Document:

exv10w62

 

Exhibit 10.62

 

    OMNIBUS
    CONSENT TO HFA INITIATIVE PROGRAM MODIFICATIONS

 

    This Omnibus Consent to HFA Initiative Program Modifications
    (this “Consent”) is entered into by the undersigned,
    on behalf of the United States Department of the Treasury
    (“Treasury”), the Federal National Mortgage
    Association (“Fannie Mae”), the Federal Home Loan
    Mortgage Corporation (“Freddie Mac”) (collectively the
    “GSEs”) and the Federal Housing Finance Agency
    (“FHFA”).

 

    The parties hereto are parties to that certain Memorandum of
    Understanding dated October 19, 2009 (the “MOU”)
    whereby Treasury, FHFA, Fannie Mae and Freddie Mac jointly
    agreed to the terms and conditions set forth therein for
    purposes of implementing the HFA Initiative (as defined in the
    MOU) including, without limitation, the New Issue Bond Program
    (NIBP) and the Temporary Credit and Liquidity Program (TCLP).
    (as such terms are defined in the MOU). Capitalized terms used
    but not defined herein shall have the meanings assigned to such
    terms in the MOU.

 

    In accordance with the MOU, Treasury, Fannie Mae and Freddie Mac
    entered into certain agreements pursuant to which Treasury, as
    authorized by the Housing and Economic Recovery Act of 2008,
    agreed to purchase GSE securities and other obligations for the
    purpose of implementing the HFA Initiative and establishing the
    NIBP and TCLP. Such agreements include, without limitation, New
    Issue Bond Program Agreements and Settlement Agreements dated
    December 9, 2009 and December 18, 2009, for the NIBP
    and the Agreements to Purchase Participation dated December 2009
    for the TCLP (HFA Initiative Program Agreements).

 

    State and local housing finance agencies (HFAs), because of the
    continued disruption in the housing finance market, have
    requested that modifications be made to certain terms and
    requirements of the NIBP and TCLP and the agreements underlying
    the NIBP and TCLP. In response to such requests, Treasury, as
    the party currently exercising Decision Control, consents to
    such modifications to be implemented by the GSEs in a manner
    consistent with the term sheets attached hereto
    as Exhibit A (Modifications).

 

    This Consent shall evidence the consent of Treasury,
    acknowledged by Fannie Mae and Freddie Mac, to the
    Modifications, whether relating to the NIBP or the TCLP or both.
    Treasury, Fannie Mae and Freddie Mac agree to enter into any
    amendments to the HFA Initiative Program Agreements that are
    necessary or appropriate to reflect the Modifications.
    Additionally, the GSEs agree to enter into with HFAs any
    amendments to the agreements underlying the NIBP and TCLP that
    are necessary or appropriate to reflect the Modifications.
    However, Treasury, Fannie Mae and Freddie Mac reserve the right
    to approve all such amendments. Furthermore, Treasury, Fannie
    Mae and Freddie Mac agree that the Modifications in no way
    change any rights, obligations, or duties of the parties under
    the HFA Initiative Program Agreements that are not explicitly
    addressed in the Modifications.

 

    In reliance on this Consent and subject to the approval of the
    amendments as described above by Treasury, Fannie Mae, and
    Freddie Mac, (i) the GSEs have determined that the
    Modifications will not adversely affect their ability to conduct
    the HFA Initiative in a manner that is consistent with the goals
    of being both commercially reasonable and safe and sound,
    (ii) FHFA has reviewed the Modifications and determined
    that participation by the GSEs in

 

    implementing the Modifications to the HFA Initiative is
    consistent with the goals and objectives of the MOU,
    (iii) implementation of the Modifications by the GSEs will
    not affect FHFA’s directive to participate in the HFA
    Initiative contained in the MOU, or its approval under the FHFA
    delegation of authorities and related instructions to the
    GSEs’ Boards of Directors also set forth in the MOU, and
    (iv) each GSE has determined, with respect to itself, that
    it has all necessary right, power and authority to honor its
    obligations under and in accordance with the HFA Initiative
    Program Agreements (as affirmed by and in accordance herewith)
    notwithstanding the Modifications.

 

    This Consent is executed this 23 day of November, 2011.

 

 

	 	 	 	 	 
	

     

	
 
	
    UNITED STATES DEPARTMENT OF THE TREASURY

	

     

	
 
	
 
	
 
	
 

	

     

	
 
	
 
	
 
	
 

	
 
	
 
	
    By
	
 
	
    /s/ Richard L. Gregg

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
    Richard L. Gregg

	
 
	
 
	
 
	
 
	
    Fiscal Assistant Secretary

    

    2

 

    [Signature
    Page to Consent to HFA Initiative Program Modifications]
    

 

 

	 	 	 	 	 
	

     

	
 
	
    FEDERAL NATIONAL MORTGAGE ASSOCIATION

	

     

	
 
	
 
	
 
	
 

	

     

	
 
	
 
	
 
	
 

	
 
	
 
	
    By
	
 
	
    /s/ Jennifer R. Whip

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
    Name Jennifer R. Whip

	
 
	
 
	
    Title Vice President for Customer Engagement-

    Customer Development

    

    3

 

    [Signature
    Page to Consent to HFA Initiative Program Modifications]
    

 

 

	 	 	 	 	 
	

     

	
 
	
    FEDERAL HOME LOAN MORTGAGE CORPORATION

	

     

	
 
	
 
	
 
	
 

	

     

	
 
	
 
	
 
	
 

	
 
	
 
	
    By
	
 
	
    /s/ Michael L. Dawson

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
    Name Michael L. Dawson

	
 
	
 
	
    Title Vice President Customer Business

	
 
	
 
	
    Management Single Family Sourcing and

    Securitization

	

     

	
 
	
 
	
 
	
 

	

     

	
 
	
 
	
 
	
 

	

     

	
 
	
 
	
 
	
 

	
 
	
 
	
    By
	
 
	
    /s/ W. Kimball Griffith

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
    Name W. Kimball Griffith

	
 
	
 
	
    Title Vice President Multifamily Affordable

    Sales and Investments

    

    4

 

    [Signature
    Page to Consent to HFA Initiative Program Modifications]
    

 

 

	 	 	 	 	 
	

     

	
 
	
    FEDERAL HOUSING FINANCE AGENCY

	

     

	
 
	
 
	
 
	
 

	

     

	
 
	
 
	
 
	
 

	
 
	
 
	
    By
	
 
	
    /s/ David J. Pearl

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
    Name David J. Pearl

	
 
	
 
	
    Title Executive Advisor Office of Housing and

    Regulatory Policy

    

    5

 

    EXHIBIT A

 

    Contents:
    

 

    –  NIBP Extension Term Sheet

 

    –  TCLP Extension Term Sheet

 

    NIBP
    EXTENSION TERM SHEET

 

    Overview

 

    Treasury and the GSEs have agreed to permit (i) the
    extension of the existing December 31, 2011 deadline for
    release of escrowed New Issue Bond Program (“NIBP”)
    funds and (ii) other modifications to the existing NIBP
    requirements subject to the terms and conditions described
    herein (collectively, the “Program Modifications”).
    Issuers that elect to avail themselves of the permitted
    extension (or that choose to implement the other permitted
    modifications to the NIBP) will be required to do so pursuant to
    amendments to the Related Documents approved or prescribed by
    Treasury and the GSEs and implemented prior to the earlier of
    (i) any mandatory redemption date of Program Bonds pursuant
    to
    Section 2.6(a)
    of the Indenture Appendices (as defined below) or (ii) any
    other action by an Issuer not currently authorized by the
    Related Documents.

 

    This Term Sheet is intended only to provide a general outline of
    the contemplated Program Modifications, and is subject to
    modification at any time by Treasury and the GSEs. Capitalized
    terms used but not defined in this Term Sheet shall have the
    meanings assigned to such terms in the existing NIBP forms of
    Supplemental Indenture/Resolution Appendix for Use with Single
    Family Escrow Bonds, Single Family Small Issue Escrow Bonds or
    Multifamily Escrow Bonds, as the case may be (collectively, the
    “Indenture Appendices”).

 

    Term of
    Extension

 

    Issuers may, in accordance with the terms and conditions set
    forth herein, extend the deadline for release of Escrowed
    Proceeds from December 31, 2011 to December 31, 2012.
    The maturity date for all Converted Program Bonds may not be
    extended.

 

    Increase
    in Number of Permitted Release Dates

 

    Issuers opting to extend the deadline for release of Escrowed
    Proceeds will be allowed a total of 9 Release Dates for each
    Single Family and Multifamily program (including those provided
    for by the existing Related Documents).

 

    Revisions
    to Mechanism for Determining

    the NIBP Permanent Rate

 

    The interest rate payable by an Issuer relative to any Program
    Bond with a Release Date in 2012 shall be determined as follows:

 

    Determination of WAL-based Rate:  The
    permanent interest rate on Program Bonds will be based on
    (i) the applicable credit-based Spread plus (ii) an
    index rate based on the weighted average life (the
    “WAL”) of the relevant Program Bonds. The WAL will be
    based on maturity and redemption schedules set forth in the
    applicable Program Bond Official Statement. Program Bond sinking
    fund schedules must be constructed with a zero prepayment
    assumption. The WAL will then be used to calculate two index
    rates based on the linear interpolation between an

 

    established
    10-year
    Treasury rate and a
    30-year
    “AAA” MMD* rate interest rate as specified below.

 

    Annual Ceiling:  Each Issuer will have
    the opportunity to request a “Ceiling Rate Pair” for
    2012 on any day between December 1, 2011 and
    December 9, 2011. The rates comprising the Ceiling Rate
    Pair will be set by taking the
    10-year CMT
    and the
    30-year
    “AAA” MMD* from the close of business of the preceding
    business day. CMT rates are as published on the Treasury website
    and MMD rates are rates as published by Thomson Reuters daily.
    These two rates each increased by 60 basis points will
    collectively be known as the Ceiling Rate Pair. If an Issuer
    does not request a ceiling CMT lock between December 1,
    2011 and December 9, 2011, the Ceiling Rate Pair recorded
    at the close of business on December 8, 2011 will be locked
    for that Issuer. Note: Neither rate in the Ceiling Rate Pair
    constitutes an absolute ceiling; the rates are inputs to the
    interpolation calculation described below.

 

    All requests for a Ceiling Rate Pair should be made via
    e-mail to:
    HFAInitiative@SSgA.com, with a cc: to JPM.HFA@jpmorgan.com. SSgA
    will confirm the Ceiling Rate Pair that was locked within two
    (2) business days. All requests that are time-stamped by
    11:59 p.m., Eastern Time, on a specific date will be
    honored.

 

    Final Rate Calculation:  Rate
    determination for 2012 Release Dates will proceed as follows:

 

    Upon receipt of a Notification of Interest Rate Conversion or a
    Notification of Interest Rate
    Conversion/Redemption Certificate, SSgA will determine the
    “Notification Date Rate Pair” comprising the
    10-year CMT
    and 30-year
    “AAA” MMD* as of close of business on the previous
    business day.

 

    The Issuer must submit a schedule of Program Bond maturities,
    mandatory redemptions and WAL, as certified by the Issuer, on or
    prior to the first business day at least nine (9) calendar
    days prior to the Release Date. The schedule submitted must
    reflect exactly the schedule that will be included in the
    relevant Program Bond Official Statement. On or prior to the
    first business day at least seven (7) calendar days prior
    to the Release Date, SSgA will notify the Issuer as to its
    Permanent Rate. The new “Permanent Rate” will be
    (i) the applicable Spread plus (ii) an index rate (R)
    to be found by calculating for both the Ceiling Rate Pair and
    the Notification Date Rate Pair the linearly interpolated point
    between the
    10-year and
    30-year
    rates in that pair utilizing the WAL. Specifically, for each of
    the two rate pairs, the interpolated index rate (exclusive of
    the Spread) will equal:

 

	 	 	 	 	 
	

    R =
    CMT10
    +

	
 
	
    WAL − 10

    20
	
 
	
    (MMD30
    −
    CMT10)

 

    The index used will be the lower of that calculated from
    the Ceiling Rate Pair or Notification Date Rate Pair (rounded to
    the nearest basis point). If the WAL is less than

 

		
	    * 	
    If on the date any rate pair is recorded, the
    30-year
    “AAA” MMD rate is below the
    10-year CMT
    or the
    30-year CMT,
    the higher of the
    10-year CMT
    and the
    30-year CMT
    on such date will be used in lieu of the
    30-year
    “AAA” MMD.

    

    2

 

    10 years, the index rate used will be the lower of the
    10-year CMT
    rates from the Ceiling Rate Pair or Notification Date Rate Pair.

 

    Additional Multifamily Credit
    Premium:  In addition, all Multifamily Program
    Bonds Released in 2012 shall be subject to an increase in the
    applicable Spread of 80 basis points.

 

    Optional
    Issuance of Market Bonds

 

    Single Family Issuers releasing Escrowed Proceeds in 2012 will
    no longer be required to issue Market Bonds (although if Market
    Bonds are issued, they will be subject to the existing NIBP
    requirements regarding Market Bond maturity schedules and
    application of mortgage prepayments).

 

    Addition
    of Issuer Escrow Redemption Fee

 

    Issuers will be subject to a new fee (equal to .30% per annum)
    on Escrowed Proceeds applied to the redemption of Program Bonds.
    Such fee shall accrue on an actual/actual basis commencing
    April 1, 2012, and shall be payable from funds of the
    Issuer on the date on which any Escrowed Proceeds are used to
    redeem Program Bonds between April 1, 2012 and the
    expiration of NIBP on December 31, 2012. Escrowed Proceeds
    which are applied to redemption of Program Bonds prior to
    April 1, 2012 or released at any time within NIBP
    requirements are not subject to the fee. The
    Participation Fee instituted in 2010 for certain Issuers will
    remain applicable.

 

    Use of
    Single Family NIBP Proceeds

    to Fund Multifamily NIBP Loans

 

    Subject to applicable requirements of existing Program Bond
    documents and applicable tax, securities, state and local law
    requirements, Issuers that were originally participants in the
    NIBP Multifamily program will be authorized to use NIBP Single
    Family Escrowed Proceeds to fund qualifying Multifamily mortgage
    loans (subject to existing NIBP requirements). In order to avail
    themselves of this option, Issuers will be required to amend the
    applicable Related Documents to implement the NIBP Multifamily
    program requirements. Any Issuer pursuing this structure must
    indicate the proposed use of funds (Single Family or
    Multifamily) in its Notification of Interest Rate Conversion or
    Notification of Interest Rate Conversion/Release Certificate, as
    applicable.

 

    The resulting mortgage loans will be pledged under the
    applicable Single Family indenture. Any amendments to such
    Single Family indenture necessary to allow for funding of
    Multifamily mortgage loans thereunder must be made by the Issuer
    prior to the applicable Release Date. Any such Multifamily loans
    must constitute security only for the Program Bonds,
    Escrowed Proceeds of which funded such loans (subject to the
    Issuer’s ability to pledge any residual amounts upon
    payment in full of the relevant Program Bonds). Furthermore,
    Program Bonds secured by Multifamily loans pursuant to this
    provision must mature or be subject to mandatory redemption or
    tender within 17 years of the Release Date or, in the case
    of Construction Program Bonds, within 17 years of the
    expiration of the interest only construction period (which may
    not exceed 4 years). The underlying mortgage loans must be
    guaranteed by the GSEs. Any Issuer pursuing this structure will
    work closely with GSE Special Closing

    

    3

 

    Counsel to ensure that these transactions meet program
    parameters and are acceptable to the GSEs and Treasury.

 

    Special
    Rules Applicable to Issuers

    Participating in the TCLP

 

    A number of additional NIBP modifications will apply to Issuers
    who are also participating in the Temporary Credit and Liquidity
    Program (“TCLP”) extension. Specifically, such
    modifications address the following issues:

 

    Limit on Refundings:  The 30% limit on
    Program Bond proceeds used for all VRDO refundings (including
    refundings of TCLP-supported bonds) will remain unchanged but
    Issuers will be permitted to utilize an additional 10% of
    Program Bond proceeds if such Program Bonds will be used only to
    refund TCLP-supported VRDOs. Each Issuer shall indicate on the
    relevant Notification of Interest Rate Conversion or
    Notification of Interest Rate
    Conversion/Redemption Certificate what portion, if any, of
    Program Bond proceeds is being used for refundings.

 

    Required Use of NIBP Proceeds to Refund TCLP-Supported
    Bonds: Issuers will be required to covenant to use NIBP
    Escrowed Proceeds to refund TCLP-supported bonds at any time
    that (i) the refunded bonds are either unhedged or any
    hedge can be terminated without cost to the Issuer and
    (ii) such a refunding can be accomplished such that the
    mortgage assets relating to the refunded bonds generate revenues
    sufficient to pay the Program Bonds and all related fees and
    expenses. Releases of NIBP Bonds for the sole purpose of
    refunding TCLP-supported bonds will not be counted
    for purposes of the limit on the number of permitted Release
    Dates.

 

    Increased Flexibility on Use of Single Family NIBP Escrowed
    Proceeds.  Subject to applicable tax, securities,
    state and local law requirements and the requirements of the
    Related Documents including the provisions outlined in the
    section entitled “Use of Single Family NIBP Proceeds to
    Fund Multifamily NIBP Loans” above, Single Family NIBP
    Escrowed Proceeds will be permitted to be used to refund
    TCLP-supported bonds regardless of whether the Program Bonds or
    the refunded bonds are single family or multifamily bonds.

 

    Collateral Review
    Requirement:  Notwithstanding anything in the
    foregoing or in the Related Documents, Treasury and the GSEs
    shall have the ability to review and approve or disapprove, in
    their sole discretion, mortgage loan collateral transferred to
    an NIBP indenture as collateral for Program Bonds used to
    refinance TCLP-supported bonds.

 

    Generally, however, mortgage loan collateral transferred to an
    NIBP indenture should be reflective of a cross-section of the
    collateral within the TCLP indenture and should not adversely
    affect the existing credit profile of the bond indenture as
    determined by Treasury and the GSEs. Pricing of NIBP Program
    Bonds will be determined based on collateral quality and
    indenture structure as determined by the Rating Agencies.

 

    If the collateral transferred to the NIBP indenture is such that
    all bonds in the indenture are backed by the same pool of
    collateral, pricing of the Spread will be based on the rating of
    the new bond issue (which should be the same as the existing
    rating of the NIBP Program Bonds).

    

    4

 

    Alternatively, if the collateral being transferred is
    “walled off” within the indenture and possesses a
    credit profile acceptable to Treasury and the GSEs, pricing of
    the Spread will be based on the new bond rating, which may not
    be lower than “Baa‘/“BBB.”

 

    Freeze on NIBP Releases:  Upon release
    of this Term Sheet, and prior to formally documenting the
    TCLP-related program modifications described herein, an Issuer
    participating in the TCLP program (unless it has affirmatively
    opted out of any available extension or modification of the
    TCLP) will be prohibited from scheduling new Release Dates in
    any amount that would cause the total amount of Program Bonds
    proceeds released to exceed 60% of the Issuer’s original
    Program Bond principal amount for the applicable program (Single
    Family or Multifamily) (subject to waivers for pending and
    previously anticipated releases). The freeze will not apply for
    any release that facilitates the refunding of a TCLP-supported
    VRDO.

 

    Additional
    Fees

 

    Issuer’s participating in the extension described in this
    Term Sheet shall be required to pay the GSEs a to-be-determined
    fee to cover the expenses of the GSEs associated with the
    Program Modifications described herein, and shall be required to
    pay to-be-determined fees of GSE Special Closing Counsel
    relating to the review and approval of NIBP document amendments.

    

    5

 

    TCLP
    EXTENSION TERM SHEET

 

    Overview

 

    Treasury and the GSEs have agreed to permit (i) the
    extension of the existing expiration date of the Temporary
    Credit and Liquidity Facilities (“TCLFs”) issued under
    the Temporary Credit and Liquidity Program (“TCLP”) to
    the first to occur of (a) the sixth (6th) anniversary of
    the Effective Date or (b) December 31, 2015, pursuant
    to a preliminary plan (a “Preliminary Plan”) and a
    detailed final plan (a “Final Plan”) prepared by the
    Issuers, and (ii) other modifications to the existing TCLP
    requirements subject to the terms and conditions described
    herein (collectively, the “Program Modifications”).
    Issuers that elect to avail themselves of the permitted
    extension will be required to do so pursuant to amendments to
    the Related Documents approved or prescribed by Treasury and the
    GSEs, and implemented within thirty (30) calendar days of
    approval of the Final Plan by Treasury and the GSEs (see
    “Plans” below).

 

    Issuers under TCLP that elect to avail themselves of the Program
    Modifications are required to implement the NIBP program
    modifications unless no escrowed proceeds are available to the
    Issuer under NIBP. In addition, upon release of this Term Sheet,
    and prior to formally documenting the Program Modifications, an
    Issuer will be subject to, among other things, a freeze on new
    NIBP releases unless it has affirmatively opted out of the
    Program Modifications (see “NIBP Extension Term
    Sheet-Special Rules Applicable to Issuers Participating in
    the TCLP”)

 

    This Term Sheet is intended only to provide a general outline of
    the contemplated Program Modifications, and is subject to
    modifications at any time by Treasury and the GSEs. Capitalized
    terms used but not defined in this Term Sheet shall have the
    meaning assigned to such terms in the existing TCLP forms of
    TCLF and Reimbursement Agreement.

 

    General
    Modifications

 

    Term of
    Extension

 

    Issuers may, in accordance with the terms and conditions set
    forth herein, extend the existing expiration date of the TCLFs
    from the first to occur of the third (3rd) anniversary of the
    Effective Date or December 31, 2012 to the first to occur
    of the sixth (6th) anniversary of the Effective Date or
    December 31, 2015.

 

    Pricing

 

    Pricing for the TCLFs will be based upon the higher of
    (i) the TCLP-supported VRDO rating or (ii) the
    Issuer’s general obligation bond rating, as set forth below:

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	
    Lowest

    
	
 
	
 
	
 
	
 
	
 
	
 

	
    Unenhanced

    
	
 
	
 
	
 
	
 
	
 
	
 

	
    Bond Rating

    
	
 
	
    Single Family

	
    (or

    
	
 
	
    Year 4

    
	
 
	
    Year 5

    
	
 
	
    Year 6

    

	
    equivalent)
	
 
	
    (2013)
	
 
	
    (2014)
	
 
	
    (2015)

	 

	

    ’Aaa’/’AAA’

	
 
	
 
	
    0.90
	
    %
	
 
	
 
	
    0.90
	
    %
	
 
	
 
	
    0.95
	
    %

	

    ’Aa’/’AA’

	
 
	
 
	
    1.00
	
    %
	
 
	
 
	
    1.00
	
    %
	
 
	
 
	
    1.05
	
    %

	

    ’A’

	
 
	
 
	
    1.15
	
    %
	
 
	
 
	
    1.15
	
    %
	
 
	
 
	
    1.20
	
    %

	

    ’Baa’/’BBB’

	
 
	
 
	
    1.75
	
    %
	
 
	
 
	
    1.75
	
    %
	
 
	
 
	
    1.85
	
    %

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	
    Lowest

    
	
 
	
 
	
 
	
 
	
 
	
 

	
    Unenhanced

    
	
 
	
 
	
 
	
 
	
 
	
 

	
    Bond Rating

    
	
 
	
    Multifamily

	
    (or

    
	
 
	
    Year 4

    
	
 
	
    Year 5

    
	
 
	
    Year 6

    

	
    equivalent)
	
 
	
    (2013)
	
 
	
    (2014)
	
 
	
    (2015)

	 

	

    ’Aaa’/’AAA’

	
 
	
 
	
    1.00
	
    %
	
 
	
 
	
    1.00
	
    %
	
 
	
 
	
    1.05
	
    %

	

    ’Aa’/’AA’

	
 
	
 
	
    1.00
	
    %
	
 
	
 
	
    1.00
	
    %
	
 
	
 
	
    1.05
	
    %

	

    ’A’

	
 
	
 
	
    1.20
	
    %
	
 
	
 
	
    1.20
	
    %
	
 
	
 
	
    1.25
	
    %

 

    Pricing for the TCLFs will be determined as of the date of the
    execution of the Program Modifications.

 

    New
    Swaps

 

    Any swaps entered into subsequent to the release of this Term
    Sheet by the Issuers that elect to avail themselves of the
    Program Modifications (“New Swaps”) must be with a
    swap counterparty rated at least ‘Baa’ by Moody’s
    Investors Service or ‘BBB’ by Standard &
    Poor’s Rating Services. In addition, New Swaps must include
    par termination provisions approved by Treasury and the GSEs.

 

    Reporting
    Requirements

 

    Issuers will be required to provide Treasury and the GSEs
    further information under the Indenture Supplements and the
    Reimbursement Agreements. Attached as Exhibit A is
    the proposed additional reporting requirements for the Issuers
    under TCLP.

 

    Bank Bond
    Modifications

 

    Bank Bond
    Maturity

 

    Bank Bonds are required to mature no later than the earliest of
    (i) the thirteenth
    (13th)

    anniversary of the Effective Date, (ii) the tenth
    (10th)

    anniversary of the date on which the related Bank Bond becomes
    subject to a Term Out Period and (iii) December 31,
    2022.

    

    2

 

    New Base
    Rate

 

    Bank Bonds will accrue interest at a new fluctuating “Base
    Rate” of prime plus 2.0%.

 

    New
    Default Rate

 

    Bank Bonds will accrue interest at a new fluctuating
    “Default Rate” of prime plus 3.0% upon an Event of
    Default.

 

    Plans

 

    Preliminary
    Plan

 

    Issuers electing to avail themselves of the permitted extension
    will be required to develop and submit a Preliminary Plan to
    Treasury and the GSEs by January 31, 2012. The Preliminary
    Plan must include a summary of the methods that the Issuers will
    implement to reduce TCLP exposure by utilizing (i) NIBP
    bonds to refund TCLP-supported VRDOs, as referenced in the NIBP
    Extension Term Sheet (see “NIBP Extension Term
    Sheet — Special Rules Applicable to
    Issuers Participating in the TCLP — Required Use of NIBP Proceeds
to Refund  TCLP-Supported
    Bonds”)
    and/or
    (ii) non-NIBP mechanisms. Attached as Exhibit B
    is the proposed informational requirements for Issuer submission
    of a Preliminary Plan.

 

    Treasury and the GSEs will endeavor to provide all of its
    feedback on the Preliminary Plan by April 30, 2011.

 

    Final
    Plan

 

    Each Issuer will prepare and submit a Final Plan to Treasury and
    the GSEs within thirty (30) calendar days after Treasury
    and the GSEs have notified the Issuer that it has received final
    feedback on the Preliminary Plan. The Final Plan must include,
    among other things, (i) the timing of all par swap
    termination options and Issuer intent to exercise such options,
    (ii) plans to convert TCLP-supported VRDOs to fixed rate
    bonds using NIBP or other means, (iii) any recommended
    covenants by Treasury and the GSEs to be added to the Related
    Documents and (iv) any additional reporting requirements
    recommended by Treasury and the GSEs to be added to the Related
    Documents. The Final Plan will be approved or disapproved by
    Treasury and the GSEs, in their sole discretion, within thirty
    (30) calendar days after Treasury and the GSEs have
    notified the Issuer that it has received final feedback on the
    Final Plan.

 

    Implementation

 

    Upon approval of the Final Plan by Treasury and the GSEs, the
    provisions of the Final Plan must be incorporated into the
    Related Documents within thirty (30) calendar days. If the
    Final Plan is disapproved by Treasury and the GSEs, the TCLFs
    will expire on the existing unextended expiration date.

    

    3

 

    In all events, Issuers will be responsible for all legal
    expenses incurred by Treasury and the GSEs as necessary to
    execute the Program Modifications.

    

    4

 

    EXHIBIT A

 

    ADDITIONAL
    REPORTING REQUIREMENTS

 

    In addition to the reporting requirements set forth in the
    form Indenture Supplements and Reimbursement Agreement, as
    amended, each Issuer electing to avail themselves of the Program
    Modifications must provide to Treasury and the GSEs the
    following:

 

		
	    (1) 
	    not later than 15 days after the end of each calendar
    month, the relevant portfolio performance data specified in
    Exhibit E to the form Indenture Appendices under the
    heading “Monthly Single Family Indenture Reporting
    Requirements” for all single family loans held within the
    trust estate of the underlying indentures;

	 
	    (2) 
	    not later than 15 days after the end of each calendar
    month, the relevant portfolio performance data specified in
    Exhibit E-1
    to the form Indenture Appendices, as amended, under the
    heading “Multifamily Indenture Reporting
    Requirements — Multi Loan Pools” or in
    Exhibit E-1
    to the form Indenture Appendices under the heading
    “Multifamily Indenture Report Requirements —
    Single Loan” (as applicable) for all multifamily loans held
    within the trust estate of the underlying indentures;

	 
	    (3) 
	    in addition to preparation by the Issuer of a Preliminary Plan
    and a Final Plan, not later than 15 days after the end of
    each calendar quarter (unless already supplied by the Issuer in
    connection with the Preliminary Plan and the Final Plan), a data
    template as provided by Treasury and GSEs to be completed by the
    Issuer for such quarter that will enumerate the following bond
    attributes including, but not limited to:

 

			
	 	    (a) 
	
    details on all outstanding VRDOs and auction rate debt (even if
    held by Issuer), other than unhedged bonds described in
    clauses (b) and (c) below, including:

 

			
	 	    (i) 
	
    outstanding principal balances,

 

			
	 	    (ii) 
	
    maturities,

 

			
	 	    (iii) 
	
    amortization schedules,

 

			
	 	    (iv) 
	
    reset rate type (e.g. daily or weekly;
    7-day,
    28-day or
    35-day) and

 

			
	 	    (v) 
	
    rate formula (e.g. LIBOR + 2.00%);

 

			
	 	    (b) 
	
    details on each unhedged TCLP-supported bond including:

 

			
	 	    (i) 
	
    outstanding principal balance,

 

			
	 	    (ii) 
	
    maturity,

 

			
	 	    (iii) 
	
    amortization schedule,

 

			
	 	    (iv) 
	
    reset rate type and

    

    A-1

 

			
	 	    (v) 
	
    rate formula;

 

			
	 	    (c) 
	
    details on each unhedged non-TCLP-supported VRDOs and auction
    rate debt (even if held by Issuer) including:

 

			
	 	    (i) 
	
    outstanding principal balance,

 

			
	 	    (ii) 
	
    maturity,

 

			
	 	    (iii) 
	
    amortization schedule,

 

			
	 	    (iv) 
	
    reset rate type and

 

			
	 	    (v) 
	
    rate formula;

 

			
	 	    (d) 
	
    details on each liquidity facility including:

 

			
	 	    (i) 
	
    liquidity provider,

 

			
	 	    (ii) 
	
    liquidity provider rating,

 

			
	 	    (iii) 
	
    amount,

 

			
	 	    (iv) 
	
    expiration date,

 

			
	 	    (v) 
	
    liquidity fee,

 

			
	 	    (vi) 
	
    material bank bond terms (e.g., term, price and
    amortization) and

 

			
	 	    (vii) 
	
    bank bond payment priorities;

 

			
	 	    (e) 
	
    details on each swap or cap, specifying the related bond in
    clause (a) above, including:

 

			
	 	    (i) 
	
    counterparty,

 

			
	 	    (ii) 
	
    expiration date,

 

			
	 	    (iii) 
	
    fixed-pay swap rate or cap rate,

 

			
	 	    (iv) 
	
    collateralization thresholds,

 

			
	 	    (v) 
	
    par termination amounts and exercise dates, if
    applicable, and

 

			
	 	    (vi) 
	
    mark-to-market valuation; and

 

			
	 	    (f) 
	
    plans for reducing outstanding VRDO balances of the Issuer.

    

    A-2

 

			
	 	      
	
    The foregoing data template is to be provided in connection with
    required updated meetings or calls to be held with Treasury and
    the GSEs (i) quarterly for calendar year 2012 and
    (ii) as required by Treasury and the GSEs for calendar
    years subsequent to 2012.

 

		
	    (4) 	
    such other information as may be reasonably requested from time
    to time by Treasury or the GSEs, whether such information is
    published or unpublished, respecting the affairs, condition
    and/or
    operations, financial or otherwise, of the Issuer, the
    underlying indenture or the TCLP-supported bonds (including,
    without limitation, loan level data, required by the GSEs with
    respect to any asset management surveillance
    and/or
    disclosure requirement).

    

    A-3

 

    EXHIBIT B

 

    PRELIMINARY
    PLAN FOR REDUCING TCLP EXPOSURE

 

    Overview

 

    The TCLP Extension Term Sheet requires each HFA, which is
    seeking to execute the Program Modifications to develop and
    submit a Preliminary Plan. Specifically, it states that the Plan
    must include a summary of all of the strategies the HFA expects
    to employ in the pursuit of the following goals:

 

			
	 	    • 
	
    Maximize swap terminations in support of VRDO refunding

	 
	 	    • 
	
    Maximize reduction in VRDO balances

	 
	 	    • 
	
    Maximize refunding of VRDOs to a fixed rate

	 
	 	    • 
	
    Maximize equity in the indenture

	 
	 	    • 
	
    Maximize replacement of TCLP by private sector liquidity
    providers

 

    Treasury and the GSEs intend to use these plans along with data
    that has been collected for the following purposes:

 

			
	 	    • 
	
    Gather baseline information on each HFA’s current situation
    and general operating strategy.

	 
	 	    • 
	
    Assist in discussions regarding each HFA’s development of a
    detailed Final Plan.

	 
	 	    • 
	
    Develop a clearer understanding of any economic, legal or policy
    obstacles affecting each HFA’s ability to reduce their TCLP
    exposure.

	 
	 	    • 
	
    Identify new strategies that may be beneficial in achieving the
    objectives of the Program Modifications.

	 
	 	    • 
	
    Develop an implementable strategy to maximize replacement of
    TCLP by private sector liquidity providers, maximize reduction
    in VRDO balances or maximize refunding of VRDOs to a fixed rate.

 

    Response
    Format

 

    Below is a suggested structure for the submission of the
    Preliminary Plan. It is divided into three sections: Overview of
    the Current Situation, Use of the Primary Strategies, and Use of
    Other Strategies:

 

			
	 	    I. 
	
    Overview of the Current Situation

 

			
	 	    • 
	
    This should be a brief description of the HFA’s current
    conditions and general strategies to manage the finances of the
    HFA and its indentures. This should include any major financial
    strains and what strategies are currently in place to

    

    B-1

 

    address them. The overview should also discuss the impact of the
    extension and any obstacles to meeting its objectives.

 

			
	 	    • 
	
    Provide a data template as provided by Treasury and the GSEs and
    detailed in paragraph 3 of “Exhibit A —
    Additional Reporting Requirements” as it relates to the
    Preliminary Plan proposed by the HFA.

 

			
	 	    II. 
	
    Use of the Primary Strategies

 

    Using the sub-questions as a guide where applicable, please
    provide details (including timing and principal amounts where
    possible), on the HFA’s abilities and plans to utilize the
    specific tools below. If the HFA is unable to utilize specific
    strategies, please provide a brief explanation of the reasons it
    is not possible.

 

			
	 	    • 
	
    Exercising Par Termination Options:

 

			
	 	    • 
	
    What quantity of par terminations do you expect to have the
    option of exercising over the life of the extension?

	 
	 	    • 
	
    What strategies have you been employing in deciding whether to
    exercise par termination options?

	 
	 	    • 
	
    What additional steps have you taken with swap providers to
    structure par termination options or collateral requirement
    reductions?

	 
	 	    • 
	
    How will those strategies change in light of the extension and
    Program Modifications?

 

			
	 	    • 
	
    VRDO Redemptions:

 

			
	 	    • 
	
    How much of your TCLP VRDO balance do you expect to be able to
    redeem through expected collateral amortization?

	 
	 	    • 
	
    What are the key drivers of the speed at which VRDOs are
    redeemed?

    Include:

 

			
	 	    • 
	
    Drivers that may be controllable such as cross-calling

	 
	 	    • 
	
    Drivers that cannot easily be changed such as other bonds in the
    indenture with payment priority

 

			
	 	    • 
	
    Do you expect to use all excess revenues to redeem VRDOs and, if
    not, please explain your intended uses of excess funds?

	 
	 	    • 
	
    Do you plan to originate any new loans under you TCLP indenture
    and, if so, what will be the impact on the speed of redemption
    on your VRDOs?

 

			
	 	    • 
	
    VRDO Refunding into fixed rate instruments through NIBP
    Refundings:

 

			
	 	    • 
	
    How much of your NIBP balance do you expect to be able to use to
    refund VRDOs?

	 
	 	    • 
	
    To what extent do you believe outstanding swaps will be an
    impediment?

	 
	 	    • 
	
    How will you determine the collateral to be used for NIBP
    Refundings?

	 
	 	    • 
	
    What if anything could make such transactions financially
    detrimental?

    

    B-2

 

			
	 	    • 
	
    Does the mortgage collateral backing your VRDOs have a
    sufficiently high yield to pay NIBP refunding bonds at the
    contemplated NIBP rates?

	 
	 	    • 
	
    Do you plan to refund MF VRDOs with SF NIBP funds and vice
    versa? Do you think you can or will amend your indenture(s) to
    facilitate such transactions?

 

			
	 	    • 
	
    VRDO Refunding into fixed rate instruments through market
    transactions:

 

			
	 	    • 
	
    What is your view of the market’s appetite for such bonds?

	 
	 	    • 
	
    What steps can you take to facilitate fixed rate refundings in
    the market?

	 
	 	    • 
	
    What are the obstacles to such transactions?

 

			
	 	    • 
	
    Obtaining replacement liquidity providers in the market:

 

			
	 	    • 
	
    What has been your experience over the two past years in
    securing replacement liquidity facilities?

	 
	 	    • 
	
    What, if anything, could change (in the market or in your
    portfolio), which would enable you to secure a replacement
    liquidity facility?

	 
	 	    • 
	
    What steps will you take to find new liquidity providers?

	 
	 	    • 
	
    Are there small, incremental steps you could take over the
    course of the extension to introduce private sector liquidity
    providers?

 

			
	 	    • 
	
    Converting to floating rate notes without tender options:

 

			
	 	    • 
	
    Would such a structure be helpful in meeting the objectives of
    the program? If so, how would you benefit?

	 
	 	    • 
	
    In what quantity and when would you have the ability to execute
    such conversions?

 

			
	 	    III. 
	
    Use of Other Strategies

 

    Treasury and the GSEs are open to exploring any other strategies
    that are consistent with the goals above. Examples of such
    strategies include:

 

			
	 	    • 
	
    Use of premium NIBP bonds to refund VRDOs with outstanding swaps
    and using the premium to finance swap
    tear-up
    costs.

	 
	 	    • 
	
    Innovative market transactions that will reduce TCLP exposure.

 

    Please identify any other strategies that you might employ,
    describing impact and any critical issues that must be addressed
    including:

 

			
	 	    • 
	
    Treasury and GSE related strategies

	 
	 	    • 
	
    Private market strategies

    

    B-3exh1018.htm

Exhibit 10.18

Form of Second Loan Modification Agreement

 

 

SECOND LOAN MODIFICATION AGREEMENT

 

This Second Loan Modification Agreement (the "Agreement"), dated as of March 8, 2012 and, provided the conditions precedent set forth in Section 4 hereof are satisfied, effective as of April 28, 2012, is entered into by and among AEROCENTURY CORP., a Delaware corporation (the "Borrower"), UNION BANK, N.A., together with CALIFORNIA BANK AND TRUST, UMPQUA BANK and U.S. BANK NATIONAL ASSOCIATION (collectively, the "Lenders" and individually, a "Lender") and UNION BANK, N.A., as Agent ("Agent") with reference to the following facts.

 

RECITALS

 

A.           Pursuant to the terms of that certain Loan and Security Agreement dated as of April 28, 2010 by and between Borrower, Agent, as Agent and a Lender, California Bank and Trust and U.S. Bank National Association, as amended pursuant to that certain Loan Modification Agreement dated as of May 13, 2011 by and between Borrower, Lenders and Agent  (as amended, the "Loan Agreement"), Lenders made available to Borrower a revolving credit facility in the aggregate principal amount not to exceed Ninety Million Dollars ($90,000,000.00) (the "Loan"), subject to Sections 2.8 and 2.17 of the Loan Agreement.  Except as otherwise specifically provided herein, all capitalized terms used and not defined herein shall have the meanings set forth in the Loan Agreement.

 

B.           The Loan is evidenced by that certain (i) Revolving Note dated April 28, 2010, made by Borrower and payable to the order of Agent in the maximum principal amount of $35,000,000.00; (ii) Revolving Note dated April 28, 2010, made by Borrower and payable to the order of California Bank and Trust in the maximum principal amount of $20,000,000.00; (iii) Revolving Note dated April 28, 2010, made by Borrower and payable to the order of U.S. Bank National Association in the maximum principal amount of $20,000,000.00; and (iv) Revolving Note dated June 4, 2010, made by Borrower and payable to the order of Umpqua Bank in the maximum principal amount of $15,000,000.00 (collectively, the "Notes").

 

C.           The Notes are secured by the Collateral pursuant, among other things, to (i) Mortgages filed with the FAA, filed in the International Registry and recorded or filed according to local law practices and (ii) that certain Beneficial Interest Pledge and Security Agreement dated as of April 28, 2010 by and among Borrower, Agent and Wells Fargo Bank Northwest, National Association, as owner trustee (the "Pledge Agreement").

 

D.           The Notes are guaranteed by, among other things, that certain Owner Trustee Guaranty dated as of April 28, 2010 (the "Guaranty") by and between Wells Fargo Bank Northwest, National Association, not in its individual capacity, except as expressly provided therein, but solely as trustee under that certain Trust Agreement "Icon/Wideroe 1999-1 Business Trust" dated as of October 26, 1999 between Icon Cash Flow Partners L.P., Series D, as beneficiary, and First Security Bank, National Association, as owner trustee, as modified by that certain Assignment and Assumption and Trust Amendment Agreement dated September 8, 2000 among Icon Cash Flow Partners L.P., Series D, as assignor, AeroCentury Investments II LLC, as assignee ("AeroCentury Investments"), and First Security Bank, National Association, as owner trustee, as modified by that certain Trust Amendment dated as of September 26, 2001 between AeroCentury Investments and Owner Trustee, successor in interest to First Security Bank, National Association, as modified by that certain Second Assignment and Assumption and Trust Amendment Agreement dated as of April 18, 2006 between AeroCentury Investments, as assignor, Borrower, as parent, AeroCentury Investments IV LLC, as assignee ("AeroCentury IV"), and Owner Trustee, as modified by that certain Assignment and Assumption and Trust Amendment Agreement dated as of March 25, 2009 among AeroCentury IV, as assignor, Owner Participant, as assignee, and Guarantor (as amended from time to time, the "Trust Agreement"), for the benefit of Agent.

 

E.           The Guaranty is secured by that certain Owner Trustee Mortgage and Security Agreement dated as of April 28, 2010, by Wells Fargo Bank Northwest, National Association, not in its individual capacity but solely as Owner Trustee in favor of Agent (the "Owner Trustee Mortgage").

 

F.           The Loan Agreement, the Notes, the Mortgages, the Pledge Agreement, the Guaranty and the Owner Trustee Mortgage, together with any other documents executed by or among the parties in connection with the Loan, and any and all amendments and modifications thereto, and together with all financing statements and other documents or instruments filed or recorded in connection with the Collateral and/or the Loan are referred to collectively as the "Loan Documents".  This Agreement is a Loan Document.

G.           As of the date hereof, the outstanding principal balance, exclusive of accrued interest and other expenses, under the Notes is $72,600,000.00.

 

H.           Borrower has requested an extension to the Loan and several modifications to the Loan Agreement with respect to certain covenants.  The parties are willing to modify the terms of the Loan Documents as more particularly described below and subject to all terms and conditions set forth herein.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree and covenant as follows:

 

  

  

  

AGREEMENT

 

1. Recitals.  The recitals set forth above are true, accurate and correct.

 

2. Reaffirmation of the Loan.  Borrower reaffirms all of its obligations under all of the Notes and all other Loan Documents, in each case either as originally executed or as the same may from time to time be supplemented, modified, amended, restated, extended or supplanted.  Borrower acknowledges that it has no claims, offsets or defenses with respect to the payment of sums due under the Notes or any other Loan Document.

 

3. Modification of Loan Agreement.  The Loan Agreement is hereby modified as follows:

 

    3.1 Definition of New Lender.  The definition of "New Lender" in Section 1.1 of the Loan Agreement is hereby deleted in its entirety.

 

    3.2 Definition of Borrowing Base Availability.  The definition of "Borrowing Base Availability" in Section 1.1 of the Loan Agreement is hereby amended in its entirety to read as follows:

 

"'Borrowing Base Availability' means, at any time, an amount equal to (i) the Borrowing Base shown on the Borrowing Base Certificate most recently delivered by Borrower to Agent and on other information available to Agent less the sum of (A) the amount then outstanding under the Revolving Loan plus (B) the lesser of (i) $5,000,000.00 or (ii) the amount reflected on the Company's balance sheet as "Maintenance Reserves and Accrued Costs" as of the date of measurement."

 

    3.3 Definition of Eligible Lease.  Section 1.1 of the Loan Agreement is hereby amended by deleting subparagraph (e) from the definition of "Eligible Lease" and replacing it with the following:

 

"'(e)  the lease payments are not more than sixty (60) days past due with respect to any payment required thereby;"

 

    3.4 Definition of “Equipment”  Section 1.1 of the Loan Agreement is hereby amended to read in its entirety as follows:

 

"Equipment" means new and used regional Airframes and attached Engines and new and used Engines each of which is either subject to an existing lease or is intended to be leased or re-leased within four months immediately following the date in question.   The Airframe or the Engine, as applicable, shall have been manufactured within twenty eight (28) years immediately preceding the date in question, shall be in good working order immediately or within a reasonable period of time, as determined by Agent, and shall be usable for commercial flight purposes immediately or within a reasonable period of time, as determined by Agent; provided, any deHavilland Dash-6 aircraft may be included in the definition of "Equipment", notwithstanding having been manufactured over 28 years preceding the date in question so long as such aircraft is subject to an Eligible Lease at all times.

 

    3.6 Definition of Maturity Date.  The definition of "Maturity Date" in Section 1.1 of the Loan Agreement is hereby amended in its entirety to read as follows:

 

"'Maturity Date' means the earliest of (a) April 29, 2013 or (b) the date of prepayment in full by Borrower of the Obligations in accordance with the provisions of Section 2.8."

 

    3.7 Definition of Maximum Amount.  The definition of "Maximum Amount" in Section 1.1 of the Loan Agreement is hereby amended in its entirety to read as follows:

 

"'Maximum Amount' means $90,000,000, or such other decreased amount as provided for under Sections 2.8 of this Agreement."

 

    3.8 Definition of Revolving Commitment.  The definition of "Revolving Commitment" in Section 1.1 of the Loan Agreement is deleted in its entirety to read as follows:

 

"'Revolving Commitment' means, subject to Sections 2.8, Ninety-Million and 00/100 Dollars ($90,000,000.00).  The respective Pro Rata Shares of the Lenders with respect to the Revolving Commitment are set forth in Schedule 2.1."

 

    3.9 Definition of Unrestricted Subsidiaries.  The following definition is added to Section 1.1 of the Loan Agreement:

 

"'Unrestricted Subsidiaries" means Subsidiaries that are (i) special purpose or bankruptcy remote and (ii) have debt on their respective balance sheets which, when consolidated with Borrower, is deemed to be Non-Recourse Debt to Borrower."

 

    3.10 Optional Increase to the Revolving Commitment.  Section 2.17 of the Loan Agreement is hereby deleted in its entirety and replaced with the phrase "Intentionally deleted."

 

    3.11 Financial Statements.  Section 5.6 of the Loan Agreement is hereby amended by deleting the phrase "December 31, 2009" and replacing it with the phrase "December 31, 2011".

 

    3.12 Financial Covenants.  Section 6.15 of the Loan Agreement is hereby amended by deleting the first sentence and replacing it with the following:

 

"6.15           Financial Covenants.  Maintain the following financial covenants on a consolidated basis, each of which shall be calculated in accordable with GAAP consistently applied as of the end of each Fiscal Quarter, as applicable, from the Fiscal Quarter ending March 31, 2012, and thereafter, on a cumulative basis until March 31, 2013, at which time it will be calculated on a trailing four quarter basis:"

 

    3.13 Maximum Leverage Ratio.  Section 6.15.1 of the Loan Agreement is hereby amended in its entirety to read as follows:

 

"6.15.1  Maximum Leverage Ratio.  A ratio of Total Recourse Debt to Tangible Net Worth of not more than 2.50 : 1.00 ("Maximum Leverage Ratio").   For purposes of this Section 6.15.1 "Tangible Net Worth" shall mean the sum of (i) capital stock plus (ii) paid-in capital; plus (iii) retained earnings; minus (iv) the net worth of any Unrestricted Subsidiaries; and minus (v) the book value of any intangibles as classified under GAAP."

 

    3.14 Interest Coverage Ratio.  Section 6.15.2 of the Loan Agreement is hereby amended by deleting the first sentence and replacing it with the following:

 

"6.15.2  Interest Coverage Ratio.  An Interest Coverage Ratio of at least 2.50 to 1.00."

 

    3.15 Debt Service Coverage Ratio.  Section 6.15.3 of the Loan Agreement is hereby amended by deleting the first sentence and replacing it with the following:

 

"6.15.3  Debt Service Coverage Ratio.  From the date of the Second Modification Agreement by and between Borrower, Agent and Lenders through the quarter ending September 30, 2012, a Debt Service Coverage Ratio of at least 1.05 : 1.00 and thereafter a Debt Service Coverage Ratio of at least 1.10 : 1.00."

 

  

  

  

    3.16 Minimum Tangible Net Worth Covenant.  Section 6.15.4 of the Loan Agreement is hereby amended by deleting the phrase "March 31, 2010" and replacing it with the phrase "December 31, 2011".

 

    3.17 No Net Loss.  Section 6.15.5 of the Loan Agreement is hereby amended by deleting the phrase "March 31, 2010" and replacing it with the phrase "March 31, 2012.

 

    3.18 Quarterly Reports.  Section 8.1.1 of the Loan Agreement is hereby amended in its entirety to read as follows:

 

"8.1.1  within sixty (60) days following the end of each of the first three Fiscal Quarters, (unless an extension is approved by the SEC), SEC Form 10-Q of Borrower for such Fiscal Quarter, along with delivery of a hard or .pdf copy to Agent of such Form 10-Q; provided that if such Form 10-Q is not filed with the SEC within such sixty (60) day time period, then the Borrower shall instead deliver to Agent internally prepared financial statements of Borrower and its Subsidiaries (including consolidating and combined and consolidated balance sheets and consolidating and combined and consolidated statements of income, retained earnings and cash flow) on or before the end of the sixty (60) day period;"

 

    3.19 Quarterly Compliance Certificate.  Section 8.1.2 of the Loan Agreement is hereby amended by deleting the phrase "forty-five (45) days" and replacing it with the phrase "sixty (60) days".

 

    3.20 Annual Reports.  Section 8.1.3 of the Loan Agreement is hereby amended in its entirety to read as follows:

 

"8.1.3    within ninety (90) days following the end of each Fiscal Year, (a) the Financial Statements of Borrower for such Fiscal Year certified by an Authorized Signatory, including consolidating and combined and consolidated audited balance sheets and consolidating and combined and consolidated audited statements of income, retained earnings and cash flow, (b) an unqualified report and opinion by an independent certified public accounting firm acceptable to Agent with respect to such Financial Statements, (c) any management letters of such public accounting firm addressed to Borrower, and (d) a Compliance Certificate; provided that the timely EDGAR SEC filing of a Form 10-K, along with delivery of a hard or .pdf copy to Agent of such Form 10-K, shall satisfy the requirements of subsections 8.1.3(a) and (b);"

 

    3.21 Form of Compliance Certificate.  Exhibit D of the Loan Agreement is hereby amended in its entirety and replaced with a new form of such Exhibit D attached as Attachment A to this Agreement.

 

4. Conditions Precedent.  Before this Agreement becomes effective and any party becomes obligated under it, all of the following conditions shall have been satisfied in a manner acceptable to Agent in its sole judgment:

 

    4.1 Agent shall have received all of the following, each of which shall be originals unless otherwise specified, each duly executed by an authorized signatory of each party thereto and each in form and substance satisfactory to Agent and its legal counsel (unless otherwise specified or, in the case of the date of any of the following, unless Agent otherwise agrees or directs):

 

       4.1.1 this Agreement.

 

       4.1.2 the Consent and Reaffirmation of Guaranty executed by Wells Fargo Bank Northwest, National Association, in its capacity as owner trustee.

 

       4.1.3 the Consent and Reaffirmation of Subordination Agreement executed by JetFleet Management Corp.

 

       4.1.4 originals of favorable written opinions, dated as of the date hereof, of independent and internal counsel to the Borrower addressed to Agent and Lenders (and their respective participants and assigns).

 

    4.2 Agent shall have received an updated Good Standing Certificate for Borrower from the Delaware Secretary of State.

 

    4.3 Agent shall have received such documentation as Agent may reasonably require to establish the due organization, valid existence and good standing of any guarantor or other party to any of the Loan Documents, its qualification to engage in business in each material jurisdiction in which they are engaged in business or required to be so qualified, its authority to execute, deliver and perform the Loan Documents to which it is a party, the identity, authority and capacity of each authorized signatory thereof authorized to act on its behalf, including certified copies of articles of organization and amendments thereto, bylaws and operating agreements and amendments thereto, certificates of good standing and/or qualification to engage in business, tax clearance certificates, certificates of corporate resolutions, incumbency certificates, Certificates of Responsible Officials, and the like.

 

    4.4 Agent shall have received any other any other agreements, resolutions, documents, opinion letters, entity documents, UCC and litigation searches, and information relating to the Loan (including evidence of Borrower's authority to enter into this Agreement) that Agent may reasonably require or request in connection with this Agreement or in accordance with the other Loan Documents, including but not limited to documents reaffirming Agent's security interest in the Collateral as required according to local law practices.

 

    4.5 All of the representations and warranties of Borrower set forth in this Agreement shall be true and correct in all material respects on and as of the date of this Agreement.

 

5. Payment of Expenses.  Borrower shall pay the reasonable fees and expenses of Agent's outside counsel, as well as any other reasonable documented costs and expenses incurred or payable by the Agent in connection with due diligence, syndication, and the preparation, execution and delivery of this Agreement and the other documentation contemplated hereby.  In addition, as a condition to the effectiveness of this Agreement, Borrower shall have paid any negotiated loan fees associated with this Agreement to each Lender.

 

6. Borrower's Representations and Warranties.  Borrower represents and warrants to Lenders as follows:

 

    6.1 Loan Documents.  Except as otherwise disclosed to Agent in writing prior to the date of this Agreement, all representations and warranties made and given by Borrower in the Loan Documents are true, accurate and correct as of the date hereof except with respect to the amended schedules attached hereto.

 

    6.2 No Default.  There exists no Event of Default or event which, with the passage of time or the giving of notice or both, would constitute a Event of Default.

 

    6.3 Borrowing Entity.  Borrower is a corporation, duly organized and existing and in good standing under the laws of the State of Delaware, and is qualified or licensed to do business in all jurisdictions (including California) in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could result in an Event of Default.  There have been no changes in the organization, composition, ownership structure or formation documents of Borrower since the inception of the Loan except for those previously disclosed in writing to Agent.

 

    6.4 Existing Liens.  As of the date hereof, except as disclosed in writing to Agent, no Liens exist on any of Borrower's assets and/or property of any kind.

 

7. No Impairment; No Novation.  Except as specifically hereby amended, the Loan Documents shall each remain unaffected by this Agreement and all Loan Documents shall remain in full force and effect.  The execution and delivery of this Agreement shall not constitute a novation of any Loan Document.

 

8. Integration.  The Loan Documents, including this Agreement:  (a) integrate all the terms and conditions mentioned in or incidental to the Loan Documents; (b) supersede all oral negotiations and prior and other writings with respect to their subject matter; and (c) are intended by the parties as the final expression of the agreement with respect to the terms and conditions set forth in those documents and as the complete and exclusive statement of the terms agreed to by the parties.  If there is any conflict between the terms, conditions and provisions of this Agreement and those of any other agreement or instrument, including any of the other Loan Documents, the terms, conditions and provisions of this Agreement shall prevail.

 

9. Miscellaneous.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument.  Delivery of an executed counterpart of the signature page to this Agreement by telefacsimile shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed counterpart of the signature page to this Agreement by telefacsimile to any other party shall thereafter also promptly deliver a manually executed counterpart of this Agreement to such other party; provided; however, that the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement.  If any court of competent jurisdiction in the state of California determines any provision of this Agreement or any of the other Loan Documents to be invalid, illegal or unenforceable, that portion shall be deemed severed from the rest, which shall remain in full force and effect as though the invalid, illegal or unenforceable portion had never been a part of the Loan Documents.  This Agreement shall be governed by the laws of the State of California, without regard to the choice of law rules of that State.  As used in this Agreement, the word "include(s)" means "includes(s), without limitation," and the word "including" means "including, but not limited to."  In the event of a dispute between any of the parties hereto over the meaning of this Agreement, all parties shall be deemed to have been the drafter hereof, and any applicable law that states that contracts are construed against the drafter shall not apply.

 

[Remainder of Page Intentionally Left Blank.  Signature Page Follows.]

 

  

  

  

IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the date first set forth above.

	
 

BORROWER

 

 

AEROCENTURY CORP.,

a Delaware corporation

 

By:            

Name:                                                                                    

Title:            

 

 

 

	  

	
AGENT AND LENDER

 

UNION BANK, N.A.

 

 

 

By:            

Name:                                                                                    

Title:            

 

 

	  

	
LENDER

 

CALIFORNIA BANK AND TRUST

 

 

 

By:            

Name:                                                                                    

Title:            

 

 

 

	  

	
LENDER

 

UMPQUA BANK

 

 

 

By:            

Name:                                                                                    

Title:            

 

 

 

	  

	
LENDER

 

U.S. BANK NATIONAL ASSOCIATION

 

 

By:            

Name:                                                                                    

Title:            

 

 

 

	  

  

  

Attachment A to Second Loan Modification

 

FORM OF EXHIBIT D TO LOAN AGREEMENT

 

COMPLIANCE CERTIFICATE

 

 

 

To:           UNION BANK, N.A., AGENT

 

This Compliance Certificate (this "Certificate") is executed and delivered by AeroCentury Corp., a Delaware corporation ("Borrower"), to Union Bank, N.A. ("Agent") pursuant to that certain Loan and Security Agreement dated as of April 28, 2010, among Union Bank, N.A., together with any other Lender thereunder from time to time (collectively, the "Lenders") and Union Bank, N.A., as Agent (as amended, extended, renewed, supplemented or otherwise modified from time to time, the "Loan Agreement").  Any terms used herein and not defined herein shall have the meanings set forth for such terms in the Loan Agreement.

 

This Certificate is delivered in accordance with Section 8.1 of the Loan Agreement by an Authorized Signatory of Borrower.  This Certificate is delivered with respect to the Fiscal [Quarter/Year] ended _________________, 20__ ("Determination Date").  Computations and other information indicating compliance with respect to the covenants contained in Sections 6.15.1, 6.15.2, 6.15.3, 6.15.4, and 6.15.5 of the Loan Agreement are set forth below:

 

 

	
1.  Section 6.15.1:  Maximum Leverage Ratio

	  	  
	  	
A ratio of Total Recourse Debt to Net Worth of not more than 2.50:1.0 ("Maximum Leverage Ratio") as of Determination Date

	  	  
	  	  	  	  
	  	
Total Recourse Debt shall mean all short-term and long-term senior debt obligations, as determined in accordance with GAAP, consistently applied, of Borrower and its Subsidiaries, with recourse to the Borrower and/or its Subsidiaries, as applicable, including any outstanding letters of credit and including unsecured Subordinated Debt.

	  	
 $

	  	  	  	  
	  	
Tangible Net Worth means the following with respect to Borrower and its Subsidiaries:

	  	  
	  	
(a) the sum of:

	  	  
	  	
capital stock

	  	  
	  	
paid-in capital

	  	  
	  	
retained earnings

	  	  
	  	
plus non-refundable maintenance reserves recorded as expense, net of taxes

	  	  
	  	
Less non-refundable maintenance reserves recorded as income, net of taxes

	  	  
	  	
Less:

	  	  
	  	
(b) the sum of :

	  	  
	  	
net worth of any Unrestricted Subsidiaries

	  	  
	  	
book value of any intangibles

	  	  
	  	  	  	  
	  	
Tangible Net Worth

	  	
 $

	  	  	  	  
	  	
Ratio of Total Recourse Debt to Tangible Net Worth

	  
	  	  	  	  
	  	  	  	  

	
2.  Section 6.15.2:  Interest Coverage Ratio

	  	  
	  	
As of the Determination Date an Interest Coverage Ratio of at least 2.50 to 1.00 means the sum of the following:

	  	  
	  	  	  	  
	  	
EBITDA:

	  	  
	  	
Net income

	  	
 $

	  	  	  	  
	  	
Interest Expense:

	  	  
	  	
Interest expense

	  	  
	  	
Plus the loss or minus the gain from the fair value of derivatives charges whether or not included in other comprehensive income or net income

	  	  
	  	
Less amortization of loan modification and waiver fees

	  	  
	  	  	  	  
	  	
Total Interest Expense

	  	  
	  	  	  	  
	  	
Taxes

	  	  
	  	  	  	  
	  	
Depreciation

	  	  
	  	  	  	  
	  	
Amortization

	  	  
	  	  	  	  
	  	
Plus non-refundable maintenance reserves recorded as expense, net of taxes

	  	  
	  	  	  	  
	  	
Minus non-refundable maintenance reserves recorded as income, net of taxes

	  	  
	  	  	  	  
	  	
EBITDA

	  	
$ 

	  	  	  	  
	  	
Total Interest Expense (as calculated above)

	  	
$ 

	  	  	  	  
	  	
Ratio of EBITDA to Interest Expense

	  	  
	  	  	  	  

	
3.  Section 6.15.3:  Debt Service Coverage

	  	  
	  	
A Debt Service Coverage Ratio of at least 1.05 to 1.00 for each Fiscal Quarter ending through September 30, 2012 and thereafter a Debt Service Coverage Ratio of at least 1.10 to 1.00

	  	  
	  	  	  	  
	  	
EBITDA  (as calculated for Section 6.15.2 above)

	
$ 

	  
	  	
Less taxes paid in cash

	  	  
	  	
Plus Maintenance Expense

	  	  
	  	  	  	  
	  	
EBITDA as adjusted

	  	
$ 

	  	  	  	  
	  	
Total Debt Service (the sum of ):

	  	  
	  	  	  	  
	  	
Phantom amortization (ten percent (10%) of all principal Indebtedness of Borrower and its Subsidiaries for borrowed money at the end of such period (other than Indebtedness owed by any Subsidiary to Borrower or any Subsidiary of Borrower or by Borrower to any Subsidiary of Borrower)

	
 $

	  
	  	  	  	  
	  	
Interest Expense (as calculated for Section 6.15.2)

	  	  
	  	  	  	  
	  	
Maintenance Expense

	  	  
	  	  	  	  
	  	
Total Debt Service

	  	
$

	  	  	  	  
	  	
Ratio of EBITDA as adjusted to Total Debt Service

	  	  
	  	  	  	  

	
4.  Section 6.15.4:  Minimum Tangible Net Worth

	  	  
	  	  	  	  
	  	
Tangible Net Worth as calculated in Section 6.15.1

	  	
$ 

	  	  	  	  
	  	
Minimum Tangible Net Worth (the sum of):

	  	  
	  	
(i)   85% of Tangible Net Worth at December 31, 2011

	  	
$ 

	  	
(ii)  50% of Net Income reported in each successive Fiscal Quarter with no deduction for any losses:

	  	  
	  	
Net income

	
$ 

	  
	  	  	  	  
	  	
Plus non-refundable maintenance reserves recorded as expense, net of taxes

	  	  
	  	  	  	  
	  	
Less non-refundable maintenance reserves recorded as income, net of taxes

	  	  
	  	  	  	  
	  	
Plus the loss or minus the gain from the fair value of derivatives charges whether or not included in other comprehensive income or net income, net of taxes

	  	  
	  	  	  	  
	  	
(iii) 100% of net proceeds from any additional equity offering in excess of $5,000,000

	  	  
	  	
(iv)  50% of any incremental additive equity associated with any Acquisition

	  	  
	  	  	  	  
	  	
Total Minimum Tangible Net Worth

	  	
$ 

	  	  	  	  
	  	
Excess (deficient) Tangible Net Worth Compared to Total Minimum Tangible Net Worth

	  	
$ 

	  	  	  	  

	
5.  Section 6.15.5:  No Net Loss

	  	  
	  	
Borrower will not suffer a net loss as of any Fiscal Quarter, commencing with the Fiscal Quarter ending March 31, 2012

	  	  
	  	  	  	  
	  	
Net income for the last four consecutive quarters

	  	
$ 

	  	  	  	  
	  	
Plus non-refundable maintenance reserves recorded as expense, net of taxes

	  	  
	  	  	  	  
	  	
Less non-refundable maintenance reserves recorded as income, net of taxes

	  	  
	  	  	  	  
	  	
Plus the loss or minus the gain from the fair value of derivatives charges whether or not included in other comprehensive income or net income, net of taxes

	  	  
	  	  	  	  
	  	
Net income, as adjusted

	  	
$ 

	  	  	  	  

 

6.           A review of the activities of Borrower during the fiscal period covered by this Certificate has been made under the supervision of the undersigned with a view to determining whether during such fiscal period Borrower performed and observed all of its Obligations.  To the best knowledge of the undersigned, during the fiscal period covered by this Certificate, all covenants and conditions have been so performed and observed and no Default or Event of Default has occurred and is continuing, with the exceptions set forth below in response to which Borrower has taken or proposes to take the following actions (if none, so state).

 

7.           The undersigned a Senior Officer of Borrower certifies that the calculations made and the information contained herein are derived from the books and records of Borrower, as applicable, and that each and every matter contained herein correctly reflects those books and records.

 

8.           To the best knowledge of the undersigned no event or circumstance has occurred that constitutes a Material Adverse Effect since the date the most recent Compliance Certificate was executed and delivered, with the exceptions set forth below (if none, so state).

 

	
Dated: ____________________

	
 

 

Printed Name and Title of Senior Officer of AeroCentury Corp.

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