Document:

Exhibit 10.12
	 

	 
	 

	 
		DIRECTOR SERVICE AGREEMENT
	 

	 
		THIS AGREEMENT is made on the ___ day of
		____________ 2007.
	 

	 
		BETWEEN:
	 

	 
		Babcock & Brown Air Limited, a company
		incorporated under the laws of Bermuda with its principal executive office
		located at West Pier, Dun Laoghaire, County Dublin, Ireland (the
		“Company”); and
	 

	 
		[Director] of [Address]
		(“Director”)
	 

	 
		WHEREAS Director is a director of the
		Company,
	 

	 
		WHEREAS highly skilled and competent persons
		are becoming more reluctant to serve public companies as directors or officers
		unless they are provided with adequate protection through insurance and
		indemnification against inordinate risks of claims and actions against them
		arising out of their service to and activities on behalf of such companies;
		
	 

	 
		WHEREAS uncertainties relating to
		indemnification increase the difficulty of attracting and retaining such
		persons; 
	 

	 
		WHEREAS the Board has determined that an
		inability to attract and retain such persons is detrimental to the best
		interests of the Company and that the Company should act to assure such persons
		that there will be increased certainty of such protection in the future;
		
	 

	 
		WHEREAS, it is reasonable, prudent and
		necessary for the Company contractually to obligate itself to indemnify
		Director to the fullest extent permitted by Bermuda law so that Director will
		serve or continue to serve the Company free from undue concern that Director
		will not be so indemnified;
	 

	 
		WHEREAS, Director is willing to serve,
		continue to serve and to take on additional service for or on behalf of the
		Company on the condition that Director be so indemnified;
	 

	 
		NOW, THEREFORE, in consideration of the
		premises and the covenants contained herein, the Company and Director do hereby
		covenant and agree as follows:
	 

	 
			
				
				  1.
				

			 	
				
				  INTERPRETATION
				

			 

 

	 
			
				
				  1.1
				

			 	
				
				  In this Agreement unless the context
				  otherwise requires, the following words and expressions shall have the
				  following meanings:
				

			 

 

	 
		 
	 

	 
			
				
				  this
				  “Agreement”
				

			 	
				
				   
				

			 	
				
				  means this Director Service
				  Agreement;
				

			 

 

	 
		 
	 

	 
	 

	 

	 
		 
	 

	 
			
				
				  “B&B”
				

			 	
				
				   
				

			 	
				
				  means Babcock & Brown Limited,
				  an Australian company;
				

			 
	
				
				  the
				  “Board”
				

			 	
				
				   
				

			 	
				
				  means the board of directors of the
				  Company;
				

			 
	
				
				  “Business
				  Day”
				

			 	
				
				   
				

			 	
				
				  means any day on which banks in
				  Ireland are open for business;
				

			 
	
				
				  “Corporate
				  Status”
				

			 	
				
				   
				

			 	
				
				  means the status of a person who is
				  or was a director, officer, employee, agent, or fiduciary of the Company or any
				  other Group Company, or is or was serving at the request of the Company as a
				  director, officer, employee, agent or fiduciary of any other company,
				  corporation, partnership, limited liability company, joint venture, trust,
				  employee benefit plan or other entity or enterprise;
				

			 
	
				
				  “Disinterested
				  Director” 
				

			 	
				
				   
				

			 	
				
				  means a director of the Company who
				  is not or was not a party to a Proceeding in respect of which indemnification
				  is sought by Director;
				

			 
	
				
				  “Group
				  Companies”
				

			 	
				
				   
				

			 	
				
				  means the Company and each
				  subsidiary of the Company (wherever incorporated or organized);
				

			 
	
				
				   “Independent Counsel”
				  
				

			 	
				
				   
				

			 	
				
				  means a law firm or a member of a
				  law firm that neither is presently nor in the past five years has been retained
				  to represent: (i) the Company or Director in any matter material to either such
				  party, or (ii) any other party to the Proceeding giving rise to a claim for
				  indemnification hereunder. Notwithstanding the foregoing, the term
				  “Independent Counsel” shall not include any person who, under the
				  applicable standards of professional conduct then prevailing, would have a
				  conflict of interest in representing either the Company or Director in an
				  action to determine Director’s right to indemnification under this
				  Agreement;
				

			 
	
				
				  the
				  “Parties”
				

			 	
				
				   
				

			 	
				
				  means the parties to this Agreement
				  collectively, and “Party” means any one of them; and
				

			 
	
				
				  “Proceeding”
				

			 	
				
				   
				

			 	
				
				  means any action, suit, arbitration,
				  alternate dispute resolution mechanism, investigation, administrative hearing
				  or any other proceeding whether civil, criminal, administrative or
				  investigative and whether formal or informal;
				

			 

 

	 
		 
	 

	 
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				  1.2
				

			 	
				
				  In this Agreement unless the context
				  otherwise requires:
				

			 

 

	 
			
				
				   
				

			 	
				
				  1.2.1
				

			 	
				
				  references to statutory provisions
				  shall be construed as references to those provisions as amended or re-enacted
				  or as their application is modified by other provisions from time to time and
				  shall include references to any provisions of which they are re-enactments
				  (whether with or without modification); 
				

			 

 

	 
			
				
				   
				

			 	
				
				  1.2.2
				

			 	
				
				  references to clauses and schedules
				  are references to clauses hereof and schedules hereto; references to
				  sub-clauses or paragraphs are, unless otherwise stated, references to
				  sub-clauses of the clause or paragraphs of the schedule in which the reference
				  appears;
				

			 

 

	 
			
				
				   
				

			 	
				
				  1.2.3
				

			 	
				
				  references to the singular shall
				  include the plural and vice versa and references to the masculine shall include
				  the feminine and/or neuter and vice versa; and
				

			 

 

	 
			
				
				   
				

			 	
				
				  1.2.4
				

			 	
				
				  references to persons shall include
				  companies, partnerships, associations and bodies of persons, whether
				  incorporated or unincorporated.
				

			 

 

	 
			
				
				  2.
				

			 	
				
				  AGREEMENT TO SERVE
				

			 

 

	 
			
				
				  2.1
				

			 	
				
				  The Director agrees to continue to
				  serve as a director of the Company. This Agreement does not create or otherwise
				  establish any right on the part of the Director to be and continue to be
				  elected or appointed a director of the Company or any other Group Company and
				  does not create an employment contract between the Company and the
				  Director.
				

			 

 

	 
			
				
				  2.2
				

			 	
				
				  The Director’s service will
				  remain subject at all times to the Company’s Memorandum of Association and
				  Bye-Laws and applicable laws. 
				

			 

 

	 
			
				
				  2.3
				

			 	
				
				  The Director’s duties as a
				  director of the Company include attending Board meetings, meetings of all Board
				  committees on which the Director serves, the Annual General Meeting of the
				  Company and any Special General Meeting of the Company. It is expected that
				  there will be approximately four scheduled Board and Board committee meetings
				  per year, and there could be additional Board and committee meetings as
				  required. The Director confirms that her or she is able to allocate sufficient
				  time to attend these meetings and to devote appropriate preparation time ahead
				  of each meeting as necessary. All Board meetings, committee meetings and
				  shareholder meetings will take place in Ireland, and the Director generally
				  should attend in person. The Director will receive details of all Board
				  meetings and other meetings in advance.
				

			 

 

	 
			
				
				  2.4
				

			 	
				
				  The Director’s duties as a
				  member of the Board also will include, but will not be limited to, the
				  following:
				

			 

 

	 
			
				
				   
				

			 	
				
				  2.4.1
				

			 	
				
				  constructively challenging and
				  helping to develop proposals on the Company’s strategy;
				

			 

 

	 
		 
	 

	 
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				  2.4.2
				

			 	
				
				  setting values and standards for the
				  Company and establishing systems for their communication and monitoring;

				

			 

 

	 
			
				
				   
				

			 	
				
				  2.4.3
				

			 	
				
				  monitoring the performance of the
				  Company’s management in meeting agreed goals and objectives and ensuring
				  that the necessary financial and human resources are in place to enable the
				  Company to meet those goals and objectives;
				

			 

 

	 
			
				
				   
				

			 	
				
				  2.4.4
				

			 	
				
				  satisfying himself or herself as to
				  the adequacy and integrity of financial and other reporting to the Board and
				  shareholders of the Company and that there are adequate systems of internal
				  control; and
				

			 

 

	 
			
				
				   
				

			 	
				
				  2.4.5
				

			 	
				
				  satisfying himself or herself that
				  systems for identification and management of risks are robust and
				  appropriate.
				

			 

 

	 
			
				
				  2.5
				

			 	
				
				  At any time during the
				  Director’s tenure, the Director’s performance as a director will be
				  reviewed in accordance with processes agreed by the Board from time to time.
				  The Director agrees to participate in such reviews. The Director agrees to
				  participate in continuous improvement programs from time to time determined by
				  the Board as being appropriate for directors, at the expense of the Company and
				  whether or not those programs are offered by the Company.
				

			 

 

	 
			
				
				  2.6
				

			 	
				
				  If the Director has been determined
				  by the Board to be an “independent director,” then the Company shall
				  pay to the Director by way of retainer for serving as a director of the Company
				  hereunder a fee of $100,000 per annum (which fee shall be net of any
				  additional amounts to cover the Director’s obligations to pay Value Added
				  Tax). Such retainer shall be payable by equal quarterly instalments in arrears
				  from [date of appointment], 2007.
				

			 

 

	 
			
				
				  2.7
				

			 	
				
				  If the Director is the chairperson
				  of the Audit Committee, the Compensation Committee or the Nominating and
				  Corporate Governance Committee of the Board, then the Company shall pay to the
				  Director an additional fee of $_______ per annum (which fee shall be net of any
				  additional amounts to cover the Director’s obligations to pay Value Added
				  Tax).
				

			 

 

	 
			
				
				  2.8
				

			 	
				
				  If the Director has been designated
				  by the Board as the “lead independent director, then the Company shall pay
				  to the Director an additional fee of $25,000 per annum (which fee shall be net
				  of any additional amounts to cover the Director’s obligations to pay Value
				  Added Tax).
				

			 

 

	 
			
				
				  2.9
				

			 	
				
				  If the Director is requested to
				  perform any special duties or undertake any responsibilities outside his
				  ordinary responsibilities as a director and agrees to do so, the Board may
				  agree to pay the Director additional remuneration. If the Director appoints an
				  alternate director, such alternate director will not be entitled to a fee in
				  such capacity.
				

			 

 

	 
			
				
				  2.10
				

			 	
				
				  The Company shall also pay to the
				  Director all reasonable air travel, hotel and other out-of-pocket expenses
				  which are properly incurred by him in or about the performance of his 
				

			 

 

	 
		 
	 

	 
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		duties as a director of the Company and for
		which vouchers (if so required) are provided to the reasonable satisfaction of
		the Board. It is understood that business class air travel is reasonable for
		inter-continental and trans-oceanic travel.
	 

	 
			
				
				  2.11
				

			 	
				
				  The Company may reimburse the
				  Director’s legal fees if circumstances should arise in which the Director
				  believes it is necessary for him to seek separate legal advice about the
				  performance of his duties. Prior to obtaining such advice, the Director shall
				  consult with the Company.
				

			 

 

	 
			
				
				  2.12
				

			 	
				
				  The Director shall provide
				  immediately to the Company details of any consultancy, employment, directorship
				  or executive position with a company which competes with B&B or any of its
				  subsidiaries and/or the Company, which confirmation and details will be minuted
				  to comply with applicable law and regulations as they relate to the Company. If
				  during the term of the Director’s appointment, the Director elects to or
				  intends to engage in or be directly or indirectly employed by, be concerned or
				  interested in, or have any office in any business or undertaking which competes
				  in any way with the business of B&B or any of its subsidiaries and/or the
				  Company, the Director shall immediately notify the Company in advance.
				

			 

 

	 
			
				
				  2.13
				

			 	
				
				  The Director may not at any time
				  during the course of his/her appointment with the Company or at any time
				  afterwards use, other than for the purposes of the Company, or disclose to any
				  third party, confidential information acquired as a result of the
				  Director’s position, including information relating to the business and
				  finances of the Company and its associated companies, its or their commercial
				  aircraft, and any other information deemed by the Company to be confidential
				  information; provided, however, that this paragraph shall not apply (i) to any
				  information which is or becomes public knowledge (otherwise than as a result of
				  the Director’s conduct); (ii) to the extent that the Director are required
				  to disclose the same pursuant to any law or order of any court or pursuant to
				  any direction, request or requirement of any governmental or other authority or
				  in the course of any legal proceedings; (iii) to the disclosure of any
				  information to professional advisers who receive the same under a duty of
				  confidentiality; or (iv) to the disclosure of any information with the consent
				  of the Company.
				

			 

 

	 
			
				
				  2.14
				

			 	
				
				  The Director will comply with all
				  applicable codes of practice issued from time to time by any relevant body or
				  by the Company relating to securities transactions by the Company’s
				  directors and specified employees.
				

			 

 

	 
			
				
				  3.
				

			 	
				
				  INDEMNITY OF DIRECTOR
				

			 

 

	 
			
				
				  3.1
				

			 	
				
				  Subject to clause 10, the Company
				  shall indemnify Director if Director is a party or is threatened to be made a
				  party to any threatened, pending or completed Proceeding, including a
				  Proceeding brought by or in the right of the Company, by reason of the fact
				  that Director is or was a director, officer, employee, agent, or fiduciary of
				  the Company or is or was serving at the request of the Company as a director,
				  officer, employee, agent, 
				

			 

 

	 
		 
	 

	 
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		or fiduciary of any other company,
		corporation, partnership, limited liability company, joint venture, trust,
		employee benefit plan or other entity or enterprise or by reason of anything
		done or not done by Director in any such capacity. Subject to clause 10,
		pursuant to this sub-clause 3.1 Director shall be indemnified against expenses
		(including attorneys’ fees and disbursements), judgments, penalties, fines
		and amounts paid in settlement actually and reasonably incurred by Director in
		connection with such Proceeding (including, but not limited to, the
		investigation, defense, settlement or appeal thereof). 
	 

	 
			
				
				  3.2
				

			 	
				
				  Notwithstanding any other provision
				  of this Agreement other than clause 10, Director shall be indemnified against
				  all expenses (including attorneys’ fees and disbursements) actually and
				  reasonably incurred by Director or on Director’s behalf in defending any
				  Proceedings referred to in clause 3.1 in which judgment is given in his favor
				  or in which he is acquitted, or in respect of which relief is granted to the
				  Director by a court under section 281 of the Bermuda Companies Act 1981.

				

			 

 

	 
			
				
				  3.3
				

			 	
				
				  Subject to clause 10, the Company
				  shall indemnify Director for such portion of the expenses (including
				  attorneys’ fees), witness fees, damages, judgments, fines and amounts paid
				  in settlement and any other amounts that Director becomes legally obligated to
				  pay in connection with any Proceeding referred to in clause 3.1 in respect of
				  which Director is entitled to indemnification hereunder, even if Director is
				  not entitled to indemnification hereunder for the total amount thereof.
				

			 

 

	 
			
				
				  3.4
				

			 	
				
				  For purposes of any determination of
				  good faith under any applicable standard of conduct, Director shall be deemed
				  to have acted in good faith if Director’s action is based on the records
				  or books of account of the Company, including financial statements, or on
				  information supplied to Director by the officers of the Company in the course
				  of their duties, or on the advice of legal counsel for the Company or the Board
				  or counsel selected by any committee of the Board or on information or records
				  given or reports made to the Company by an independent certified public
				  accountant or by an appraiser, investment banker, compensation consultant or
				  other expert selected with reasonable care by the Company or the Board or any
				  committee of the Board. The provisions of the preceding sentence shall not be
				  deemed to be exclusive or to limit in any way the other circumstances in which
				  Director may be deemed to have met the applicable standard of conduct.
				

			 

 

	 
			
				
				  3.5
				

			 	
				
				  The knowledge and/or actions, or
				  failure to act, or any director, officer, agent or employee of the Company
				  shall not be imputed to Director for purposes of determining the right to
				  indemnification under this Agreement.
				

			 

 

	 
			
				
				  4.
				

			 	
				
				  INDEMNIFICATION FOR EXPENSES OF A
				  WITNESS
				

			 

 

	 
		Subject to clause 10, to the extent that
		Director is, by reason of Director’s Corporate Status, a witness in any
		proceeding, Director shall be indemnified by the Company
	 

	 
		 
	 

	 
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		against all expenses actually and reasonably
		incurred by Director or on Director’s behalf in connection
		therewith.
	 

	 
			
				
				  5.
				

			 	
				
				  DETERMINATION OF ENTITLEMENT TO
				  INDEMNIFICATION 
				

			 

 

	 
			
				
				  5.1 
				

			 	
				
				  The Director shall request
				  indemnification pursuant to this Agreement by notice in writing to the
				  secretary of the Company. The secretary shall, promptly upon receipt of
				  Director’s request for indemnification, advise in writing the Board or
				  such other person or persons empowered to make the determination as provided in
				  sub-clause 5.2 that Director has made such request for indemnification. Subject
				  to clause 10, upon making such request for indemnification, Director shall be
				  presumed to be entitled to indemnification hereunder and the Company shall have
				  the burden of proof in the making of any determination contrary to such
				  presumption.
				

			 

 

	 
			
				
				  5.2
				

			 	
				
				  Upon written request by Director for
				  indemnification pursuant to sub-clause 3.1, the entitlement of the Director to
				  indemnification pursuant to the terms of this Agreement shall be determined by
				  the following person or persons who shall be empowered to make such
				  determination: 
				

			 

 

	 
			
				
				   
				

			 	
				
				  5.2.1 
				

			 	
				
				  the Board, by a majority vote of the
				  Disinterested Directors; or
				

			 

 

	 
			
				
				   
				

			 	
				
				  5.2.2
				

			 	
				
				  if such vote is not obtainable or,
				  even if obtainable, if such Disinterested Directors so direct by majority vote,
				  by Independent Counsel in a written opinion to the Board, a copy of which shall
				  be delivered to Director.
				

			 

 

	 
			
				
				  5.3
				

			 	
				
				  For purposes of sub-clause 5.2,
				  Independent Counsel shall be selected by the Board and approved by Director.
				  Upon failure of the Board to so select such Independent Counsel or upon failure
				  of Director to so approve, such Independent Counsel shall be selected by the
				  American Arbitration Association. Such determination of entitlement to
				  indemnification shall be made not later than 60 days after receipt by the
				  Company of a written request for indemnification. Such request shall include
				  documentation or information which is necessary for such determination and
				  which is reasonably available to Director. Subject to clause 10, any expenses
				  (including attorneys’ fees) incurred by Director in connection with
				  Director’s request for indemnification hereunder shall be borne by the
				  Company irrespective of the outcome of the determination of Director’s
				  entitlement to indemnification. If the person or persons making such
				  determination shall determine that Director is entitled to indemnification as
				  to part (but not all) of the application for indemnification, such persons may
				  reasonably prorate such partial indemnification among such claims, issues or
				  matters in respect of which indemnification is requested.
				

			 

 

	 
			
				
				  6.
				

			 	
				
				  ADVANCEMENT OF
				  EXPENSES
				

			 

 

	 
		All reasonable expenses incurred by Director
		(including attorneys’ fees, retainers and advances of disbursements
		required of Director) shall be paid by the Company in
	 

	 
		 
	 

	 
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		advance of the final disposition of any
		Proceeding at the request of Director as promptly as possible, and in any event
		within twenty days after the receipt by the Company of a statement or
		statements from Director requesting such advance or advances from time to time.
		Director’s entitlement to such expenses shall include those incurred in
		connection with any Proceeding by Director seeking an adjudication or award in
		arbitration pursuant to this Agreement. Such statement or statements shall
		reasonably evidence the expenses incurred by Director in connection therewith
		and shall include or be accompanied by an undertaking by or on behalf of
		Director to repay such amount if it is ultimately determined that Director is
		not entitled to be indemnified against such expenses by the Company as provided
		by this Agreement or otherwise. Subject to clause 10, the Company shall have
		the burden of proof in any determination under this clause 6. No amounts
		advanced hereunder shall be deemed an extension of credit by the Company to
		Director.
	 

	 
			
				
				  7.
				

			 	
				
				  REMEDIES OF DIRECTOR IN CASES OF
				  DETERMINATION NOT TO INDEMNIFY OR TO ADVANCE EXPENSES 
				

			 

 

	 
			
				
				  7.1
				

			 	
				
				  In the event that: (a) a
				  determination is made that Director is not entitled to indemnification
				  hereunder; (b) payment has not been timely made following a determination of
				  entitlement to indemnification pursuant to clause 5; or (c) expenses are not
				  advanced pursuant to clause 6, Director shall be entitled to apply to any court
				  of competent jurisdiction for a determination of Director’s entitlement to
				  such indemnification or advance. 
				

			 

 

	 
			
				
				  7.2
				

			 	
				
				  Alternatively to sub-clause 7.1, the
				  Parties, at the Director’s option, shall submit any controversy or claim
				  arising out of or in connection with (a), (b) or (c) as referred to in clause
				  7.1 above to arbitration administered by the American Arbitration Association
				  under its Commercial Arbitration Rules, and judgment on the award tendered by
				  the Arbitrator may be entered in any court having jurisdiction hereof. The
				  number of arbitrators shall be one. The place of arbitration shall be Dublin,
				  Ireland. Such award to be made within sixty days following the filing of the
				  demand for arbitration. The Company shall not oppose Director’s right to
				  seek any such adjudication or award in arbitration or any other claim.
				

			 

 

	 
			
				
				  7.3
				

			 	
				
				  A judicial proceeding or arbitration
				  pursuant to this clause 7 shall be made anew and Director shall not be
				  prejudiced by reason of a determination otherwise made hereunder (if so made)
				  that Director is not entitled to indemnification. Subject to clause 10, if a
				  determination is made pursuant to the terms of clause 5 that Director is
				  entitled to indemnification, the Company shall be bound by such determination
				  and is precluded from asserting that such determination has not been made or
				  that the procedure by which such determination was made is not valid, binding
				  and enforceable. If the court or arbitrator shall determine that Director is
				  entitled to any indemnification hereunder, the Company shall pay all reasonable
				  expenses (including attorneys’ fees and disbursements) actually incurred
				  by Director in connection with such adjudication or award in arbitration
				  (including, but not limited to, any appellate proceedings).
				

			 

 

	 
		 
	 

	 
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				  8.
				

			 	
				
				  OTHER RIGHTS TO
				  INDEMNIFICATION
				

			 

 

	 
		The indemnification and advancement of
		expenses (including attorneys’ fees) provided by this Agreement shall not
		be deemed exclusive of any other right to which Director may now or in the
		future be entitled under any provision of the Company’s bye-laws, any
		agreement, vote of shareholders, the Board or Disinterested Directors,
		provision of law, or otherwise; provided, however, that: (a) this Agreement
		supersedes any other agreement that has been entered into by the Company with
		the Director which has as its principal purpose the retainer as a director and
		indemnification of Director; and (b) where the Company may indemnify the
		Director pursuant to either this Agreement or the bye-laws of the Company, the
		Company may indemnify the Director under either this Agreement or the bye-laws
		but the Director shall, in no case, be indemnified by the Company in respect of
		any expense, liability or cost of any type for which payment is or has been
		actually made to Director under any insurance policy, indemnity clause, bye-law
		or agreement, except in respect of any excess beyond such payment.
	 

	 
			
				
				  9.
				

			 	
				
				  ATTORNEYS’ FEES AND OTHER
				  EXPENSES TO ENFORCE AGREEMENT
				

			 

 

	 
		In the event that Director is subject to or
		intervenes in any Proceeding in which the validity or enforceability of this
		Agreement is at issue or seeks an adjudication or award in arbitration to
		enforce Director’s rights under, or to recover damages for breach of, this
		Agreement, Director, if Director prevails in whole or in part in such action,
		shall be entitled to recover from the Company and shall be indemnified by the
		Company against, any actual expenses for attorneys’ fees and disbursements
		reasonably incurred by Director, provided that in bringing such action,
		Director acted in good faith.
	 

	 
			
				
				  10.
				

			 	
				
				  LIMITATION OF
				  INDEMNIFICATION
				

			 

 

	 
		Notwithstanding any other terms of this
		Agreement, nothing herein shall indemnify the Director against, or exempt the
		Director from, any liability in respect of the Director’s fraud,
		dishonesty, bad faith, gross negligence, wilful default or wilful misfeasance
		in the performance or non-performance by the Director of his obligations or
		duties hereunder.
	 

	 
			
				
				  11.
				

			 	
				
				  LIABILITY INSURANCE
				

			 

 

	 
		The Company undertakes (i) to obtain and
		maintain, either directly or through a group policy covering the Company and
		its affiliates, adequate Director’s and Officers’ Liability Insurance
		on terms that are reasonably acceptable to the Director and the other directors
		of the Company that shall cover the Director and the other directors of the
		Company, (ii) that in the event it is reasonably foreseeable that the Company
		will cease to exist whether by reason of insolvency, bankruptcy or other
		similar events, the Company will purchase adequate Directors’ and
		Officers’ Liability and Company Reimbursement Insurance on terms
		reasonably acceptable to the Director and the other directors of the Company
		that shall cover the Director and the other directors of the Company for a
		period of not less than 7 years from the date the Company ceases to exist or
		such lesser 
	 

	 
		 
	 

	 
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		period as is practicable given the
		availability of such coverage in the insurance market at that time, and (iii)
		at the Director’s request to arrange an annual review of the
		Directors’ and Officers’ Liability and Company Reimbursement
		Insurance by an independent insurance adviser, all fees and charges arising
		from such review to be met by the Company. The Director will be covered by and
		required to participate in such insurance. Evidence of such current insurance
		and of each renewal will be sent to the Director (in the case of current
		insurance, in advance of the Director’s appointment being
		confirmed).
	 

	 
			
				
				  12.
				

			 	
				
				  DURATION OF AGREEMENT
				

			 

 

	 
		This Agreement shall apply with respect to
		Director’s occupation of any of the position(s) described in sub-clause
		3.1 of this Agreement prior to the date of this Agreement and with respect to
		all periods of such service after the date of this Agreement, even though the
		Director may have ceased to occupy such positions(s).
	 

	 
			
				
				  13.
				

			 	
				
				  NOTICE OF PROCEEDINGS BY
				  DIRECTOR
				

			 

 

	 
			
				
				  13.1
				

			 	
				
				  Director agrees promptly to notify
				  the Company in writing upon being served with any summons, citation, subpoena,
				  complaint, indictment, information or other document relating to any Proceeding
				  which may be subject to indemnification hereunder, provided, however, that the
				  failure to so notify the Company will not relieve the Company from any
				  liability it may have to Director except to the extent that such failure
				  materially prejudices the Company’s ability to defend such claim. With
				  respect to any such Proceeding as to which Director notifies the Company of the
				  commencement thereof:
				

			 

 

	 
			
				
				   
				

			 	
				
				  13.1.1
				

			 	
				
				  the Company will be entitled to
				  participate therein at its own expense; and
				

			 

 

	 
			
				
				   
				

			 	
				
				  13.1.2
				

			 	
				
				  except as otherwise provided below,
				  to the extent that it may wish, the Company jointly with any other indemnifying
				  party similarly notified will be entitled to assume the defense thereof, with
				  counsel reasonably satisfactory to Director. After notice from the Company to
				  Director of its election so to assume the defense thereof, the Company will not
				  be liable to Director under this Agreement for any legal or other expenses
				  subsequently incurred by Director in connection with the defense thereof other
				  than reasonable costs of investigation or as otherwise provided below. Director
				  shall have the right to employ Director’s own counsel in such Proceeding,
				  but the fees and expenses of such counsel incurred after notice from the
				  Company of its assumption of the defense thereof shall be at the expense of
				  Director and not subject to indemnification hereunder unless (a) the employment
				  of counsel by Director has been authorized by the Company; (b) in the
				  reasonable opinion of counsel to Director there is or may be a conflict of
				  interest between the Company and Director in the conduct of the defense of such
				  Proceeding; or (c) the Company shall not in fact have employed counsel to
				  assume the defense of such action, in each of which cases, subject to clause
				  10, the fees and expenses of counsel shall be at the expense of the
				  Company.
				

			 

 

	 
		 
	 

	 
		10
	 

	 
		 
	 

	 
	 

	 

	 
			
				
				  13.2
				

			 	
				
				  Neither the Company nor the Director
				  shall settle any claim without the prior written consent of the other (which
				  shall not be unreasonably withheld).
				

			 

 

	 
			
				
				  13.3
				

			 	
				
				  To the extent that the Company
				  receives a request or requests from a governmental third party or other
				  licensing or regulating organization (the “Requesting Agency”),
				  whether formal or informal, to produce documentation or other information
				  concerning an investigation, whether formal or informal, being conducted by the
				  Requesting Agency, and such investigation is reasonably likely to include
				  review of any actions or failures to act by Director, the Company shall
				  promptly give notice to Director of such request or requests and any subsequent
				  request. In addition, the Company shall promptly provide Director with a copy
				  of any and all information or documentation that the Company provides to the
				  Requesting Agency.
				

			 

 

	 
			
				
				  14.
				

			 	
				
				  NOTICES
				

			 

 

	 
		Any notice required to be given hereunder
		shall be in writing in the English language and shall be served by sending the
		same by prepaid recorded post, facsimile or by delivering the same by hand to
		the address of the Party or Parties in question as set out below (or such other
		address as such Party or Parties shall notify the other Parties of in
		accordance with this clause). Any notice sent by post as provided in this
		clause shall be deemed to have been served five Business Days after despatch
		and any notice sent by facsimile as provided in this clause shall be deemed to
		have been served at the time of despatch and in proving the service of the same
		it will be sufficient to prove in the case of a letter that such letter was
		properly stamped, addressed and placed in the post; and in the case of a
		facsimile that such facsimile was duly despatched to a current facsimile number
		of the addressee.
	 

	 
		Company -
	 

	 
		Babcock & Brown Air Limited
	 

	 
		West Pier
	 

	 
		Dun Laoghaire
	 

	 
		County Dublin, Ireland
	 

	 
		Attn: Chief Executive Officer
	 

	 
		Fax: +353 (1) 231-1901
	 

	 
		 
	 

	 
		11
	 

	 
		 
	 

	 
	 

	 

	 
		Director -
	 

	 
		Name:
	 

	 
		Address:
	 

	 
		Fax:
	 

	 
			
				
				  15.
				

			 	
				
				  MISCELLANEOUS
				

			 

 

	 
			
				
				  15.1
				

			 	
				
				  Notwithstanding the expiration or
				  termination of this Agreement howsoever arising, such expiration or termination
				  shall not operate to affect such of the provisions hereof as are expressed or
				  intended to remain in full force and effect.
				

			 

 

	 
			
				
				  15.2
				

			 	
				
				  Any paragraph of this Agreement that
				  shall be prohibited or unenforceable in any jurisdiction shall, as to such
				  jurisdiction, be ineffective only to the extent of such prohibition or
				  unenforceability without invalidating the remaining paragraph hereof and any
				  such prohibition or unenforceability in any jurisdiction shall not invalidate
				  or render unenforceable such paragraph in any other jurisdiction.
				

			 

 

	 
			
				
				  15.3
				

			 	
				
				  This Agreement shall be binding upon
				  the Company and its successors and assigns (including any transferee of all or
				  substantially all of its assets and any successor or resulting company by
				  merger, amalgamation or operation of law) and shall inure to the benefit of
				  Director and Director’s spouse, assigns, heirs, estate, devises,
				  executors, administrators or other legal representatives. 
				

			 

 

	 
			
				
				  15.4.
				

			 	
				
				  This Agreement (together with any
				  documents referred to herein) constitutes the whole agreement between the
				  Parties relating to its subject matter and supersedes any prior indemnification
				  arrangement between the Company (or its predecessor) and Director (except as
				  specifically set forth in clause 8).
				

			 

 

	 
			
				
				  15.5
				

			 	
				
				  No provision in this Agreement may
				  be amended unless such amendment is agreed to in writing, signed by the
				  Director and by a duly authorised officer of the Company. No waiver by either
				  Party of any breach by the other Party of any condition or provision of this
				  Agreement to be performed by such other Party shall be deemed a waiver of a
				  similar or dissimilar condition or provision at the same or any prior or
				  subsequent time. Any waiver must be in writing and signed by the Director or a
				  duly authorised officer of the Company, as the case may be.
				

			 

 

	 
			
				
				  15.6
				

			 	
				
				  The headings in this Agreement are
				  inserted for convenience only and shall not affect the construction of this
				  Agreement.
				

			 

 

	 
		 
	 

	 
		12
	 

	 
		 
	 

	 
	 

	 

	 
			
				
				  15.7
				

			 	
				
				  This Agreement may be executed in
				  counterparts each of which when executed and delivered shall constitute an
				  original but all such counterparts together shall constitute one and the same
				  instrument.
				

			 

 

	 
			
				
				  15.8
				

			 	
				
				  The terms and conditions of this
				  Agreement and the rights of the parties hereunder shall be governed by and
				  construed in all respects in accordance with the laws of Ireland. The parties
				  to this Agreement hereby irrevocably agree that the courts of Ireland shall
				  have non-exclusive jurisdiction in respect of any dispute, suit, action,
				  arbitration (save for any matter referred to arbitration under clause 7.2
				  hereof) or proceedings (“Agreement Proceedings”) which may arise out
				  of or in connection with this Agreement and waive any objection to Agreement
				  Proceedings in the courts of Ireland on the grounds of venue or on the basis
				  that the Agreement Proceedings have been brought in an inconvenient
				  forum.
				

			 

 

	 
			
				
				  15.9
				

			 	
				
				  All payments made by the Company to
				  Director hereunder shall be deemed to have been made in the ordinary course of
				  business of the Company, and shall not be deemed to be extraordinary
				  payments.
				

			 

 

	 
		IN WITNESS WHEREOF, the undersigned,
		intending to be bound hereby, have duly executed this Agreement as of the date
		first written above.
	 

	 
		 
	 

	 
		13
	 

	 
		 
	 

	 
	 

	 

	 
		 
	 

	 
			
				
				  
 SIGNED by and on behalf
				  of
				

			 	
				
				  )
				

			 	
				
				   
				

			 	
				
				

			 
	
				
				  THE COMPANY
				

			 	
				
				  )
				

			 	
				
				   
				

			 	
				
				  Name:
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Title:
				

			 

 

	 
		 
	 

	 
			
				
				  
 SIGNED by
				

			 	
				
				  )
				

			 	
				
				   
				

			 	
				
				

			 
	
				
				  THE DIRECTOR
				

			 	
				
				  )
				

			 	
				
				   
				

			 	
				
				  Name:
				

			 

 

	 
		 
	 

	 
		 
	 

	 
		14Exhibit 10.13

EXECUTION

 

Credit Suisse, New York Branch

11 Madison Avenue

New York, New York  10010

July 9, 2007

Mr. Colm Barrington

Babcock & Brown Air Limited

West Pier

Dún Laoghaire

County Dublin, Ireland

Re: Aircraft Lease Warehouse Facility Commitment Letter

Dear Colm:

This engagement letter confirms our understanding that Babcock & Brown Air Limited (“B & B Air” or the “Company”) has engaged Credit Suisse, New York Branch and its subsidiaries, affiliates, successors and assigns, as appropriate (“CS”, “us” or “our”) as sole structuring agent of an Aircraft Lease Warehouse Facility (the “Facility”) and the sole underwriter of the Class A and Class B Notes for the Facility, including the syndication of the Facility after the closing thereof, for Aircraft (as defined below) in an amount of $1.104 billion to Babcock & Brown Air Acquisition 1 Limited (the “Borrower”). The proceeds of revolving notes issued by the Borrower will
be used to provide financing for a portfolio of commercial aircraft, their respective leases and certain other related reserves and deposits, if any, held by the Borrower (the “Collateral” or the “Aircraft”) originated by the Company. CS proposes to arrange the Facility on the terms and conditions set forth in the Aircraft Lease Warehouse Facility Summary Term Sheet dated June 30, 2007 (the “Aircraft Lease Warehouse Facility Summary Term Sheet”) a copy of which is attached hereto. Unless otherwise defined, all capitalized terms herein shall have the meaning provided in the Aircraft Lease Warehouse Facility Summary Term Sheet.

The agreement by CS to provide the Facility will be subject to (a) after the date hereof, no occurrence of any material adverse change in or affecting the Company’s or the Borrower’s business or financial condition; (b) our not being aware, after the date hereof, of any information or other matter which in our judgment is inconsistent in a material and adverse manner with any information or other material disclosed to us prior to the date hereof; (c) no occurrence of a material disruption of or material adverse change in financial, banking or capital market conditions that, in our reasonable judgment, could materially impair the funding or syndication of the Facility; (d) our review and reasonable satisfaction with the terms of the documentation governing the Facility except as otherwise 

 

 

Mr. Colm Barrington
July 9, 2007
Page 2

 

agreed in the Aircraft Lease Warehouse Facility Summary Term Sheet; (e) the satisfactory completion of CS’s due diligence of the Borrower and any other parties involved with the Facility; (f) the negotiation, execution and delivery on or before September 15, 2007 of definitive documentation with respect to the Facility satisfactory to CS, and (i) the other conditions set forth in the Aircraft Lease Warehouse Facility Term Sheet.

1. Information.  The Company will furnish CS with all financial and other information concerning the Company as CS deems appropriate in connection with the performance of the services contemplated by this engagement and in that connection will provide CS with access to the Company’s officers, directors, employees, accountants, counsel and other representatives. The Company acknowledges and confirms that CS (i) will use and rely solely on such information and on information available from generally recognized public sources in the performance of the services contemplated by this engagement without assuming any responsibility for independent investigation or verification thereof, (ii) assumes no responsibility for the accuracy or completeness of such information or any other information regarding the
Company and (iii) will not make any appraisal of any assets of the Company. 

The Company represents and warrants and covenants that all information (the “Company Information”) which has been or is hereafter made available to CS by the Company or any of the Company’s representatives in connection with the Facility contemplated hereby, taken as a whole and as supplemented from time to time, is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements are made. The Company authorizes CS to provide the Company Information to any actual or prospective lender or participant in the Facility (each, a “Lender”).

2. Matters Relating to Engagement. The Company acknowledges that CS has been retained solely to provide the services set forth in this engagement letter. In rendering such services, CS shall act as an independent contractor, and any duties of CS arising out of its engagement hereunder shall be owed solely to the Company and the Borrower. In connection with any offering of securities, the Company acknowledges that CS is engaged in securities trading and brokerage activities, as well as the provision of investment banking and financial advisory services. In the ordinary course of trading and brokerage activities, CS and its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for their own account or the accounts of customers, in debt or equity securities of
entities that may be involved in the transactions contemplated hereby.

3. Fees and Expenses. As compensation for the services of CS hereunder:

The Company shall pay CS, at the closing of the proposed Transaction, a structuring fee. The amount of such fee shall be detailed within a fee letter and negotiated as part of the underlying documentation for the Facility. The Company shall pay promptly upon request, the reasonable out-of-pocket costs and expenses (including without limitation, the 

 

 

Mr. Colm Barrington
July 9, 2007
Page 3

 

fees and expenses of counsel to CS and CS’s other out-of-pocket expenses) arising in connection with the preparation, execution, and delivery of this engagement letter and the activities described herein, and the definitive financing agreements and the related agreements, whether or not the transaction described in the first paragraph closes.

4. Use of Name. The Company agrees that any references to CS or any of its affiliates made in connection with any Facility in any publicly distributed writing are subject to CS’s prior approval. CS agrees that any references to the Company or any of its affiliates made in connection with any Facility in any publicly distributed writing are subject to the Company’s prior approval.

5. Additional Services. The Company further understands that if CS is asked to act for the Company in any other formal additional capacity relating to this engagement but not specifically addressed in this engagement letter, such activities shall constitute separate engagements and the terms of any such additional engagements will be embodied in one or more separate written agreements containing terms and conditions to be mutually agreed upon including without limitation appropriate indemnification provisions. The indemnity provisions in the Indemnification Letter shall apply to any such additional engagements, unless superseded by an indemnity provision set forth in a separate agreement applicable to any such additional engagements. 

6. Indemnification. Since CS will be acting on behalf of the Company in connection with its engagement hereunder, the Company has entered into a separate letter agreement (the “Indemnification Letter”) set forth in Annex A hereto, dated the date hereof, providing for the indemnification by the Company of CS and certain related persons and entities. The Indemnification Letter will survive any termination or expiration of this engagement letter and the closing of the Facility.

7. Termination. This engagement will terminate on December 31, 2007 if the Facility contemplated herein has not closed on or before that date. 

Upon the termination of this Agreement, CS will be entitled to prompt reimbursement for any legal or Facility related expenses as described above. The Company further agrees that it will not enter into any financing transaction described in this engagement letter unless, prior to or simultaneously with such transaction, adequate provision is made with respect to the payment of all amounts payable to CS hereunder.

8. General. This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. This Agreement may not be amended or modified except by a writing executed by each of the parties hereto. Paragraph headings herein are for convenience only and are not a part of this Agreement. This Agreement is solely for the benefit of the Company and CS and no other person shall acquire or have any rights under or by virtue of this Agreement. This Agreement may not be assigned by either party without prior written consent of the other party.

 

 

Mr. Colm Barrington
July 9, 2007
Page 4

 

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 MAY BE BROUGHT IN ANY STATE COURT OF COMPETENT JURISDICTION IN NEW YORK, NEW YORK OR IN ANY FEDERAL COURT OF COMPETENT JURISDICTION IN THE SOUTHERN DISTRICT OF NEW YORK, 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 (SUBJECT TO ANY RIGHT OF APPEAL TO A HIGHER COURT).

EACH OF US HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE ACTIONS OF THE UNDERSIGNED IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF. WITH RESPECT TO ANY PROCEEDINGS FILED IN CALIFORNIA IF THE ABOVE JURY TRIAL WAIVER IS UNENFORCEABLE, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES THAT ALL DISPUTES BE RESOLVED BY A JUDICIAL REFERENCE PROCEEDING PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 AND THAT THE REFEREE IS EMPOWERED TO HEAR AND RESOLVE ANY OR ALL ISSUES IN THE PROCEEDING, WHETHER OF FACT OR LAW. 

If any term, provision, covenant or restriction in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. B & B Air and CS shall endeavor in good faith negotiations to replace the invalid, void or unenforceable provisions.

This engagement letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this engagement letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.

 

 

Mr. Colm Barrington
July 9, 2007
Page 5

 

Please confirm that the foregoing is in accordance with B & B Air’s understanding by signing this letter of agreement and returning it to CS. The letter signed by you shall constitute a binding agreement between the parties hereto as of the date first above written.

Very truly yours,

 

	
                        CREDIT SUISSE, NEW YORK BRANCH
 	
                         
 	
                         
 	
                         
 
	
                        

                        By: 
 	
        
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Name: 
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Title: 
 	
                         
 	
                         
 	
                         
 

 

	
                        

                        By: 
 	
                          
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Name: 
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Title: 
 	
                         
 	
                         
 	
                         
 

 

 

Mr. Colm Barrington
July 9, 2007
Page 6

 

Accepted and agreed as 

of the date first written above:

 

	
                        BABCOCK & BROWN AIR LIMITED
 	
                         
 	
                         
 	
                         
 
	
                        

                        By: 
 	
        
 	
                         
 	
                         
 	
                         
 
	
                        Name: 
 	
                        Colm Barrington
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

 

 

Mr. Colm Barrington
July 9, 2007
Page 7

 

ANNEX A

In further consideration of the engagement by Babcock & Brown Air Limited (the “Company”) of Credit Suisse Securities (USA) LLC (“CS”) to act in the capacity described in our commitment letter dated the date hereof (the “Agreement”), the Company agrees to indemnify and hold CS and its affiliates, and the respective directors, officers, agents and employees of CS and its affiliates and each other entity or person, if any, controlling CS or any of its affiliates within the meaning of either Section 15 of the Securities Act of 1933, as amended or Section 20 of the Securities Exchange Act of 1934, as amended (CS and each such entity or person being collectively referred to as an “Indemnified Party”)  from and against any losses, claims, damages or liabilities (or actions in respect thereof) (i) arising out of or in connection with the
Agreement and the Facility (terms used herein but not defined shall have the meaning set forth in the Agreement) or any other matter contemplated by the Agreement, (ii) arising out of, based upon or in connection with any breach by the Company of any representation or warranty or failure to comply with any of the agreements of the Company set forth in the Agreement and any other agreement to be entered into by and the Company and CS with respect to the Facility or (iii) arising out of or based upon an untrue statement or alleged untrue statement of a material fact contained in any materials approved by the Company and delivered to prospective lenders in connection with the Facility, including in each case any amendments or supplements thereto and including but not limited to any documents deemed to be incorporated in any such document by reference (the “Offering Materials”), or arising out of or based upon any omission or alleged omission to state in the Offering Materials a
material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading, other than a misstatement or omission in information provided by CS about CS for inclusion in the Offering Materials.

The Company will reimburse any Indemnified Party for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees and disbursements of counsel incurred by such Indemnified Party in connection with investigating, preparing for or defending any such action or claim, whether in connection with pending or threatened litigation to which the Indemnified Party is a party), in each case, as such expenses are incurred or paid. With respect to the preceding paragraph, the Company will not, however, be responsible for any losses, claims, damages or liabilities (or expenses related thereto) incurred by any Indemnified Party that are finally judicially determined by a court of competent jurisdiction to have resulted directly from the willful misconduct or gross negligence of any Indemnified Party.

In case any proceeding (including any governmental investigation) shall be instituted involving any Indemnified Party, such Indemnified Party shall promptly notify the Company in writing and the Company shall have the right, exercisable by giving written notice to the Indemnified Party within 30 days of receipt of written notice for the Indemnified Party of such proceeding, to retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and any others the Company may designate in such proceeding and shall pay the reasonable fees and disbursements of such 

 

 

Mr. Colm Barrington
July 9, 2007
Page 8

 

counsel related to such proceeding. 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 Company and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the Company or the Indemnified Party has been advised by counsel that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Company shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such Indemnified Parties, and that all such reasonable fees and expenses shall be reimbursed as they are incurred and paid.
In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by CS and acceptable to the Company (which consent shall not be unreasonably withheld).

The Company will not, without CS’s prior written consent, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any action, claim, suit, investigation or proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination includes a release of each Indemnified Person from any liabilities arising out of such action, claim, suit, investigation or proceeding. The Company will not permit any such settlement, compromise, consent or termination to include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an Indemnified Person, without such Indemnified Person’s prior written consent. No Indemnified Person seeking indemnification, reimbursement or contribution under this
Annex A will, without the Company’s prior written consent, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any action, claim, suit, investigation or proceeding referred to herein.

If the indemnification provided for in the second paragraph of this Annex A is unavailable to an Indemnified Party in respect of any losses, claims, damages or liabilities referred to therein, then the indemnifying party, 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 losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and CS, on the other hand, from the Facility or (ii) if the allocation provided by clause (i) above is not permitted by 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 Company and of CS, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on one hand, and CS, on the other hand, shall be deemed to be in the same respective proportions as the proceeds received or proposed to be received by the Company from the Facility (before deducting expenses) bear to the total placement fees received or proposed to be received by CS pursuant to the Facility. The relative fault of the Company and the Borrower, on the one hand, and CS, on the other hand, (i) in the case of any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact, shall be determined by reference to, among other things, whether such statement or omission relates to information supplied by the Company or CS 

 

 

Mr. Colm Barrington
July 9, 2007
Page 9

 

and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and (ii) in the case of any other action or omission shall be determined by reference to, among other things, whether such action or omission was taken by the Company or by CS and the parties’ relative intent, knowledge, access to information and opportunity to prevent such action or omission.

The Company and CS agree that it would not be just and equitable if contribution pursuant to this Annex A were determined by pro rata allocation or any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to limitations set forth above, any legal or other expenses incurred in connection with investigating or defending any such action or claim. Notwithstanding any of the provisions of this Annex A, in no event shall the aggregate contribution by all Indemnified Parties to the amount paid or payable exceed the aggregate amount of fees actually received by CS under the Agreement or in connection with the Facility.

The Company’s obligations hereunder shall be in addition to any rights that any Indemnified Party may have at common law or otherwise. The Company acknowledges that, in connection with the CS Mandate, CS is acting as an independent contractor and not in any other capacity with duties owing solely to the Company. 

THIS ANNEX A AND ANY OTHER AGREEMENTS RELATING TO THE CS MANDATE 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 Annex A may be brought in any state court of competent jurisdiction in New York, New York or in any federal court of competent jurisdiction in the Southern District of New York, and by execution of and delivery of Annex A each such part accepts for itself and in connection with its properties, generally and unconditionally, the exclusive 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 engagement letter (subject to any
right of appeal to a higher court). Notwithstanding the foregoing, solely for purposes of enforcing the Company’s obligations hereunder, the Company consents to personal jurisdiction, service and venue in any court proceeding in which any claim subject to this Annex A is brought by or against any Indemnified Party.

Each of the parties hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Annex A, or the actions of the undersigned in the negotiation, performance or enforcement hereof.

The provisions of this Annex A shall apply to the Agreement (including related activities prior to the date hereof) and any modification thereof and shall remain in full 

 

 

Mr. Colm Barrington
July 9, 2007
Page 10

 

force and effect regardless of the completion or termination of the Agreement. If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

 

 

Mr. Colm Barrington
July 9, 2007
Page 11

 

Please confirm that the foregoing is in accordance with the Company’s understanding by signing this letter of agreement and returning it to CS. The letter signed by you shall constitute a binding agreement between the parties hereto as of the date first above written.

 

	
                        BABCOCK & BROWN AIR LIMITED
 	
                         
 	
                        CREDIT SUISSE, NEW YORK BRANCH
 
	
                        

                        By: 
 	
        
 	
                         
 	
                        By: 
 	
                          
 
	
                         
 	
                        Name: Colm Barrington
 	
                         
 	
                         
 	
                        Name: 
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: 
 

 

	
                         
 	
                         
 	
                         
	
       
 	
       
 	
                         
 	
                        

                        By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Name: 
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: 
 

 

 

   
	 
		
 
	 

	 
			
				
				   
				

			 
	
				
				  AIRCRAFT WAREHOUSE
				  FACILITY
				

			 
	 
	
				
				  SUMMARY TERM
				  SHEET
				

			 
	
				
				   JUNE
				  2007
				

			 
	
				
				  FINAL
				

			 

 

	 
		 
	 

	 
		 
	 

	 
		 
	 

	 
		 
	 

	 
		 
	 

	 
		 
	 

	 
		 
	 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
				   
				

			 	
				
				  June 30,
				  2007
				

			 

 

	 
		 
	 

	 
		 
	 

	 
	 

	 

	 
		 
	 

	 
			
				
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  

				

			 
	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
		Summary Term
		Sheet
	 

	 
		Indicative Summary of Terms and
		Conditions
	 

	 
		Credit Suisse Securities
		(USA) LLC or one of its affiliates (“CS”), is pleased to provide this
		summary term sheet (the “Term Sheet”) solely for discussion purposes.
		The Term Sheet does not present all of the terms, conditions, covenants,
		representations, warranties and other provisions which will be contained in the
		definitive legal documentation for the transactions contemplated thereby. Those
		matters that are not covered or made clear in this Term Sheet are subject to
		mutual agreement of the parties. Documentation will include, in addition to the
		provisions outlined in this Term Sheet and the provisions that are customary
		and appropriate for this type of transaction, any other documentation which is
		mutually acceptable to the parties. In addition, the effectiveness of the
		Facility (as defined herein) will be subject to, among other things, final
		credit approval, documents, filings, and opinions acceptable to counsel and the
		execution of mutually acceptable definitive documentation.
	 

	 
		 
	 

	 
			
				
				  Executive
				  Summary:
				

			 	
				
				   
				

			 	
				
				  Babcock & Brown Air
				  Limited (“B & B Air”) has requested that CS structure and
				  underwrite a warehouse facility (the “Facility” or the
				  “Loan”) to finance commercial aircraft (the “Aircraft”)
				  acquired by Babcock & Brown Air Acquisition 1 Limited (the
				  “Borrower”), a special-purpose bankruptcy-remote entity established
				  by B & B Air. The Facility will be comprised of two Classes of loans each
				  ranking senior to the other in alphanumeric order (the “Class A
				  Loans” and the “Class B Loans”, collectively, the
				  “Loans”) and Equity (the “Equity”) under a Warehouse Loan
				  Agreement (the “Warehouse Agreement”). Each Aircraft will be owned by
				  a separate special purpose subsidiary of the Borrower (each, an “Aircraft
				  Owning Subsidiary”). The Aircraft will be leased to lessees by the
				  Aircraft Owning Subsidiaries, or if a treaty would provide more favorable tax
				  treatment if a head lease/sublease structure was used, may be leased by an
				  Aircraft Owning Subsidiary through another special purpose, direct or indirect
				  subsidiary of the Borrower (together with the Aircraft Owning Subsidiaries,
				  “Aircraft Subsidiaries”). The Loans shall be secured by the
				  membership interest of the Borrower, each Aircraft Subsidiary, Aircraft (but no
				  Aircraft will be subject to a “mortgage” and security interests in
				  Aircraft will not be required to be registered or perfected), leases of
				  Aircraft, Aircraft purchase agreements, assignments of insurance proceeds,
				  certain deposit and trust accounts, certain cash collateral, maintenance
				  reserves and other deposits (the “Collateral”). CS will act as Agent
				  for the Facility and a syndicate of financial institutions selected by CS shall
				  be the Lenders.
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Borrower:
				

			 	
				
				   
				

			 	
				
				  Babcock & Brown Air
				  Acquisition I Limited, a special-purpose bankruptcy-remote entity. The equity
				  interests of the Borrower will be held (directly or indirectly) by B & B
				  Air and/or its affiliates.
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Servicer:
				

			 	
				
				   
				

			 	
				
				  Babcock & Brown
				  Aircraft Management LLC (“BBAM”) and its delegates,; provided that
				  BBAM shall remain liable for any responsibilities delegated.
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Agent:
				

			 	
				
				   
				

			 	
				
				  CS.
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Lenders:
				

			 	
				
				   
				

			 	
				
				  A syndicate of
				  financial institutions selected by CS. Lenders may designate 
				

			 

 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
				   
				

			 	
				
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				  commercial paper
				  conduits administered by them to make advances under the Facility.
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Facility Closing
				  Date:
				

			 	
				
				   
				

			 	
				
				  August 2007
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Facility:
				

			 	
				
				   
				

			 	
				
				  A warehouse lending
				  facility with respect to the Collateral.
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Structure:
				

			 	
				
				   
				

			 	
				
				  The aggregate amount
				  available under the Facility is initially expected to be comprised as
				  follows:
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  Debt
				

			 	
				
				   
				

			 	
				
				  Amount
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Class A
				

			 	
				
				   
				

			 	
				
				  $
				

			 	
				
				  920,000,000
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Class B
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  184,000,000
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Total
				

			 	
				
				   
				

			 	
				
				  $
				

			 	
				
				  1,104,000,000
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Equity
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Amount
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Initial Cash
				  Reserve
				

			 	
				
				   
				

			 	
				
				  $
				

			 	
				
				  16,000,000
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Fixed Equity
				  Acquisition Contributions
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  96,000,000
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Total
				

			 	
				
				   
				

			 	
				
				  $
				

			 	
				
				  112,000,000
				

			 

 

	 
		 
	 

	 
			
				
				  Collateral
				  Eligibility:
				

			 	
				
				   
				

			 	
				
				  The Agent and the
				  Borrower shall agree to a detailed list of Collateral eligibility criteria to
				  be set forth in the final transaction documentation. The Borrower will only
				  acquire Aircraft so as not to breach the criteria set forth in the final
				  transaction documentation. Funding of any advance with respect to any Aircraft
				  is subject to the prior approval of the Agent.
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Approved Aircraft
				  Types:
				

			 	
				
				   
				

			 	
				
				  The Agent and the
				  Borrower shall agree to a predetermined list of Approved Aircraft Types to be
				  set forth in the final transaction documentation. Those aircraft types
				  designated as Approved Aircraft can be contributed to the Facility with the
				  consent of the Agent, subject to the collateral eligibility criteria set forth
				  in the final transaction documentation. Advances against aircraft types not
				  designated as Approved Aircraft Types require the approval of 66 2/3% of the
				  Class A Lenders and 66 2/3% of the Class B Lenders as measured by their
				  combined loan and unfunded allocation amounts.
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Maximum
				  Credit:
				

			 	
				
				   
				

			 	
				
				  Up to an aggregate
				  outstanding amount of up to $1,104 million (the “Maximum Facility
				  Amount”), comprised of the Class A Loans, the Class B Loans and the
				  Equity, each ranking junior to the other in alphanumeric order. Upon request by
				  the Borrower and consent of the Agent, and for any increase of the Maximum
				  Facility Amount to an amount greater than $1,104 million, 66 2/3% of the
				  Lenders, such amount may be increased pro rata among all Loans and will be
				  contingent on an additional pro rata Fixed Equity Acquisition Contribution. No
				  Lender, however, is required to increase its allocation or be assigned a new
				  allocation without such
				

			 

 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  Lender’s
				  consent.
				

			 
	
				
				  Availability
				  Period:
				

			 	
				
				   
				

			 	
				
				  The Maximum Facility
				  Amount shall be available for advances to the Borrower for a period of 24
				  months from the Facility Closing Date. This Availability Period may be extended
				  for additional time periods (the “Extended Availability Period”) by
				  written agreement among the Borrower, the Agent and each Lender. No Lender,
				  however, is required to extend the Availability Period with respect to its
				  loans without such Lender’s consent.
				

			 
	
				
				  Interim Repayment
				  Dates:
				

			 	
				
				   
				

			 	
				
				  Amounts borrowed must
				  be repaid in 4 quarterly installments commencing on the 36th
				  Settlement Date after the end of the Availability Period or, if applicable, any
				  Extended Availability Period (each an “Interim Repayment Date”). The
				  amount repaid on or prior to each of the 4 Interim Repayment Dates shall be
				  equal to or greater than 25%, 50%, 75% and 100%, respectively, of the amount
				  outstanding under the Facility as of the end of the Availability Period (each
				  an “Interim Repayment Amount”).
				

			 
	
				
				  Expected Maturity
				  Date:
				

			 	
				
				   
				

			 	
				
				  At the end of the
				  Availability Period.
				

			 
	
				
				  Legal Final Maturity
				  Date:
				

			 	
				
				   
				

			 	
				
				  The Agent, at the
				  request of lenders consisting of no less than 66 2/3% of the aggregate dollar
				  amount of outstanding Class A and Class B Loans and unfunded allocations
				  combined, may extend the date for any payment due on any Interim Repayment
				  Date, provided, however, that no such extension may extend the Final Interim
				  Repayment Date for more than 24 months beyond the date initially provided
				  unless the consent of all Lenders is obtained. In the event that the final
				  Interim Repayment Date is extended more than 24 months beyond the date
				  originally provided, the Lenders of the most senior class shall be the
				  controlling party for all classes of Loans. In no event shall the final Interim
				  Repayment Date be extended such that the term of the loan exceeds 30
				  years.
				

			 
	
				
				  Purchase
				  Price:
				

			 	
				
				   
				

			 	
				
				  The sum of (a) the cash
				  purchase price paid by the applicable Aircraft Owning Subsidiary (or by the
				  Borrower in the case of the acquisition of an Aircraft Owning Subsidiary), net
				  of any amounts to be paid or transferred by the seller to the purchaser in
				  connection therewith, plus (b) the amount of any cash security deposit or cash
				  maintenance reserve balance under the applicable Lease at the time of such
				  acquisition, plus (c) the amount of any lessor maintenance contribution
				  obligation not included in the cash maintenance reserve balance, plus (d) the
				  amount of any rent previously paid by the applicable Lessee as of the date of
				  such acquisition and amounts agreed by the Agent to be held in the rent account
				  to be applied during any rent holiday permitted under the applicable lease for
				  periods after the date of such acquisition to the extent those amounts were
				  either payable by the seller to the applicable Aircraft Owning Subsidiary or
				  were otherwise deducted from the amount the applicable Aircraft Owning
				  Subsidiary paid to the seller.
				

			 
	
				
				  Advance
				  Amount:
				

			 	
				
				   
				

			 	
				
				  The Lenders will
				  advance the lesser of: (A) 100% of the Purchase Price (as defined herein)
				  paid by the relevant Aircraft Owning Subsidiary and (B) an amount, when added
				  to the then outstanding Loans will not result in the aggregate outstanding
				  Class A and Class B Loans exceeding the sum of: (x) 85.0% of the Aircraft Value
				  (as defined below) of all Aircraft plus (y) 50.0% of the maintenance
				  reserves paid to the depositary in respect of all Aircraft and (C) the Maximum
				  Facility Amount.
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  The advances will be
				  funded first by the Fixed Equity Acquisition Contributions, then by Class B
				  Loans and lastly by Class A Loans, so that, upon full utilization of the
				  Facility, $184 million funded within the Facility is represented by Class B
				  Loans, $96 million is represented by the Fixed Equity Acquisition Contributions
				  and the balance is represented by Class A Loans.
				

			 
	
				
				  Physical
				  Inspection:
				

			 	 	
				
				  Each aircraft to be
				  funded under the Facility will have undergone a full physical inspection
				  completed by a qualified third party firm mutually acceptable to the Agent and
				  the Borrower. Such inspections shall be performed annually commencing at the
				  end of the Availability Period and may be performed upon a Facility Event of
				  Default, subject to the terms of the Lease; provided, however, that in no event
				  shall physical inspection reports be provided more than twice annually on each
				  aircraft.
				

			 
	
				
				  Appraisers:
				

			 	 	
				
				  Three pre-selected
				  appraisal firms, each certified by ISTAT and mutually acceptable to the Agent
				  and the Borrower.
				

			 
	
				
				  Aircraft
				  Value:
				

			 	 	
				
				  Aircraft Value
				  (“AV”) will be determined by the average of the three desktop
				  appraisals to be provided by the Appraisers to the Agent and the Borrower. The
				  individual appraisals will rely upon “Base Values” as defined by
				  ISTAT, adjusted for current physical condition, based on the relevant physical
				  inspection report.
				

				
				  The AV of the aggregate
				  funded aircraft will be updated by the Appraisers from time to time and under
				  certain circumstances as to be determined by the Agent and the Borrower in the
				  final documentation. Such updated appraisals shall be based on the
				  aircraft’s condition as reflected in the most recent physical inspection
				  or other relevant maintenance records to the extent applicable and
				  available.
				

			 
	
				
				  Borrowing
				  Base:
				

			 	 	
				
				  At any time of
				  determination, the sum
				  of: (x) 85.0% of the updated aggregate AV of the Aircraft plus (y) 50.0% of the aggregate maintenance reserves in
				  respect of the Aircraft at such time plus (z) the aggregate amounts deposited in the Cash
				  Collateral Account (excluding maintenance reserves and security deposits) held
				  by the depository at such time.
				

				
				  If the aggregate
				  outstanding principal amount of the Class A and Class B Loans exceeds the
				  Borrowing Base (a “Collateral Deficiency”), the Borrower shall, by
				  the third succeeding Settlement Date, either (A) pay the amount of the
				  Collateral Deficiency or (B) pledge additional collateral to cure the
				  Collateral Deficiency.
				

			 
	
				
				  Settlement
				  Date:
				

			 	
				
				   
				

			 	
				
				  The 15th calendar day
				  of each month and if such day is not a Business Day, then the first Business
				  Day following such 15th calendar day.
				

			 
	
				
				  Calculation
				  Date:
				

			 	
				
				   
				

			 	
				
				  With respect to any
				  Settlement Date, the last day of the calendar month preceding such Settlement
				  Date.
				

			 
	
				
				  Measuring
				  Period:
				

			 	
				
				   
				

			 	
				
				  For any Settlement
				  Date, the period from the second preceding Calculation Date to the then most
				  recent Calculation Date.
				

			 
	
				
				  Interest
				  Period:
				

			 	
				
				   
				

			 	
				
				  The period from each
				  applicable date of funding to the immediately 
				

			 
				

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  succeeding Settlement
				  Date and, thereafter, the period from the last day of the immediately preceding
				  Interest Period to (but excluding) the next succeeding Settlement Date.
				

			 
	
				
				  Margins:
				

			 	
				
				   
				

			 	
				
				  Facility Margin
				

			 	
				
				  250 bps
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Class A Margin
				

			 	
				
				  125 bps
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Class B Margin
				

			 	
				
				  400 bps
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Equity Margin
				

			 	
				
				  See calculation of
				  Equity Margin located in Schedule A hereto.
				

			 
	
				
				  Unutilized
				  Fee:
				

			 	
				
				   
				

			 	
				
				  To the Class A Lenders,
				  an amount due on each Settlement Date to the extent there are sufficient funds
				  available through the waterfall and equal to 30 bps against any undrawn
				  allocation extended by the Class A Lenders on Class A Loans and not utilized by
				  the Borrower, commencing on the closing date. To the Class B Lenders, an amount
				  due on each Settlement Date to the extent there are sufficient funds available
				  through the waterfall and equal to 30 bps against any undrawn allocation
				  extended by the Class B Lenders on Class B Loans and not utilized by the
				  Borrower, commencing 6 months after the closing date.
				

			 
	
				
				  Interest
				  Rate:
				

			 	
				
				   
				

			 	
				
				  Interest shall accrue
				  and be payable in arrears on each Settlement Date and on the Maturity Date,
				  calculated for the actual number of days elapsed during the Interest Period and
				  assuming a year consisting of 360 days. The Interest Rate shall be based upon 1
				  Month LIBOR plus the applicable Margin.
				

			 
	
				
				  Aggregated
				  Additional Interest:
				

			 	
				
				   
				

			 	
				
				  (a) With respect to
				  each Interest Period from the first Interim Repayment Date to the second
				  Interim Repayment Date, the Class A Margin and Class B Margin will increase 25
				  bps, (b) with respect to each Interest Period from the second Interim Repayment
				  Date to the third Interim Repayment Date, the Class A Margin and the Class B
				  Margin will increase 50 bps, (c) with respect to each Interest Period from the
				  third Interim Repayment Date to the fourth Interim Repayment Date, the Class A
				  Margin and the Class B Margin will increase 75 bps, (d) with respect to each
				  Interest Period from the fourth Interim Repayment Date to the twenty-fourth
				  month after the first Interim Repayment Date, the Class A Margin and the Class
				  B Margin will increase 100 bps, (e) with respect to each Interest Period from
				  the twenty-fourth month after the first Interim Repayment Date to the
				  thirty-sixth month after the first Interim Repayment Date, the Class A Margin
				  will increase 200 bps and the Class B Margin will increase 300 bps and (f) with
				  respect to each Interest Period from and after the thirty-sixth month after the
				  first Interim Repayment Date, the Class A Margin will increase 250 bps and the
				  Class B Loans will increase 400 bps (collectively, the “Interim Repayment
				  Date Margin Increase”).
				

			 
	
				
				  Default
				  Margins:
				

			 	
				
				   
				

			 	
				
				  For Class A and Class B
				  Loans, 100 bps. This Default Margin shall be incremental to the applicable
				  Margins.
				

			 
	
				
				  Aggregated Default
				  Interest Rate:
				

			 	
				
				   
				

			 	
				
				  For any day during any
				  Interest Period, the sum of the 1 Month LIBOR for such Interest Period plus 350
				  basis points. The Aggregated Default Margin
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  shall be incremental to
				  the applicable Margins.
				

			 
	
				
				  Aggregated Default
				  Interest:
				

			 	 	
				
				  At any time during
				  which an Event of Default (but not
				  a Servicer Replacement Event unless an Event of Default is also continuing) has
				  occurred and is continuing, Class A and Class B Loans shall bear additional
				  interest on the outstanding principal amount at a rate per annum equal to the
				  Default Margin and such accrued additional interest, together with any
				  additional interest which has accrued due to any Interim Repayment Date Margin
				  Increases, shall be aggregated on the last day of the Interest Period (all such
				  aggregated additional interest, the “Aggregated Default Interest”). Such accrued interest shall be aggregated on
				  the last day of the Interest Period along with the Aggregated Default Interest
				  and shall be deemed total “Aggregated Default Interest” upon such
				  aggregation. Aggregated Default Interest and the interest thereon shall be
				  payable in arrears on the date on which the aggregate principal amount of the
				  Loans have been paid in full.
				

			 
	
				
				  Required Principal
				  Payment:
				

			 	 	
				
				  On each Settlement Date
				  beginning on the first Settlement Date to occur following the earlier of (A)
				  the six (6) month anniversary of the date upon which the Facility utilization
				  rate exceeds the Threshold Utilization Rate, and (B) the end of the
				  Availability Period, and in accordance with the Cash Flow Waterfall (as defined
				  herein), all amounts collected (excluding, so long as no Event of Default has
				  occurred and is continuing, maintenance reserves and security deposits) in
				  excess of the required interest expense, management fees, permitted expenses
				  and Cash Collateral top-up amounts, if any, will be used to amortize the
				  Loan.
				

				
				  All securitization
				  proceeds or any Prepayments (voluntary or otherwise) will be used to pay down
				  the Loan in accordance with the Cash Flow Waterfall and as specified herein.
				  
				

			 
	
				
				  Maintenance Reserves
				  & Security Deposits:
				

			 	 	
				
				  Any maintenance
				  reserves related to an Aircraft will be retained in the Reserves Account and
				  any security deposits related to an Aircraft will be retained in the Deposit
				  Accounts, in each case, for the benefit of the Lenders. Upon receipt by the
				  Agent of an officer’s certificate from the Servicer that maintenance has
				  been performed by a lessee and expenses incurred in connection therewith are
				  reimbursable, the Servicer may draw from the Reserves Account to reimburse such
				  lessee for such reimbursable expenses an amount not to exceed the amount of
				  such reimbursable expenses. During the term of this Facility, the Agent will
				  have control over the release of funds from any separate accounts, provided,
				  however, that all balances related to maintenance reserves and security
				  deposits will be handled and dispensed in accordance with the terms of the
				  related lease.
				

			 
	
				
				  Base
				  Rent:
				

			 	 	
				
				  The revenues associated
				  solely with the basic rent payment due under each lease without regard for
				  security deposits, maintenance reserves, additional collateral or any other
				  payment made by a lessee other than in regards to basic rent.
				

			 
	
				
				  Servicer
				  Advances:
				

			 	 	
				
				  On or prior to each
				  Settlement Date, the Servicer may make advances in its discretion in respect of
				  unpaid (or unpaid in full) Base Rent or maintenance reserves.
				

			 
	
				
				  Cash Collateral
				  Account:
				

			 	 	
				
				  The Borrower shall
				  establish and maintain a Cash Collateral Account for the benefit of the
				  Lenders. Amounts in the Cash Collateral Account (“Cash
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  Collateral”) shall
				  not be less than the sum
				  of (i) $16,000,000, plus (ii) 10% of the aggregate Base Rent actually
				  collected during the Measuring Period related to such Settlement Date and each
				  prior Settlement Date, plus (iii) 10% of the aggregate amount of security deposits
				  related to each Lessee applied to cover Monthly Rent of such Lessee during the
				  Measuring Period relating to such Settlement Date and each prior Settlement
				  Date, minus (iv) any Cash Collateral released in
				  accordance with sales of aircraft or payments required to be made to a lessee
				  under the terms of its lease (the “Cash Collateral Target
				  Amount”).
				

				
				  An amount equal to
				  $16,000,000 plus maintenance reserves of all Aircraft funded on the first
				  funding date will be deposited in the Cash Collateral Account on or before the
				  date of the first advance under the Facility. The Cash Collateral Account
				  Target Balance (excluding maintenance reserves of all Aircraft) will be no
				  greater than the greater of (x) 5% of the Maximum Facility Amount and (y) $16
				  million.
				

			 
	
				
				  Sources of Payments
				  on Loans:
				

			 	 	
				
				  Payments of interest
				  and principal on each Class of Loans will be made on each Settlement Date to
				  holders of each Class of Loans on such Settlement Date, but only to the extent
				  of amounts on deposit in the collection account and, at the Agent’s
				  discretion, the Cash Collateral Accounts on such Settlement Date (net of
				  expenses then due and payable, and other amounts set forth under the applicable
				  Cash Flow Waterfall) (the “Available Collections”).
				

			 
	
				
				  Cash Flow
				  Waterfall:
				

			 	 	
				
				  Distributions of
				  available collections will be made monthly on each Settlement Date and on the
				  Legal Final Maturity Date in accordance with the following priority:
				

			 
	
				
				   
				

			 	 	
				
				  first, to the payment of any fees or expenses other than the
				  fees and expenses described below;
				

			 
	
				
				   
				

			 	 	
				
				  second, if a lessee has paid any amounts into Concentration
				  Accounts to reimburse the Servicer for obligations of such lessee paid on
				  behalf of the Servicer, to the Servicer, an amount equal to such amount
				  paid;
				

			 
	
				
				   
				

			 	 	
				
				  third, to an aircraft expense account for payment of all
				  aircraft expenses anticipated to be incurred in the one month period following
				  the applicable Settlement Date and to such account an amount that the Servicer
				  deems prudent to establish a reserve for expected future expenses on the
				  Aircraft;
				

			 
	
				
				   
				

			 	 	
				
				  fourth, ratably to the Servicer, an amount equal to due an
				  owing Servicer fees;
				

			 
	
				
				   
				

			 	 	
				
				  fifth, ratably to the payment of accrued and unpaid Class A
				  interest (except for Aggregated Default Interest and accrued and unpaid
				  interest thereon), and any derivatives obligations;
				

			 
	
				
				   
				

			 	 	
				
				  sixth, ratably to the payment of accrued and unpaid Class B
				  interest (except for Aggregated Default Interest and accrued and unpaid
				  interest thereon);
				

			 
	
				
				   
				

			 	 	
				
				  seventh, ratably to B&B Air the payment of accrued and
				  unpaid Equity Distributions (calculated as a return on the balance of Fixed
				  Equity Acquisition Contributions at an annual rate of LIBOR plus the Equity
				  Margin);
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  2007
				

			 

 

	 
		 
	 

	 
		 
	 

	 
	 

	 

	 
		 
	 

	 
			
				
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  

				

			 
	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
			
				
				   
				

			 	 	
				
				  eighth, to the Servicer, for the repayment of any Servicer
				  Advances advanced during the previous Measuring Period;
				

			 
	
				
				   
				

			 	 	
				
				  ninth, to the payment of the Unutilized Fee on the Class A
				  Loans;
				

			 
	
				
				   
				

			 	 	
				
				  tenth, deposit to the Cash Collateral Accounts the positive
				  difference (if any) between (A) the Cash Collateral Target Amount minus
				  (B) the Cash Collateral, in each case as determined on the immediately
				  preceding Calculation Date;
				

			 
	
				
				   
				

			 	 	
				
				  eleventh, beginning on the first Settlement Date to occur
				  following the earlier of (A) the six (6) month anniversary of the date upon
				  which the Facility utilization rate exceeds the Threshold Utilization Rate, and
				  (B) the end of the Availability Period to the payment of the unpaid principal
				  amount of the Class A Loans;
				

			 
	
				
				   
				

			 	 	
				
				  twelfth, beginning on the first Settlement Date to occur
				  following the earlier of (A) the six (6) month anniversary of the date upon
				  which the Facility utilization rate exceeds the Threshold Utilization Rate, and
				  (B) the end of the Availability Period to the payment of the unpaid principal
				  amount of the Class B Loans;
				

			 
	
				
				   
				

			 	 	
				
				  thirteenth, to the payment of any Aggregate Default Interest and
				  Aggregate Additional Interest due to Class A Lenders;
				

			 
	
				
				   
				

			 	 	
				
				  fourteenth, to the payment of any Aggregate Default Interest and
				  Aggregate Additional Interest due to Class B Lenders;
				

			 
	
				
				   
				

			 	 	
				
				  fifteenth, beginning on the first Settlement Date to occur
				  following the earlier of (A) the six (6) month anniversary of the date upon
				  which the Facility utilization rate exceeds the Threshold Utilization Rate and
				  (B) the end of the Availability Period to the payment to B&B Air a return
				  of the Fixed Equity Acquisition Contributions;
				

			 
	
				
				   
				

			 	 	
				
				  sixteenth, to the payment in full of all other obligations owed
				  by the Borrower; and
				

			 
	
				
				   
				

			 	 	
				
				  seventeenth, any remaining balance shall be payable at the
				  direction of the Borrower.
				

			 
	
				
				  Servicer’s
				  Fees:
				

			 	 	
				
				  BBAM, as Servicer,
				  shall be entitled to receive a monthly management fee equal to $20,000 plus
				  3.5% of the aggregate Base Rent actually collected for the respective period to
				  the extent funds are available to pay such fee as dictated by the applicable
				  Cash Flow Waterfall.
				

			 
	
				
				  Sales
				  Fee:
				

			 	 	
				
				  BBAM, as Servicer,
				  shall be entitled to receive a sales fee equal to 1.5% of the cash proceeds
				  collected related to the Sale of any Aircraft; provided however, no Sales Fee
				  will be payable related to a securitization or other refinancing of the
				  facility.
				

			 
	
				
				  Prepayment
				  Right:
				

			 	 	
				
				  The Borrower may elect
				  to prepay any portion of the Facility at any time subject to the Borrowing Base
				  maintenance requirements, where applicable.
				

			 
	
				
				  Prepayments:
				

			 	 	
				
				  Voluntary prepayments
				  and mandatory prepayments of the Loans as a consequence of securitization,
				  casualties, Aircraft sales and similar events will be in an amount equal to the
				  Prepayment Amount (as defined below).
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  2007
				

			 

 

	 
		 
	 

	 
		 
	 

	 
	 

	 

	 
			
				
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  

				

			 
	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
				

			 	 	
				
				  and will, in the
				  absence of Defaults, Events of Default or Servicer Events of Default, be
				  applied (after payment of interest and expenses) to the payment of unpaid
				  principal of the then most senior outstanding Class of Loans.
				

			 
	
				
				  Prepayment
				  Amount:
				

			 	 	
				
				  With respect to any
				  Aircraft, 
				

				
				  (a) at any time after
				  the Availability Period or upon the occurrence and during the continuation of a
				  Default, an Event of Default or Servicer Replacement Event, an amount equal to
				  all proceeds from sales of Aircraft and all insurance and all other proceeds
				  received with respect to any event of total loss of the Aircraft, and
				

				
				  (b) at any other time,
				  an amount equal to the product of (A) the Allocable Percentage applicable to such
				  Aircraft times (B) the aggregate outstanding principal amount of the
				  Loans immediately prior to such payment;
				

				
				  provided that if the payment of such amount together with any
				  related event of loss or any release of Aircraft and maintenance reserves
				  pursuant to any provision hereof would result in a Collateral Deficiency, such
				  Prepayment Amount shall be increased to the extent required to prevent such
				  Collateral Deficiency from occurring.
				

				
				  The “Allocable
				  Percentage” applicable to any Aircraft is equal to the quotient of (A) the sum of (1) the most recent
				  Aircraft Value of such Aircraft plus (2) 50% of the maintenance reserves then held in
				  respect to such Aircraft divided by (B) the sum
				  of (1) the most recent aggregate Aircraft Value of all Portfolio Aircraft
				  plus (2) 50% of the aggregate maintenance
				  reserves held for all Portfolio Aircraft.
				

			 
	
				
				  Security
				  Interest:
				

			 	 	
				
				  To secure the payment
				  and performance of all obligations under the Warehouse Agreement, the Borrower
				  and the Aircraft Owning Subsidiaries will grant to the Agent, for the benefit
				  of the Lenders, a first priority security interest in substantially all assets
				  of the Borrower and the Aircraft Owning Subsidiaries, including the following
				  Collateral:
				

			 
	
				
				   
				

			 	 	
				
				  a)   the
				  Aircraft (provided that there will be no “mortgages” on the
				  Aircraft and security interests in the Aircraft will not be required to be
				  registered or perfected);
				

				
				  b)   the
				  underlying leases and all Aircraft purchase agreements;
				

				
				  c)   the
				  shares of the Borrower and each Aircraft-Owning Subsidiary;
				

				
				  d)   the
				  collection accounts and all other accounts;
				

				
				  e)   any
				  insurance proceeds resulting from a loss, condemnation, etc. of the
				  Aircraft;
				

				
				  f)    the Administrative Agreement
				  with the Servicer; and
				

				
				  g)   all
				  proceeds of the foregoing.
				

				
				  The transaction
				  documentation will contain standard provisions regarding excluded
				  property.
				

				
				   
				

			 
	
				
				  Release of
				  Cash Collateral:
				

			 	 	
				
				  Upon payment by the
				  Borrower of the Prepayment Amount on a Settlement Date for an Aircraft, if no
				  Default or Event of Default shall be continuing and 
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  2007
				

			 

 

	 
		 
	 

	 
		 
	 

	 
	 

	 

	 
			
				
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  

				

			 
	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				   
				

			 	 	
				
				  the First Interim
				  Repayment Date shall not have occurred, the Agent shall release an amount of
				  Cash Collateral for such Aircraft equal to the amount that the then aggregate
				  balance of the Cash Collateral Account exceeds the Cash Collateral Target
				  Amount, taking into account the release of the applicable Aircraft.
				

			 
	
				
				  Documentation:
				

			 	 	
				
				  Warehouse Agreement,
				  Security Agreement, Depository Agreement, Administrative Agreement and other
				  related documents including, but not limited to, assignments of leases and
				  lessee consents.
				

			 
	
				
				  Expenses:
				

			 	 	
				
				  The reasonable fees
				  associated with the Agent’s counsel in connection with this warehouse
				  facility will be payable by the Borrower.
				

				
				  The reasonable expenses
				  associated with each advance made under the Facility will be payable by the
				  Borrower, including but not limited to, fees and expenses of Agent’s
				  counsel for each advance, reasonable fees and expenses of Agent’s local
				  counsel, and appraisal and inspection fees.
				

				
				  The Borrower shall be
				  responsible for all expenses and fees incurred in connection with any portfolio
				  securitization or refinancing, it being understood and agreed that such fees
				  and expenses are to be paid from the proceeds of such securitization.
				

			 
	
				
				  Funding
				  Procedures:
				

			 	 	
				
				  Advances under the
				  Facility will be made available subject to Agent’s receipt and approval of
				  the following:
				

			 
	
				
				   
				

			 	 	
				
				  a)   an
				  initial informational package (the “Funding Package”), the contents
				  of which will include, among other things, a copy of each appraisal, a copy of
				  the physical inspection report, a copy of the underlying lease, a copy of the
				  purchase agreement, an overview of the seller financing terms (if any),
				  jurisdiction information (when necessary), detailed financial, credit and
				  operational information on the lessee and, if available, a six-month payment
				  history on the targeted lease; each initial Funding Package shall be received
				  by the Agent at least ten (10) Business Days prior to its related funding
				  date;
				

				
				  b)   a
				  finalized Funding Package, with final versions of the lease and the purchase
				  agreement; each finalized Funding Package will be received by the Agent at
				  least three (3) Business Days prior to its related funding; and
				

				
				  c)   a
				  request for funds notice at least three (3) Business Days prior to an
				  applicable funding date (a “Funding Request”).
				

			 
	
				
				  Conditions Precedent
				  to the Initial Funding:
				

			 	 	
				
				  Customary conditions
				  precedent, including, but not limited to:
				

			 
	
				
				   
				

			 	 	
				
				  a)   execution and delivery of
				  documentation satisfactory to the Agent and its counsel including, but not
				  limited to:
				

			 
	
				
				   
				

			 	 	
				
				  I.      Warehouse
				  Agreement,
				

				
				  II.     Notes (if required by
				  Lenders),
				

				
				  III.    Administrative
				  Agreement,
				

				
				  IV.   Security Agreement and supplement
				  thereto,
				

				
				  V.    Depository Agreement,
				  and
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  VI.        Assignment
				  of Lease.
				

			 
	
				
				   
				

			 	 	
				
				  b)    legal opinions of counsel for
				  each of the Borrower and the applicable Aircraft Owning Subsidiary that
				  execution and performance of the transaction documents to which each is a party
				  will not violate any provision of law and will not conflict with or result in a
				  breach of its respective constitutional documents; and
				

				
				  c)    legal opinions of local
				  counsel in respect of questions of law where the relevant Aircraft is
				  registered.
				

			 
	
				
				  Reporting
				  Requirements:
				

			 	 	
				
				  The Servicer will
				  provide performance reports with respect to the Portfolio for the related
				  Measuring Period by e-mail no later than the second Business Day before each
				  Settlement Date. Such reports shall include, but not be limited to, outstanding
				  lease delinquencies, lease terminations, lease roll-offs, re-leasing activities
				  and service/maintenance reports by the Borrower. Each such report will be in a
				  format as may be agreed upon by the Borrower and the Agent from time to time.
				  In addition, the Borrower will provide a hard copy of all of the aforementioned
				  reports at the Agent’s request. The Servicer will provide such information
				  directly to the Agent and each lender.
				

			 
	
				
				  Interest Coverage
				  Ratio:
				

			 	 	
				
				  The Interest Coverage
				  Ratio for any Measuring Period will be the ratio of (A) the aggregate amount of
				  Base Rent collected (inclusive of any security deposits transferred to the
				  collection account in connection with an applicable lease default and, solely
				  with respect to the one month calculation of such ratio, Servicer Advances for
				  such Measuring Period) during such Measuring Period to (B) the aggregate amount
				  of interest accrued for each day of the same Measuring Period on the Class A
				  and Class B Loans. 
				

			 
	
				
				  Events of
				  Default:
				

			 	 	
				
				  An Event of Default
				  under the Facility shall occur upon (subject in each case to certain cure
				  periods):
				

			 
	 	
				
				   
				

			 	
				
				  a)   failure to make any payment or
				  prepayment of principal or interest on the Loans when due or, without
				  duplication, payment of Collateral Deficiency when due and such payment is not
				  received within one (1) Business Day of the due date therefore; or
				

				
				  b)   failure to make any other payment
				  under the loan documents 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; or
				

				
				  c)   failure to maintain the insurance
				  required under the Warehouse Agreement; or
				

				
				  d)   failure to consummate Collateral
				  Sales (as defined below) within 6 months of notice to do so from the Agent;
				  or
				

				
				  e)   failure of the Borrower or Aircraft
				  Owning Subsidiary to perform any covenant contained in any loan document and
				  such failure shall continue unremedied for a period of twenty (20) Business
				  Days after written notice; or
				

				
				  f)    any material representation or
				  warranty made by the Borrower, any Aircraft Owning Subsidiary or the Servicer
				  shall prove to have been
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  2007
				

			 

 

	 
		 
	 

	 
		 
	 

	 
	 

	 
	 
			
				
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  

				

			 
	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				            incorrect
				  at the time made, and shall not have been cured within twenty (20) Business
				  Days after written notice; or
				

				
				  g)       bankruptcy
				  or insolvency of the Borrower or any Aircraft Owning Subsidiary, including any
				  subsidiary of the foregoing; or
				

				
				  h)       a default
				  under a derivatives agreement occurs as to which the Borrower is the
				  “defaulting party” or a termination under a derivatives agreement
				  occurs to which the Borrower is the “affected party” and the payment
				  due as a result of such termination is in excess of $5,000,000; or
				

				
				  i)        the
				  average Interest Coverage Ratio for the three full consecutive Measuring
				  Periods ended before the date of determination is less than 1.25:1.00
				  (exclusive of all Servicer Advances during any of the relevant Measuring
				  Periods); or
				

				
				  j)        the
				  Interest Coverage Ratio for any Measuring Period is less than 1.10:1.00
				  (inclusive of any Servicer Advances in such Measuring Period); or
				

				
				  k)       Babcock
				  & Brown Limited does not own legally and beneficially (directly or
				  indirectly) at least 51% of BBAM for so long as BBAM is the Servicer, or
				  Babcock & Brown Limited does not own legally or beneficially (either
				  directly or indirectly) a minimum percentage of B & B Air (the
				  “Minimum Ownership Percentage” as to be determined in the final
				  documentation), or the Borrower shall not own legally and beneficially 100% of
				  each Aircraft Subsidiary.
				

				
				  “Default”
				  means any event which, with the giving of notice or lapse of time or both,
				  would constitute an Event of Default.
				

			 
	
				
				  Servicer Replacement
				  Events:
				

			 	
				
				   
				

			 	
				
				  A Servicer Replacement
				  Event shall occur upon:
				

			 

 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  a)       an Event of
				  Default under the Facility; or
				

				
				  b)       BBAM or any
				  significant subsidiary shall fail to make any payment when due in respect of
				  any recourse indebtedness for which the recourse portions exceed $25,000,000
				  (and (A) such non-payment continues for fifteen (15) days or (B) any creditor
				  commences the exercise of remedies against BBAM or such significant subsidiary)
				  or such indebtedness shall be accelerated; or
				

				
				  c)       the average
				  Interest Coverage Ratio for the three (3) consecutive Measuring Periods ended
				  before the date of determination, is less than 1.35:1.00 (exclusive of all
				  Servicer Advances during any of the relevant Measuring Periods); or
				

				
				  d)       as of any
				  applicable Settlement Date, failure to pay any Interim Repayment Amount then
				  due; or 
				

				
				  e)       failure to
				  maintain on behalf of the Borrower insurance that the Servicer is required to
				  maintain for the Borrower; or
				

				
				  f)        failure
				  of the Servicer to perform any covenant contained in any loan document and such
				  failure shall continue unremedied for a period of thirty (30) days after
				  written notice (other than with respect to delivery of the monthly report,
				  which cure period shall be 2 days); or
				

				
				  g)       bankruptcy
				  or insolvency of the Servicer or any significant subsidiary of the Servicer,
				  which, in the case of the significant subsidiary of the
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
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				  2007
				

			 

 

	 
		 
	 

	 
	 

	 

	 
		 
	 

	 
			
				
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  

				

			 
	
				
				   
				

			 	
				
				   
				

			 

 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				            Servicer
				  reasonably could be expected to have a material adverse affect on the
				  Servicer’s ability to perform its obligations in respect of the Facility;
				  or
				

				
				  h)       failure of
				  BBAM to have Appropriate Management Expertise or to utilize such Appropriate
				  Management Expertise for any reason. “Appropriate Management
				  Expertise” means that BBAM has available to it the full time services of
				  one or more individuals who have experience in the aviation industry and, in
				  particular, in relation to the administrative management of commercial jet
				  aircraft subject to lease; or
				

				
				  i)        any
				  financial statement required to be submitted under the Administrative Agreement
				  contains an impermissible qualification.
				

				
				  Upon a Servicer
				  Replacement Event, the Agent shall have the right to replace the Servicer at
				  the request of Lenders consisting of no less than 66 2/3% of the aggregate
				  outstanding Class A and Class B Loans and unfunded allocations combined, and
				  the Availability Period shall immediately end, and each Lender’s
				  allocation to make advances to the Borrower shall terminate.
				

			 
	
				
				  Business
				  Day:
				

			 	
				
				   
				

			 	
				
				  Any day of the week,
				  other than a Saturday or a Sunday on which banks are open for business in
				  London, New York and San Francisco.
				

			 
	
				
				  Equity Suspension
				  Events:
				

			 	
				
				   
				

			 	
				
				  a)       an Event of
				  Default under the Facility; or
				

				
				  b)       the average
				  Interest Coverage Ratio for the three (3) consecutive Measuring Periods ended
				  before the date of determination, is less than 1.35:1.00 (exclusive of all
				  Servicer Advances during any of the relevant Measuring Periods); or
				

				
				  c)       the first
				  Interim Repayment Date has occurred; or
				

				
				  Upon the occurrence of
				  a Equity Suspension Event, the return on Fixed Equity Acquisition Contributions
				  to B&B Air will accrue but payments of these amounts and repayment of Fixed
				  Equity Acquisition Contributions will be suspended. Should any of these events
				  be cured in future periods, payments of interest and principal will
				  resume.
				

			 
	
				
				  Minimum
				  Holds
				

			 	
				
				   
				

			 	
				
				  An assignee lender must
				  either (1) acquire all of the outstanding Loans and/or Allocations of the
				  assignor Lender or (2) acquire in the aggregate upon any such assignment by one
				  or more Lenders, and the assignor shall retain Loans and/or Allocations with an
				  aggregate principal balance of, at least $50,000,000 ($1,000,000 if an Event of
				  Default, certain bankruptcy Defaults or a Servicer Replacement Event has
				  occurred and is continuing) with respect to Class A Loans and/or Class A
				  Allocations and $10,000,000 ($1,000,000 if an Event of Default, certain
				  bankruptcy Defaults or a Servicer Replacement Event has occurred and is
				  continuing) with respect to Class B Loans and/or Class B Allocations.
				  Assignments of any Lender’s Class B Allocation will require the prior
				  approval of Borrower. Class A Loans and/or unfunded Class A Allocations, and
				  Class B Loans and/or Class B Allocations shall be separately assignable.

				

			 
	
				
				  Governing
				  Law:
				

			 	
				
				   
				

			 	
				
				  New York
				

			 

 
 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
				  13
				

			 	
				
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				  2007
				

			 

 

	 
		 
	 

	 
	 

	 

	 
		 
	 

	 
			
				
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  

				

			 
	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
		SCHEDULE A
	 

	 
		EQUITY MARGIN
		CALCULATION
	 

	 
		“Equity Margin” means
		a rate per annum at any time determined in accordance with the following
		formula:
	 

	 
		 
	 

	 
			
				
				  Equity Margin = 

				

			 	
				
				  (I x P) - ((AI x AP)
				  + (BI x BP)) - L
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  CP
				

			 	
				
				   
				

			 

 

	 
		where
	 

	 
		 
	 

	 
			
				
				  “AI”
				

			 	
				
				   
				

			 	
				
				  =
				

			 	
				
				   
				

			 	
				
				  L + Class A
				  Margin
				

			 
	
				
				  “L”
				

			 	
				
				   
				

			 	
				
				  =
				

			 	
				
				   
				

			 	
				
				  1 Month LIBOR rate in
				  effect for the applicable Interest Period
				

			 
	
				
				  “AP”
				

			 	
				
				   
				

			 	
				
				  =
				

			 	
				
				   
				

			 	
				
				  the aggregate unpaid
				  principal balance at any time of the amounts advanced by the Class A Lenders to
				  the Borrower
				

			 
	
				
				  “BI”
				

			 	
				
				   
				

			 	
				
				  =
				

			 	
				
				   
				

			 	
				
				  L + Class B
				  Margin
				

			 
	
				
				  “BP”
				

			 	
				
				   
				

			 	
				
				  = 
				

			 	
				
				   
				

			 	
				
				  the aggregate unpaid
				  principal balance at any time of the amounts advanced by the Class B Lenders to
				  the Borrower
				

			 
	
				
				  “CP”
				

			 	
				
				   
				

			 	
				
				  =
				

			 	
				
				   
				

			 	
				
				  the aggregate
				  non-repaid balance at any time of the Fixed Equity Acquisition Contributions
				  advanced by B&B Air to the Borrower
				

			 
	
				
				  “I”
				

			 	
				
				   
				

			 	
				
				  =
				

			 	
				
				   
				

			 	
				
				  L + M
				

			 
	
				
				  “M”
				

			 	
				
				   
				

			 	
				
				  =
				

			 	
				
				   
				

			 	
				
				  Facility Margin
				

			 
	
				
				  “P”
				

			 	
				
				   
				

			 	
				
				  = 
				

			 	
				
				   
				

			 	
				
				  AP + BP + CP
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				  
 
				

			 	
				
				  1
				

			 	
				
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				  2007

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]