) any Aircraft, any Engine, any Part or any other portion of the Collateral or any Grantor’s acquisition, purchase, sale, selection, design, financing, condition, location, storage, modification, repair, maintenance, possession, registration, delivery, nondelivery, transportation, transfer, rental, lease, use, operation, control, ownership or disposition of any Aircraft, Engine, Part or any other portion of the Collateral or any interest therein and (v) with respect to any Protected Party which is the Collateral Agent or its Affiliates, participation in the transaction contemplated hereby.
     The Borrower shall, no later than ten (10) days following demand, reimburse any Indemnitee for any sum or sums expended with respect to any of the foregoing or, upon request from any Indemnitee, shall pay such amounts directly. Without duplication of any amounts payable under this Section 5.5 , any payment made to or on behalf of any Indemnitee pursuant to this Section 5.5 shall be adjusted to such amount as will, after taking into account all Taxes imposed with respect to the accrual or receipt of such payment (net of any Tax savings) (as the same may be increased pursuant to this sentence), equal the amount of the payment. To the

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extent that the Borrower in fact indemnifies any Indemnitee pursuant to the provisions of this Section 5.5 (other than in respect of Taxes), the Borrower shall be subrogated to such Indemnitee’s rights in the affected transaction and shall have a right to determine the settlement of claims therein.
     The indemnities contained in this Section 5.5 shall not be affected by and shall survive any termination of this Agreement, the Lease Assignment and each other Loan Document or the repayment of the Loans and the occurrence of the Termination Date.
     Notwithstanding any provisions of this Section 5.5 to the contrary, the Borrower shall not indemnify and hold harmless any Indemnitee under this Section 5.5 in respect of any (a) Taxes (except to the extent provided in the second paragraph of this Section 5.5 ), (b) Losses which would not have occurred but for the willful misconduct, bad faith or the gross negligence of such Indemnitee including without limitation the willful breach of any express obligation to the Borrower under the Loan documents; and (c) losses which result from, arise out of, or are attributable to a nonexempt prohibited transaction under ERISA or Section 4975 of the Code caused by the incorrectness of a Lender’s representation in Section 6.02 of the Warehouse Agreement or a breach of a Lender’s covenant in Section 8.03 of the Warehouse Agreement.
     If a claim of the type described above is made against an Indemnitee and such Indemnitee has notice thereof, such Indemnitee shall promptly, upon receiving such notice, give notice of such claim to the Borrower; provided that the failure to provide such notice shall not release the Borrower from any of its obligations hereunder except if and to the extent that such failure results in an increase in the Borrower’s indemnification obligations hereunder. The Borrower shall be entitled, at its sole cost and expense, acting through counsel reasonably acceptable to the relevant Indemnitee in any judicial or administrative proceeding that involves solely a claim of the type described in clause (iii) or (iv) of first paragraph of this Section 5.5 (other than with respect to Taxes), to assume responsibility for and control thereof. Notwithstanding anything in the foregoing to the contrary, the Borrower shall not be entitled to assume responsibility for and control of any such judicial or administrative proceedings: (w) while a Facility Default described in clause (ii) or (iii) of Section 9.01(h) of the Warehouse Agreement, Facility Event of Default, Amortization Event or Servicer Replacement Event shall have occurred and be continuing; (x) if such proceedings will involve any risk of criminal liability on the part of such Indemnitee or a material risk of the sale, forfeiture or loss of any part of the Collateral; (y) where the interests of the Borrower or any other ALC Party are adverse to such Indemnitee, as determined by counsel for such Indemnitee or (z) to the extent that the Indemnitee has defenses available to it which are not available to the Borrower and allowing the Borrower to assert such defenses will be prejudicial to the interests of such Indemnitee; provided that the limitation on the Borrower’s ability to control such judicial or administrative proceeding shall apply only to those aspects of such proceeding which address issues with respect to which such defenses are available.
     The relevant Indemnitee shall supply the Borrower with such information reasonably requested by the Borrower as is necessary or advisable for the Borrower to control or participate in any proceeding to the extent permitted by this Section 5.5 . Such Indemnitee shall not enter into a settlement or other compromise with respect to any covered claim without the prior written consent of the Borrower, which consent shall not be unreasonably withheld or delayed, unless such Indemnitee waives its right to be protected with respect to such covered claim.

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     SECTION 5.6. Collateral Agent Appointed Attorney-in-Fact . Each Grantor hereby irrevocably appoints the Collateral Agent its attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or as otherwise authorized, from time to time in the Collateral Agent’s discretion during the continuance of a Facility Event of Default, to take any action and to execute any instrument which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Security Agreement, including:
     (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;
     (b) the right to make claim for, receive and collect all Cash Flow, income, revenues, issues, profits, insurance proceeds, condemnation awards and other sums and Proceeds payable or receivable under any Lease or pursuant thereto (excluding Excepted Payments), to make all waivers and agreements, to give and receive all notices and other instruments, to take all action upon the happening of a Lease Event of Default under any Lease, including the commencement, conduct and consummation of proceedings at law or in equity as shall be permitted under any provision of any Lease or by Applicable Law, and to do all other things which the Borrower, any Aircraft Subsidiary or any “lessor” is or may become entitled to do under any Lease;
     (c) to receive, endorse, and collect any drafts or other Instruments, Documents and Chattel Paper constituting Collateral, in connection with clauses (a) and (b)  above;
     (d) to file any claims or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Agent with respect to any of the Collateral; and
     (e) to perform the affirmative obligations of such Grantor hereunder.
Each Grantor hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section is irrevocable and coupled with an interest. Upon the request of the Collateral Agent, each Grantor will provide documentation evidencing such power of attorney and such further powers of attorney on the same terms as set forth above.
     SECTION 5.7. Collateral Agent Has No Duty . The powers conferred on the Collateral Agent hereunder are solely to protect its interest (on behalf of itself and on behalf of the Protected Parties) in the Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or responsibility for
     (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Investment Property, whether or not the Collateral Agent has or is deemed to have knowledge of such matters, or

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     (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.
     SECTION 5.8. Reasonable Care . The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property.
ARTICLE VI
THE PROTECTED PARTIES
     SECTION 6.1. Prohibition on Contesting Liens . Each Protected Party agrees that it shall not (and hereby waives any right to) contest or support any other Person in contesting, in any proceeding (including any Insolvency or Liquidation Proceeding) the priority, validity or enforceability of a Lien held by the Collateral Agent on behalf of the above parties in the Collateral in the priority provided for hereunder, and the priority of payments from proceeds of Collateral set forth in clauses (a) through (c) of Section 3.03 of the Warehouse Agreement.
     SECTION 6.2. Insurance . The Agent shall have the sole and exclusive right, subject to the rights of the Grantors under the Loan Documents, to adjust settlement for any hull insurance policy covering the Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding affecting the Collateral pursuant to Section 7.8(a)(ii) of the Warehouse Agreement. All proceeds of any such hull policy and any such award if in respect to the Collateral shall be deposited in the Additional Collateral Account for the benefit of the Protected Parties.
     SECTION 6.3. Preference Issues . If the Agent or Collateral Agent, in each case on behalf of the Protected Parties, or any Protected Party is required in any Insolvency or Liquidation Proceeding or otherwise with respect to any Grantor to turn over or otherwise pay to the estate of any such Person any amount as a preference (a “ Recovery ”), then the Termination Date shall be deemed not to have occurred, the Obligations shall be reinstated to the extent of such Recovery and the Agent and Collateral Agent, in each case on behalf of the Protected Parties, or such Protected Party shall be entitled to the payment in full of such Obligations with respect to all such recovered amounts. If this Security Agreement or any other Loan Document shall have been terminated prior to such Recovery, each such Loan Document shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto from such date of reinstatement.
     SECTION 6.4. Reliance . The execution and delivery of the Loan Documents by the Protected Parties and all loans and other extensions of credit and all agreements made or deemed made on and after the date hereof by the Protected Parties to the Borrower shall be deemed to have been given and made in reliance upon this Security Agreement.
     SECTION 6.5. No Waiver of Lien Priorities .
     (a) To the fullest extent permitted under Applicable Law, no right of any party hereto to enforce any provision of this Security Agreement shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Grantor or by

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any act or failure to act by any other party (including the Collateral Agent acting on behalf of the other Protected Parties), or by any noncompliance by any Person with the terms, provisions and covenants of this Security Agreement, any of the Loan Documents, regardless of any knowledge thereof which any party may have or be otherwise charged with;
     (b) Each Protected Party agrees, to the fullest extent permitted under Applicable Law, that no Protected Party shall have any liability to any other, and each Protected Party, to the fullest extent permitted under Applicable Law, hereby waives any claim against any Protected Party arising out of any and all actions which such Protected Parties may take or permit or omit to take with respect to: (i) the Loan Documents (ii) the collection of the Obligations or (iii) the foreclosure upon, or sale, liquidation or other disposition of, the Collateral, but only so long as such acts or omissions do not contravene clauses (a) through (c) of Section 3.03 of the Warehouse Agreement.
     (c) Each Protected Party agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law or any other similar rights a junior secured creditor may have under Applicable Law.
     SECTION 6.6. No Proceedings Against Grantors . Each Protected Party hereby agrees that it will not institute against any Grantor, or join any other Person in instituting against any Grantor, any Insolvency or Liquidation proceeding from the Closing Date until one year plus one day following the Termination Date.
     SECTION 6.7. No Proceeding Against the Conduit Lenders . Each party hereto hereby agrees that it will not institute against any Conduit Lender, or join any other Person in instituting against any Conduit Lender, an Insolvency or Liquidation Proceeding from the Closing Date until one year plus one day following the last day on which all commercial paper notes and other publicly or privately placed indebtedness for borrowed money of such Conduit Lender shall have been indefeasibly paid in full.
ARTICLE VII
REMEDIES
     SECTION 7.1. Certain Remedies . Without limiting the rights of the Agent and the Collateral Agent under Section 7.4 , if any Facility Event of Default shall have occurred and be continuing and the Agent shall have declared, pursuant to Section 9.02 of the Warehouse Agreement, all of the outstanding principal amount of the Loans to be due and payable:
     (a) The Collateral Agent may exercise in respect of the Collateral or any other Collateral (as defined in the Warehouse Agreement), in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party under the UCC (whether or not the UCC applies to the affected Collateral or any other Collateral (as defined in the Warehouse Agreement)) and also may

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     (i) take possession of any Collateral or any other Collateral (as defined in the Warehouse Agreement) not already in its possession without demand and without legal process;
     (ii) require each Grantor to, and each Grantor hereby agrees that it will, at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the Collateral or any other Collateral (as defined in the Warehouse Agreement) pledged by such Grantor as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties;
     (iii) require any Grantor to promptly execute and deliver to the Collateral Agent such instruments of title and other documents as the Collateral Agent may deem necessary or advisable to enable the Collateral Agent, at such time or times and place or places as the Collateral Agent may specify, to obtain possession of all or any part of the Collateral or any other Collateral (as defined in the Warehouse Agreement); provided that, if any Grantor shall for any reason fail to execute and deliver such instruments and documents after the request by the Collateral Agent, the Collateral Agent may obtain a judgment conferring on the Collateral Agent the right to immediate possession and requiring such Grantor to execute and deliver such instruments and documents to the Collateral Agent; provided , further , that all expenses of obtaining such judgment or of pursuing, searching for and taking such property shall, until paid by the Grantors, be secured by the Lien of this Security Agreement;
     (iv) (x) as a matter of right, appoint a receiver or agent or representative (who may be the Collateral Agent or any successor or nominee thereof) for all or any part of the Collateral or any other Collateral (as defined in the Warehouse Agreement), whether such receivership or agency or representation be incidental to a proposed sale of the Collateral or any other Collateral (as defined in the Warehouse Agreement) or the taking of possession thereof, the exercise of remedies under this Security Agreement or any Lease or otherwise, and each Grantor hereby consents to the appointment of such a receiver or agent or representative and will not oppose any such appointment; and (y) any receiver or agent or representative appointed for all or any part of the Collateral or any other Collateral (as defined in the Warehouse Agreement) shall be entitled to exercise all rights of the Collateral Agent under this Security Agreement and the other Loan Documents to the extent provided in such appointment and shall be entitled to exercise all the powers and pursue all the remedies of the Collateral Agent hereunder and with respect to the Collateral or any other Collateral (as defined in the Warehouse Agreement); and
     (v) subject to the provisions of the relevant Lease, including the Lessee’s right to quiet enjoyment, enter onto the property where any Collateral or any other Collateral (as defined in the Warehouse Agreement) is located and take possession thereof without demand and without legal process.

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     (b) The Collateral Agent may
     (i) transfer all or any part of the Collateral or any other Collateral (as defined in the Warehouse Agreement) into the name of the Collateral Agent or its nominee, with or without disclosing that such Collateral or any other Collateral (as defined in the Warehouse Agreement) is subject to the Lien hereunder,
     (ii) notify the parties obligated on any of the Collateral or any other Collateral (as defined in the Warehouse Agreement) to make payment to the Collateral Agent of any amount due or to become due thereunder,
     (iii) withdraw, or cause or direct the withdrawal, of all funds with respect to each Depository Account;
     (iv) enforce collection of any of the Collateral or any other Collateral (as defined in the Warehouse Agreement) by suit or otherwise, and in a commercially reasonable manner, surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto,
     (v) endorse any checks, drafts, or other writings in any Grantor’s name (except for the Parent) to allow collection of the Collateral or any other Collateral (as defined in the Warehouse Agreement),
     (vi) take control of any Proceeds of the Collateral or any other Collateral (as defined in the Warehouse Agreement), and
     (vii) execute (in the name, place and stead of any Grantor) endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral.
     (c) Upon taking of possession pursuant hereto, the Collateral Agent may, from time to time, at the expense of the Borrower, make all such expenditures for maintenance, insurance, repairs, replacements and alterations to any of the Collateral or any other Collateral (as defined in the Warehouse Agreement), as it may deem proper and commercially reasonable. In such case, the Collateral Agent shall have the right (but not the obligation) to maintain, use, operate, store, lease, control or manage the Collateral or any other Collateral (as defined in the Warehouse Agreement) and to carry on the business and to exercise all rights and powers of each Grantor relating to the Collateral or any other Collateral (as defined in the Warehouse Agreement), as the Collateral Agent shall deem best, including the right, subject to the provisions of any relevant Lease (so long as no default or event of default has occurred and is continuing thereunder), to enter into any and all such agreements with respect to the maintenance, use, operation, storage, leasing, control, management or disposition of the Collateral or any other Collateral (as defined in the Warehouse Agreement) or any part thereof as the Collateral Agent may determine.

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     (d) The Collateral Agent shall be entitled to collect and receive directly all tolls, rents (including all amounts due under any Lease, other than Excepted Payments), revenues, issues, income, products and profits of the Collateral or any other Collateral (as defined in the Warehouse Agreement) and every part thereof, without prejudice, however, to the right of the Collateral Agent under any provision of this Security Agreement to collect and receive all cash held by, or required to be deposited with, any Grantor hereunder. Such tolls, rents (including Rent), revenues, issues, income, products and profits may be applied to pay the expenses of the use, operation, storage, leasing, control, management or disposition of any Collateral or any other Collateral (as defined in the Warehouse Agreement) or any part thereof or of conducting the business thereof, and of all maintenance, repairs, replacements, alterations, additions and improvements, and to make all payments which the Collateral Agent may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon the Collateral or any other Collateral (as defined in the Warehouse Agreement) or any part thereof (including the employment of engineers and accountants to examine, inspect and report upon the properties and books and records of each Grantor other than the Parent), and all other payments which the Collateral Agent may be required or authorized to make under any provision of this Agreement, as well as just and reasonable compensation for the services of the Collateral Agent, and of all Persons engaged and employed by the Collateral Agent or may, at the sole discretion of the Collateral Agent, be applied against any Obligation.
     (e) (i) The Collateral Agent may sell, assign, transfer and deliver the whole, or from time to time to the extent permitted by Applicable Law, any part of the Collateral or any other Collateral (as defined in the Warehouse Agreement) or any interest therein, at any private sale or public auction with or without demand, advertisement or notice (except as herein required or as may be required by Applicable Law) of the date, time and place of sale and any adjustment thereof for cash or credit or other property for immediate or future delivery and for such price or prices and on such terms as the Collateral Agent may determine, or as may be required by Applicable Law. It is agreed that ten (10) days’ notice to the applicable Grantor of the date, time and place (and terms, in the case of a private sale) of any proposed sale by the Collateral Agent of the Collateral or any other Collateral (as defined in the Warehouse Agreement) or any part thereof or interest therein is reasonable. The Collateral Agent may be a purchaser of the Collateral or any other Collateral (as defined in the Warehouse Agreement) or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Collateral Agent shall, upon any such purchase, acquire good title to the property so purchased, to the extent permitted by Applicable Law, free of all rights of redemption. The Collateral Agent shall not be obligated to make any sale of Collateral or any other Collateral (as defined in the Warehouse Agreement) regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.
     (ii) Upon any sale of the Collateral or any other Collateral (as defined in the Warehouse Agreement) or any part thereof or interest therein, whether

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pursuant to foreclosure or power of sale or otherwise, the receipt of the official making the sale by judicial proceeding or of the Collateral Agent shall be sufficient discharge to the purchaser for the purchase money and neither such official nor such purchaser shall be obliged to see to the application thereof.
     (iii) Any sale of the Collateral or any other Collateral (as defined in the Warehouse Agreement) or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall forever be a perpetual bar against each Grantor to the extent permitted by Applicable Law. Subject to the provisions of this Security Agreement and each other Loan Document, each Grantor (to the extent that it may lawfully do so) covenants that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit of advantage of for itself any appraisement, valuation, stay or extension law or law requiring the provision of a bond in a repossession or foreclosure action wherever enacted, nor at any time hereafter in force, in order to prevent or hinder the enforcement of this Security Agreement or the execution of any power granted herein to the Collateral Agent, or the absolute sale of the Collateral or any other Collateral (as defined in the Warehouse Agreement), or any part thereof, or the possession thereof by any purchaser at any sale under this Section 7.1 ; and each Grantor for itself, for all who may claim under them, so far as any of them now or thereafter lawfully may, waive all right to have the Collateral or any other Collateral (as defined in the Warehouse Agreement) marshaled upon any foreclosure hereof, and agree that any court having jurisdiction to foreclose this Security Agreement or any other Loan Document may order the sale of the Collateral or any other Collateral (as defined in the Warehouse Agreement) as an entirety.
     (f) If the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Security Agreement or any other Loan Document by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case each Grantor, each Lender, and the Collateral Agent shall, subject to any binding determination in such proceeding, be restored to their former positions and rights hereunder or thereunder with respect to the Collateral and any other Collateral (as defined in the Warehouse Agreement), and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceedings had been instituted.
     (g) If the Collateral Agent shall have amended any existing Lease or have entered into any new Lease with respect to an Aircraft, it shall use reasonable efforts to have the Borrower, the Servicer and the related Aircraft Subsidiary, named as an additional insured and, with respect to any such amendment or new Lease, shall provide a copy thereof to the Borrower and the Servicer.
     (h) Notwithstanding any other provision of this Agreement, all cash Proceeds received by the Collateral Agent in respect of (i) all or any part of the Collateral or any other Collateral (as defined in the Warehouse Agreement), shall be converted to cash and

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applied by the Collateral Agent against all or any part of the Obligations, as set forth in Section 3.03(a) through (c) of the Warehouse Agreement.
     SECTION 7.2. Compliance with Restrictions . Each Grantor agrees that in any sale of any of the Collateral or any other Collateral (as defined in the Warehouse Agreement) under Section 7.1 whenever a Facility Event of Default shall have occurred and be continuing, the Collateral Agent is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of Applicable Law (including compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to Persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral or any other Collateral (as defined in the Warehouse Agreement)), or in order to obtain any required approval of the sale or of the purchaser by any Governmental Entity or official, and such Grantor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Collateral Agent be liable or accountable to such Grantor for any discount allowed by the reason of the fact that such Collateral or any other Collateral (as defined in the Warehouse Agreement) is sold in compliance with any such limitation or restriction.
     SECTION 7.3. Protection of Collateral . The Collateral Agent may from time to time, at its option, perform any act which any Grantor fails to perform under this Agreement after being requested in writing so to perform (it being understood that no such request need be given after the occurrence and during the continuance of a Facility Event of Default) and the Collateral Agent may from time to time take any other action which the Collateral Agent deems reasonably necessary for the maintenance, preservation or protection of any of the Collateral or any other Collateral (as defined in the Warehouse Agreement) or of its security interest therein.
     SECTION 7.4. Replacement of the Servicer . The rights of the Grantors under the Servicing Agreement have been assigned to the Collateral Agent pursuant to Section 2.1 hereof and are part of the Collateral. Such rights include, without limitation, the right to replace the Servicer under the circumstances set forth in the Servicing Agreement. Notwithstanding Section 7.1 or any other provision of this Security Agreement, the parties hereto agree that the rights of the Grantors to replace the Servicer under the Servicing Agreement may be exercised by the Agent, or by the Collateral Agent at the direction of the Agent, upon the occurrence of a Servicer Replacement Event or the resignation of the Servicer, irrespective of whether a Facility Event of Default shall have occurred or shall be continuing.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
     SECTION 8.1. Loan Document . This Security Agreement is a Loan Document executed pursuant to the Warehouse Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof.

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     SECTION 8.2. Binding on Successors, Transferees and Assigns; Assignment . This Security Agreement shall remain in full force and effect until the Termination Date has occurred, shall be binding upon each of the parties hereto and their successors, transferees and assigns and shall inure to the benefit of and be enforceable by each party hereto and each Protected Party and their respective successors, transferees and assigns; provided that no party hereto shall (unless otherwise permitted under the terms of the Warehouse Agreement or this Security Agreement) assign any of its obligations hereunder without the prior written consent of the Agent.
     SECTION 8.3. Amendments, Etc. No amendment to or waiver of any provision of this Security Agreement, nor consent to any departure by any party from its obligations under this Security Agreement, shall in any event be effective unless the same shall be in writing and signed by the Agent and the applicable Grantor and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment to (i) Section 2.1 of this Agreement, (ii) Section 7.1(h) of this Agreement, (iii) this paragraph or (iv) Section 3 of an AS Joinder and Security Agreement Supplement, in each of clauses (i) through (iv) , in a manner that adversely affects a Derivatives Creditor, shall be effective without the written concurrence of such Derivatives Creditor and no addition of any new provision to this Agreement in a manner that impacts any of the sections described in clauses (i) through (iv) of this paragraph and that adversely affects a Derivatives Creditor shall be effective without the written concurrence of such Derivates Creditor.
     SECTION 8.4. Notices . All notices, offers, instructions, acceptances, approvals, waivers, requests, demands and other communications required or permitted hereunder to be given to or made upon any party hereto or under any instrument, certificate or other document delivered in connection with the transactions described herein shall be in writing (including telecopier and electronic mail transmissions), shall be addressed as provided in the Warehouse Agreement and shall be considered as properly given (a) if delivered in person, (b) if sent by overnight courier service or (c) if sent by telecopier or electronic mail but in such case such notice shall be confirmed by a copy sent by the methods described in clause (a) or (b) above. For purposes of communications to the Parent, the initial address shall be the address set forth in the Servicing Agreement. For the purposes of communications to the Collateral Agent, the initial address shall be:
Deutsche Bank Trust Company Americas
c/o Deutsche Bank National Trust Company
100 Plaza One, MSJCY03-0699
Jersey City, NJ 07311-3901
Attn: Alternative & Structured Finance Services Trust & Securities Services — Michele Hy Voon
Telephone: 201-593-8420
Facsimile: 212-553-2461
Any party shall have the right to change its address for communications to any other location by giving written notice to the other parties in the manner set forth in Section 11.04 of the Warehouse Agreement.

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     Any notice shall be deemed to have been delivered upon its actual receipt; provided that if any such notice is received upon a day which is not a Business Day at the place of delivery, such notice shall be deemed to have been received on the immediately following Business Day at the place of delivery; provided , further , that if tender of any notice is refused by the addressee thereof, such notice shall be deemed to have been delivered upon such tender.
     SECTION 8.5. Release of Liens .
     Upon the occurrence of the Termination Date or at such time from time to time as the Agent has directed the Collateral Agent in writing to take any action to release, modifiy, amend, waive, maintain or protect all or a portion of any Liens granted to the Collateral Agent on behalf of the Protected Parties on all or any portion of the Collateral in accordance with the Warehouse Agreement, including Section 11.23 thereof, the Liens granted to the Collateral Agent on behalf of the Protected Parties on the Collateral or such portion thereof shall be automatically, unconditionally and simultaneously released and the Collateral Agent agrees to execute and deliver any releases, deeds or other instruments reasonably requested by any Grantor with respect to any such release of the applicable Collateral at such Grantor’s cost and expense.
     SECTION 8.6. Additional Grantors; Additional Collateral .
     (a) Upon the execution and delivery by any Person of an AS Joinder and Security Agreement Supplement and upon such AS Joinder and Security Agreement Supplement being effective in accordance with its terms, such Person shall, inter alia , become a “Grantor” hereunder with the same force and effect as if it were originally a party to this Security Agreement and named as a “Grantor” hereunder. The execution and delivery of any AS Joinder and Security Agreement Supplement shall not require the consent of any other Grantor hereunder, and the rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Security Agreement.
     (b) Upon the execution and delivery by any Person of an Additional Collateral Certificate, the aircraft and leases set forth therein shall be considered Aircraft and Leases, respectively, hereunder and under the Warehouse Agreement and all other Loan Documents, and shall be subject, in all respects, to the terms of the Warehouse Agreement and the other Loan Documents and all documents related thereto.
    SECTION 8.7. No Waiver; Remedies .
     (a) No failure or delay on the part of any party hereto in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. No failure on the part of the Collateral Agent at any time to request further information or to require further action of any Grantor under Section 4.7 or otherwise, shall constitute a waiver by the Collateral Agent of any right, power, remedy or privilege of the Collateral Agent to request further information or require further action. No acceptance of partial

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payment or performance of any matured Obligation shall constitute a waiver of any inchoate default or Facility Event of Default then existing or a waiver or release by the Collateral Agent of payment or performance in full by any Grantor of such Obligation. No notice to or demand on any Person in any case shall entitle such Person to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the any party hereto to any other or further action in any circumstances without notice or demand.
     (b) Nothing contained in this Security Agreement shall be construed to limit in any way any right, power, remedy or privilege of the Collateral Agent hereunder or under any other Loan Document now or hereafter existing at law or in equity. Each and every right, power, remedy and privilege hereby given to, or retained by, the Collateral Agent in this Security Agreement shall be in addition to and not in limitation of every other right, power, remedy and privilege given under any other Loan Document or now or hereafter existing at law or in equity. Each and every right, power, remedy and privilege of the Collateral Agent may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent in its sole and absolute discretion. All such rights, powers, remedies and privileges shall be cumulative and not mutually exclusive and the exercise of one shall not be deemed a waiver of the right to exercise any other. Each Grantor hereby waives to the extent permitted by Applicable Law any right which they may have to require the Collateral Agent to choose or elect remedies.
     SECTION 8.8. Headings . Section and subsection headings in this Security Agreement are included herein for convenience of reference only and shall not constitute a part of this Security Agreement for any other purpose or be given any substantive effect.
     SECTION 8.9. Severability . In case any provision in or obligation under this Security Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
     SECTION 8.10. Governing Law, Jurisdiction and Venue; Waiver of Trial by Jury; Entire Agreement . THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
     ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION PROVIDED THEREIN MAY BE BROUGHT IN SUPREME COURT OF THE STATE OF NEW YORK (WITHOUT PREJUDICE TO THE RIGHT OF ANY PARTY TO REMOVE TO THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK) AND TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR OTHER COURT OF THE STATE OF NEW YORK SITTING

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IN THE BOROUGH OF MANHATTAN, AND BY EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT EACH SUCH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS SECURITY AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH OBLIGATION PROVIDED THEREIN (SUBJECT TO ANY RIGHT OF APPEAL TO A HIGHER COURT). Each party hereto hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to such party at its address provided herein, in Section 11.04 of the Warehouse Agreement or in the applicable AS Joinder and Security Agreement Supplement, such service being hereby acknowledged by all parties hereto to be sufficient for personal jurisdiction in any action against all parties hereto in any such court and to be otherwise an effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any party hereto to bring proceedings against any other party hereto in the courts of any other jurisdiction.
     EACH OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY AGREES TO WAIVE AND DOES WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL. The scope of the above waiver and agreement is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that the above waiver and agreement is a material inducement to enter into a business relationship, that each has already relied on the above waiver and agreement in entering into this Security Agreement, and that each will continue to rely on the above waiver and agreement in their related future dealings. Each party hereto further warrants and represents that it has reviewed the above waiver and agreement with its legal counsel and that it knowingly and voluntarily waives its jury trial rights as described above following consultation with legal counsel. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS. In the event of litigation, this Security Agreement may be filed as written consent to a trial by the court or by judicial reference proceeding, as applicable.
     This Security Agreement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect thereto.
     SECTION 8.11. Counterparts . This Security Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery of an executed counterpart of a signature page to this Security Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Security Agreement.

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     SECTION 8.12. Reinstatement . This Security Agreement shall remain in full force and effect and continue to be effective should any Insolvency or Liquidation Proceeding be filed by or against any Grantor, should any Grantor become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of any Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations or any part thereof, is, pursuant to Applicable Law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations whether as a “voidable preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
     SECTION 8.13. Certain Rights Subject to Law; Waiver . The rights, powers, remedies and privileges of the Collateral Agent under this Security Agreement or any other Loan Document or otherwise shall, in all respects, be subject to mandatory requirements of Applicable Law; provided that if and to the extent that any such right, power, remedy or privilege shall be available to the Collateral Agent, under Applicable Law, only upon the agreement of any Grantor or the waiver by such Grantor of any such right, power, remedy or privilege, such agreement or waiver shall be deemed to have been made hereby for all purposes of this Security Agreement or any other Loan Document, subject to the terms and conditions of this Security Agreement and the other Loan Document.
     SECTION 8.14. Compliance with Applicable Anti-Terrorism and Anti-Money Laundering Regulations . In order to comply with laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions, including those relating to the funding of terrorist activities and money laundering (“ Relevant Law ”), the Collateral Agent is required to obtain, verify and record certain information relating to individuals and entities which maintain a business relationship with the Collateral Agent. Accordingly, each of the parties agrees to provide to the Collateral Agent upon its request from time to time such identifying information and documentation as may be available for such party in order to enable the Collateral Agent to comply with Relevant Law.
* * *

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     IN WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement to be duly executed and delivered by its Authorized Officer as of the date first above written.
         
  AIR LEASE CORPORATION
 
 
  By:   /s/ James C. Clarke   
    Name:   James C. Clarke   
    Title:   Senior Vice President and
Chief Financial Officer 
 
 
  ALC WAREHOUSE BORROWER, LLC

By: Air Lease Corporation
Its: Manager
 
 
  By:   /s/ James C. Clarke   
    Name:   James C. Clarke   
    Title:   Senior Vice President and
Chief Financial Officer 
 

 


 

         
[Pledge and Security Agreement]
         
  DEUTSCHE BANK TRUST COMPANY AMERICAS, as Collateral Agent    
 
 
  By:   /s/ Louis Bodi    
    Name:   LOUIS BODI   
    Title:   VICE PRESIDENT   
 
     
  By:   /s/ Mark Esposito    
    Name:   MARK ESPOSITO   
    Title:   ASSOCIATE   

 


 

         
[Pledge and Security Agreement]
         
  CREDIT SUISSE AG, NEW YORK
BRANCH, as Agent
 
 
  By:   /s/ Scott Corman    
    Name:   Scott Corman   
    Title:   Managing Director   
 
     
  By:   /s/ Josh Borg    
    Name:   Josh Borg   
    Title:   Director   
 

 

Exhibit 10.6
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND IN ACCORDANCE WITH STATE SECURITIES LAWS.
     
WARRANT NO.1   DATE: JUNE 4, 2010
AIR LEASE CORPORATION
WARRANT TO PURCHASE
214,500 SHARES OF
COMMON STOCK
     This certifies that, for good and valuable consideration, Société Générale and its assigns, is entitled to acquire from Air Lease Corporation, a Delaware corporation (the “ Company ”), subject to the terms and conditions hereof, at any time and from time to time during the Exercise Period, 214,500 shares of fully paid and non-assessable shares of the Company’s Common Stock, in such classes as the Warrantholder shall elect in the Subscription Form, subject to adjustment from time to time as set forth herein, at the Exercise Price.
ARTICLE I
DEFINITIONS
     As used in this Warrant, the following capitalized terms shall have the following respective meanings:
      Aggregate Offering Price : The meaning set forth in Section 3.03(b).
      Appraiser : A nationally recognized or major regional investment banking firm or nationally recognized firm of independent certified public accountants.
      BHA : The Bank Holding Company Act of 1956, as amended.
      Beneficially Own : The meaning contemplated by Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
      Business Day : A day other than a Saturday, Sunday or other day on which state chartered banks in the State of California are authorized by law to remain closed.
      Cashless Exercise : The exercise of this Warrant in whole or in part by surrendering this Warrant in exchange for (i) the number of Warrant Shares equal to the product of (A) the number of shares as to which this Warrant is being exercised multiplied by (B) a fraction, the

 


 

numerator of which is the positive difference, if any, of the Per Share Market Value minus the Exercise Price then in effect, and the denominator of which is the Per Share Market Value, and (ii) a new Warrant evidencing the right to acquire the number of Warrant Shares for which this Warrant has not yet been exercised.
      Common Stock : Together, Class A Common Stock of the Company, par value $0.01 per share (“ Class A Common Stock ”) and Class B Common Stock of the Company, par value $0.01 per share (“ Class B Common Stock ”).
      Company : The meaning set forth in the Preamble.
      Effective Date : The date hereof.
      Exercise Period : From the Effective Date through 11:59 p.m., Los Angeles time, on the Expiration Date.
      Exercise Price : $20.00 per Warrant Share, subject to adjustment from time to time as set forth herein.
      Expiration Date : The seventh (7 th ) anniversary of the Effective Date (unless such day is not a Business Day, in which event the next following Business Day).
      Nasdaq : The Nasdaq Global Market.
      NYSE : The New York Stock Exchange.
      Offering : The offering for sale by the Company of shares of Common Stock pursuant to one or more exemptions from registration under the Securities Act through FBR Capital Markets & Co., a Delaware corporation, as initial purchaser and placement agent, pursuant to which the original holder of this Warrant purchased shares of Common Stock at the price per share established in such offering and in connection with which this Warrant was issued.
      Per Share Market Value : As of any particular date of determination, (i) if the Class A Common Stock is then listed on the NYSE or on Nasdaq, the average of the closing sales prices (or, if no trade occurs on a relevant day, the average of the closing bid and asked prices on such day) per share of Class A Common Stock (as reported by Bloomberg Information Services, Inc., or any successor reporting service) on the NYSE or Nasdaq on the ten consecutive Business Days immediately preceding such date of determination, (ii) if the Class A Common Stock is not then listed on the NYSE or on Nasdaq, the average of the closing bid and asked prices per share of Class A Common Stock in the United States domestic over-the-counter market, as reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), on the ten consecutive Business Days immediately preceding such date of determination, or (iii) if the Class A Common Stock is not then publicly traded, the fair market value of a share of Class A Common Stock as of such date of determination as determined in good faith by the Board of Directors of the Company.
      Person : An individual, partnership, joint venture, corporation, trust, limited liability company, unincorporated organization or government or any department or agency thereof.
      Reorganization : The meaning set forth in Section 3.01.

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      Rights and Rights Distribution Date : The respective meanings set forth in Section 3.04.
      Securities Act : The Securities Act of 1933, as amended from time to time.
      Subscription Form : The Subscription Form annexed hereto.
      Warrants : This Warrant and all other warrants that may be issued in substitution or replacement (in whole or in part) thereof.
      Warrantholder : The person(s) or entity(ies) to whom this Warrant is originally issued, or any successor in interest thereto, or any assignee or transferee thereof.
      Warrant Shares : All shares of Common Stock and other securities issued or issuable upon exercise of any Warrant.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
      Section 2.01 : Duration of Warrant . The Warrantholder may exercise this Warrant at any time and from time to time during the Exercise Period. If this Warrant is not exercised on or prior to the Expiration Date, it shall become void, and all rights hereunder shall thereupon cease. If this Warrant is exercised, in whole or in part, on or prior to the Expiration Date, the provisions of Articles I, VI, VII and VIII hereof shall survive the Expiration Date.
      Section 2.02 : Exercise of Warrant .
          (a) The Warrantholder may exercise this Warrant, in whole or in part, by presentation and surrender of this Warrant to the Company at its principal executive offices or at the office of its stock transfer agent, if any, with the Subscription Form annexed hereto duly executed and either:
     (i) accompanied by payment of the full Exercise Price for each Warrant Share to be purchased; or
     (ii) specifying on the Subscription Form the election to effect a Cashless Exercise.
Upon an exercise of this Warrant pursuant to Section 2.02(a)(i), the Warrantholder shall be deemed to have purchased the number of Warrant Shares for which the Warrant is exercised as specified in the Subscription Form. Upon an exercise of this Warrant pursuant to Section 2.02(a)(ii), the Warrantholder shall be deemed to have purchased the number of Warrant Shares equal to the product of (i) the number of shares as to which this Warrant is being exercised multiplied by (ii) a fraction, the numerator of which is the positive difference, if any, of the Per Share Market Value minus the Exercise Price then in effect, and the denominator of which is the Per Share Market Value.
          (b) Upon receipt of the documents and payment described in Section 2.02(a), the Company shall cause to be issued certificates for the total number of whole Warrant Shares purchased by the Warrantholder pursuant to such exercise in such denominations as are requested for delivery to the Warrantholder, and the Company shall thereupon deliver such certificates to the Warrantholder.

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The Warrantholder shall be deemed to be the holder of record of such purchased Warrant Shares as of the close of business on the date on which delivery to the Company of all applicable documents and payment as contemplated by Section 2.02(a) is achieved, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Warrantholder. If, at the time this Warrant is exercised, a registration statement is not in effect to register under the Securities Act the issuance of the Warrant Shares upon exercise of this Warrant, the Company may require the Warrantholder to make such representations, and may place such legends on certificates representing the Warrant Shares, as may be reasonably required in the opinion of counsel to the Company to permit the Warrant Shares to be issued without such registration.
          (c) Certificates for the Warrant Shares so purchased pursuant to Section 2.02(a) shall be delivered to the Warrantholder within a reasonable time, not exceeding five (5) Business Days, after this Warrant shall have been so exercised. In case the Warrantholder shall exercise this Warrant with respect to less than all of the Warrant Shares that may be purchased under this Warrant, the Company shall execute a new warrant in the form of this Warrant for the balance of such Warrant Shares and deliver such new warrant to the Warrantholder.
          (d) The Company shall pay any and all stock transfer and similar taxes that may be payable in respect of the issue of this Warrant or in respect of the issue of any Warrant Shares; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer of this Warrant, or the Warrant Shares, by any Warrantholder.
          (e) Notwithstanding the terms of this Section 2.02, if (i) the Warrantholder has not elected to exercise this Warrant prior to the Expiration Date and (ii) the Exercise Price is less than the Per Share Market Value upon such Expiration Date, then (unless notice to the contrary is provided by the Warrantholder), this Warrant shall be deemed automatically exercised as to the maximum number of shares of Common Stock for which this Warrant is then exercisable pursuant to the provisions of Section 2.02(a)(ii) on such Expiration Date without any action by the Warrantholder, provided that the Warrantholder shall be issued the maximum number of shares of Class A Common Stock that would allow it not to be in violation of the BHA’s rules and regulations regarding the acquisition and ownership of voting securities, with the remaining shares to be issued, if any, being shares of Class B Common Stock. The Company shall be entitled to conclusively rely on a certification by the Warrantholder as to the maximum number of shares of Class A Common Stock issuable in accordance with the preceding sentence and if, 5 business days after contacting the Warrantholder for such certification the Company has not received such certification, then the Company shall satisfy the requirements of this clause (e) by issuing solely shares of Class B Common Stock in connection with such deemed automatic exercise.
          (f) Notwithstanding anything to the contrary contained elsewhere in this Warrant, this Warrant is exercisable for shares of (i) Class B Common Stock or (ii) to the extent, and only to the extent, the Warrantholder would not after giving effect thereto be in violation of the BHA’s rules and regulations regarding the acquisition and ownership of voting securities, shares of Class A Common Stock.
      Section 2.03 : Reservation of Shares . The Company hereby agrees that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of Warrant Shares as may be issuable from time to time upon exercise of this Warrant. All such Warrant Shares shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and

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nonassessable, free and clear of all taxes, liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights (except for restrictions on transfer provided for herein, the restriction imposed by the legend appearing at the top of Page 1 of this Warrant, liens or charges created by the Warrantholder, income and franchise taxes incurred in connection with the exercise of this Warrant and taxes in respect of any transfer occurring contemporaneously therewith).
      Section 2.04: Fractional Shares. Upon any exercise of this Warrant, the Company shall not be required to issue stock certificates representing a fraction of a Warrant Share, but may make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not to make such a cash payment, or is unable to make such cash payment, the Warrantholder shall be entitled to receive, in lieu of the final fraction of a share, one whole Warrant Share.
ARTICLE III
ADJUSTMENT OF WARRANT SHARES AND EXERCISE PRICE UPON
CERTAIN EVENTS
      Section 3.01 : Preservation of Rights in Certain Transactions . In case of (a) any reclassification, capital reorganization or other change of outstanding shares of Common Stock (other than a subdivision or a combination of the outstanding Common Stock and other than a change in the par value of the Common Stock), (b) any payment of a dividend to holders of Common Stock of capital stock of the Company other than Common Stock, (c) any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which the Company is the continuing corporation and said merger does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the classes issuable upon exercise of this Warrant) or (d) any sale, lease, transfer or conveyance to another corporation of the property and assets of the Company as an entirety or substantially as an entirety (each such action being referred to herein as a “ Reorganization ”), the Company shall, as a condition precedent to consummating each such Reorganization, execute, and cause such successor or purchasing corporation, as the case may be, to execute with the Warrantholder an agreement granting the Warrantholder the right thereafter to receive, upon payment of the Exercise Price in effect immediately prior to such Reorganization, in lieu of each Warrant Share issuable upon exercise of this Warrant, the kind and amount of shares and other securities, cash and property that such Warrantholder would have owned or been entitled to receive upon consummation of such Reorganization in respect of a Warrant Share if it had been outstanding immediately prior to such Reorganization. Such agreement shall provide for adjustments in respect of such shares of stock and other securities and property, which shall be as nearly equivalent as may be practicable to the adjustments provided to such shares of stock and other securities and property prior to such transaction by the Company. The provisions of this Section shall similarly apply to successive reclassifications, capital reorganizations, consolidations, mergers, sales or conveyances.
      Section 3.02 : Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits . If the Company, at any time while this Warrant is outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide or split outstanding shares of Common Stock into a larger number of shares, or (c) combine outstanding shares of Common Stock into a smaller number of shares, then in each such case (i) the Exercise Price thereafter shall be equal to the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction, the numerator of which shall be the

5


 

number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event and (ii) the number of Warrant Shares thereafter issuable upon exercise of this Warrant shall be equal to the product of the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such event multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding after such event and the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event. Any adjustment made pursuant to this Section 3.02 shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, split or combination. If any dividend or distribution which resulted in an adjustment in the Exercise Price and issuable Warrant Shares pursuant to this Section 3.02 is declared but not so paid or made, the Exercise Price and issuable Warrant Shares shall, immediately upon the determination by the Board of Directors of the Company not to pay such dividend or distribution, be recomputed to the Exercise Price and issuable Warrant Shares that would have been in effect if such dividend or distribution had not been declared.
      Section 3.03 : Rights; Options; Warrants; Convertible Securities .
          (a) Subject to Section 3.04, if the Company, at any time while this Warrant is outstanding, shall issue rights, options, warrants or convertible securities to any Person entitling the holder thereof, upon the exercise or conversion thereof, to subscribe for or purchase shares of Common Stock at a price per share less than the Per Share Market Value as of the date of such issuance, then in each such case (a) the Exercise Price after the record date fixed for determination of stockholders entitled to receive such issuance (or, if no record date is used, after the date of issuance of such rights, options, warrants or convertible securities) shall be equal to the product of the Exercise Price in effect immediately prior to such record date (or issuance date, as applicable) multiplied by a fraction (which shall not be greater than one (1)), the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on such record date plus the number of shares of Common Stock that the Aggregate Offering Price (as defined below) of the shares offered for subscription or purchase pursuant to such rights, options, warrants or convertible securities would purchase at a per share price equal to such Per Share Market Value, and the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on such record date plus the number of additional shares of Common Stock offered for such subscription or purchase, and (b) the number of Warrant Shares issuable upon exercise of this Warrant after the record date fixed for determination of stockholders entitled to receive such issuance (or, if no record date is used, after the date of issuance of such rights, options, warrants or convertible securities) shall be equal to the product of the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such record date (or issuance date, as applicable) multiplied by a fraction, the numerator of which shall be the Exercise Price in effect immediately prior to such record date (or issuance date, as applicable), and the denominator of which shall be the adjusted Exercise Price determined pursuant to clause (a). Such adjustment shall be made whenever such rights, options, warrants or convertible securities are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options, warrants or convertible securities (or, if no record date is used, after the date of issuance of such rights, options, warrants or convertible securities). Upon the expiration of any such rights, options, warrants or convertible securities without exercise or conversion thereof in full for or into Common Stock, the issuance of which resulted in an adjustment in the Exercise Price and issuable Warrant Shares pursuant to this Section 3.03, the Exercise Price and issuable Warrant Shares shall immediately upon such

6


 

expiration be recomputed to the Exercise Price that would have been in effect had the adjustment of the Exercise Price and issuable Warrant Shares made upon the issuance of such rights, options, warrants or convertible securities been made on the basis of (i) the number of shares of Common Stock actually purchased upon the exercise or conversion thereof and (ii) the Aggregate Offering Price actually received by the Company in respect of only the rights, options, warrants or convertible securities actually exercised or converted for which shares of Common Stock were actually issued by the Company.
          (b) “ Aggregate Offering Price ” shall mean, in respect of any right, option, warrant or convertible security issued by the Company, the sum of (i) the consideration received by the Company for the issuance of such right, option, warrant or convertible security plus (ii) the minimum consideration payable to the Company upon exercise or conversion in full of such right, option, warrant or convertible security (excluding the forfeiture of such convertible security) for the issuance of the underlying shares of Common Stock.
          (c) Any sale by the Company of, and any agreement by the Company to sell, shares of Common Stock to any Person at a price per share less than the Per Share Market Value as of the date of such sale or agreement (as applicable) shall be deemed to be an issuance by the Company of a right to purchase such shares that has been exercised in full and shall be subject to the adjustment provisions of Section 3.03(a).
          (d) Any reduction in the exercise or conversion price per share of Common Stock under any outstanding right, option, warrant or convertible security shall be deemed an expiration without exercise or conversion of such outstanding right, option, warrant or convertible security and a new issuance by the Company of such right, option, warrant or convertible security at the reduced exercise or conversion price per share of Common Stock.
      Section 3.04 : Stockholder Rights Plan . Notwithstanding Section 3.03, in the event that the Company shall distribute “poison pill” rights pursuant to a “poison pill” stockholder rights plan (the “ Rights ”), the Company shall, in lieu of making any adjustment pursuant to this Article III, make proper provision so that each Warrantholder who exercises a Warrant after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such exercise, in addition to the shares of Common Stock issuable upon such exercise, a number of Rights to be determined as follows: (a) if such exercise occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the “ Rights Distribution Date ”), the number of Rights to which a holder at the time of such exercise of a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon such Warrant exercise would be entitled in accordance with the terms and provisions of and applicable to the Rights (assuming such shares had been outstanding at the record date for the distribution of the Rights); and (b) if such exercise occurs after the Rights Distribution Date, the number of Rights to which a holder on the Rights Distribution Date of a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon such Warrant exercise would be entitled in accordance with the terms and provisions of and applicable to the Rights (assuming such shares had been outstanding at the record date for the distribution of the Rights), and in each case subject to the terms and conditions of the Rights.
      Section 3.05 : Implementation and Rounding . No adjustment in the Exercise Price shall be required unless the adjustment would require an increase or decrease of at least 1% of the Exercise Price. If the adjustment is not made because the adjustment does not change the Exercise Price by at

7


 

least 1%, then the adjustment that is not made shall be carried forward and taken into account in any future adjustment. All calculations under this Article III shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
      Section 3.06 : Exceptions to Adjustment. Notwithstanding any other Section of this Article III, no adjustment in the Exercise Price or issuable Warrant Shares shall be made for (a) the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in shares of Common Stock under any plan; (b) the issuance of any shares of Common Stock, restricted stock units or options or rights (including stockholder appreciation rights) to purchase such shares pursuant to any of the Company’s present or future employee, director, or consultant benefit plans, or employee agreements, arrangements or programs; (c) the issuance of any shares of Common Stock pursuant to any option, warrant or right, or exercisable, exchangeable or convertible security outstanding as of the Effective Date; or (d) a change in the par value of Common Stock.
ARTICLE IV
NOTICES TO WARRANTHOLDER
      Section 4.01 : Notice of Events . The Company shall give notice to the Warrantholder by registered mail if at any time prior to the expiration or exercise in full of the Warrant, any of the following events shall occur:
          (a) the Company shall authorize the payment of any dividend upon shares of Common Stock payable in any securities or authorize the making of any distribution to all holders of Common Stock;
          (b) the Company shall authorize the issuance of any additional shares of Common Stock or of rights, options or warrants to subscribe for or purchase Common Stock (other than pursuant to bona fide employee benefit plans);
          (c) the Company shall authorize or engage in a dissolution, liquidation or winding up of the affairs of the Company;
          (d) the Company shall authorize or engage in a Reorganization.
          (e) there shall have occurred an event that, pursuant to the terms of this Warrant, requires an adjustment to this Warrant or otherwise affects the Common Stock.
     Such notice shall be given to the Warrantholder (i) at least ten (10) Business Days prior to the earliest of (i) the record date for the determination of stockholders entitled to vote on such event, (ii) the record date for the determination of stockholders entitled to such dividend, distribution or subscription rights or (iii) the effective date of such event. Such notice shall specify any such record date.
      Section 4.02 : Notice of Adjustment . Whenever the Exercise Price or issuable Warrant Shares are adjusted pursuant to Article III, the Company shall promptly deliver to the Warrantholder a

8


 

notice setting forth the Exercise Price and issuable Warrant Shares after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
ARTICLE V
SPLIT-UP, COMBINATION, EXCHANGE, TRANSFER AND REPLACEMENT
OF WARRANTS
      Section 5.01 : Split-Up, Combination, Exchange and Transfer of Warrants . This Warrant may be split up, combined or exchanged for another Warrant or Warrants containing the same terms to purchase a like aggregate number of Warrant Shares. If the Warrantholder desires to split up, combine or exchange Warrants, he or it shall make such request in writing delivered to the Company and shall surrender to the Company any Warrants to be so split up, combined or exchanged. Upon any such surrender for a split up, combination or exchange, the Company shall execute and deliver to the person entitled thereto a Warrant or Warrants, as the case may be, as so requested. The Company may require such Warrantholder to pay a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any split up, combination or exchange of Warrants.
      Section 5.02 : Transfer . This Warrant may be assigned, in whole or in part as to a specified number of Warrant Shares issuable hereunder, without the consent of the Company subject to compliance with the provisions of the Securities Act and the rules and regulations promulgated thereunder.
      Section 5.03 : Lost, Stolen, Mutilated or Destroyed Warrants . If this Warrant is lost, stolen, mutilated or destroyed, the Company shall, subject to such reasonable terms as to indemnity or otherwise as it may request, issue a new Warrant of like denomination and tenor as and in substitution for this Warrant.
ARTICLE VI
REGISTRATION RIGHTS
      Section 6.01 : Registration Rights . The Warrant Shares shall have registration rights to the same extent as the registration rights provided to the shares of Common Stock that the Company shall issue pursuant to the Offering, as set forth in the Registration Rights Agreement to be entered into by the Company and FBR Capital Markets & Co., a Delaware corporation, on or about the Effective Date.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
      Section 7.01 : Representations and Warranties of the Company . The Company hereby represents and warrants to the Warrantholder as follows:
          (a) The execution and delivery by the Company of this Warrant and the performance of all obligations of the Company hereunder, including the issuance to the Warrantholder of the Warrant Shares, (i) have been duly authorized by all necessary corporate action on the part of the Company, its Board of Directors and stockholders, (ii) do not conflict with or violate the Company’s

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Articles of Incorporation or Bylaws, (iii) do not contravene any law or governmental rule, regulation or order applicable to it and (iv) do not contravene any provision of, or constitute a default under, any material indenture, mortgage, deed of trust, loan agreement, contract or other instrument or agreement to which the Company is a party or by which it is bound or to which any of the property or assets of the Company is subject.
          (b) This Warrant constitutes the legal, valid and binding agreement of the Company, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally.
      Section 7.02: Representations and Warranties of the Warrantholder. The Warrantholder hereby represents and warrants to the Company as follows:
          (a)  Purchase for Own Account . This Warrant will be acquired for investment for the Warrantholder’s account, not as nominee or agent, and not with a view to sale or distribution in violation of applicable federal and state securities laws. The Warrantholder has not been formed for the specific purpose of acquiring this Warrant or the Warrant Shares. The Warrantholder represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any Warrant Shares.
          (b)  Shares not Registered . The Warrantholder understands that the Warrant Shares at the time of issuance may not be registered under the Securities Act, and applicable state securities laws, on the ground that the issuance of such securities is exempt under the Securities Act and state law exemptions relating to offers and sales not by means of a public offering, and that the Company’s reliance on such exemptions is predicated on the Warrantholders’ representations set forth herein. The Warrantholder acknowledges that the Warrant Shares may not be offered sold, transferred, hypothecated or otherwise assigned except (i) pursuant to a registration statement with respect to the Warrant Shares that is effective under the Securities Act or pursuant to an available exemption from registration under the Securities Act relating to the disposition of the Warrant Shares and (ii) in accordance with applicable state securities laws.
          (c)  Investment Experience . The Warrantholder understands that the ownership of this Warrant and the Warrant Shares involves substantial risk. The Warrantholder (i) has sufficient knowledge and experience in financial and business affairs that it can evaluate the risks and merits of its investment in this Warrant and the Warrant Shares and (ii) can bear the economic risk of such Warrantholder’s investment in this Warrant and the Warrant Shares. The Warrantholder acknowledges that it has asked questions of, and received answers from, the Company and obtained such information as it deems relevant to making an investment decision with respect to this Warrant and the Warrant Shares.
          (d)  Accredited Investor . The Warrantholder is an “accredited investor” as such term is defined in Regulation D under the Securities Act.

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ARTICLE VIII
OTHER MATTERS
      Section 8.01 : Amendments and Waivers . The provisions of this Warrant, including without limitation the provisions of this sentence, and all rights hereunder may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, without the written consent of (a) a majority of the independent and disinterested members of the Board of Directors of the Company and (b) the Warrantholder.
      Section 8.02 : Governing Law . This Warrant shall be governed by and construed in accordance with the internal laws (and not the laws pertaining to conflicts or choice of law) of the State of New York. Each party hereby irrevocably submits to the nonexclusive jurisdiction of the state and Federal courts sitting in the City of New York, State of New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABL Y WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN.
      Section 8.03 : Severability . In the event that anyone or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provisions in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
      Section 8.04 : Attorneys’ Fees . In any action or proceeding brought to enforce any provisions of this Warrant, or where any provisions hereof or thereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys’ fees and disbursements in addition to its costs and expenses and any other available remedy.
      Section 8.05 : Notice . All notices, requests, demands, directions and other communications (“Notices”) concerning this Warrant shall be in writing and shall be mailed or delivered by a nationally recognized next-day courier or delivered personally or sent by telecopier or facsimile to the applicable party at the address of such party set forth below. When mailed, each such Notice shall be sent by first class, certified mail, return receipt requested, enclosed in a postage prepaid wrapper, and shall be effective on the fifth Business Day after it has been deposited in the mail. When delivered by a nationally recognized next-day courier, each such Notice shall be sent utilizing a next-day service, and shall be effective on the first Business Day after it has been dispatched. When delivered personally, each such Notice shall be effective when delivered to the address for the respective party set forth herein provided that it is delivered on a Business Day and further provided that it is delivered prior to 5:00 p.m., local time of the party to whom the notice is being delivered, on that Business Day; otherwise, each such Notice shall be effective on the first Business Day occurring after the Notice is

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delivered. When sent by telecopier or facsimile, each such Notice shall be effective on the day on which it is sent provided that it is sent on a Business Day and further provided that it is sent prior to 5:00 p.m., local time of the party to whom the Notice is being sent, on that Business Day; otherwise, each such Notice shall be effective on the first Business Day occurring after the Notice is sent. Each such Notice shall be addressed as follows: if to the Warrantholder, addressed to it or him at:
Société Générale
189 rue d’aubervilliers
75886 Paris
CEDEX 18
FRANCE
Attention: Sonia Mcirdi, OPER/TLP/FLO/BSE
Fax: +33 1 58 98 00 68
     or, if the Warrantholder has designated, by notice in writing to the Company, any other address, to such other address, and if to the Company, addressed to it at:
Air Lease Corporation
2000 Avenue of the Stars, Suite 600N
Los Angeles, California 90067
Attention: General Counsel
Facsimile: (310) 553-0999
with a concurrent copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Dhiya El-Saden, Esq.
Facsimile: (213) 229-6196
     The Company may change its address by written notice to the Warrantholder and the Warrantholder may change its or his address by written notice to the Company.
      Section 8.06 : Headings and Captions; Section References . The article, section and paragraph headings and captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation of this Warrant. All references to an Article or Section include all subparts thereof.
      Section 8.07 : No Rights as Stockholder . This Warrant shall not entitle the Warrantholder to any rights as a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive notice of, or to attend, meetings of stockholders or any other proceedings of the Company, except to the extent exercised for Warrant Shares in accordance with the terms hereof.
      Section 8.08 : Survival . If this Warrant is exercised, in whole or in part, on or prior to the Expiration Date, the provisions of Articles I, VI, VII and VIII hereof shall survive the Expiration Date.

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          IN WITNESS WHEREOF, this Warrant has been duly executed by the Company under its corporate seal as of the 4 th day of June, 2010.
         
  AIR LEASE CORPORATION
 
 
  By:   /s/ Steven F. Udvar-Házy  
    Name:   Steven F. Udvar-Házy   
    Title:   Chairman and Chief Executive Officer   
 
         
Attest:
  /s/ Grant A. Levy    
 
       
 
  Secretary    
Societe Generale Warrant

 


 

ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
     For value received,                                            hereby sells, assigns and transfers unto                                             the within Warrant with respect to the number of Warrant Shares issuable upon exercise of said Warrant set forth below, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint                                             attorney, to transfer said Warrant on the books of the within-named Company, with full power of substitution in the premises:
         
Name(s) of        
Assignee(s)   Address   No. of Warrant Shares
         
     And if said number of Warrant Shares shall not be all of the Warrant Shares issuable upon exercise of said Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the Warrant Shares issuable upon exercise of said Warrant.
     Dated:                              
       
 
  Note: The above signature should correspond exactly with the name of the Warrantholder.  

 


 

SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 2.02)
CHECK ONLY BOX A OR BOX B (CAPITALIZED TERMS HAVE THE MEANINGS SET FORTH IN THE WITHIN WARRANT):
A. o The undersigned IS subject to the ownership limitations under the BHA, and, before giving effect to the exercise of this Warrant and without giving effect to any adjustments under Article III of the Warrant (other than any such adjustments as to which the undersigned has been notified in accordance with Section 4.02 of the Warrant), the undersigned Beneficially Owns only
                                           shares of Class A Common Stock
(the undersigned acknowledges that (i) it will only be entitled to acquire a number of shares of the Class A Common Stock upon this exercise of the within Warrant such that, after giving effect to such acquisition, the undersigned will Beneficially Own no more than 4.99% of the outstanding shares of Class A Common Stock, and (ii) the balance of the shares being purchased hereby will consist of Class B Common Stock); AND :
                    CHECK ONLY ONE OF THE FOLLOWING:
  o   The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder,                    shares of Common Stock, as provided for therein, and tenders herewith payment of the purchase price in full in the form of cash or a certified or official bank check in the amount of $                    .
 
      OR
 
  o   The undersigned hereby irrevocably elects to exercise the within Warrant for              shares of Common Stock pursuant to a Cashless Exercise as provided for in Section 2.02(a)(ii) of said Warrant.
OR
B.   o The undersigned IS NOT subject to the ownership limitations under the BHA; AND :
                    CHECK ONLY ONE OF THE FOLLOWING:
  o   The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder,                    shares of Class A Common Stock, as provided for therein, and tenders herewith payment of the purchase price in full in the form of cash or a certified or official bank check in the amount of $                    .
 
      OR

 


 

  o   The undersigned hereby irrevocably elects to exercise the within Warrant for __________ shares of Class A Common Stock pursuant to a Cashless Exercise as provided for in Section 2.02(a)(ii) of said Warrant.

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SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 2.02)
(Continued)
     Please issue a certificate or certificates for such Common Stock in the name of:
   
Name:
 
 
 
 
(Please Print Name, Address and
Social Security Number)
     And if said number of Warrant Shares shall not be all of the Warrant Shares issuable upon exercise of said Warrant, a new Warrant is to be issued in the name of the undersigned for the balance remaining of the Warrant Shares issuable upon exercise of said Warrant, and if such balance remaining shall not be a whole number it shall be rounded up to the next higher whole number of shares.
     Dated:                            
       
 
  Note: The above signature should correspond exactly with the name of the Warrantholder.  

17

Exhibit 10.7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND IN ACCORDANCE WITH STATE SECURITIES LAWS.
     
WARRANT NO. 2   DATE: JUNE 4, 2010
AIR LEASE CORPORATION
WARRANT TO PURCHASE
268,125 SHARES OF
COMMON STOCK
     This certifies that, for good and valuable consideration, Commonwealth Bank of Australia (the “ Original Warrantholder ”) and its assigns, is entitled to acquire from Air Lease Corporation, a Delaware corporation (the “ Company ”), subject to the terms and conditions hereof, at any time and from time to time during the Exercise Period, 268,125 shares of fully paid and non-assessable shares of the Company’s Common Stock, subject to adjustment from time to time as set forth herein, at the Exercise Price; provided, however, that, prior to the receipt by the Original Warrantholder of the Fed Approval, the Original Warrantholder shall be entitled to acquire, first, a number of shares of the Company’s Class A Common Stock, par value $.01 per share (the “ Class A Common Stock ”), such that, after giving effect to such acquisition, the Warrantholder will Beneficially Own up to but no more than 4.99% of the outstanding shares of Class A Common Stock, and second, shares of the Company’s Class B Non-Voting Common Stock, par value $.01 per share (the “ Class B Common Stock ”); provided further, however, that, after the receipt by the Original Warrantholder of the Fed Approval, or if the Warrantholder is not subject to the ownership limitations under the BHA, the Warrantholder shall only be entitled to acquire shares of Class A Common Stock.
ARTICLE I
DEFINITIONS
    As used in this Warrant, the following capitalized terms shall have the following respective meanings:
      Aggregate Offering Price : The meaning set forth in Section 3.03(b).
      Appraiser : A nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing.
      BHA : The Bank Holding Company Act of 1956, as amended.

 


 

           Beneficially Own : The meaning contemplated by Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
           Business Day : A day other than a Saturday, Sunday or other day on which state chartered banks in the State of California are authorized by law to remain closed.
           Cashless Exercise : The exercise of this Warrant in whole or in part by surrendering this Warrant in exchange for (i) the number of Warrant Shares equal to the product of (A) the number of shares as to which this Warrant is being exercised multiplied by (B) a fraction, the numerator of which is the positive difference, if any, of the Per Share Market Value minus the Exercise Price then in effect, and the denominator of which is the Per Share Market Value, and (ii) a new Warrant evidencing the right to acquire the number of Warrant Shares for which this Warrant has not yet been exercised.
           Class A Common Stock : The meaning set forth in the entitlement paragraph immediately preceding Article I hereof.
           Class B Common Stock : The meaning set forth in the entitlement paragraph immediately preceding Article I hereof.
           Common Stock : Both Class A Common Stock and Class B Common Stock.
           Company : The meaning set forth in the entitlement paragraph immediately preceding Article I hereof.
           Effective Date : The date hereof.
           Exercise Period : From the Effective Date through 11:59 p.m., Los Angeles time, on the Expiration Date.
           Exercise Price : $20.00 per Warrant Share, subject to adjustment from time to time as set forth herein.
           Expiration Date : The seventh (7 th ) anniversary of the Effective Date (unless such day is not a Business Day, in which event the next following Business Day).
           Fed Approval : Approval from the United States Federal Reserve Board pursuant to its rules governing acquisitions by banks of voting securities of companies engaged in nonbanking activities that would allow the Warrantholder to acquire 5% or more of the outstanding shares of Class A Common Stock.
           Nasdaq : The Nasdaq Global Market.
           NYSE : The New York Stock Exchange.
           Offering : The offering for sale by the Company of shares of Common Stock pursuant to one or more exemptions from registration under the Securities Act through FBR Capital Markets & Co., a Delaware corporation, as initial purchaser and placement agent, pursuant to which the original holder of this Warrant purchased shares of Common Stock at the price per share established in such offering and in connection with which this Warrant was issued.

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      Per Share Market Value : As of any particular date of determination, (i) if the Class A Common Stock is then listed on the NYSE or on Nasdaq, the average of the closing sales prices (or, if no trade occurs on a relevant day, the average of the closing bid and asked prices on such day) per share of Class A Common Stock (as reported by Bloomberg Information Services, Inc., or any successor reporting service) on the NYSE or Nasdaq on the ten consecutive Business Days immediately preceding such date of determination, (ii) if the Class A Common Stock is not then listed on the NYSE or on Nasdaq, the average of the closing bid and asked prices per share of Class A Common Stock in the United States domestic over-the-counter market, as reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), on the ten consecutive Business Days immediately preceding such date of determination, or (iii) if the Class A Common Stock is not then publicly traded, the fair market value of a share of Class A Common Stock as of such date of determination as determined in good faith by the Board of Directors of the Company.
      Person : An individual, partnership, joint venture, corporation, trust, limited liability company, unincorporated organization or government or any department or agency thereof.
      Reorganization : The meaning set forth in Section 3.01.
      Rights and Rights Distribution Date : The respective meanings set forth in Section 3.04.
      Securities Act : The Securities Act of 1933, as amended from time to time.
      Subscription Form : The Subscription Form annexed hereto.
      Warrants : This Warrant and all other warrants that may be issued in substitution or replacement (in whole or in part) thereof.
      Warrantholder : The person(s) or entity(ies) to whom this Warrant is originally issued, or any successor in interest thereto, or any assignee or transferee thereof.
      Warrant Shares : All shares of Common Stock and other securities issued or issuable upon exercise of any Warrant.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
      Section 2.01 : Duration of Warrant . The Warrantholder may exercise this Warrant at any time and from time to time during the Exercise Period. If this Warrant is not exercised on or prior to the Expiration Date, it shall become void, and all rights hereunder shall thereupon cease. If this Warrant is exercised, in whole or in part, on or prior to the Expiration Date, the provisions of Articles I, VI, VII and VIII hereof shall survive the Expiration Date.
      Section 2.02 : Exercise of Warrant .
          (a) The Warrantholder may exercise this Warrant, in whole or in part, by presentation and surrender of this Warrant to the Company at its principal executive offices or at the office of its stock transfer agent, if any, with the Subscription Form annexed hereto duly executed and either:

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     (i) accompanied by payment of the full Exercise Price for each Warrant Share to be purchased; or
     (ii) specifying on the Subscription Form the election to effect a Cashless Exercise.
Upon an exercise of this Warrant pursuant to Section 2.02(a)(i), the Warrantholder shall be deemed to have purchased the number of Warrant Shares for which the Warrant is exercised as specified in the Subscription Form. Upon an exercise of this Warrant pursuant to Section 2.02(a)(ii), the Warrantholder shall be deemed to have purchased the number of Warrant Shares equal to the product of (i) the number of shares as to which this Warrant is being exercised multiplied by (ii) a fraction, the numerator of which is the positive difference, if any, of the Per Share Market Value minus the Exercise Price then in effect, and the denominator of which is the Per Share Market Value.
          (b) Upon receipt of the documents and payment described in Section 2.02(a), the Company shall cause to be issued certificates for the total number of whole Warrant Shares purchased by the Warrantholder pursuant to such exercise in such denominations as are requested for delivery to the Warrantholder, and the Company shall thereupon deliver such certificates to the Warrantholder. The Warrantholder shall be deemed to be the holder of record of such purchased Warrant Shares as of the close of business on the date on which delivery to the Company of all applicable documents and payment as contemplated by Section 2.02(a) is achieved, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Warrantholder. If, at the time this Warrant is exercised, a registration statement is not in effect to register under the Securities Act the issuance of the Warrant Shares upon exercise of this Warrant, the Company may require the Warrantholder to make such representations, and may place such legends on certificates representing the Warrant Shares, as may be reasonably required in the opinion of counsel to the Company to permit the Warrant Shares to be issued without such registration.
          (c) Certificates for the Warrant Shares so purchased pursuant to Section 2.02(a) shall be delivered to the Warrantholder within a reasonable time, not exceeding five (5) Business Days, after this Warrant shall have been so exercised. In case the Warrantholder shall exercise this Warrant with respect to less than all of the Warrant Shares that may be purchased under this Warrant, the Company shall execute a new warrant in the form of this Warrant for the balance of such Warrant Shares and deliver such new warrant to the Warrantholder.
          (d) The Company shall pay any and all stock transfer and similar taxes that may be payable in respect of the issue of this Warrant or in respect of the issue of any Warrant Shares; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer of this Warrant, or the Warrant Shares, by any Warrantholder.
          (e) Notwithstanding the terms of this Section 2.02, if (i) the Warrantholder has not elected to exercise this Warrant prior to the Expiration Date and (ii) the Exercise Price is less than the Per Share Market Value upon such Expiration Date, then (unless notice to the contrary is provided by the Warrantholder), this Warrant shall be deemed automatically exercised as to the maximum number of shares of Common Stock for which this Warrant is then exercisable pursuant to the provisions of Section 2.02(a)(ii) on such Expiration Date without any action by the Warrantholder. The Company shall be entitled to conclusively rely on a certification by the Warrantholder as to (A) whether the Warrantholder is subject to the BHA, (B) whether the Warrantholder has received the Fed Approval

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and (C) if the Warrantholder is subject to the ownership limitations under the BHA and has not received the Fed Approval, the number of shares of Class A Common Stock Beneficially Owned by the Warrantholder, and if the Company does not receive such certification within five (5) Business Days after requesting such certification from the Warrantholder, then the Company shall satisfy the requirements of this Section 2.02(e) by issuing solely shares of Class B Common Stock in connection with such deemed automatic exercise.
      Section 2.03: Reservation of Shares . The Company hereby agrees that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of Warrant Shares as may be issuable from time to time upon exercise of this Warrant. All such Warrant Shares shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and nonassessable, free and clear of all taxes, liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights (except for restrictions on transfer provided for herein, the restriction imposed by the legend appearing at the top of Page 1 of this Warrant, liens or charges created by the Warrantholder, income and franchise taxes incurred in connection with the exercise of this Warrant and taxes in respect of any transfer occurring contemporaneously therewith).
      Section 2.04: Fractional Shares . Upon any exercise of this Warrant, the Company shall not be required to issue stock certificates representing a fraction of a Warrant Share, but may make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not to make such a cash payment, or is unable to make such cash payment, the Warrantholder shall be entitled to receive, in lieu of the final fraction of a share, one whole Warrant Share.
ARTICLE III
ADJUSTMENT OF WARRANT SHARES AND EXERCISE PRICE UPON
CERTAIN EVENTS
      Section 3.01 : Preservation of Rights in Certain Transactions . In case of (a) any reclassification, capital reorganization or other change of outstanding shares of Common Stock (other than a subdivision or a combination of the outstanding Common Stock and other than a change in the par value of the Common Stock), (b) any payment of a dividend to holders of Common Stock of capital stock of the Company other than Common Stock, (c) any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which the Company is the continuing corporation and said merger does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the classes issuable upon exercise of this Warrant) or (d) any sale, lease, transfer or conveyance to another corporation of the property and assets of the Company as an entirety or substantially as an entirety (each such action being referred to herein as a “ Reorganization ”), the Company shall, as a condition precedent to consummating each such Reorganization, execute, and cause such successor or purchasing corporation, as the case may be, to execute with the Warrantholder an agreement granting the Warrantholder the right thereafter to receive, upon payment of the Exercise Price in effect immediately prior to such Reorganization, in lieu of each Warrant Share issuable upon exercise of this Warrant, the kind and amount of shares and other securities, cash and property that such Warrantholder would have owned or been entitled to receive upon consummation of such Reorganization in respect of a Warrant Share if it had been outstanding immediately prior to such Reorganization. Such agreement shall provide for adjustments in respect of such shares of stock and other securities and property, which shall be as

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nearly equivalent as may be practicable to the adjustments provided to such shares of stock and other securities and property prior to such transaction by the Company. The provisions of this Section shall similarly apply to successive reclassifications, capital reorganizations, consolidations, mergers, sales or conveyances.
      Section 3.02 : Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits . If the Company, at any time while this Warrant is outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, or (c) combine outstanding shares of Common Stock into a smaller number of shares, then in each such case (i) the Exercise Price thereafter shall be equal to the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event and (ii) the number of Warrant Shares thereafter issuable upon exercise of this Warrant shall be equal to the product of the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such event multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding after such event and the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event. Any adjustment made pursuant to this Section 3.02 shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If any dividend or distribution which resulted in an adjustment in the Exercise Price and issuable Warrant Shares pursuant to this Section 3.02 is declared but not so paid or made, the Exercise Price and issuable Warrant Shares shall, immediately upon the determination by the Board of Directors of the Company not to pay such dividend or distribution, be recomputed to the Exercise Price and issuable Warrant Shares that would have been in effect if such dividend or distribution had not been declared.
      Section 3.03 : Rights; Options; Warrants; Convertible Securities .
          (a) Subject to Section 3.04, if the Company, at any time while this Warrant is outstanding, shall issue rights, options, warrants or convertible securities to any Person entitling the holder thereof, upon the exercise or conversion thereof, to subscribe for or purchase shares of Common Stock at a price per share less than the Per Share Market Value as of the date of such issuance, then in each such case (a) the Exercise Price after the record date fixed for determination of stockholders entitled to receive such issuance (or, if no record date is used, after the date of issuance of such rights, options, warrants or convertible securities) shall be equal to the product of the Exercise Price in effect immediately prior to such record date (or issuance date, as applicable) multiplied by a fraction (which shall not be greater than one (1)), the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on such record date plus the number of shares of Common Stock that the Aggregate Offering Price (as defined below) of the shares offered for subscription or purchase pursuant to such rights, options, warrants or convertible securities would purchase at a per share price equal to such Per Share Market Value, and the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on such record date plus the number of additional shares of Common Stock offered for such subscription or purchase, and (b) the number of Warrant Shares issuable upon exercise of this Warrant after the record date fixed for determination of stockholders entitled to receive such issuance (or, if no record date is used, after the date of issuance of such rights, options, warrants or convertible securities) shall be equal to the product of the number of Warrant Shares issuable upon exercise of this Warrant

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immediately prior to such record date (or issuance date, as applicable) multiplied by a fraction, the numerator of which shall be the Exercise Price in effect immediately prior to such record date (or issuance date, as applicable), and the denominator of which shall be the adjusted Exercise Price determined pursuant to clause (a). Such adjustment shall be made whenever such rights, options, warrants or convertible securities are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options, warrants or convertible securities (or, if no record date is used, after the date of issuance of such rights, options, warrants or convertible securities). Upon the expiration of any such rights, options, warrants or convertible securities without exercise or conversion thereof in full for or into Common Stock, the issuance of which resulted in an adjustment in the Exercise Price and issuable Warrant Shares pursuant to this Section 3.03, the Exercise Price and issuable Warrant Shares shall immediately upon such expiration be recomputed to the Exercise Price that would have been in effect had the adjustment of the Exercise Price and issuable Warrant Shares made upon the issuance of such rights, options, warrants or convertible securities been made on the basis of (i) the number of shares of Common Stock actually purchased upon the exercise or conversion thereof and (ii) the Aggregate Offering Price actually received by the Company in respect of only the rights, options, warrants or convertible securities actually exercised or converted for which shares of Common Stock were actually issued by the Company.
          (b) “ Aggregate Offering Price ” shall mean, in respect of any right, option, warrant or convertible security issued by the Company, the sum of (i) the consideration received by the Company for the issuance of such right, option, warrant or convertible security plus (ii) the minimum consideration payable to the Company upon exercise or conversion in full of such right, option, warrant or convertible security (excluding the forfeiture of such convertible security) for the issuance of the underlying shares of Common Stock.
          (c) Any sale by the Company of, and any agreement by the Company to sell, shares of Common Stock to any Person at a price per share less than the Per Share Market Value as of the date of such sale or agreement (as applicable) shall be deemed to be an issuance by the Company of a right to purchase such shares that has been exercised in full and shall be subject to the adjustment provisions of Section 3.03(a).
          (d) Any reduction in the exercise or conversion price per share of Common Stock under any outstanding right, option, warrant or convertible security shall be deemed an expiration without exercise or conversion of such outstanding right, option, warrant or convertible security and a new issuance by the Company of such right, option, warrant or convertible security at the reduced exercise or conversion price per share of Common Stock.
      Section 3.04 : Stockholder Rights Plan . Notwithstanding Section 3.03, in the event that the Company shall distribute “poison pill” rights pursuant to a “poison pill” stockholder rights plan (the “ Rights ”), the Company shall, in lieu of making any adjustment pursuant to this Article III, make proper provision so that each Warrantholder who exercises a Warrant after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such exercise, in addition to the shares of Common Stock issuable upon such exercise, a number of Rights to be determined as follows: (a) if such exercise occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the “ Rights Distribution Date ”), the number of Rights to which a holder at the time of such exercise of a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon such Warrant exercise would be entitled in accordance with the terms and provisions of and applicable to the Rights

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(assuming such shares had been outstanding at the record date for the distribution of the Rights); and (b) if such exercise occurs after the Rights Distribution Date, the number of Rights to which a holder on the Rights Distribution Date of a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon such Warrant exercise would be entitled in accordance with the terms and provisions of and applicable to the Rights (assuming such shares had been outstanding at the record date for the distribution of the Rights), and in each case subject to the terms and conditions of the Rights.
      Section 3.05 : Implementation and Rounding . No adjustment in the Exercise Price shall be required unless the adjustment would require an increase or decrease of at least 1% of the Exercise Price. If the adjustment is not made because the adjustment does not change the Exercise Price by at least 1%, then the adjustment that is not made shall be carried forward and taken into account in any future adjustment. All calculations under this Article III shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
      Section 3.06 : Exceptions to Adjustment . Notwithstanding any other Section of this Article III, no adjustment in the Exercise Price or issuable Warrant Shares shall be made for (a) the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in shares of Common Stock under any plan; (b) the issuance of any shares of Common Stock, restricted stock units or options or rights (including stockholder appreciation rights) to purchase such shares pursuant to any of the Company’s present or future employee, director, or consultant benefit plans, or employee agreements, arrangements or programs; (c) the issuance of any shares of Common Stock pursuant to any option, warrant or right, or exercisable, exchangeable or convertible security outstanding as of the Effective Date; or (d) a change in the par value of Common Stock.
ARTICLE IV
NOTICES TO WARRANTHOLDER
      Section 4.01 : Notice of Events . The Company shall give notice to the Warrantholder by registered mail if at any time prior to the expiration or exercise in full of the Warrant, any of the following events shall occur:
          (a) the Company shall authorize the payment of any dividend upon shares of Common Stock payable in any securities or authorize the making of any distribution to all holders of Common Stock;
          (b) the Company shall authorize the issuance of any additional shares of Common Stock or of rights, options or warrants to subscribe for or purchase Common Stock (other than pursuant to bona fide employee benefit plans);
          (c) the Company shall authorize or engage in a dissolution, liquidation or winding up of the affairs of the Company; or
          (d) the Company shall authorize or engage in a Reorganization.

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     Such notice shall be given to the Warrantholder (i) at least ten (10) Business Days prior to the earliest of (i) the record date for the determination of stockholders entitled to vote on such event, (ii) the record date for the determination of stockholders entitled to such dividend, distribution or subscription rights or (iii) the effective date of such event. Such notice shall specify any such record date.
      Section 4.02 : Notice of Adjustment . Whenever the Exercise Price or issuable Warrant Shares are adjusted pursuant to Article III, the Company shall promptly deliver to the Warrantholder a notice setting forth the Exercise Price and issuable Warrant Shares after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
ARTICLE V
SPLIT-UP, COMBINATION, EXCHANGE, TRANSFER AND REPLACEMENT
OF WARRANTS
      Section 5.01 : Split-Up, Combination, Exchange and Transfer of Warrants . This Warrant may be split up, combined or exchanged for another Warrant or Warrants containing the same terms to purchase a like aggregate number of Warrant Shares. If the Warrantholder desires to split up, combine or exchange Warrants, he or it shall make such request in writing delivered to the Company and shall surrender to the Company any Warrants to be so split up, combined or exchanged. Upon any such surrender for a split up, combination or exchange, the Company shall execute and deliver to the person entitled thereto a Warrant or Warrants, as the case may be, as so requested. The Company may require such Warrantholder to pay a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any split up, combination or exchange of Warrants.
      Section 5.02 : Transfer . This Warrant may be assigned, in whole or in part as to a specified number of Warrant Shares issuable hereunder, without the consent of the Company subject to compliance with the provisions of the Securities Act and the rules and regulations promulgated thereunder.
      Section 5.03 : Lost, Stolen, Mutilated or Destroyed Warrants . If this Warrant is lost, stolen, mutilated or destroyed, the Company shall, subject to such reasonable terms as to indemnity or otherwise as it may request, issue a new Warrant of like denomination and tenor as and in substitution for this Warrant.
ARTICLE VI
REGISTRATION RIGHTS
      Section 6.01 : Registration Rights . The Warrant Shares shall have registration rights to the same extent as the registration rights provided to the shares of Common Stock that the Company shall issue pursuant to the Offering, as set forth in the Registration Rights Agreement to be entered into by the Company and FBR Capital Markets & Co., a Delaware corporation, on or about the Effective Date.

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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
      Section 7.01 : Representations and Warranties of the Company . The Company hereby represents and warrants to the Warrantholder as follows:
          (a) The execution and delivery by the Company of this Warrant and the performance of all obligations of the Company hereunder, including the issuance to the Warrantholder of the Warrant Shares, (i) have been duly authorized by all necessary corporate action on the part of the Company, its Board of Directors and stockholders, (ii) do not conflict with or violate the Company’s Articles of Incorporation or Bylaws, (iii) do not contravene any law or governmental rule, regulation or order applicable to it and (iv) do not contravene any provision of, or constitute a default under, any material indenture, mortgage, deed of trust, loan agreement, contract or other instrument or agreement to which the Company is a party or by which it is bound or to which any of the property or assets of the Company is subject.
          (b) This Warrant constitutes the legal, valid and binding agreement of the Company, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally.
      Section 7.02 : Representations and Warranties of the Warrantholder . The Warrantholder hereby represents and warrants to the Company as follows:
          (a) Purchase for Own Account. This Warrant will be acquired for investment for the Warrantholder’s account, not as nominee or agent, and not with a view to sale or distribution in violation of applicable federal and state securities laws. The Warrantholder has not been formed for the specific purpose of acquiring this Warrant or the Warrant Shares. The Warrantholder represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any Warrant Shares.
          (b) Shares not Registered . The Warrantholder understands that the Warrant Shares at the time of issuance may not be registered under the Securities Act, and applicable state securities laws, on the ground that the issuance of such securities is exempt under the Securities Act and state law exemptions relating to offers and sales not by means of a public offering, and that the Company’s reliance on such exemptions is predicated on the Warrantholders’ representations set forth herein. The Warrantholder acknowledges that the Warrant Shares may not be offered sold, transferred, hypothecated or otherwise assigned except (i) pursuant to a registration statement with respect to the Warrant Shares that is effective under the Securities Act or pursuant to an available exemption from registration under the Securities Act relating to the disposition of the Warrant Shares and (ii) in accordance with applicable state securities laws.
          (c) Investment Experience . The Warrantholder understands that the ownership of this Warrant and the Warrant Shares involves substantial risk. The Warrantholder (i) has sufficient knowledge and experience in financial and business affairs that it can evaluate the risks and merits of its investment in this Warrant and the Warrant Shares and (ii) can bear the economic risk of such Warrantholder’s investment in this Warrant and the Warrant Shares. The Warrantholder acknowledges that it has asked questions of, and received answers from, the Company and obtained such information

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as it deems relevant to making an investment decision with respect to this Warrant and the Warrant Shares.
          (d) Accredited Investor . The Warrantholder is an “accredited investor” as such term is defined in Regulation D under the Securities Act.
ARTICLE VIII
OTHER MATTERS
      Section 8.01 : Amendments and Waivers . The provisions of this Warrant, including without limitation the provisions of this sentence, and all rights hereunder may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, without the written consent of (a) a majority of the independent and disinterested members of the Board of Directors of the Company and (b) the Warrantholder.
      Section 8.02 : Governing Law . This Warrant shall be governed by and construed in accordance with the internal laws (and not the laws pertaining to conflicts or choice of law) of the State of New York. Each party hereby irrevocably submits to the nonexclusive jurisdiction of the state and Federal courts sitting in the City of New York, State of New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN.
      Section 8.03 : Severability . In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provisions in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
      Section 8.04 : Attorneys’ Fees . In any action or proceeding brought to enforce any provisions of this Warrant, or where any provisions hereof or thereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys’ fees and disbursements in addition to its costs and expenses and any other available remedy.
      Section 8.05 : Notice . All notices, requests, demands, directions and other communications (“ Notices ”) concerning this Warrant shall be in writing and shall be mailed or delivered by a nationally recognized next-day courier or delivered personally or sent by telecopier or facsimile to the applicable party at the address of such party set forth below. When mailed, each such Notice shall be sent by first class, certified mail, return receipt requested, enclosed in a postage prepaid wrapper, and shall be effective on the fifth Business Day after it has been deposited in the mail. When delivered by a

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nationally recognized next-day courier, each such Notice shall be sent utilizing a next-day service, and shall be effective on the first Business Day after it has been dispatched. When delivered personally, each such Notice shall be effective when delivered to the address for the respective party set forth herein provided that it is delivered on a Business Day and further provided that it is delivered prior to 5:00 p.m., local time of the party to whom the notice is being delivered, on that Business Day; otherwise, each such Notice shall be effective on the first Business Day occurring after the Notice is delivered. When sent by telecopier or facsimile, each such Notice shall be effective on the day on which it is sent provided that it is sent on a Business Day and further provided that it is sent prior to 5:00 p.m., local time of the party to whom the Notice is being sent, on that Business Day; otherwise, each such Notice shall be effective on the first Business Day occurring after the Notice is sent. Each such Notice shall be addressed as follows: if to the Warrantholder, addressed to it or him at:
Commonwealth Bank of Australia
Level 17 Darling Park Tower 1
201 Sussex Street
Sydney NSW 2000
Australia
         
 
  Attention:   Executive General Manager, Group Mergers and Acquisitions
Group Strategic Development
 
  Facsimile:   (02) 9118 7679
     or, if the Warrantholder has designated, by notice in writing to the Company, any other address, to such other address, and if to the Company, addressed to it at:
Air Lease Corporation
2000 Avenue of the Stars, Suite 600N
Los Angeles, California 90067
         
 
  Attention:   General Counsel
 
  Facsimile:   (310) 553-0999
with a concurrent copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
         
 
  Attention:   Dhiya El-Saden, Esq.
 
  Facsimile:   (213)229-6196
     The Company may change its address by written notice to the Warrantholder and the Warrantholder may change its or his address by written notice to the Company.
      Section 8.06 : Headings and Captions; Section References . The article, section and paragraph headings and captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation of this Warrant. All references to an Article or Section include all subparts thereof.
      Section 8.07 : No Rights as Stockholder . This Warrant shall not entitle the Warrantholder to any rights as a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive notice of, or to attend, meetings of stockholders or any

12


 

other proceedings of the Company, except to the extent exercised for Warrant Shares in accordance with the terms hereof.
    Section 8.08 : Survival . If this Warrant is exercised, in whole or in part, on or prior to the Expiration Date, the provisions of Articles I, VI, VII and VIII hereof shall survive the Expiration Date.

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      IN WITNESS WHEREOF, this Warrant has been duly executed by the Company under its corporate seal as of the 4 th day of June, 2010.
         
  AIR LEASE CORPORATION
 
 
  By:   /s/ Steven F. Udvar-Házy    
    Name:   Steven F. Udvar-Házy   
    Title:   Chairman and Chief Executive Officer   
 
         
Attest:
  /s/ Grant A. Levy    
 
       
 
  Secretary    
Commonwealth Bank of Australia Warrant

 


 

ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
     For value received,                                           hereby sells, assigns and transfers unto                                           the within Warrant with respect to the number of Warrant Shares issuable upon exercise of said Warrant set forth below, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint                                           attorney, to transfer said Warrant on the books of the within-named Company, with full power of substitution in the premises:
                 
Name(s) of            
Assignee(s)   Address     No. of Warrant Shares  
 
               
     And if said number of Warrant Shares shall not be all of the Warrant Shares issuable upon exercise of said Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the Warrant Shares issuable upon exercise of said Warrant.
    Dated:                           
 
Note: The above signature should correspond
exactly with the name of the Warrantholder.

 


 

SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 2.02)
CHECK ONLY BOX A OR BOX B (CAPITALIZED TERMS HAVE THE MEANINGS SET FORTH IN THE WITHIN WARRANT):
A.   o The undersigned IS subject to the ownership limitations under the BHA and HAS NOT received the Fed Approval, and the undersigned Beneficially Owns only
 
                        __________ shares of Class A Common Stock
 
    (the undersigned acknowledges that (i) it will only be entitled to acquire a number of shares of the Class A Common Stock upon this exercise of the within Warrant such that, after giving effect to such acquisition, the undersigned will Beneficially Own no more than 4.99% of the outstanding shares of Class A Common Stock, and (ii) the balance of the shares being purchased hereby will consist of Class B Common Stock); AND:
  CHECK ONLY ONE OF THE FOLLOWING:
 
  o   The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder,                          shares of Common Stock, as provided for therein, and tenders herewith payment of the purchase price in full in the form of cash or a certified or official bank check in the amount of $                            .
 
      OR
 
  o   The undersigned hereby irrevocably elects to exercise the within Warrant for                            shares of Common Stock pursuant to a Cashless Exercise as provided for in Section 2.02(a)(ii) of said Warrant.
OR
B.   o The undersigned HAS received the Fed Approval or IS NOT subject to the ownership limitations under the BHA; AND :
  CHECK ONLY ONE OF THE FOLLOWING:      
 
  o   The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder,                          shares of Class A Common Stock, as provided for therein, and tenders herewith payment of the purchase price in full in the form of cash or a certified or official bank check in the amount of $                            .
 
      OR
 
  o   The undersigned hereby irrevocably elects to exercise the within Warrant for                          shares of Class A Common Stock pursuant to a Cashless Exercise as provided for in Section 2.02(a)(ii) of said Warrant.

 


 

SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 2.02)
(Continued)
     Please issue a certificate or certificates for such Common Stock in the name of:
       
 
  Name:                                                                                              
 
     
 
     
 
 
 
 
 
     
 
 
 
 
 
     
 
 
 
(Please Print Name, Address and
Social Security Number)
 
     And if said number of Warrant Shares shall not be all of the Warrant Shares issuable upon exercise of said Warrant, a new Warrant is to be issued in the name of the undersigned for the balance remaining of the Warrant Shares issuable upon exercise of said Warrant, and if such balance remaining shall not be a whole number it shall be rounded up to the next higher whole number of shares.
     Dated:                                          
 
Note: The above signature should correspond exactly
with the name of the Warrantholder.

17

Exhibit 10.8
Execution Version
EMPLOYMENT AGREEMENT
     EMPLOYMENT AGREEMENT dated as of February 5, 2010 (the “ Effective Date ”), by and between Air Lease Corporation, a Delaware corporation with its principal place of business at 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067 (the “ Company ”), and Steven F. Udvar-Házy, c/o Air Lease Corporation, 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067 (the “ Executive ”).
     WHEREAS the Company wishes to employ the Executive in the capacity of Chairman of the Board and Chief Executive Officer, on the terms and subject to the conditions set forth herein; and
     WHEREAS the Executive wishes to accept such employment;
     NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:
     1. Term . The Company hereby employs the Executive, and the Executive hereby accepts such employment, for a term commencing as of the Effective Date and continuing until June 30, 2013 (as may be amended from time to time, the “ End Date ”), unless sooner terminated in accordance with the provisions of Section 4 or Section 5 (the period during which the Executive is employed hereunder being hereinafter referred to as the “ Term ”).
     2. Duties . During the Term, the Executive shall be employed by the Company as Chairman of the Board and Chief Executive Officer, and, as such, the Executive shall faithfully perform for the Company the duties of said offices and shall perform such other duties of an executive, managerial or administrative nature as shall he specified and designated from time to

 


 

time by the Board of Directors of the Company. The Executive shall devote substantially all of his business time and effort to the performance of his duties hereunder.
      3. Compensation .
          3.1 Annual Salary . The Company shall pay the Executive during the Term a salary at the rate of One Million Eight Hundred Thousand Dollars ($1,800,000) per annum (the “ Annual Salary ”), in accordance with the customary payroll practices of the Company applicable to senior executives. Beginning in the first quarter of 2011, the Annual Salary shall he reviewed by the Compensation Committee of the Board of Directors (the “ Compensation Committee ”) at least annually for anticipated annual increases, such increases, if any, to be determined in the sole discretion of the Committee based on satisfactory performance of the Executive’s duties.
      3.2 Bonus .
               (a)  Annual Bonus . During the Term, in addition to the Annual Salary, the Executive shall have the opportunity to receive an annual bonus (the “ Annual Bonus ”) for each calendar year ending during the Term. The Executive’s target Annual Bonus shall be one hundred percent (100%) of his Annual Salary actually paid for such year and his maximum Annual Bonus shall be two hundred percent (200%) of his Annual Salary actually paid for such year, but the actual Annual Bonus shall be determined on the basis of the Company’s attainment of objective financial performance metrics or a combination of the Company’s attainment of such financial performance metrics and the Executive’s attainment of individual objectives, in each case as determined and approved by the Compensation Committee. The Executive’s Annual Bonus with respect to the partial calendar year in which the Effective Date occurs shall be prorated according to the Annual Salary actually paid for such partial calendar year and may be determined on the basis of attainment of individual objectives or subjective criteria approved

2


 

by the Compensation Committee, but shall not, in any case, be less than One Million Six Hundred Twelve Thousand Five Hundred Dollars ($1,612,500). The Annual Bonus shall be paid in a lump sum, no later than March 15 of the calendar year following the calendar year to which such bonus relates.
               (b)  144A Success Bonus . In the event that the Rule 144A Offering is consummated, the Executive shall receive a one-time bonus in an amount equal to Five Hundred Thousand Dollars ($500,000), payable in a lump sum on the tenth (10th) business day following the closing of such offering. The “ Rule 144A Offering ” means the offerings and concurrent private placements of shares of the Company’s Class A Common Stock, par value $0.01 per share, and Class B Common Stock, par value $0.01 per share, pursuant to Rule 144A, Regulation S and Regulation D under the Securities Act of 1933, as amended, contemplated by the Company as of the date on which the Executive executed this Agreement (the “ Execution Date ”), including, without limitation, shares of the Company’s capital stock issued to funds managed by Ares Management LLC and Leonard Green & Partners, L.P., but excluding shares of the Company’s capital stock issued prior to the Execution Date at a price per share of $2.00.
               (c)  IPO Bonus . If a registration statement filed by the Company with the U.S. Securities and Exchange Commission (the “ SEC ”) in respect of an initial public offering of any class of the Company’s common stock becomes effective during the Term, the Executive shall receive a bonus in an amount equal to ten percent (10%) of the Executive’s then current rate of Annual Salary, payable in a lump sum on the tenth (10th) business day thereafter.
               (d)  Three-Year Service Completion Bonus . If the Executive is employed by the Company on the third anniversary of the Effective Date, the Executive shall

3


 

receive a bonus in an amount equal to ten percent (10%) of the Executive’s then current rate of Annual Salary, payable in a lump sum on the tenth (10th) business day thereafter.
               (e)  Deferred Bonus Plan . It is the intention of the Company to establish a Deferred Bonus Plan, pursuant to which employees of the Company shall have the opportunity to receive a bonus in an amount equal to a percentage (to be specified in such plan or an award agreement thereunder) of the aggregate amount of salary and annual bonus compensation set forth on their Form W-2 issued by the Company with respect to a particular calendar year (but excluding any amounts included in such W-2 that are attributable to equity compensation or bonus compensation other than annual bonus compensation), which bonus shall (i) vest on the third (3d) anniversary of the end of the applicable calendar year if an employee is still employed by the Company on such anniversary and (ii) be paid on the tenth (10th) business day thereafter. The Company intends that the bonus percentage for which the Executive shall be eligible shall be nine percent (9%).
          3.3 Benefits . Except with respect to benefits of a type otherwise provided for under Section 3.4 , the Executive shall be permitted during the Term to participate in any group life, accidental death, hospitalization or disability insurance plans, health programs, retirement plans, fringe benefit programs and similar benefits, if any, that may be available to other senior executives of the Company generally, on the same terms as such other executives, in each case to the extent that the Executive is eligible under the terms of such plans or programs. Without limiting the generality of the foregoing:
               (a) The Company shall provide the Executive with VIP employee parking at the place of the Company’s principal offices.

4


 

               (b) The Company shall pay, on behalf of the Executive, the premiums associated with a team life insurance policy providing a benefit of Five Million Dollars ($5,000,000) payable to the Executive’s spouse or other beneficiary.
               (c) The Company shall establish a “safe harbor” qualified plan under Section 401(k) of the Internal Revenue Code of 1986, as amended, and such plan shall provide for the maximum employer matching contribution permissible under the applicable safe harbor provisions.
          3.4 Grant of Equity Incentives . In the event that the Rule 144A Offering closes and results in gross proceeds to the Company of at least $800 million (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent), the Company shall, on the date of such closing, grant to the Executive options to purchase shares of Class A Common Stock (“ Options ”) and restricted stock units in respect of shares of Class A Common Stock (“ RSUs ”) under the Company’s equity incentive plan (the “ Incentive Plan ”), in amounts to be determined as follows:
               (a) If the Rule 144A Offering results in gross proceeds to the Company of $1.0–1.2 billion (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent), the Company shall grant to the Executive One Million Seven Hundred Fifty Thousand (1,750,000) Options and One Million Seven Hundred Fifty Thousand (1,750,000) RSUs (each such respective grant of Options and RSUs, a “ Base Award ”).
               (b) If the Rule 144A Offering results in gross proceeds to the Company of at least $800 million but less than $1.0 billion (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent), then the Company shall

5


 

grant to the Executive Options and RSUs in the following amounts, as a percentage of the Base Awards:
                         
Gross Proceeds            
Resulting from the   Percentage Applied to   Options to Be    
Rule 144A Offering   Each Base Award   Awarded   RSUs to Be Awarded
At least $800 million but less than $900 million
    80 %     1,400,000       1,400,000  
At least $900 million but less than $1.0 billion
    90 %     1,575,000       1,575,000  
               (c) If the Rule 144A Offering results in gross proceeds to the Company in excess of $1.2 billion (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent), the Company shall grant to the Executive Options and RSUs, in each case in an amount equal to the Base Award increased proportionately by Twenty Thousand (20,000) RSUs and Twenty Thousand (20,000) Options, respectively, for every increment of One Million (1,000,000) shares sold in excess of the number of shares representing $1.2 billion of gross proceeds to the Company, calculated on the basis of the weighted average share price of the shares sold in the Rule 144A Offering. Such increases shall be automatic and shall not require any further action by the Board of Directors or its Compensation Committee. By way of example only, in the event that 69.4 million shares of the Company’s Class A Common Stock and Class B Common Stock were sold in the Rule 144A Offering for aggregate gross proceeds of approximately $1.36 billion at a weighted average price per share of $19.58, the Executive would receive an additional 162,260 RSUs and 162,260 Options, for total awards of 1,912,260 RSUs and 1,912,260 Options.

6


 

               (d) The Options and the RSUs shall be subject to such terms and conditions (including, without limitation, provisions relating to exercise price, vesting, method of exercise and payment, withholding, limited periods after termination of employment within which the Options may be exercised, adjustments in the case of changes in capital structure, nontransferability and rights of repurchase and first refusal) not inconsistent with the foregoing and the Incentive Plan, as may be determined by the Compensation Committee in its sole discretion; provided . that the Executive shall be entitled to elect to have shares withheld to pay the exercise price of the Options and to satisfy the statutory minimum tax withholding obligations for the Options and the RSUs; and provided , further, that the RSUs and Options shall be subject to the vesting conditions set forth on Exhibit A attached hereto. The general terms and conditions of the grant of the Options and the grant of the RSUs shall be set forth in award agreements (the “ Options Agreement ” and “ RSU Agreement ,” respectively) to be entered into by the Company and the Executive, and such award agreements shall evidence such grants. Subject to this Section 3.4 and Sections 4 and 5 of this Agreement, the Options and RSUs shall be governed in all respects by the terms of the Incentive Plan and the applicable award agreement.
          3.5 Expenses . The Company shall pay or reimburse the Executive for all ordinary and reasonable out-of-pocket expenses actually incurred (and, in the case of reimbursement, paid) by the Executive during the Term in the performance of the Executive’s services under this Agreement, including, without limitation, appropriate industry association fees, in accordance with the policies, practices and procedures of the Company applicable to senior executives of the Company.
     4.  Termination upon Death or Disability . If the Executive dies during the Term, the Term shall terminate as of the date of death, and the obligations of the Company to or with

7


 

respect to the Executive shall terminate in their entirety upon such date except as otherwise provided under this Section 4 . If the Executive by virtue of ill health or other disability is unable to perform substantially and continuously the duties assigned to him for more than one hundred eighty (180) consecutive or non-consecutive days out of any consecutive twelve (12)-month period, the Company shall have the right, to the extent permitted by law, to terminate the employment of the Executive upon notice in writing to the Executive. Upon termination of employment due to death or disability,
          (a) the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall be entitled to receive:
(i) any Annual Salary and other benefits earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination), as well as any Annual Bonus earned with respect to a calendar year completed during the Term but not yet paid, to be paid in a lump sum on the thirtieth (30th) day following the date of such termination;
(ii) a prorated Annual Bonus with respect to the calendar year in which such termination occurs, based on actual performance, payable in a lump sum by March 15 of the calendar year following the calendar year to which such bonus relates;
(iii) a deferred bonus pursuant to Section 3.2(e) with respect to the calendar year in which such termination occurs, which bonus shall vest in full and shall be paid in a lump sum on the tenth (10th) business day following the date of such termination; and
(iv) any deferred bonuses granted but not yet paid pursuant to Section 3.2(e) , with respect to years prior to the year in which such termination occurs, which bonuses shall vest in full and shall be paid in a lump sum on the tenth (10th) business day following the date of such termination;
          (b) to the extent not previously vested as of the date of such termination, (i) the Options shall be subject to accelerated vesting and become fully vested as of the date of termination, and shall otherwise be exercisable pursuant to the terms and conditions set forth in

8


 

the applicable Options Agreement, and (ii) the RSUs shall be subject to accelerated time-vesting, but shall remain subject to any unmet performance conditions set forth in the applicable RSU Agreement and, for this purpose, shall remain outstanding until the end of the applicable performance period; and
          (c) the Executive (or, in the case of his death, his estate and beneficiaries) shall have no further right to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.
     5.  Certain Terminations of Employment .
          5.1 Termination by the Company for Cause; Termination by the Executive Without Good Reason .
          (a) For purposes of this Agreement, “ Cause ” shall mean the Executive’s:
(i) conviction of, or plea of guilty or nolo contendere to, a felony; a crime of moral turpitude, dishonesty, breach of trust or unethical business conduct, or any crime involving the Company;
(ii) engagement during the performance of his duties hereunder, or otherwise to the detriment of the Company, in willful misconduct, willful or gross neglect, fraud, misappropriation or embezzlement;
(iii) repeated failure to adhere to the directions of the Board of Directors, to adhere to the Company’s policies and practices or to devote substantially all of his business time and efforts to the Company;
(iv) willful failure to substantially perform his duties properly assigned to him (other than any such failure resulting from his disability);
(v) breach of any of the provisions of Section 6 ; or
(vi) breach in any material respect of the terms and provisions of this Agreement;
provided , that , in the event of a termination of the Executive’s employment pursuant to clause (iii) , (iv) , (v) or (vi) , the Company shall provide the Executive with a Notice of Termination at

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any time not more than thirty (30) days following the occurrence of any of the events described in such clause (or, if later, the Company’s knowledge thereof), and the Executive shall have thirty (30) days following the provision of such Notice of Termination to cure the basis for termination specified in such notice. A “Notice of Termination” means a written notice which (I) indicates the specific termination provision in this Agreement relied upon, (II) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (III) specifies the date on which the Executive’s employment shall terminate (which date shall be not less than thirty (30) days or more than sixty (60) days after the giving of such notice).
          (b) The Company may terminate the Executive’s employment hereunder for Cause pursuant to Section 5.1(a) , and the Executive may terminate his employment on no less than thirty (30) days’ and no more than sixty (60) days’ written notice given to the Company. If the Company terminates the Executive for Cause, or the Executive terminates his employment and the termination by the Executive is not covered by Section 5.2(a) , (i) the Executive shall receive Annual Salary and other benefits earned and accrued under this Agreement prior to the termination of employment (and reimbursement under this Agreement for expenses incurred prior to such termination), as well as any Annual Bonus earned with respect to a calendar year completed during the Term but not yet paid, to be paid in a lump sum on the thirtieth (30th) day following the date of such termination; (ii) any and all Options and RSUs not vested as of the date of such termination shall be forfeited pursuant to the terms and conditions set forth in the applicable Options Agreement and RSU Agreement, respectively; and (iii) the Executive shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.

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          5.2 Termination by the Company without Cause; Termination by the Executive for Good Reason .
          (a) For purposes of this Agreement, “ Good Reason ” shall mean, unless otherwise consented to by the Executive,
(i) the material reduction of the Executive’s authority, duties and responsibilities, or the assignment to the Executive of duties materially inconsistent with the Executive’s position or positions with the Company;
(ii) a reduction in Annual Salary of the Executive; or
(iii) the relocation of the Executive’s office to more than thirty-five (35) miles from the principal offices of the Company.
Notwithstanding the foregoing, (i) Good Reason (A) shall not be deemed to exist unless the Executive provides to the Company a Notice of Termination on account thereof (specifying a termination date not less than thirty (30) days and not more than sixty (60) days after the giving of such notice) no later than thirty (30) days after the time at which the event or condition purportedly giving rise to Good Reason first occurs or arises, and (B) shall not be deemed to exist at any time at which there exists an event or condition which could serve as the basis of a termination of the Executive’s employment for Cause; and (ii) if there exists (without regard to this clause (ii) ) an event or condition that constitutes Good Reason, the Company shall have thirty (30) days from the date such Notice of Termination is given to cure such event or condition and, if the Company does so, such event or condition shall not constitute Good Reason hereunder.
          (b) The Company may terminate the Executive’s employment at any time for any reason or no reason, and the Executive may terminate the Executive’s employment with the Company for Good Reason pursuant to Section 5.2(a) . If the Company terminates the

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Executive’s employment and the termination is not covered by Section 4 or 5.1 , or the Executive terminates his employment for Good Reason,
(i) the Executive shall receive Annual Salary and other benefits earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination), as well as any Annual Bonus earned with respect to a calendar year completed during the Term but not yet paid, to be paid in a lump sum on the thirtieth (30th) day following the date of such termination;
(ii) the Executive shall receive (A) a prorated Annual Bonus with respect to the calendar year in which such termination occurs, based on actual performance and payable in a lump sum by March 15 of the calendar year following the calendar year to which such bonus relates, and (B) a deferred bonus pursuant to Section 3.2(e) with respect to the calendar year in which such termination occurs, which bonus shall vest in full and shall be paid in a lump sum on the tenth (10th) business day following the statutory period for revocation of the Release (as defined below);
(iii) subject to compliance with the Executive’s covenants set forth in Section 6 below, (A) the Executive shall receive salary continuation at the rate of the Annual Salary in effect as of the date of termination of employment, for the period commencing on the date of termination and ending on the later of the End Date and the second anniversary of the date of such termination (the “ Continuation Period ”), payable in accordance with the customary payroll practices of the Company applicable to senior e executives, (B) the Executive shall receive an amount equal to the target Annual Bonus for each calendar year remaining in the Continuation Period, beginning with the year following the year in which the termination of the Executive’s employment occurred, (C) the Executive shall receive through the end of the Continuation Period, continuing coverage under the group health plans in which the Executive was participating at the time of termination of employment, (D) the Company shall continue to pay the premiums for the Executive’s term life insurance described in Section 3.3(c) through the end of the Continuation Period, and (E) any deferred bonuses granted but not yet paid pursuant to Section 3.2(e) , with respect to years prior to the year in which the termination of the Executive’s employment occurred, shall vest in full and shall be paid in a lump sum on the tenth (10th) business day following the statutory period for revocation of the Release;
(iv) to the extent not previously vested as of the date of such termination, (A) the Options shall be subject to accelerated vesting and become fully vested as of the date of termination, and shall otherwise be exercisable pursuant to the terms and conditions set forth in the applicable Options Agreement, and (B) the RSUs shall be subject to accelerated time-vesting, but shall remain subject to any unmet performance conditions set forth in the applicable RSU Agreement and, for this

12


 

purpose, shall remain outstanding until the end of the applicable performance period; and
(v) the Executive shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.
          Notwithstanding the foregoing, it shall be a condition to the Executive’s right to receive the amounts provided for in Section 5.2(b)(ii) and 5.2(b)(iii) that the Executive execute and deliver to the Company a release of claims in substantially the form attached hereto as Exhibit B (the “ Release ) within twenty-one (21) days following the date of termination of the Executive’s employment and that the Executive not revoke such release within seven (7) days thereafter.
          (c) Notwithstanding clause (iii)(C) of Section 5.2(b) , (i) nothing herein shall restrict the ability of the Company to amend or terminate the plans and programs referred to in such clause (iii)(C) from time to time in its sole discretion, and (ii) the Company shall in no event be required to provide any benefits otherwise required by such clause (iii)(C) after such time as the Executive becomes entitled to receive benefits of the same type from another employer or recipient of the Executive’s services (such entitlement being determined without regard to any individual waivers or other similar arrangements).
     6.  Covenants of the Executive .
          6.1 Covenant Against Competition; Other Covenants . The Executive acknowledges that (i) the principal business of the Company (which expressly includes for purposes of this Section 6 (and any related enforcement provisions hereof), its successors and assigns) is aircraft and aviation equipment leasing (such business, and any and all other businesses that after the Effective Date, and from time to time during the Term, become material with respect to the Company’s then-overall business, herein being collectively referred to as the

13


 

Business ”); (ii) the Company is one of the limited number of persons and entities who have developed such a business (the business of such a person or entity in competition with the Company, a “ Competing Business ”); (iii) the Company’s Business is, in part, national in scope; (iv) the Executive’s work for the Company has given and will continue to give him access to the confidential affairs and proprietary information of the Company; (v) the covenants and agreements of the Executive contained in this Section 6 are essential to the business and goodwill of the Company; and (vi) the Company would not have entered into this Agreement but for the covenants and agreements set forth in this Section 6 . Accordingly, the Executive covenants and agrees that:
          (a) By and in consideration of the salary and benefits to be provided by the Company hereunder, including the severance arrangements set forth herein, and further in consideration of the Executive’s exposure to the proprietary information of the Company, the Executive covenants and agrees that, during the period commencing on the Effective Date and ending one (1) year following the date upon which the Executive shall cease to be an employee of the Company and its affiliates (the “ Restricted Period ”), he shall not in the United States, directly or indirectly, (i) engage in any element of a Competing Business or otherwise compete with the Company or its affiliates, (ii) render any services to any person, corporation, partnership or other entity (other than the Company or its affiliates) engaged in any element of a Competing Business, or (iii) become interested in any such person, corporation, partnership or other entity (other than the Company or its affiliates) as a partner, shareholder, principal, agent, employee, consultant or in any other relationship or capacity; provided , however , that , notwithstanding the foregoing, the Executive may invest in securities of any entity, solely for investment purposes and without otherwise participating in the business thereof, if (A) such securities are traded on

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any national securities exchange or the National Association of Securities Dealers, Inc. Automated Quotation System, (B) the Executive is not a controlling Person of, or a member of a group which controls, such entity and (C) the Executive does not, directly or indirectly, own five percent (5%) or more of any class of securities of such entity.
          (b) During and after the Restricted Period, the Executive shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of the Company and its affiliates, all confidential matters relating to the Company’s Business and the business of any of its affiliates and to the Company and any of its affiliates, learned by the Executive heretofore or hereafter directly or indirectly from the Company or any of its affiliates, including, without limitation, information with respect to (i) rates and expiration dates under aircraft- and aviation equipment-related leases to which the Company is a party; (ii) the number and identities of airlines leasing aircraft or aviation equipment from the Company, or otherwise making use of other services provided by the Company; (iii) the number, type, remaining useful life, and value of aircraft owned by the Company and/or its direct or indirect subsidiaries; (iv) profit or loss figures; and (v) customers, clients, suppliers, sources of supply and lists of customers and potential customers (collectively, the “ Confidential Company Information ”); and shall not disclose such Confidential Company Information to anyone outside of the Company except with the Company’s express written consent and except for Confidential Company Information which is at the time of receipt or thereafter becomes publicly known through no wrongful act of the Executive or is received from a third party not under an obligation to keep such information confidential and without breach of this Agreement.

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          (c) During the Restricted Period, the Executive shall not, without the Company’s prior written consent, directly or indirectly, (i) solicit or encourage to leave the employment or other service of the Company, or any of its affiliates, any employee or independent contractor thereof or (ii) hire (on behalf of the Executive or any other person or entity) any employee or independent contractor who has left the employment or other service of the Company or any of its affiliates within the one (1)-year period which follows the termination of such employee’s or independent contractor’s employment or other service with the Company and its affiliates. The immediately preceding sentence does not apply in respect of general solicitations of employment, such as published advertisements not specifically directed toward employees of the Company. During the Restricted Period, the Executive will not, whether for his own account or for the account of any other person, firm, corporation or other business organization, intentionally interfere with the Company’s or any of its affiliates’ relationship with, or endeavor to entice away from the Company or any of its affiliates, any person who during the Term is or was a customer or client of the Company or any of its affiliates.
          (d) All memoranda, notes, lists, records, property and any other tangible product and documents (and all copies thereof), whether visually perceptible, machine-readable or otherwise, made, produced or compiled by the Executive or made available to the Executive concerning the business of the Company or its affiliates, (i) shall at all times be the property of the Company (and, as applicable, any affiliates) and shall be delivered to the Company at any time upon its request, and (ii) upon the Executive’s termination of employment, shall be immediately returned to the Company.

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          6.2 Rights and Remedies upon Breach .
          (a) The Executive acknowledges and agrees that any breach by him of any of the provisions of Section 6.1 (the “ Restrictive Covenants ” ) would result in irreparable injury and damage for which money damages would not provide an adequate remedy. Therefore, if the Executive breaches, or threatens to commit a breach of, any of the provisions of Section 6.1 , the Company and its affiliates shall have the following rights and remedies to the extent permitted under applicable law, each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company and its affiliates under law or in equity (including, without limitation, the recovery of damages):
               (i) the right and remedy to have the Restrictive Covenants specifically enforced (without posting bond and without the need to prove damages) by any court having equity jurisdiction, including, without limitation, the right to an entry against the Executive of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of such covenants; and
               (ii) the right and remedy to require the Executive to account for and pay over to the Company and its affiliates all compensation, profits, monies, accruals, increments or other benefits (collectively, “ Benefits ”) derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive shall account for and pay over such Benefits to the Company and, if applicable, its affected affiliates.
          (b) The Executive agrees that, in any action seeking specific performance or other equitable relief, he will not assert or contend that any of the provisions of this Section 6 are

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unreasonable or otherwise unenforceable. The existence of any claim or cause of action by the Executive, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement of the Restrictive Covenants.
     7.  Other Provisions .
          7.1 Severability . The Executive acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Agreement, and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If it is determined that any of the provisions of this Agreement, including, without limitation , any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the provisions of this Agreement shall not thereby be affected and shall be given full effect, without regard to the invalid portions.
          7.2 Duration and Scope of Covenants . If any court or other decision-maker of competent jurisdiction determines that any of the Executive’s covenants contained in this Agreement, including, without limitation, any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, then, after such determination has become final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
          7.3 Enforceability; Jurisdiction; Arbitration .
          (a) The Company and the Executive intend to and hereby confer jurisdiction to enforce the Restrictive Covenants set forth in Section 6 upon the courts of any jurisdiction within the geographical scope of the Restrictive Covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of breadth of scope

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or otherwise, it is the intention of the Company and the Executive that such determination not bar or in any way affect the Company’s right, or the right of any of its affiliates, to the relief provided above in the courts of any other jurisdiction within the geographical scope of such Restrictive Covenants, as to breaches of such Restrictive Covenants in such other respective jurisdiction, such Restrictive Covenants as they relate to each jurisdiction being, for this purpose, severable, diverse and independent covenants, subject, where appropriate, to the doctrine of res judicata. The parties hereby agree to waive any right to a trial by jury for any and all disputes hereunder (whether or not relating to the Restricted Covenants).
          (b) Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement (other than a controversy or claim arising under Section 6 , to the extent necessary for the Company (or its affiliates, where applicable) to avail itself of the rights and remedies referred to in Section 6.2 ) that is not resolved by the Executive and the Company (or its affiliates, where applicable) shall be submitted to arbitration administered by JAMS/Endispute in Los Angeles, California before a single arbitrator in accordance with the then existing JAMS/Endispute Arbitration Rules and Procedures for Employment Disputes. The determination of the arbitrator shall be conclusive and binding on the Company (or its affiliates, where applicable) and the Executive, and judgment may be entered on the arbitrator’s award in any court having jurisdiction. In the event of such an arbitration proceeding, the Executive and the Company shall select a mutually acceptable neutral arbitrator from among the JAMS/Endispute panel of arbitrators. In the event the Executive and the Company cannot agree on an arbitrator, the Administrator of JAMS/Endispute will appoint an arbitrator. Neither the Executive nor the Company nor the arbitrator shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties. Except as provided

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herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator shall render an award and a written, reasoned opinion in support thereof. Judgment upon the award may be entered in any court having jurisdiction thereof.
          7.4 Section 409A of the Code .
          (a) Certain payments and benefits under this Agreement are intended to be exempt from the application of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), while other payments hereunder may constitute “nonqualified deferred compensation” within the meaning of Section 409A, the payment of which is intended to comply with Section 409A. To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder (collectively, “ Section 409A ”). Notwithstanding any provision of this Agreement to the contrary, if the Company determines that any compensation or benefits payable under this Agreement may be subject to Section 409A, the Company the company may, with the Executive’s prior written consent, adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to (i) exempt the compensation and benefits payable under this Agreement from Section 409A and/or preserve

20


 

the intended tax treatment of such compensation and benefits, or (ii) comply with the requirements of Section 409A.
          (b) Any reimbursement pursuant to the provisions of this Agreement will be paid no later than the last day of the calendar year following the calendar year in which the expense was incurred. The amount of expenses eligible for reimbursement or in-kind benefits provided, during a calendar year will not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year. Any reimbursement to be made or in-kind benefit to be provided pursuant to the provisions of this Agreement is not subject to liquidation or exchange for another benefit.
          (c) The Executive shall not receive any amounts set forth in Section 5.2(b) unless the termination of the Executive’s employment constitutes a “separation from service” within the meaning of Section 409A.
          (d) Nothing in this Agreement shall create any obligation on the part of the Company or any of its affiliates to indemnify, reimburse, gross up, or otherwise compensate the Executive for any taxes, interest, penalties, costs, losses, damages, or expenses arising out of any violation of Section 409A or any corresponding provision of state, local, or foreign law.
          (e) Each payment under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A.
          (f) Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any severance payments or benefits payable under Section 5.2(b) hereof, shall be paid to the Executive during the six (6)-month period following the Executive’s “separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of the Code) if the Company determines that paying such amounts at the time

21


 

or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A without resulting in a prohibited distribution, including as a result of the Executive’s death), the Company shall pay the Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to the Executive during such period, plus interest credited at the applicable federal rate in effect as of the date of termination of the Executive’s employment provided for in Section 7872(f)(2)(A) of the Code.
          7.5 Notices . Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission or, if mailed, five days after the date of deposit in the United States mails as follows:
          (a) If to the Company, to:
Air Lease Corporation
2000 Avenue of the Stars
Suite 600N
Los Angeles, California 90067
Attention: John L. Plueger
                  President and Chief Operating Officer
Copy:        Grant A. Levy
                  Executive Vice President and General Counsel
Telephone: (310) 553-0555
Facsimile: (310) 553-0999

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with a copy (which shall not constitute notice) to:
Munger, Tolles & Olson, LLP
355 South Grand Avenue
35th Floor
Los Angeles, California 90071
Attention: Mark H. Kim
Telephone: (213) 683-9144
Fax: (213) 683-5144
          (b) If to the Executive, to:
Steven F. Udvar-Házy
c/o Air Lease Corporation
2000 Avenue of the Stars
Suite 600N
Los Angeles, California 90067
Telephone: (310) 553-0555
Facsimile: (310) 553-0999
Any such person may by notice given in accordance with this Section 7.5 to the other parties hereto designate another address or person for receipt by such person of notices hereunder.
          7.6 Entire Agreement . This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto.
          7.7 Waivers and Amendments . This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.

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          7.8 GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.
          7.9 Assignment . This Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive; any purported assignment by the Executive in violation hereof shall be null and void. In the event of any sale, transfer or other disposition of all or substantially all of the Company’s assets or business, whether by merger, consolidation or otherwise, the Company may assign this Agreement and its rights hereunder; provided , that, the assignee of or successor to the Company assumes all of the Company’s obligations hereunder.
          7.10 Withholding . The Company shall be entitled to withhold from any payments or deemed payments any amount of tax withholding it determines to be required by law.
          7.11 No Duty to Mitigate . The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor will any payments hereunder be subject to offset in the event the Executive does mitigate.
          7.12 Binding Effect . This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors and legal representatives.
          7.13 Counterparts . This Agreement may be executed by the parties hereto in separate counterparts (including by facsimile or .pdf or .tif attachment to electronic mail), each

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of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two copies hereof each signed by one of the parties hereto.
          7.14 Survival . Notwithstanding anything contained in this Agreement to the contrary, the provisions of Sections 4 , 5 , 6 , and 7 , shall survive termination of this Agreement and any termination of the Executive’s employment hereunder.
          7.15 Existing Agreements . The Executive represents to the Company that he is not subject or a party to any employment or consulting agreement, non-competition covenant or other agreement, covenant or understanding which might prohibit him from executing this Agreement or limit his ability to fulfill his responsibilities hereunder.
          7.16 Headings . The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
[Signature page follows.]

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Execution Version
     IN WITNESS WHEREOF, the parties hereto have signed their names as of the date written below.
         
  AIR LEASE CORPORATION
 
 
  By:   /s/ John L. Plueger    
    Name:   John L. Plueger   
    Title:   President and Chief Operating Officer   
 
  Dated: May 10, 2010   
 
  STEVEN F. UDVAR-HÁZY
 
 
  /s/ Steven F. Udvar-Házy    
     
  Dated: May 10 th , 2010  

 


 

Execution Version
EXHIBIT A
VESTING CONDITIONS FOR EQUITY AWARDS
    The RSUs will vest in cumulative installments as follows:
 
  25% of the RSUs (the “First Tranche”) will vest in full upon the first anniversary of the completion of the Rule 144A Offering (the “First Anniversary Date”) so long as the Company has attained, as of the First Anniversary Date, at least 2% growth in book value per share over the book value per share immediately following the completion of the Rule 144A Offering (the “Initial Book Value), determined in accordance with U.S. generally accepted accounting principles (“GAAP”);
 
  25% of the RSUs (the “Second Tranche”) will vest in full, and any unvested RSUs from the First Tranche will vest in full, upon the second anniversary of the completion of the Rule 144A Offering (the “Second Anniversary Date”) so long as the Company has attained, as of the Second Anniversary Date, at least 5.06% growth in book value per share over the Initial Book Value, determined in accordance with GAAP;
 
  25% of the RSUs (the “Third Tranche”) will vest in full, and any unvested RSUs from the First Tranche and the Second Tranche will vest in full, upon the third anniversary of the completion of the Rule 144A Offering (the “Third Anniversary Date”) so long as the Company has attained, as of the Third Anniversary Date, at least 9.26% growth in book value per share over the Initial Book Value, determined in accordance with GAAP; and
 
  25% of the RSUs (the “Fourth Tranche”) will vest in full, and any unvested RSUs from the First Tranche, the Second Tranche and the Third Tranche will vest in full, on the fourth anniversary of the completion of the Rule 144A Offering or on any date thereafter up to and including the fifth anniversary of the completion of the Rule 144A Offering so long as the Company has attained, as of such date, at least 13.63% growth in book value per share over the Initial Book Value, determined in accordance with GAAP.
 
    The Options will be subject to ratable vesting over three years.

 


 

EXHIBIT B
GENERAL RELEASE
     For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby release and forever discharge the “ Releasees ” hereunder, consisting of Air Lease Corporation, a Delaware corporation (the “ Company ”), and each of its partners, subsidiaries, associates, affiliates, successors, heirs, assigns, agents, directors, officers, employees, representatives, lawyers, insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “ Claims ”), which the undersigned now has or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof. The Claims released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or related to the employment or termination of employment of the undersigned by the Releasees, or any of them; any alleged breach of any express or implied contract of employment; any alleged torts or other alleged legal restrictions on the Company’s or a Releasee’s right to terminate the employment of the undersigned; and any alleged violation of any federal, state or local statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination In Employment Act, the Americans With Disabilities Act, and the California Fair Employment and Housing Act. Nothing in this paragraph is intended to limit the undersigned’s participation in any proceeding brought by any federal, state or other governmental agency to the extent such participation is protected by law. Notwithstanding anything to the contrary in this Release, this Release shall not operate to release any rights or claims of the undersigned (i) to payments or benefits under Section 5.2(b) of that certain Employment Agreement, dated as of February 5, 2010, between Air Lease Corporation and the undersigned (the “ Employment Agreement ”), which is applicable to the payments and benefits provided in exchange for this Release, (ii) to payments or benefits under the Options Agreement and RSU Agreement (as defined in the Employment Agreement), or (iii) to accrued or vested benefits the undersigned may have, if any, as of the date hereof under any applicable plan, policy, practice, program, contract or agreement with the Company.
     THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
     “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”
THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS HE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
     IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:

 


 

     (A) HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE;
     (B) HE HAS TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE BEFORE SIGNING IT; AND
     (C) HE HAS SEVEN (7) DAYS AFTER SIGNING THIS RELEASE TO REVOKE THIS RELEASE, AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD.
     The undersigned represents and warrants that he has received payment by the Company of all compensation due as of the date of termination of his employment. The undersigned further represents and warrants that there has been no assignment or other transfer of any interest in any Claim which he may have against Releasees, or any of them, and the undersigned agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against the undersigned under this indemnity.
     The undersigned agrees that should any person or entity file or cause to be filed any civil action, suit, arbitration, administrative charge, or legal proceeding seeking equitable or monetary relief in connection with any aspect of his employment relationship with the Company or any other matter relating to the claims released by this Release, he will not seek or accept any personal relief from or as the result of such civil action, suit, arbitration, administrative charge, or legal proceeding.
     The undersigned agrees that if he hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then the undersigned agrees to pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim.
     The undersigned further understands and agrees that neither the payment of any sum of money nor the execution of this Release shall constitute or be construed as an admission of any liability whatsoever by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned.
    IN WITNESS WHEREOF, the undersigned has executed this Release this _______ day of ______________, _____.
         
     
     
     
     
 

B-2

Exhibit 10.9
AMENDMENT TO EMPLOYMENT AGREEMENT
     This Amendment (the “ Amendment ”) to that certain Employment Agreement, dated as of February 5, 2010 (the “ Employment Agreement ”), by and between Air Lease Corporation, a Delaware corporation with its principal place of business at 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067 (the “ Company ”), and Steven F. Udvar-Házy, c/o Air Lease Corporation, 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067 (the “ Executive ”), is made as of August 11, 2010.
     WHEREAS the Compensation Committee of the Board of Directors of the Company has approved the Amended and Restated Deferred Bonus Plan effective as of August 4, 2010;
     WHEREAS the Executive has received grants of options to purchase shares of the Company’s Class A Common Stock (“ Options ”) and restricted stock units in respect of shares of the Company’s Class A Common Stock (“ RSUs ”) under the 2010 Equity Incentive Plan in accordance with Section 3.4(a) of the Employment Agreement, effective as of June 4, 2010;
     WHEREAS the Executive is entitled to receive additional grants of Options and RSUs in accordance with Section 3.4(c) of the Employment Agreement;
     WHEREAS the Company and the Executive desire to amend certain provisions of the Employment Agreement relating to the Amended and Restated Deferred Bonus Plan;
     WHEREAS the Company and the Executive desire to amend the vesting schedule and certain provisions relating to tax withholding with respect to RSUs; and
     WHEREAS, for good and valuable consideration, the Executive desires to waive his rights to a portion of the awards under Section 3.4(c) of the Employment Agreement;

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     NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:
          1. Amendment to Section 3.2(e) . Section 3.2(e) of the Employment Agreement shall be replaced in its entirety with the following provision:
          “(e) Deferred Bonus Plan . It is the intention of the Company to establish a Deferred Bonus Plan, pursuant to which employees of the Company shall have the opportunity to receive a bonus in an amount equal to a percentage (to be specified in an award agreement thereunder) of the aggregate amount of salary, annual bonus compensation, and other short-term or special cash bonus set forth on their Form W-2 issued by the Company with respect to a particular calendar year (but excluding any amounts included in such W-2 that are attributable to equity compensation and any other amounts not attributable to salary, annual bonus, and other short-term or special cash bonus), which bonus shall (i) vest on the second (2d) anniversary of the end of the applicable calendar year, subject to the employee having been continuously employed on a full-time basis with the Company through such anniversary, and (ii) be paid on January 15 next following such vesting date, but in any event no later than March 15 next following such vesting date; in each case, except as otherwise provided in Sections 4 and 5 of this Agreement. The Company intends that the bonus percentage for which the Executive shall be eligible shall be nine percent (9%).”
          2. Waiver of Equity Awards . The Company and the Executive hereby agree and acknowledge that the Company has granted to the Executive 1,750,000 Options and 1,750,000 RSUs pursuant to Section 3.4(a) of the Employment Agreement. The Company and the Executive further agree and acknowledge that the Executive shall receive grants of 1,352

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Options and 426 RSUs pursuant to Section 3.4(c) of the Employment Agreement, effective as of August 11, 2010, subject to the terms and conditions set forth in the Employment Agreement. The Executive hereby waives any and all rights to receive additional grants of Options or RSUs pursuant to Section 3.4(c) of the Employment Agreement, and the Company shall have no further obligation to grant any additional awards thereunder.
          3. Tax Withholding . The first sentence of Section 3.4(d) of the Employment Agreement shall be replaced in its entirety with the following sentence:
          “The Options and the RSUs shall be subject to such terms and conditions (including, without limitation, provisions relating to exercise price, vesting, method of exercise and payment, withholding, limited periods after termination of employment within which the Options may be exercised, adjustments in the case of changes in capital structure, nontransferability and rights of repurchase and first refusal) not inconsistent with the foregoing and the Incentive Plan, as may be determined by the Compensation Committee in its sole discretion; provided, that the Executive shall be entitled to elect to have shares withheld to pay the exercise price of the Options and to satisfy the statutory minimum tax withholding obligations for the Options and the RSUs; provided, further, that in all events the Company may, at its option, require that the applicable tax withholding obligations for the RSUs be satisfied by the withholding of shares otherwise issuable pursuant to the RSUs, and the Executive hereby consents to such withholding; and provided, further, that the RSUs and Options shall be subject to the vesting conditions set forth on Exhibit A attached hereto.”
          4. Amendment to Exhibit A . Exhibit A to the Employment Agreement shall be replaced in its entirety with Exhibit A attached hereto.

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          5. Governing Law . This Amendment shall be governed by and construed in accordance with the laws of the State of California without regard to any principles of conflicts of law which could cause the application of the laws of any jurisdiction other than the State of California.
          6. Binding Effect . This Amendment shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors and legal representatives.
          7. Counterparts . This Amendment may be executed by the parties hereto in separate counterparts (including by facsimile or .pdf or .tif attachment to electronic mail), each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two copies hereof each signed by one of the parties hereto.
[Signature page follows.]

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     IN WITNESS WHEREOF, the parties hereto have signed their names as of the day and year first above written.
         
  AIR LEASE CORPORATION
 
 
  By:   /s/ John L. Plueger    
    Name:   John L. Plueger   
    Title:   President and COO  
     
  Dated: 8/11/10   
     
  STEVEN F. UDVAR-HÁZY
 
 
  /s/ Steven F. Udvar-Házy    
     
  Dated: 8/11/10    

 


 

         
EXHIBIT A
VESTING CONDITIONS FOR EQUITY AWARDS
The RSUs will vest in cumulative installments as follows:
    25% of the RSUs (the “First Tranche”) will vest in full on June 30, 2011, so long as the Company has attained, as of such date, at least 2% growth in book value per share over the book value per share as of June 30, 2010 (the “Initial Book Value”), determined in accordance with U.S. generally accepted accounting principles (“GAAP”);
 
    25% of the RSUs (the “Second Tranche”) will vest in full, and any unvested RSUs from the First Tranche will vest in full, on June 30, 2012, so long as the Company has attained, as of such date, at least 5.06% growth in book value per share over the Initial Book Value, determined in accordance with GAAP;
 
    25% of the RSUs (the “Third Tranche”) will vest in full, and any unvested RSUs from the First Tranche and the Second Tranche will vest in full, on June 30, 2013, so long as the Company has attained, as of such date, at least 9.26% growth in book value per share over the Initial Book Value, determined in accordance with GAAP; and
 
    25% of the RSUs (the “Fourth Tranche”) will vest in full, and any unvested RSUs from the First Tranche, the Second Tranche and the Third Tranche will vest in full, on June 30, 2014, or on any date thereafter up to and including June 30, 2015, so long as the Company has attained, as of the relevant date, at least 13.63% growth in book value per share over the Initial Book Value, determined in accordance with GAAP.
The Options granted pursuant to Section 3.4(a) will be subject to ratable vesting over three years, with one-third of the Options vesting on each of the first, second and third anniversaries of the grant date.
The Options granted pursuant to Section 3.4(c) will be subject to ratable vesting over three years, with one-third of the Options vesting on each of June 30, 2011, June 30, 2012, and June 30, 2013.

 

Exhibit 10.10
Execution Copy
EMPLOYMENT AGREEMENT
     EMPLOYMENT AGREEMENT dated as of March 29, 2010 (the “ Effective Date ”), by and between Air Lease Corporation, a Delaware corporation with its principal place of business at 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067 (the “ Company ”), and John L. Plueger, c/o Air Lease Corporation, 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067 (the “ Executive ”).
     WHEREAS the Company wishes to employ the Executive in the capacity of President, Chief Operating Officer and director, on the terms and subject to the conditions set forth herein; and
     WHEREAS the Executive wishes to accept such employment;
     NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:
     1.  Term . The Company hereby employs the Executive, and the Executive hereby accepts such employment, for a term commencing as of the Effective Date and continuing until June 30, 2013 (as may be amended from time to time, the “ End Date ”), unless sooner terminated in accordance with the provisions of Section 4 or Section 5 (the period during which the Executive is employed hereunder being hereinafter referred to as the “ Term ”).
     2.  Duties . During the Term, the Executive shall be employed by the Company as President and Chief Operating Officer, and, as such, the Executive shall faithfully perform for the Company the duties of said offices and shall perform such other duties of an executive, managerial or administrative nature as shall be specified and designated from time to time by the Board of Directors of the Company. The Executive shall devote substantially all of his business

 


 

time and effort to the performance of his duties in such capacities hereunder. In addition, if nominated and elected to the Board of Directors of the Company, the Executive hereby agrees to serve as a member of the Board.
     3.  Compensation .
          3.1 Annual Salary . The Company shall pay the Executive during the Term a salary at the rate of One Million Five Hundred Thousand Dollars ($1,500,000) per annum (the “ Annual Salary ”), in accordance with the customary payroll practices of the Company applicable to senior executives. Beginning in the first quarter of 2011, the Annual Salary shall be reviewed by the Compensation Committee of the Board of Directors (the “ Compensation Committee ”) at least annually for anticipated annual increases, such increases, if any, to be determined in the sole discretion of the Committee based on satisfactory performance of the Executive’s duties.
          3.2 Bonus .
               (a)  Annual Bonus . During the Term, in addition to the Annual Salary, the Executive shall have the opportunity to receive an annual bonus (the “ Annual Bonus ”) for each calendar year ending during the Term. The Executive’s target Annual Bonus shall be eighty percent (80%) of his Annual Salary actually paid for such year and his maximum Annual Bonus shall be one hundred twenty percent (120%) of his Annual Salary actually paid for such year, but the actual Annual Bonus shall be determined on the basis of the Company’s attainment of objective financial performance metrics or a combination of the Company’s attainment of such financial performance metrics and the Executive’s attainment of individual objectives, in each case as determined and approved by the Compensation Committee. The Executive’s Annual Bonus with respect to the partial calendar year in which the Effective Date occurs shall be prorated according to the Annual Salary actually paid for such partial calendar year and may

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be determined on the basis of attainment of individual objectives or subjective criteria approved by the Compensation Committee. The Annual Bonus shall be paid in a lump sum, no later than March 15 of the calendar year following the calendar year to which such bonus relates.
               (b)  IPO Bonus . If a registration statement filed by the Company with the U.S. Securities and Exchange Commission (the “ SEC ”) in respect of an initial public offering of any class of the Company’s common stock becomes effective during the Term, the Executive shall receive a bonus in an amount equal to ten percent (10%) of the Executive’s then current rate of Annual Salary, payable in a lump sum on the tenth (10th) business day thereafter.
               (c)  Three-Year Service Completion Bonus . If the Executive is employed by the Company on the third anniversary of the Effective Date, the Executive shall receive a bonus in an amount equal to ten percent (10%) of the Executive’s then current rate of Annual Salary, payable in a lump sum on the tenth (10th) business day thereafter.
               (d)  Deferred Bonus Plan . It is the intention of the Company to establish a Deferred Bonus Plan, pursuant to which employees of the Company shall have the opportunity to receive a bonus in an amount equal to a percentage (to be specified in such plan or an award agreement thereunder) of the aggregate amount of salary and annual bonus compensation set forth on their Form W-2 issued by the Company with respect to a particular calendar year (but excluding any amounts included in such W-2 that are attributable to equity compensation or bonus compensation other than annual bonus compensation), which bonus shall (i) vest on the third (3d) anniversary of the end of the applicable calendar year if an employee is still employed by the Company on such anniversary and (ii) be paid on the tenth (10th) business day thereafter. The Company intends that the bonus percentage for which the Executive shall be eligible shall be nine percent (9%).

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          3.3 Benefits . Except with respect to benefits of a type otherwise provided for under Section 3.4 , the Executive shall be permitted during the Term to participate in any group life, accidental death, hospitalization or disability insurance plans, health programs, retirement plans, fringe benefit programs and similar benefits, if any, that may be available to other senior executives of the Company generally, on the same terms as such other executives, in each case to the extent that the Executive is eligible under the terms of such plans or programs. Without limiting the generality of the foregoing:
               (a) The Company shall provide the Executive with employee parking at the place of the Company’s principal offices.
               (b) The Company shall purchase, on behalf of the Executive, a term life insurance policy providing a benefit of Two Million Dollars ($2,000,000) payable to the Executive’s spouse or other beneficiary.
               (c) The Company shall establish a “safe harbor” qualified plan under Section 401(k) of the Internal Revenue Code of 1986, as amended, and such plan shall provide for the maximum employer matching contribution permissible under the applicable safe harbor provisions.
          3.4 Grant of Equity Incentives . In the event that the Rule 144A Offering (as defined below) closes and results in gross proceeds to the Company of at least $800 million (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent), the Company shall, on the date of such closing, grant to the Executive options to purchase Class A Common Stock, par value $0.01 per share, of the Company (“ Options ”) and restricted stock units in respect of shares of Class A Common Stock (“ RSUs ”) under the Company’s equity incentive plan (the “ Incentive Plan ”), in amounts to be determined as follows:

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               (a) If the Rule 144A Offering results in gross proceeds to the Company of $1.0–1.2 billion (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent), the Company shall grant to the Executive Seven Hundred Thousand (700,000) Options and Seven Hundred Thousand (700,000) RSUs (each such respective grant of Options and RSUs, a “ Base Award ”).
               (b) If the Rule 144A Offering results in gross proceeds to the Company of at least $800 million but less than $1.0 billion (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent), then the Company shall grant to the Executive Options and RSUs in the following amounts, as a percentage of the Base Awards:
                         
Gross Proceeds            
Resulting from the   Percentage Applied to   Options to Be    
Rule 144A Offering   Each Base Award   Awarded   RSUs to Be Awarded
At least $800 million but less than $900 million
    80 %     560,000       560,000  
At least $900 million but less than $1.0 billion
    90 %     630,000       630,000  
               (c) If the Rule 144A Offering results in gross proceeds to the Company in excess of $1.2 billion (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent), the Company shall grant to the Executive Options and RSUs, in each case in an amount equal to the Base Award increased by a percentage equal to the percentage represented by (I) the amount of gross proceeds resulting from the Rule 144A Offering (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent) in excess of $1.2 billion, divided by (II) $1.2 billion.

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Such increases shall be automatic and shall not require any further action by the Board of Directors or its Compensation Committee. By way of example only, if the Rule 144A Offering results in gross proceeds to the Company of $1.36 billion (including as a result of any exercise of the additional allotment by the initial purchaser and placement agent), the Executive’s equity awards would increase to 793,334 RSUs and 793,334 Options.
               (d) The Options and the RSUs shall be subject to such terms and conditions (including, without limitation, provisions relating to exercise price, vesting, method of exercise and payment, withholding, limited periods after termination of employment within which the Options may be exercised, adjustments in the case of changes in capital structure, nontransferability and rights of repurchase and first refusal) not inconsistent with the foregoing and the Incentive Plan, as may he determined by the Compensation Committee in its sole discretion; provided , that the Executive shall be entitled to elect to have shares withheld to pay the exercise price of the Options and to satisfy the statutory minimum tax withholding obligations for the Options and the RSUs; and provided , further, that the RSUs and Options shall be subject to the vesting conditions set forth on Exhibit A attached hereto. The general terms and conditions of the grant of the Options and the grant of the RSUs shall be set forth in award agreements (the “ Options Agreement ” and “ RSU Agreement ,” respectively) to be entered into by the Company and the Executive, and such award agreements shall evidence such grants. Subject to this Section 3.4 and Sections 4 and 5 of this Agreement, the Options and RSUs shall be governed in all respects by the terms of the Incentive Plan and the applicable award agreement. The “ Rule 144A Offering ” means the offerings and concurrent private placements of shares of the Company’s Class A Common Stock and Class B Common Stock, par value $0.01 per share, pursuant to Rule 144A, Regulation S and Regulation D under the Securities Act of 1933, as

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amended, contemplated by the Company as of the date on which the Executive executed this Agreement (“ Execution Date ”), including, without limitation, shares of the Company’s capital stock issued to funds managed by Ares Management LLC and Leonard Green & Partners, L.P., but excluding shares of the Company’s capital stock issued prior to the Execution Date at a price per share of $2.00.
          3.5 Expenses . The Company shall pay or reimburse the Executive for all ordinary and reasonable out-of-pocket expenses actually incurred (and, in the case of reimbursement, paid) by the Executive during the Term in the performance of the Executive’s services under this Agreement, including, without limitation, appropriate industry association fees, in accordance with the policies, practices and procedures of the Company applicable to senior executives of the Company.
     4.  Termination upon Death or Disability . If the Executive dies during the Term, the Term shall terminate as of the date of death, and the obligations of the Company to or with respect to the Executive shall terminate in their entirety upon such date except as otherwise provided under this Section 4 . If the Executive by virtue of ill health or other disability is unable to perform substantially and continuously the duties assigned to him for more than one hundred eighty (180) consecutive or non-consecutive days out of any consecutive twelve (12)-month period, the Company shall have the right, to the extent permitted by law, to terminate the employment of the Executive upon notice in writing to the Executive. Upon termination of employment due to death or disability,
          (a) the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall be entitled to receive:
(i) any Annual Salary and other benefits earned and accrued under this Agreement prior to the date of termination (and reimbursement under this

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Agreement for expenses incurred prior to the date of termination), as well as any Annual Bonus earned with respect to a calendar year completed during the Term but not yet paid, to be paid in a lump sum on the thirtieth (30th) day following the date of such termination;
(ii) a prorated Annual Bonus with respect to the calendar year in which such termination occurs, based on actual performance, payable in a lump sum by March 15 of the calendar year following the calendar year to which such bonus relates;
(iii) a deferred bonus pursuant to Section 3.2(d) with respect to the calendar year in which such termination occurs, which bonus shall vest in full and shall be paid in a lump sum on the tenth (10th) business day following the date of such termination; and
(iv) any deferred bonuses granted but not yet paid pursuant to Section 3.2(d) , with respect to years prior to the year in which such termination occurs, which bonuses shall vest in full and shall be paid in a lump sum on the tenth (10th) business day following the date of such termination;
          (b) to the extent not previously vested as of the date of such termination, (i) the Options shall be subject to accelerated vesting and become fully vested as of the date of termination, and shall otherwise be exercisable pursuant to the terms and conditions set forth in the applicable Options Agreement, and (ii) the RSUs shall be subject to accelerated time-vesting, but shall remain subject to any unmet performance conditions set forth in the applicable RSU Agreement and, for this purpose, shall remain outstanding until the end of the applicable performance period; and
          (c) the Executive (or, in the case of his death, his estate and beneficiaries) shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.

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     5.  Certain Terminations of Employment .
          5.1 Termination by the Company for Cause; Termination by the Executive without Good Reason .
          (a) For purposes of this Agreement, “ Cause ” shall mean the Executive’s:
(i) conviction of, or plea of guilty or nolo contendere to, a felony; a crime of moral turpitude, dishonesty, breach of trust or unethical business conduct, or any crime involving the Company;
(ii) engagement during the performance of his duties hereunder, or otherwise to the detriment of the Company, in willful misconduct, willful or gross neglect, fraud, misappropriation or embezzlement;
(iii) repeated failure to adhere to the directions of the Board of Directors, to adhere to the Company’s policies and practices or to devote substantially all of his business time and efforts to the Company;
(iv) willful failure to substantially perform his duties properly assigned to him (other than any such failure resulting from his disability);
(v) breach of any of the provisions of Section 6 ; or
(vi) breach in any material respect of the terms and provisions of this Agreement;
provided , that , in the event of a termination of the Executive’s employment pursuant to clause (iii) , (iv) , (v)  or (vi) , the Company shall provide the Executive with a Notice of Termination at any time not more than thirty (30) days following the occurrence of any of the events described in such clause (or, if later, the Company’s knowledge thereof), and the Executive shall have thirty (30) days following the provision of such Notice of Termination to cure the basis for termination specified in such notice. A “Notice of Termination” means a written notice which (I) indicates the specific termination provision in this Agreement relied upon, (II) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (III)

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specifies the date on which the Executive’s employment shall terminate (which date shall be not less than thirty (30) days or more than sixty (60) days after the giving of such notice).
          (b) The Company may terminate the Executive’s employment hereunder for Cause pursuant to Section 5.1(a) , and the Executive may terminate his employment on no less than thirty (30) days’ and no more than sixty (60) days’ written notice given to the Company. If the Company terminates the Executive for Cause, or the Executive terminates his employment and the termination by the Executive is not covered by Section 5.2(a) , (i) the Executive shall receive Annual Salary and other benefits earned and accrued under this Agreement prior to the termination of employment (and reimbursement under this Agreement for expenses incurred prior to such termination), as well as any Annual Bonus earned with respect to a calendar year completed during the Term but not yet paid, to be paid in a lump sum on the thirtieth (30th) day following the date of such termination; (ii) any and all Options and RSUs not vested as of the date of such termination shall be forfeited pursuant to the terms and conditions set forth in the applicable Options Agreement and RSU Agreement, respectively; and (iii) the Executive shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.
          5.2 Termination by the Company without Cause; Termination by the Executive for Good Reason .
          (a) For purposes of this Agreement. “ Good Reason ” shall mean, unless otherwise consented to by the Executive,
(i) the material reduction of the Executive’s authority, duties and responsibilities, or the assignment to the Executive of duties materially inconsistent with the Executive’s position or positions with the Company;
(ii) a reduction in Annual Salary of the Executive; or

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(iii) the relocation of the Executive’s office to more than thirty-five (35) miles from the principal offices of the Company.
Notwithstanding the foregoing, (i) Good Reason (A) shall not be deemed to exist unless the Executive provides to the Company a Notice of Termination on account thereof (specifying a termination date not less than thirty (30) days and not more than sixty (60) days after the giving of such notice) no later than thirty (30) days after the time at which the event or condition purportedly giving rise to Good Reason first occurs or arises, and (B) shall not be deemed to exist at any time at which there exists an event or condition which could serve as the basis of a termination of the Executive’s employment for Cause; and (ii) if there exists (without regard to this clause (ii) ) an event or condition that constitutes Good Reason, the Company shall have thirty (30) days from the date such Notice of Termination is given to cure such event or condition and, if the Company does so, such event or condition shall not constitute Good Reason hereunder.
          (b) The Company may terminate the Executive’s employment at any time for any reason or no reason, and the Executive may terminate the Executive’s employment with the Company for Good Reason pursuant to Section 5.2(a) . If the Company terminates the Executive’s employment and the termination is not covered by Section 4 or 5.1 , or the Executive terminates his employment for Good Reason,
(i) the Executive shall receive Annual Salary and other benefits earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination), as well as any Annual Bonus earned with respect to a calendar year completed during the Term but not yet paid, to be paid in a lump sum on the thirtieth (30th) day following the date of such termination;
(ii) the Executive shall receive (A) a prorated Annual Bonus with respect to the calendar year in which such termination occurs, based on actual performance and payable in a lump sum by March 15 of the calendar year following the calendar year to which such bonus relates, and (B) a deferred bonus pursuant to Section

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3.2(d) with respect to the calendar year in which such termination occurs, which bonus shall vest in full and shall be paid in a lump sum on the tenth (10th) business day following the statutory period for revocation of the Release (as defined below);
(iii) subject to compliance with the Executive’s covenants set forth in Section 6 below, (A) the Executive shall receive salary continuation at the rate of the Annual Salary in effect as of the date of termination of employment, for the period commencing on the date of termination and ending on the later of the End Date and the second anniversary of the date of such termination (the “ Continuation Period ”), payable in accordance with the customary payroll practices of the Company applicable to senior executives, (B) the Executive shall receive an amount equal to the target Annual Bonus for each calendar year remaining in the Continuation Period, beginning with the year following the year in which the termination of the Executive’s employment occurred, (C) the Executive shall receive through the end of the Continuation Period, continuing coverage under the group health plans in which the Executive was participating at the time of termination of employment, (D) the Company shall continue to pay the premiums for the Executive’s term life insurance described in Section 3.3(c) through the end of the Continuation Period, and (E) any deferred bonuses granted but not yet paid pursuant to
Section 3.2(d) , with respect to years prior to the year in which the termination of the Executive’s employment occurred, shall vest in full and shall be paid in a lump sum on the tenth (10th) business day following the statutory period for revocation of the Release;
(iv) to the extent not previously vested as of the date of such termination, (A) the Options shall be subject to accelerated vesting and become fully vested as of the date of termination, and shall otherwise be exercisable pursuant to the terms and conditions set forth in the applicable Options Agreement, and (B) the RSUs shall be subject to accelerated time-vesting, but shall remain subject to any unmet performance conditions set forth in the applicable RSU Agreement and, for this purpose, shall remain outstanding until the end of the applicable performance period; and
(v) the Executive shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.
          Notwithstanding the foregoing, it shall be a condition to the Executive’s right to receive the amounts provided for in Section 5.2(b)(ii) and 5.2(b)(iii) that the Executive execute and deliver to the Company a release of claims in substantially the form attached hereto as Exhibit B (the “ Release ) within twenty-one (21) days following the date of termination of the

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Executive’s employment and that the Executive not revoke such release within seven (7) days thereafter.
          (c) Notwithstanding clause (iii)(C) of Section 5.2(b) , (i) nothing herein shall restrict the ability of the Company to amend or terminate the plans and programs referred to in such clause (iii)(C) from time to time in its sole discretion, and (ii) the Company shall in no event be required to provide any benefits otherwise required by such clause (iii)(C) after such time as the Executive becomes entitled to receive benefits of the same type from another employer or recipient of the Executive’s services (such entitlement being determined without regard to any individual waivers or other similar arrangements).
     6.  Covenants of the Executive .
          6.1 Covenant Against Competition; Other Covenants . The Executive acknowledges that (i) the principal business of the Company (which expressly includes for purposes of this Section 6 (and any related enforcement provisions hereof), its successors and assigns) is aircraft and aviation equipment leasing (such business, and any and all other businesses that after the Effective Date, and from time to time during the Term, become material with respect to the Company’s then-overall business, herein being collectively referred to as the “ Business ”); (ii) the Company is one of the limited number of persons and entities who have developed such a business (the business of such a person or entity in competition with the Company, a “ Competing Business ”); (iii) the Company’s Business is, in part, national in scope; (iv) the Executive’s work for the Company has given and will continue to give him access to the confidential affairs and proprietary information of the Company; (v) the covenants and agreements of the Executive contained in this Section 6 are essential to the business and goodwill of the Company; and (vi) the Company would not have entered into this Agreement but

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for the covenants and agreements set forth in this Section 6 . Accordingly, the Executive covenants and agrees that:
          (a) By and in consideration of the salary and benefits to be provided by the Company hereunder, including the severance arrangements set forth herein, and further in consideration of the Executive’s exposure to the proprietary information of the Company, the Executive covenants and agrees that, during the period commencing on the Effective Date and ending one (1) year following the date upon which the Executive shall cease to be an employee of the Company and its affiliates (the “ Restricted Period ”), he shall not in the United States, directly or indirectly, (i) engage in any element of a Competing Business or otherwise compete with the Company or its affiliates, (ii) render any services to any person, corporation, partnership or other entity (other than the Company or its affiliates) engaged in any element of a Competing Business, or (iii) become interested in any such person, corporation, partnership or other entity (other than the Company or its affiliates) as a partner, shareholder, principal, agent, employee, consultant or in any other relationship or capacity; provided , however , that , notwithstanding the foregoing, the Executive may invest in securities of any entity, solely for investment purposes and without otherwise participating in the business thereof, if (A) such securities are traded on any national securities exchange or the National Association of Securities Dealers, Inc. Automated Quotation System, (B) the Executive is not a controlling person of, or a member of a group which controls, such entity and (C) the Executive does not, directly or indirectly, own five percent (5%) or more of any class of securities of such entity.
          (b) During and after the Restricted Period, the Executive shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of the Company and its affiliates, all confidential

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matters relating to the Company’s Business and the business of any of its affiliates and to the Company and any of its affiliates, learned by the Executive heretofore or hereafter directly or indirectly from the Company or any of its affiliates, including, without limitation, information with respect to (i) rates and expiration dates under aircraft- and aviation equipment-related leases to which the Company is a party; (ii) the number and identities of airlines leasing aircraft or aviation equipment from the Company, or otherwise making use of other services provided by the Company; (iii) the number, type, remaining useful life, and value of aircraft owned by the Company and/or its direct or indirect subsidiaries; (iv) profit or loss figures; and (v) customers, clients, suppliers, sources of supply and lists of customers and potential customers (collectively, the “ Confidential Company Information ”); and shall not disclose such Confidential Company Information to anyone outside of the Company except with the Company’s express written consent and except for Confidential Company Information which is at the time of receipt or thereafter becomes publicly known through no wrongful act of the Executive or is received from a third party not under an obligation to keep such information confidential and without breach of this Agreement.
          (c) During the Restricted Period, the Executive shall not, without the Company’s prior written consent, directly or indirectly, (i) solicit or encourage to leave the employment or other service of the Company, or any of its affiliates, any employee or independent contractor thereof or (ii) hire (on behalf of the Executive or any other person or entity) any employee or independent contractor who has left the employment or other service of the Company or any of its affiliates within the one (1)-year period which follows the termination of such employee’s or independent contractor’s employment or other service with the Company and its affiliates. The immediately preceding sentence does not apply in respect of general

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solicitations of employment, such as published advertisements not specifically directed toward employees of the Company. During the Restricted Period, the Executive will not, whether for his own account or for the account of any other person, firm, corporation or other business organization, intentionally interfere with the Company’s or any of its affiliates’ relationship with, or endeavor to entice away from the Company or any of its affiliates, any person who during the Term is or was a customer or client of the Company or any of its affiliates.
          (d) All memoranda, notes, lists, records, property and any other tangible product and documents (and all copies thereof), whether visually perceptible, machine-readable or otherwise, made, produced or compiled by the Executive or made available to the Executive concerning the business of the Company or its affiliates, (i) shall at all times be the property of the Company (and, as applicable, any affiliates) and shall be delivered to the Company at any time upon its request, and (ii) upon the Executive’s termination of employment, shall be immediately returned to the Company.
          6.2 Rights and Remedies upon Breach .
               (a) The Executive acknowledges and agrees that any breach by him of any of the provisions of Section 6.1 (the “ Restrictive Covenants ”) would result in irreparable injury and damage for which money damages would not provide an adequate remedy. Therefore, if the Executive breaches, or threatens to commit a breach of, any of the provisions of Section 6.1 , the Company and its affiliates shall have the following rights and remedies to the extent permitted under applicable law, each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company and its affiliates under law or in equity (including, without limitation, the recovery of damages):

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                    (i) the right and remedy to have the Restrictive Covenants specifically enforced (without posting bond and without the need to prove damages) by any court having equity jurisdiction, including, without limitation, the right to an entry against the Executive of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of such covenants; and
                    (ii) the right and remedy to require the Executive to account for and pay over to the Company and its affiliates all compensation, profits, monies, accruals, increments or other benefits (collectively, “ Benefits ”) derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive shall account for and pay over such Benefits to the Company and, if applicable, its affected affiliates.
          (b) The Executive agrees that, in any action seeking specific performance or other equitable relief, he will not assert or contend that any of the provisions of this Section 6 are unreasonable or otherwise unenforceable. The existence of any claim or cause of action by the Executive, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement of the Restrictive Covenants.
     7.  Other Provisions .
          7.1 Severability . The Executive acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Agreement, and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If it is determined that any of the provisions of this Agreement, including, without limitation, any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the

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remainder of the provisions of this Agreement shall not thereby be affected and shall be given full effect, without regard to the invalid portions.
          7.2 Duration and Scope of Covenants . If any court or other decision-maker of competent jurisdiction determines that any of the Executive’s covenants contained in this Agreement, including, without limitation, any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, then, after such determination has become final and unappealable, the duration or scope of such provision, as the case may he, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
          7.3 Enforceability; Jurisdiction; Arbitration .
          (a) The Company and the Executive intend to and hereby confer jurisdiction to enforce the Restrictive Covenants set forth in Section 6 upon the courts of any jurisdiction within the geographical scope of the Restrictive Covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of breadth of scope or otherwise, it is the intention of the Company and the Executive that such determination not bar or in any way affect the Company’s right, or the right of any of its affiliates, to the relief provided above in the courts of any other jurisdiction within the geographical scope of such Restrictive Covenants, as to breaches of such Restrictive Covenants in such other respective jurisdictions, such Restrictive Covenants as they relate to each jurisdiction being, for this purpose, severable, diverse and independent covenants, subject, where appropriate, to the doctrine of res judicata. The parties hereby agree to waive any right to a trial by jury for any and all disputes hereunder (whether or not relating to the Restricted Covenants).

18


 

          (b) Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement (other than a controversy or claim arising under Section 6 , to the extent necessary for the Company (or its affiliates, where applicable) to avail itself of the rights and remedies referred to in Section 6.2 ) that is not resolved by the Executive and the Company (or its affiliates, where applicable) shall be submitted to arbitration administered by JAMS/Endispute in Los Angeles, California before a single arbitrator in accordance with the then existing JAMS/Endispute Arbitration Rules and Procedures for Employment Disputes. The determination of the arbitrator shall be conclusive and binding on the Company (or its affiliates, where applicable) and the Executive, and judgment may be entered on the arbitrator’s award in any court having jurisdiction. In the event of such an arbitration proceeding, the Executive and the Company shall select a mutually acceptable neutral arbitrator from among the JAMS/Endispute panel of arbitrators. In the event the Executive and the Company cannot agree on an arbitrator, the Administrator of JAMS/Endispute will appoint an arbitrator. Neither the Executive nor the Company nor the arbitrator shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties. Except as provided herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator shall render an award and a written, reasoned opinion in support thereof. Judgment upon the award may be entered in any court having jurisdiction thereof.

19


 

          7.4 Section 409A of the Code .
          (a) Certain payments and benefits under this Agreement are intended to be exempt from the application of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), while other payments hereunder may constitute “nonqualified deferred compensation” within the meaning of Section 409A, the payment of which is intended to comply with Section 409A. To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder (collectively, “ Section 409A ”). Notwithstanding any provision of this Agreement to the contrary, if the Company determines that any compensation or benefits payable under this Agreement may be subject to Section 409A, the Company may, with the Executive’s prior written consent, adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to (i) exempt the compensation and benefits payable under this Agreement from Section 409A and/or preserve the intended tax treatment of such compensation and benefits, or (ii) comply with the requirements of Section 409A.
          (b) Any reimbursement pursuant to the provisions of this Agreement will be paid no later than the last day of the calendar year following the calendar year in which the expense was incurred. The amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year will not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year. Any reimbursement to be made or in-kind benefit to be provided pursuant to the provisions of this Agreement is not subject to liquidation or exchange for another benefit.

20


 

          (c) The Executive shall not receive any amounts set forth in Section 5.2(b) unless the termination of the Executive’s employment constitutes a “separation from service” within the meaning of Section 409A.
          (d) Nothing in this Agreement shall create any obligation on the part of the Company or any of its affiliates to indemnify, reimburse, gross up, or otherwise compensate the Executive for any taxes, interest, penalties, costs, losses, damages, or expenses arising out of any violation of Section 409A or any corresponding provision of state, local, or foreign law.
          (e) Each payment under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A.
          (f) Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any severance payments or benefits payable under Section 5.2(b) hereof, shall be paid to the Executive during the six (6)-month period following the Executive’s “separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of the Code) if the Company determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A without resulting in a prohibited distribution, including as a result of the Executive’s death), the Company shall pay the Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to the Executive during such period, plus interest credited at the applicable federal rate in effect as of the date of termination of the Executive’s employment provided for in Section 7872(f)(2)(A) of the Code.

21


 

          7.5 Notices . Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission or, if mailed, five days after the date of deposit in the United States mails as follows:
          (a) If to the Company, to:
Air Lease Corporation
2000 Avenue of the Stars
Suite 600N
Los Angeles, California 90067
Attention:  Steven F. Udvar-Házy
Chairman and Chief Executive Officer
Telephone: (310) 553-0555
Facsimile: (310) 553-0999
with a copy (which shall not constitute notice) to:
Munger, Tolles & Olson, LLP
355 South Grand Avenue
35th Floor
Los Angeles, California 90071
Attention: Mark H. Kim
Telephone:(213) 683-9144
Fax:(213) 683-5144
          (b) If to the Executive, to:
John L. Plueger
c/o Air Lease Corporation
2000 Avenue of the Stars
Suite 600N
Los Angeles, California 90067
Telephone: (310) 553-0555
Facsimile: (310) 553-0999
     Any such person may by notice given in accordance with this Section 7.5 to the other parties hereto designate another address or person for receipt by such person of notices hereunder.

22


 

          7.6 Entire Agreement . This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto.
          7.7 Waivers and Amendments . This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.
          7.8 GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.
          7.9 Assignment . This Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive; any purported assignment by the Executive in violation hereof shall be null and void. In the event of any sale, transfer or other disposition of all or substantially all of the Company’s assets or business, whether by merger, consolidation or otherwise, the Company may assign this Agreement and its rights hereunder; provided , that, the assignee of or successor to the Company assumes all of the Company’s obligations hereunder.

23


 

          7.10 Withholding . The Company shall be entitled to withhold from any payments or deemed payments any amount of tax withholding it determines to be required by law.
          7.11 No Duty to Mitigate . The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor will any payments hereunder be subject to offset in the event the Executive does mitigate.
          7.12 Binding Effect . This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors and legal representatives.
          7.13 Counterparts . This Agreement may be executed by the parties hereto in separate counterparts (including by facsimile or .pdf or .tif attachment to electronic mail), each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two copies hereof each signed by one of the parties hereto.
          7.14 Survival . Notwithstanding anything contained in this Agreement to the contrary, the provisions of Sections 4 , 5 , 6 , and 7 , shall survive termination of this Agreement and any termination of the Executive’s employment hereunder.
          7.15 Existing Agreements . The Executive represents to the Company that he is not subject or a party to any employment or consulting agreement, non-competition covenant or other agreement, covenant or understanding which might prohibit him from executing this Agreement or limit his ability to fulfill his responsibilities hereunder.

24


 

          7.16 Headings . The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
[Signature page follows.]

25


 

Execution Copy
     IN WITNESS WHEREOF, the parties hereto have signed their names as of the date written below.
         
  AIR LEASE CORPORATION
 
 
  By:   /s/ Steven F. Udvar-Házy    
    Name:   Steven F. Udvar-Házy   
    Title:   Chairman and Chief Executive Officer   
 
Dated: May 10, 2010  
 
 
  JOHN L. PLUEGER
 
 
  /s/ John L. Plueger    
 
Dated: May 10, 2010 
 
     

 


 

         
Execution Copy
EXHIBIT A
VESTING CONDITIONS FOR EQUITY AWARDS
    The RSUs will vest in cumulative installments as follows:
 
  25% of the RSUs (the “First Tranche”) will vest in full upon the first anniversary of the completion of the Rule 144A Offering (the “First Anniversary Date”) so long as the Company has attained, as of the First Anniversary Date, at least 2% growth in book value per share over the book value per share immediately following the completion of the Rule 144A Offering (the “Initial Book Value), determined in accordance with U.S. generally accepted accounting principles (“GAAP”);
 
  25% of the RSUs (the “Second Tranche”) will vest in full, and any unvested RSUs from the First Tranche will vest in full, upon the second anniversary of the completion of the Rule 144A Offering (the “Second Anniversary Date”) so long as the Company has attained, as of the Second Anniversary Date, at least 5.06% growth in book value per share over the Initial Book Value, determined in accordance with GAAP;
 
  25% of the RSUs (the “Third Tranche”) will vest in full, and any unvested RSUs from the First Tranche and the Second Tranche will vest in full, upon the third anniversary of the completion of the Rule 144A Offering (the “Third Anniversary Date”) so long as the Company has attained, as of the Third Anniversary Date, at least 9.26% growth in book value per share over the Initial Book Value, determined in accordance with GAAP; and
 
  25% of the RSUs will vest in full, and any unvested RSUs from the First Tranche, the Second Tranche and the Third Tranche will vest in full, on the fourth anniversary of the completion of the Rule 144A Offering or on any date thereafter up to and including the fifth anniversary of the completion of the Rule 144A Offering so long as the Company has attained, as of such date, at least 13.63% growth in book value per share over the Initial Book Value, determined in accordance with GAAP.
 
    The Options will be subject to ratable vesting over three years.

 


 

Execution Copy
EXHIBIT B
GENERAL RELEASE
     For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby release and forever discharge the “ Releasees ” hereunder, consisting of Air Lease Corporation, a Delaware corporation (the “ Company ”), and each of its partners, subsidiaries, associates, affiliates, successors, heirs, assigns, agents, directors, officers, employees, representatives, lawyers, insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “ Claims ”), which the undersigned now has or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof. The Claims released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or related to the employment or termination of employment of the undersigned by the Releasees, or any of them; any alleged breach of any express or implied contract of employment; any alleged torts or other alleged legal restrictions on the Company’s or a Releasee’s right to terminate the employment of the undersigned; and any alleged violation of any federal, state or local statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination In Employment Act, the Americans With Disabilities Act, and the California Fair Employment and Housing Act. Nothing in this paragraph is intended to limit the undersigned’s participation in any proceeding brought by any federal, state or other governmental agency to the extent such participation is protected by law. Notwithstanding anything to the contrary in this Release, this Release shall not operate to release any rights or claims of the undersigned (i) to payments or benefits under Section 5.2(b) of that certain Employment Agreement, dated as of March 29, 2010, between Air Lease Corporation and the undersigned (the “ Employment Agreement ”), which is applicable to the payments and benefits provided in exchange for this Release, (ii) to payments or benefits under the Options Agreement and RSU Agreement (as defined in the Employment Agreement), or (iii) to accrued or vested benefits the undersigned may have, if any, as of the date hereof under any applicable plan, policy, practice, program, contract or agreement with the Company.
     THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
     “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”
THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS HE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
     IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:

 


 

     (A) HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE;
     (B) HE HAS TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE BEFORE SIGNING IT; AND
     (C) HE HAS SEVEN (7) DAYS AFTER SIGNING THIS RELEASE TO REVOKE THIS RELEASE, AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD.
     The undersigned represents and warrants that he has received payment by the Company of all compensation due as of the date of termination of his employment. The undersigned further represents and warrants that there has been no assignment or other transfer of any interest in any Claim which he may have against Releasees, or any of them, and the undersigned agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against the undersigned under this indemnity.
     The undersigned agrees that should any person or entity file or cause to be filed any civil action, suit, arbitration, administrative charge, or legal proceeding seeking equitable or monetary relief in connection with any aspect of his employment relationship with the Company or any other matter relating to the claims released by this Release, he will not seek or accept any personal relief from or as the result of such civil action, suit, arbitration, administrative charge, or legal proceeding.
     The undersigned agrees that if he hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then the undersigned agrees to pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim.
     The undersigned further understands and agrees that neither the payment of any sum of money nor the execution of this Release shall constitute or be construed as an admission of any liability whatsoever by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned.
     IN WITNESS WHEREOF, the undersigned has executed this Release this       day of                 ,       .
         
     
     
 
 
 
     

B-2

Exhibit 10.11
AMENDMENT TO EMPLOYMENT AGREEMENT
     This Amendment (the “ Amendment ”) to that certain Employment Agreement dated as of March 29, 2010 (the “ Employment Agreement ”), by and between Air Lease Corporation, a Delaware corporation with its principal place of business at 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067 (the “ Company ”), and John L. Plueger, c/o Air Lease Corporation, 2000 Avenue of the Stars, Suite 600N, Los Angeles, California 90067 (the “ Executive ”), is made as of August 11, 2010.
     WHEREAS the Compensation Committee of the Board of Directors of the Company has approved the Amended and Restated Deferred Bonus Plan effective as of August 4, 2010;
     WHEREAS the Executive has received grants of options to purchase shares of the Company’s Class A Common Stock (“ Options ”) and restricted stock units in respect of shares of the Company’s Class A Common Stock (“ RSUs ”) under the 2010 Equity Incentive Plan in accordance with Section 3.4(a) of the Employment Agreement, effective as of June 4, 2010;
     WHEREAS the Executive is entitled to receive additional grants of Options and RSUs in accordance with Section 3.4(c) of the Employment Agreement;
     WHEREAS the Company and the Executive desire to amend certain provisions of the Employment Agreement relating to the Amended and Restated Deferred Bonus Plan;
     WHEREAS the Company and the Executive desire to amend the vesting schedule and certain provisions relating to tax withholding with respect to RSUs; and
     WHEREAS, for good and valuable consideration, the Executive desires to waive his rights to a portion of the awards under Section 3.4(c) of the Employment Agreement;

1


 

     NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:
          1. Amendment to Section 3.2(d) . Section 3.2(d) of the Employment Agreement shall be replaced in its entirety with the following provision:
          “(d) Deferred Bonus Plan . It is the intention of the Company to establish a Deferred Bonus Plan, pursuant to which employees of the Company shall have the opportunity to receive a bonus in an amount equal to a percentage (to be specified in an award agreement thereunder) of the aggregate amount of salary, annual bonus compensation, and other short-term or special cash bonus set forth on their Form W-2 issued by the Company with respect to a particular calendar year (but excluding any amounts included in such W-2 that are attributable to equity compensation and any other amounts not attributable to salary, annual bonus, and other short-term or special cash bonus), which bonus shall (i) vest on the second (2d) anniversary of the end of the applicable calendar year, subject to the employee having been continuously employed on a full-time basis with the Company through such anniversary, and (ii) be paid on January 15 next following such vesting date, but in any event no later than March 15 next following such vesting date; in each case, except as otherwise provided in Sections 4 and 5 of this Agreement. The Company intends that the bonus percentage for which the Executive shall be eligible shall be nine percent (9%).”
          2. Waiver of Equity Awards . The Company and the Executive hereby agree and acknowledge that the Company has granted to the Executive 700,000 Options and 700,000 RSUs pursuant to Section 3.4(a) of the Employment Agreement. The Company and the Executive further agree and acknowledge that the Executive shall receive grants of 10,806 Options and

2


 

10,431 RSUs pursuant to Section 3.4(c) of the Employment Agreement, effective as of August 11, 2010, subject to the terms and conditions set forth in the Employment Agreement. The Executive hereby waives any and all rights to receive additional grants of Options or RSUs pursuant to Section 3.4(c) of the Employment Agreement, and the Company shall have no further obligation to grant any additional awards thereunder.
          3. Tax Withholding . The first sentence of Section 3.4(d) of the Employment Agreement shall be replaced in its entirety with the following sentence:
          “The Options and the RSUs shall be subject to such terms and conditions (including, without limitation, provisions relating to exercise price, vesting, method of exercise and payment, withholding, limited periods after termination of employment within which the Options may be exercised, adjustments in the case of changes in capital structure, nontransferability and rights of repurchase and first refusal) not inconsistent with the foregoing and the Incentive Plan, as may be determined by the Compensation Committee in its sole discretion; provided , that the Executive shall be entitled to elect to have shares withheld to pay the exercise price of the Options and to satisfy the statutory minimum tax withholding obligations for the Options and the RSUs; provided , further, that in all events the Company may, at its option, require that the applicable tax withholding obligations for the RSUs be satisfied by the withholding of shares otherwise issuable pursuant to the RSUs, and the Executive hereby consents to such withholding; and provided , further, that the RSUs and Options shall be subject to the vesting conditions set forth on Exhibit A attached hereto.”
          4. Amendment to Exhibit A . Exhibit A to the Employment Agreement shall be replaced in its entirety with Exhibit A attached hereto.

3


 

          5. Governing Law . This Amendment shall be governed by and construed in accordance with the laws of the State of California without regard to any principles of conflicts of law which could cause the application of the laws of any jurisdiction other than the State of California.
          6. Binding Effect . This Amendment shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors and legal representatives.
          7. Counterparts . This Amendment may be executed by the parties hereto in separate counterparts (including by facsimile or .pdf or .tif attachment to electronic mail), each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two copies hereof each signed by one of the parties hereto.
[Signature page follows.]

4


 

     IN WITNESS WHEREOF, the parties hereto have signed their names as of the day and year first above written.
         
  AIR LEASE CORPORATION
 
 
  By:   /s/ Steven F. Udvar-Házy   
    Name:   Steven F. Udvar-Házy   
    Title:   Chairman and CEO   
 
  Dated: 8/11/10     
 
  JOHN L. PLUEGER
 
 
  /s/ John L. Plueger    
     
  Dated: 8/11/2010   

 


 

         
EXHIBIT A
VESTING CONDITIONS FOR EQUITY AWARDS
The RSUs will vest in cumulative installments as follows:
    25% of the RSUs (the “First Tranche”) will vest in full on June 30, 2011, so long as the Company has attained, as of such date, at least 2% growth in book value per share over the book value per share as of June 30, 2010 (the “Initial Book Value”), determined in accordance with U.S. generally accepted accounting principles (“GAAP”);
 
    25% of the RSUs (the “Second Tranche”) will vest in full, and any unvested RSUs from the First Tranche will vest in full, on June 30, 2012, so long as the Company has attained, as of such date, at least 5.06% growth in book value per share over the Initial Book Value, determined in accordance with GAAP;
 
    25% of the RSUs (the “Third Tranche”) will vest in full, and any unvested RSUs from the First Tranche and the Second Tranche will vest in full, on June 30, 2013, so long as the Company has attained, as of such date, at least 9.26% growth in book value per share over the Initial Book Value, determined in accordance with GAAP; and
 
    25% of the RSUs (the “Fourth Tranche”) will vest in full, and any unvested RSUs from the First Tranche, the Second Tranche and the Third Tranche will vest in full, on June 30, 2014, or on any date thereafter up to and including June 30, 2015, so long as the Company has attained, as of the relevant date, at least 13.63% growth in book value per share over the Initial Book Value, determined in accordance with GAAP.
The Options granted pursuant to Section 3.4(a) will be subject to ratable vesting over three years, with one-third of the Options vesting on each of the first, second and third anniversaries of the grant date.
The Options granted pursuant to Section 3.4(c) will be subject to ratable vesting over three years, with one-third of the Options vesting on each of June 30, 2011, June 30, 2012, and June 30, 2013.

 

Exhibit 21.1
AIR LEASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
         
    Percentage of
    Voting Securities
    Owned by
    the Registrant
    or a
    Subsidiary of
Name of Company/Jurisdiction of Incorporation or Formation   the Registrant
Delaware
       
ALC A320-2 4316, LLC
    100  
ALC A321-2 4334, LLC
    100  
ALC B738 37758, LLC
    100  
ALC B738 37760, LLC
    100  
ALC B738 35077, LLC
    100  
ALC A319-1 2657, LLC
    100  
ALC B737-7 33015, LLC
    100  
ALC B738 29674, LLC
    100  
ALC B738 35115, LLC
    100  
ALC 777-3 37434, LLC
    100  
ALC B378 32919, LLC
    100  
ALC A320 3218, LLC
    100  
ALC B378 35101, LLC
    100  
ALC A319-1 2560, LLC
    100  
ALC A319 1893, LLC
    100  
ALC B378 34898, LLC
    100  
ALC B378 34253, LLC
    100  
ALC Aircraft Holdings I, LLC
    100  
ALC A320 4681, LLC
    100  
ALC A332 1266, LLC
    100  
ALC A332 1256, LLC
    100  
ALC A320 354778, LLC
    100  
ALC A320 4694, LLC
    100  
ALC A320 354777, LLC
    100  
ALC Aircraft Holdings SA, LLC
    100  
ALC A320-2 1944, LLC
    100  
ALC A320 4601, LLC
    100  
ALC A320 4604, LLC
    100  
ALC B773 35544, LLC
    100  
ALC E190 72012, LLC
    100  
ALC E190 22012, LLC
    100  
ALC E190 12012, LLC
    100  
ALC E190 62011, LLC
    100  
ALC E190 72011, LLC
    100  
ALC ATR 726 22012, LLC
    100  
ALC ATR 726 12012, LLC
    100  
ALC ATR 726 32012, LLC
    100  
ALC ATR 726 112011, LLC
    100  
ALC ATR 726 102011, LLC
    100  
ALC A320 22012, LLC
    100  
ALC A320 12012, LLC
    100  

 


 

         
    Percentage of
    Voting Securities
    Owned by
    the Registrant
    or a
    Subsidiary of
Name of Company/Jurisdiction of Incorporation or Formation   the Registrant
ALC A320 52012, LLC
    100  
ALC A320 4553, LLC
    100  
ALC A320 4584, LLC
    100  
ALC Warehouse Borrower, LLC
    100  
ALC B737 35086, LLC
    100  
ALC A320-2 1467, LLC
    100  
ALC A332 443, LLC
    100  
ALC A321-2 4251, LLC
    100  
ALC A332 1138, LLC
    100  
ALC A319 1703, LLC
    100  
ALC B378 30370, LLC
    100  
ALC B378 35228, LLC
    100  
ALC B378 34254, LLC
    100  
ALC B773 35254, LLC
    100  
ALC B378 36529, LLC
    100  
ALC B378 35217, LLC
    100  
ALC A320 3256, LLC
    100  
ALC A320 3576, LLC
    100  
ALC B378 30372, LLC
    100  
ALC B377 30746, LLC
    100  
ALC A320-2 3021, LLC
    100  
ALC A320 2645, LLC
    100  
ALC B378 32920, LLC
    100  
ALC B378 30286, LLC
    100  
ALC B378 30360, LLC
    100  
ALC B378 35120, LLC
    100  
ALC A319-1 2456, LLC
    100  
ALC A319 2326, LLC
    100  
ALC G IV, LLC
    100  
ALC Servicer, LLC
    100  
 
       
Cayman Islands
       
ALC A320-2 1944 Cayman Limited
    100  
ACG Acquisition (Cayman) 2645 Limited
    100  
 
       
Ireland
       
ALC Blarney Aircraft Limited
    100  
ALC Clover Ireland Limited
    100  
ALC Warehouse Ireland Limited
    100  
 
       
Labuan
       
ALC Labuan Aircraft Limited
    100  

 

Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Air Lease Corporation:
We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the Registration Statement.
/s/  KPMG LLP
San Francisco, California
January 13, 2011

Exhibit 23.3
(AVITAS LETTERHEAD)
January 10, 2011
Mr. Grant A. Levy
Executive Vice President and General Counsel
Air Lease Corporation
2000 Avenue of the Stars, Suite 600N
Los Angeles, California 90067
Re:     Written Consent to Form S-1 of Air Lease Corporation
Dear Mr. Levy:
We hereby consent to the reference to our firm under the heading “Experts” and to the use of information contained in our report entitled “Report on the Aviation Industry”, dated December 2010, in the Registration Statement on Form S-1 of Air Lease Corporation, including any amendments thereto, for the registration of shares of its Class A common stock.
 
Sincerely,

/s/ John W. Vitale

John W. Vitale
President & CEO